As filed with the Securities and Exchange Commission on April 23, 2021
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ZIPRECRUITER, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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7370
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27-2976158
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
604 Arizona Avenue
Santa Monica, CA 90401
(877) 252-1062
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(I.R.S. Employer
Identification Number)
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(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Ian Siegel
Chief Executive Officer
ZipRecruiter, Inc.
604 Arizona Avenue
Santa Monica, CA 90401
(877) 252-1062
(Name, address, including zip code, and telephone number, including area code, of agent for service)
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James D. Evans
Katherine K. Duncan
Janiece A. Jenkins
Fenwick & West LLP
228 Santa Monica Blvd., Suite 300
Santa Monica, CA 90401
(310) 434-5400
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Ryan Sakamoto
General Counsel
ZipRecruiter, Inc.
604 Arizona Avenue
Santa Monica, CA 90401
(877) 252-1062
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Marc D. Jaffe
Ian D. Schuman
Sarah B. Axtell
Latham & Watkins LLP
140 Scott Drive
Menlo Park, CA 94025
(650) 328-4600
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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.
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, as amended, or Securities Act, 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, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
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. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☒
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Smaller reporting company
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☐
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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Title of each class of securities
to be registered
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Amount to be registered
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Proposed maximum
offering price per share
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Proposed maximum
aggregate offering
price(1)
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Amount of registration
fee
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Class A common stock, $0.00001 par value per share
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Not applicable
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$100,000,000
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$10,910
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(1)Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(a) of the Securities Act of 1933, as amended. Given that there is no proposed maximum offering price per share of Class A common stock, the registrant calculates the proposed maximum aggregate offering price, by analogy to Rule 457(f)(2), based on the book value of the Class A common stock the registrant registers, which will be calculated from its unaudited pro forma balance sheet as of December 31, 2020. Given that the registrant’s shares of Class A common stock are not traded on an exchange or over-the-counter, the registrant did not use the market prices of its Class A common stock in accordance with Rule 457(c).
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 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this prospectus is not complete and may be changed. The securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PROSPECTUS (Subject to Completion)
Issued, , 2021.
Shares of Class A Common Stock
This prospectus relates to the registration of the resale of up to shares of our Class A common stock by the stockholders identified in this prospectus, or the registered stockholders. Unlike an initial public offering, the resale by the registered stockholders is not being underwritten by any investment bank. The registered stockholders may, or may not, elect to sell their shares of Class A common stock covered by this prospectus, as and to the extent they may determine. Sales of our Class A common stock, if any, will be made through brokerage transactions on the New York Stock Exchange at prevailing market prices. See the section titled “Plan of Distribution.” If the registered stockholders choose to sell their shares of Class A common stock, we will not receive any proceeds from the sale of such shares of Class A common stock.
We have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to twenty votes and is convertible at any time into one share of Class A common stock. As of , 2021, the holders of our outstanding Class B common stock hold approximately % of the voting power of our outstanding capital stock, with our directors, executive officers, and 5% stockholders, and their respective affiliates, holding approximately % of the voting power of our outstanding capital stock. Prior to any sales of shares of Class A common stock, the registered stockholders who hold Class B common stock must convert their shares of Class B common stock into shares of Class A common stock.
No public market for our Class A common stock currently exists. However, our shares of Class B common stock have a history of trading in private transactions. Based on information available to us, the low and high sales price per share of Class B common stock for such private transactions during the period from January 1, 2021 through , 2021 was $ . For more information, see the section titled “Sale Price History of our Capital Stock.” Our recent trading prices of Class B common stock in private transactions may have little or no relation to the opening public price or the subsequent trading price of our shares of Class A common stock on the New York Stock Exchange. Further, the listing of our Class A common stock on the New York Stock Exchange without underwriters is a novel method for commencing public trading in shares of our Class A common stock, and consequently, the trading volume and price of shares of our Class A common stock may be more volatile than if shares of our Class A common stock were initially listed in connection with an underwritten initial public offering.
We intend to apply to list our Class A common stock on the New York Stock Exchange under the symbol “ZIP.” We expect our Class A common stock to begin trading on or about , 2021.
We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, we have elected to comply with certain reduced reporting requirements for this prospectus and may elect to do so in future filings.
See the section titled “Risk Factors” beginning on page 23 to read about factors you should consider before buying shares of our Class A common stock.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
, 2021
TABLE OF CONTENTS
You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission, or SEC. Neither we nor the registered stockholders have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. Neither we nor the registered stockholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The registered stockholders will offer to sell, and seek offers to buy, shares of their Class A common stock only in jurisdictions where it is lawful to do so. 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 Class A common stock. Our business, financial condition, results of operations, and prospects may have changed since that date.
Through and including , 2021 (the 25th day after the listing date of our Class A common stock), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.
For investors outside of the United States: Neither we nor any of the registered stockholders have done anything that would permit possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of Class A common stock by the registered stockholders and the distribution of this prospectus outside of the United States.
ABOUT THIS PROSPECTUS
This prospectus is a part of a registration statement on Form S-1 that we filed with the SEC using a “shelf” registration or continuous offering process. Under this shelf process, the registered stockholders may, from time to time, sell the Class A common stock covered by this prospectus in the manner described in the section titled “Plan of Distribution.” Additionally, we may provide a prospectus supplement to add information to, or update or change information contained in, this prospectus, including the section titled “Plan of Distribution.” You may obtain this information without charge by following the instructions under the section titled “Where You Can Find Additional Information” appearing elsewhere in this prospectus. You should read this prospectus and any prospectus supplement before deciding to invest in our Class A common stock.
Except as otherwise indicated, all information in this prospectus assumes:
•the amendment of our amended and restated certificate of incorporation on April 22, 2021 to redesignate our outstanding common stock as Class B common stock and create a new class of Class A common stock;
•the conversion of 2,271,437 shares of our Series A convertible preferred stock and 6,030,706 shares of our Series B convertible preferred stock outstanding as of December 31, 2020 into 24,202,202 shares of our Class B common stock, the conversion of which will occur upon the effectiveness of the registration statement of which this prospectus forms a part;
•the conversion of our outstanding convertible promissory notes and interest due June 2023 into 3,055,007 shares of Class B common stock, the conversion of which will occur immediately following the first trading day of our Class A common stock on the New York Stock Exchange, assuming a conversion price of $8.2909 per share (which is the maximum price per share at which the convertible promissory notes are convertible by their terms, as further described within the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Convertible Notes with Related Parties”) and conversion as of December 31, 2020;
•the filing and effectiveness of our amended and restated certificate of incorporation and adoption of our amended and restated bylaws, each of which will occur in connection with the effectiveness of the registration statement of which this prospectus forms a part;
•the vesting and settlement of 1,225,890 restricted stock units, or RSUs, into the same number of shares of Class B common stock, for which RSUs the service-based vesting condition was satisfied as of December 31, 2020 and for which our board of directors has waived the liquidity event-based vesting condition effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022, as if our board of directors had waived the liquidity event-based condition and such RSUs settled as of December 31, 2020; and
•no exercise of outstanding options or settlement of additional outstanding RSUs after December 31, 2020.
GLOSSARY OF TERMS USED IN THIS PROSPECTUS
Throughout this prospectus, we use a number of key terms and provide a number of key operating metrics used by management. These key operating metrics are discussed in more detail in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Our Business Model—Key Operating Metrics and Non-GAAP Financial Measures.” We define these terms as follows:
“Active Job Seeker” means a job seeker who, within a specified period, takes one or more of the following actions: (1) makes at least one visit to a ZipRecruiter-hosted site, (2) launches a ZipRecruiter job seeker mobile application, or (3) opens a ZipRecruiter-hosted engagement email. For purposes of counting Active Job Seekers, we count only unique users who are registered with ZipRecruiter as job seekers and who have previously visited a ZipRecruiter-hosted site at least once. Activity by users not registered with ZipRecruiter, registered users who are logged out of their job seeker account, or users who have opened an email alert generated by sign-ups with a ZipRecruiter partner will not contribute toward the Active Job Seeker metric.
“ATS” means applicant tracking system, which refers to the software platform in which hiring teams can review, rate and ultimately decide which candidate to hire.
“Average Number of Days Job Stays Posted” means the aggregate number of days jobs have been posted by employers in our marketplace divided by the number of jobs posted during a particular period, excluding jobs having a duration of greater than 90 days to eliminate “ever-green” jobs that remain open to source multiple job candidates.
“Cohort” means Paid Employers acquired during a particular year.
“Employer Acquisition Expense” means our marketing media expenses incurred for advertising directed toward employers, plus salary, bonus and commission expenses for our customer acquisition sales and marketing teams.
“Great Match” means a designation assigned by ZipRecruiter’s technology to either a job seeker or a job to indicate a high potential fit between a job seeker and a job.
“Job Acquisition Partners” means third-party sites and ATSs who have a relationship with us and from whom we receive jobs for our marketplace.
“Job Distribution Partners” means third-party sites who have a relationship with us and advertise jobs from our marketplace, and includes job boards, newspaper classifieds, search engines, social networks, talent communities and resume services.
“Paid Employer(s)” means any employer(s) (or entities acting on behalf of an employer) on a paying subscription plan or performance marketing campaign for at least one day. Paid Employer(s) excludes employers from our Job Distribution Partners or other indirect channels, employers who are not actively searching for candidates, but otherwise have access to previously posted jobs, and employers on free trial.
“Payback Period” means the number of months, beginning in January of the Cohort’s initial calendar year, required to generate enough cumulative revenue to recover the Employer Acquisition Expense incurred in the Cohort’s initial calendar year.
“Quarterly Paid Employers” means, with respect to any fiscal quarter, the count of Paid Employers during such fiscal quarter.
“Revenue per Paid Employer” means the total Company revenue in a particular period divided by the count of Paid Employers in the same period.
“Thumbs Up Rate” means the percentage of all Great Match applicants receiving a rating who received “thumbs up,” or a positive rating, by a Paid Employer.
PROSPECTUS SUMMARY
This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our Class A common stock. You should carefully read this prospectus in its entirety before investing in our Class A common stock, including the sections titled “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the accompanying notes, provided elsewhere in this prospectus. Some of the statements in this prospectus constitute forward-looking statements. See the section titled “Special Note Regarding Forward-Looking Statements.” Unless the context otherwise requires, the terms “ZipRecruiter,” “the company,” “we,” “us,” and “our” in this prospectus refer to ZipRecruiter, Inc. and our consolidated subsidiaries. Our fiscal year ends December 31.
ZIPRECRUITER, INC.
Before we begin, we first want to recognize the impact of the COVID-19 pandemic. The toll on the health, safety, economic security and emotional well-being of the global community is ongoing and will take years to fully appreciate. Amidst all the stories of the true heroes who have helped manage through the pandemic and those who will bring the pandemic to its end, we feel incredibly grateful and fortunate to tell our story, about a growing business doing our part to help power the economic recovery to come.
Businesses and people need to get back to work after the pandemic. We are committed to helping in that great and noble effort.
Overview
Our Mission. To actively connect people to their next great opportunity.
The Problem. Twenty years after moving online, the job market remains painfully inefficient. Job seekers are required to navigate on their own in order to find the right jobs to apply to, usually across multiple sites, and without effective tools for monitoring new opportunities. Employers in turn are overwhelmed by the complexity of modern recruiting given the abundance of job boards, search engines, and social networks to source talent from. Neither side is an expert at their role. Neither side enjoys the process.
Our Business. We founded ZipRecruiter to simplify the job market for both job seekers and employers. Unlike traditional online job sites, ZipRecruiter works like a matchmaker curating job opportunities for job seekers, and candidates for employers. Since the founding of our company in 2010, over 2.8 million businesses and 110 million job seekers have come to ZipRecruiter for their hiring and job search needs.
Creating Value for Job Seekers. For job seekers across all industries and levels of seniority, we operate like a dedicated recruiter. That means presenting strong fit job opportunities, proactively pitching potential candidates to employers, and providing job seekers with updates on the status of their applications. This makes job seekers feel supported while searching for work. That’s why ZipRecruiter has been the #1 rated job seeker app on iOS and Android for the past four years.1
Creating Value for Employers. For employers, we focus on building technology to rapidly deliver quality candidates to companies of all sizes and across all industries. Our algorithms alert the best job seekers in our marketplace when a job goes live. Employers posting jobs often get their first quality candidate before they can get up from their chair. 80% of employers posting in our marketplace receive a
1 Based on ratings information for the Google Play Store and Apple App Store from the AppFollow platform during the period of March 2017 to March 2021 for the job seeker apps of ZipRecruiter, CareerBuilder, Craigslist, Glassdoor, Indeed, LinkedIn, and Monster.
quality candidate within the first 24 hours. That’s why ZipRecruiter is the #1 rated employment marketplace by G22.
Unique Data and Artificial Intelligence Provide Better Outcomes for Employers and Job Seekers. With a relevant data pipeline created from billions of interactions between job seekers and employers, we are uniquely positioned to harness that data to fuel the advanced artificial intelligence behind our matching, recommendation and marketplace optimization capabilities. Through our deep learning-based natural language processing, we understand job seekers’ and employers’ nuanced needs. We model and analyze clicks, applications, hiring signals, and numerous other interactions to improve outcomes for all participants in our marketplace. Our advanced technology stack processes the data generated by our highly engaged user base to continuously improve our matchmaking. Our climbing satisfaction metrics on both sides of our marketplace over the past few years give us confidence that these technology investments are yielding results for employers and job seekers alike.
Accelerating Network Effects. Increasing the number of jobs in our marketplace attracts more job seekers. A greater number of job seekers attracts more employers who in turn post more job opportunities in our marketplace. These natural, self-perpetuating network effects increase our data and thereby accelerate the rate at which our matching technology gets smarter over time.
Compelling Financial Results. The combination of the scale on both sides of our marketplace, our efficient go-to-market strategy, and intelligent use of technology has resulted in compelling financial results. For the year ended December 31, 2019, our revenue was $429.6 million. For the year ended December 31, 2019, we generated a net loss of $6.3 million and Adjusted EBITDA of $9.4 million. For the year ended December 31, 2020, our revenue was $418.1 million. For the year ended December 31, 2020, we generated a net income of $86.0 million and Adjusted EBITDA of $80.1 million. Adjusted EBITDA is a financial measure not presented in accordance with generally accepted accounting principles, or GAAP. For a definition of Adjusted EBITDA, an explanation of our management’s use of this measure and a reconciliation of net income (loss) to Adjusted EBITDA, see the section titled “Summary Consolidated Financial and Operating Data.”
2 Based on G2 satisfaction ratings as set forth in G2, Best Job Boards Software, https://www.g2.com/categories/job-boards?utf8=%E2%9C%93&order=top_shelf (last visited January 25, 2021).
What We Do
We enable work by connecting job seekers and employers in our marketplace. Since the founding of our company in 2010, over 2.8 million businesses and 110 million job seekers have come to ZipRecruiter for their hiring and job search needs.
How We Work for Employers
ZipRecruiter is focused on meaningfully reducing the time associated with making a new hire. Our technology delivers high-quality matches immediately after a job goes live and provides tools to streamline the vetting process.
Quality Candidates Fast
•Job distribution. Jobs posted with ZipRecruiter are distributed to well over 1,000 sites managed by our Job Distribution Partners. The diversity and depth of our partner network enables employers to reach an especially broad job seeker audience.
•Instant alerts to qualified potential candidates. When employers post a job, ZipRecruiter’s matching technology identifies and sends an alert to the best job seekers in our marketplace.
•Direct recruitment messages from the employer. Immediately after a job is posted, ZipRecruiter’s matching technology presents the employer with a list of potential Great Match candidates in the market. The employer can then, with a single click, personally invite the most qualified potential candidates to apply.
•Matching that learns. When an employer gives an applicant a “thumbs up” rating, our technology searches for other job seekers with similar profiles to that candidate and proactively encourages them to apply.
•Access to an expansive database of job seekers. We provide employers with access to 14 million monthly Active Job Seekers with broad skill sets and a range of experiences.
Efficient Candidate Vetting
•All the applicants in one place. For employers who do not already have an established process to manage hiring, job applicants from all these different sites are captured inside the ZipRecruiter ATS.
•Great Match sorting. Our technology sorts applicants identified as a Great Match to the top of the list to help hiring managers avoid missing high-quality candidates.
•In-demand candidate alerts. We apply an “Act Fast!” label to notify employers when their candidates have received interest from other employers, encouraging them to reach out quickly. In a tight, competitive market for top-quality talent, these notifications prompt hiring managers to move quickly to avoid losing out on a potentially great hire.
Flexible Pricing
•Flexible pricing based on customer needs. We provide a variety of pricing plans to best suit an employer’s specific needs, including flat rate pricing on terms ranging from a day to a year, as well as performance-based pricing for employers that run sophisticated recruitment marketing campaigns.
How We Work for Job Seekers
We make finding work easier.
Process Efficiency
•Search millions of jobs in one place. ZipRecruiter provides job seekers with access to millions of jobs from all over the internet.
•Simple, one-click applications. On ZipRecruiter, job seekers create a profile and can then apply for opportunities with a single click. Our one-click application works across both our marketplace and our Job Distribution Partners to remove barriers between a job seeker and their next opportunity.
•Job application tracking. Job seekers apply to numerous opportunities throughout the course of their search. Our simple, user-friendly dashboard aggregates their application history so job seekers can track opportunities.
Personalized Recruiter Assistance
•Pitched to employers as a potential candidate. After a new job is posted, ZipRecruiter’s matching technology immediately presents potential Great Match job seekers to the employer for consideration. Employers can then directly invite the job seekers they like best to apply.
•“Phil,” your personal (automated) recruiter. Our automated recruiter “Phil” curates and presents individual opportunities to job seekers for which they are a Great Match. Phil engages in a human-feeling, positive, personalized dialogue with candidates, inviting them to apply for new open positions.
•Job alerts. ZipRecruiter delivers a digest of relevant new opportunities from across the web on a daily basis to job seekers, enabling them to monitor the full breadth of our marketplace offerings.
•Match scoring. Match scores highlight best-fit opportunities for job seekers. This allows job seekers to see how well their skills match with available jobs so they can focus their energy on the right opportunities.
•Application updates. Our technology notifies job seekers when an employer either views their application or gives them a “thumbs up” rating. This addresses the #1 complaint we hear from job seekers: applying to a job and then hearing nothing back.
The Future of Work is at an Inflection Point
Today, more than 20% of working Americans, or over 40 million individuals, change jobs every year.3 Additionally, more than half of those currently working employees are either actively searching for new jobs or passively exploring new career opportunities.4
Employees are changing jobs faster. Median tenure of Millennials at a single organization is now only 2.8 years, down from a median of 10 years for the Baby Boomer generation of employees.5 Recruiting is becoming an “always on” reality for an increasing percentage of businesses. Over 75% of employers report using an online job board in 2020.6
We anticipate these trends will continue for the foreseeable future, with tens of millions of job seekers continuing to seek out tens of millions of new jobs each year. As has been the case since our founding in 2010, we believe we will continue to grow the share of that job seeking activity that we enable. But more recent developments, especially those driven by the global pandemic, are also introducing new disruptive forces into the traditional work paradigm.
COVID-19 dramatically suppressed the job market and put an end to a 10-year run of job growth.7 Multiple high volume hiring categories like hospitality, tourism, and live events have gone dormant. Further, in spite of there having been over 20 million people unemployed or under-employed due to the pandemic, according to our internal data, job seekers are currently searching for work in our marketplace at 20% below pre-pandemic levels.
We believe distribution of vaccines for COVID-19 will drive a broad-based and extended recovery in the hiring market on both sides of our marketplace. We further believe that the future of work, and by extension recruiting, has been irreversibly changed.
The percentage of workers around the world that permanently work from home is expected to double in 2021 as employers and workers alike have realized productivity increases during the COVID-19 pandemic.8 Removing a geographic constraint from the definition of a qualified applicant will be a significant change for those executing talent searches. For most new work from home jobs, the qualified candidate pool will increase by orders of magnitude. Trying to select from the hundreds, or even thousands, of candidates resulting from a nationwide job posting would be painfully inefficient for employers.
We believe this dramatic increase in available quality applicants per job opening will tilt employers towards tools with the ability to identify and selectively recruit talent from across the nation. Our advanced matching and existing process tools for employers are well suited to meet the challenges of this dynamic new opportunity.
We believe that the confluence of all the trends above will provide a significant tailwind for our faster, smarter marketplace.
Opportunities to Meet the Challenges Employers Face
Companies have been searching for candidates on the internet for decades, but unlike the vast majority of other internet-enabled services, such as shopping, entertainment, or booking travel, the task of
3 U.S. Bureau of Labor Statistics, Employee Tenure Summary - Employee Tenure in 2020, September 22, 2020 (20% - 24% of Americans change jobs every year). Referred to hereinafter as the U.S. BOL Employee Tenure Summary.
4 Gallup Inc., State of the American Workplace, 2017.
5 U.S. BOL Employee Tenure Summary.
6 ZipRecruiter Brand Awareness Survey, 2020. Referred to hereinafter as the Brand Awareness Survey. For more information about the Brand Awareness Survey, see the section titled “Market and Industry Data.”
7 U.S. Bureau of Labor Statistics, Total Nonfarm Employment, Seasonally Adjusted.
8 Thomson Reuters Corporation, Permanently remote workers seen doubling in 2021 due to pandemic productivity: survey, October 2020.
finding the right candidate remains complicated. Employers face a series of challenges that make the process of selecting the best candidate frustrating and inefficient.
•Access to all job seekers. Employers want to feel confident they have reached a critical mass of potential candidates.
•Surfacing highly qualified applicants. Choosing the right candidate to hire starts with evaluating all applicants to assess if they are a potential Great Match for the role.
•Quickly engaging potential Great Match candidates. The best candidates are in high demand and engaging those candidates before the window of opportunity closes is critical.
Opportunities to Meet the Challenges Job Seekers Face
If there is a job seeker out there who loves the traditional job search process, we have not found them yet. Searching for a job is hard and time consuming. We believe technology designed for job seekers can uncover more great opportunities with less effort and rejection.
•Access to all jobs. Job seekers often need to search broadly to find the right position, replicating the same search across multiple sites to find the opportunities for which they are a good fit.
•Surfacing those jobs that could be a Great Match. Amidst the millions of jobs that are searchable, finding those that fit best is cumbersome.
•Providing feedback on where a job application stands. Most job seekers who apply to a job never hear anything back from the employer.
Our Strengths
Transforming how people find work requires a combination of world-class skills. Our core competitive advantages that have been critical to our success include:
•Large and unique set of jobs. With over 90 million job postings available for matching in 2020 alone9, technology brings both jobs listed directly in our marketplace as well as those from our Job Acquisition Partners together. ZipRecruiter was the canonical source for millions of these jobs, which means a job seeker’s search is incomplete unless they access our marketplace.
•Engaged job seeker community. Over 36 million Active Job Seekers engaged in the ZipRecruiter marketplace in 2020. Those job seekers come to us directly and through our network of well over 1,000 sites managed by our Job Distribution Partners.
•Powerful artificial intelligence powered technology. Our technology captures insights from billions of user interactions facilitated by our marketplace, driving meaningful increases in the quality of matches we can enable over time.
•Designed for simplicity and speed. We thrive on taking unnecessarily complex processes and simplifying them. This product design philosophy permeates our entire company. We focus on continually making ZipRecruiter faster and simpler for employers and job seekers to use.
•Metrics-driven culture. We are a metrics and data-driven company. We are disciplined about setting quantitative operating goals and then finding innovative ways to achieve those goals.
•Powerful network effects. The scale of matching activity in our marketplace provides us with a unique and growing data set consisting of billions of signals which help drive superior matching.
9 According to internal data tracking the number of unique job postings, based on hiring company, job title, and location, available on our marketplace during 2020.
More jobs, more job seekers and better matching technology over time create more high-velocity hiring activity in our marketplace, fueling a self-perpetuating cycle of network effects.
•Our brand. Since our founding, we have invested over $600 million in building the ZipRecruiter brand. We are proud that our investment in our brand has led to 82% aided brand awareness among U.S. employers10.
Our Growth Strategy
Our strategy is to use technology to consistently grow our marketplace in three key areas: more jobs, more job seekers and better matching. These three growth vectors will both directly grow our business and also strengthen the network effects that serve as a competitive advantage. Several specific growth initiatives fit well into our overall strategy:
•Increasing the number of employers in our marketplace. We believe the marketplace we have built serves employers of all sizes, regions and industries. We see an opportunity to continue to meaningfully grow our employer footprint, from small businesses to large global enterprises.
•Increasing the number of job seekers in our marketplace. We believe we can continue to drive a greater volume of Active Job Seekers to our marketplace as well as innovate ways to engage job seekers that are more passively open to evaluating new opportunities.
•Strengthening our artificial intelligence powered technology. Our artificial intelligence and matching algorithms continually improve as we ingest incremental data. The signals across our marketplace train our recommendations, increasing utility for both job seekers and employers. Despite our progress, we believe there remains a significant opportunity to continue to further improve our matching with ongoing investment in technology and an increase in the number and quality of data signals we collect over time.
•Continuing to optimize performance-based pricing. Employers’ willingness to pay for recruitment varies by company and by each job opening. We believe we have multiple pricing optimization opportunities that will provide more flexibility to employers of different sizes.
•Expanding our global footprint. We believe our strengths as a company, especially our purpose-built technology for bringing job seekers and employers together, can be leveraged in additional markets as we continue to expand our geographic footprint. Many of our over 1,000 Job Distribution Partners already operate in other markets which will accelerate our ability to expand internationally.
•Building an enduring brand. We plan to increase our brand investment to ensure ZipRecruiter further develops as a category-defining, enduring brand for employers and job seekers alike.
Summary of Risks Factors
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. Some of these risks include:
•We face intense competition and could lose market share to our competitors, which could adversely affect our business, operating results, and financial condition.
•COVID-19 has caused significant uncertainty and disruption in our business operations. The ongoing effects of the COVID-19 pandemic continue to be unpredictable, and may have an adverse effect on our business, results of operations, and financial condition.
10 Brand Awareness Survey. For more information about the Brand Awareness Survey, see the section titled “Market and Industry Data.”
•Our business is significantly affected by fluctuations in general economic conditions, which have been adversely affected by the COVID-19 pandemic. There is risk that any economic recovery may be short-lived and uneven, and may not result in increased demand for our services.
•Our marketplace functions on software that is highly technical and complex, and if it fails to perform properly, our reputation could be adversely affected, our market share could decline and we could be subject to liability claims.
•Our future success depends in part on employers purchasing and renewing subscriptions and performance-based services from us. Any decline in our user renewals or performance-based services could harm our future operating results.
•We have experienced growth in recent periods and expect to continue to invest in our growth for the foreseeable future. If we cannot manage our growth effectively, our business, operating results, and financial condition could be adversely affected.
•Significant segments of the market for job advertisements services may have hiring needs and service preferences that are subject to greater volatility than the overall economy.
•Our efforts and ability to sell to a broad mix of businesses could adversely affect our operating results in a given period.
•Our business depends largely on our ability to attract and retain talented employees, including senior management and key personnel. If we lose the services of Ian Siegel, our Chief Executive Officer, or other members of our senior management team, we may not be able to execute on our business strategy.
•If internet search engines’ methodologies or other channels that we use to direct traffic to our website are modified to our disadvantage, or our search result page rankings decline for other reasons, our user growth could decline.
•Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business, which makes our future results difficult to predict.
•Our success depends on our ability to maintain the value and reputation of the ZipRecruiter brand.
•An active, liquid, and orderly market for our Class A common stock may not develop or be sustained. You may be unable to sell your shares of Class A common stock at or above the price at which you purchased them.
•The trading price of our Class A common stock, upon listing on the New York Stock Exchange, may have little or no relationship to the historical sales prices of our capital stock in private transactions, and such private transactions have been limited.
•None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, the sales or distribution of substantial amounts of our Class A common stock, or the perception that such sales or distributions might occur, could cause the market price of our Class A common stock to decline.
•Market volatility may affect the value of an investment in our Class A common stock and could subject us to litigation.
•The dual class structure of our common stock will have the effect of concentrating voting control with those stockholders who held our capital stock prior to our listing, including our directors, executive officers, and 5% stockholders who will hold in the aggregate 86.7% of the voting power of our capital stock following the registration and listing of our Class A common stock on the New
York Stock Exchange, which will limit or preclude your ability to influence corporate matters, including the election of directors and the approval of any change of control transaction.
•The registration and listing of our Class A common stock differs significantly from an underwritten initial public offering.
Corporate Information
We were incorporated in 2010 as ZipRecruiter, Inc., a Delaware corporation. In March 2020, in response to the global COVID-19 pandemic, a vast majority of our employees began to work remotely rather than on-site. Our principal executive offices are located at 604 Arizona Avenue, Santa Monica, California 90401, and our telephone number is (877) 252-1062. Our website address is www.ziprecruiter.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into, and is not a part of, this prospectus. Investors should not rely on any such information in deciding whether to purchase our Class A common stock.
ZipRecruiter, the ZipRecruiter logo, and other registered or common law trade names, trademarks, or service marks of ZipRecruiter appearing in this prospectus are the property of ZipRecruiter. This prospectus contains additional trade names, trademarks, and service marks of other companies that are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies. Solely for convenience, our trademarks and tradenames referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor, to these trademarks and tradenames.
Channels for Disclosure of Information
Following the effectiveness of the registration statement of which this prospectus forms a part, we intend to announce material information to the public through filings with the SEC, the investor relations page on our website (www.ziprecruiter.com), press releases, public conference calls, public webcasts, our Twitter feed (@ZipRecruiter), our Facebook page, and our LinkedIn page.
The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media, and others to follow the channels listed above and to review the information disclosed through such channels.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
Implications of Being an Emerging Growth Company
As a company with less than $1.07 billion in revenue during our most recently completed fiscal year, we qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable, in general, to public companies that are not emerging growth companies. These provisions include, but are not limited to:
•being permitted to present only two years of audited financial statements and only two years of related Management’s Discussion and Analysis of Financial Condition and Results of Operations;
•an exemption from compliance with the auditor attestation requirement on the effectiveness of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002;
•an exemption from the requirement that critical audit matters be discussed in our independent auditor’s reports on our audited financial statements or any other requirements that may be
adopted by the Public Company Accounting Oversight Board unless the SEC determines that the application of such requirements to emerging growth companies is in the public interest;
•reduced disclosure obligations about our executive compensation arrangements;
•exemptions from the requirements to obtain a non-binding advisory vote on executive compensation or a stockholder approval of any golden parachute arrangements; and
•extended transition periods for complying with new or revised accounting standards.
We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (3) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (4) the last day of the fiscal year ending after the fifth anniversary of the date of effectiveness of the registration statement of which this prospectus forms a part.
We may take advantage of these exemptions until such time that we are no longer an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. Further, pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our operating results and financial statements may not be comparable to the operating results and financial statements of other companies that have adopted the new or revised accounting standards. It is possible that some investors will find our Class A common stock less attractive as a result, which may result in a less active trading market for our Class A common stock and higher volatility in the stock price of our Class A common stock.
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following tables summarize our consolidated financial and operating data. The summary consolidated statements of operations data for the years ended December 31, 2019 and 2020 and the summary consolidated balance sheet data as of December 31, 2019 and 2020 have been derived from our audited consolidated financial statements included elsewhere in this prospectus.
You should read the following summary consolidated financial and operating data together with the sections titled “Selected Consolidated Financial and Operating Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the related notes included elsewhere in this prospectus. The summary consolidated financial and operating data in this section are not intended to replace our audited consolidated financial statements and the related notes and are qualified in their entirety by our audited consolidated financial statements and the related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of our results in any future period.
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2019
|
|
2020
|
|
|
(in thousands, except per share data)
|
|
Revenue
|
$
|
429,559
|
|
|
$
|
418,142
|
|
|
Cost of revenue(1)
|
54,778
|
|
|
54,163
|
|
|
Gross profit
|
374,781
|
|
|
363,979
|
|
|
Operating expenses:
|
|
|
|
|
Sales and marketing(1)
|
276,197
|
|
|
191,141
|
|
|
Research and development(1)
|
65,410
|
|
|
69,408
|
|
|
General and administrative(1)
|
39,492
|
|
|
38,998
|
|
|
Total operating expenses
|
381,099
|
|
|
299,547
|
|
|
Income (loss) from operations
|
(6,318)
|
|
|
64,432
|
|
|
Other income (expense):
|
|
|
|
|
Interest expense
|
(575)
|
|
|
(1,037)
|
|
|
Sublease income
|
1,170
|
|
|
1,051
|
|
|
Other expense, net
|
(38)
|
|
|
(109)
|
|
|
Total other income (expense), net
|
557
|
|
|
(95)
|
|
|
Income (loss) before income taxes
|
(5,761)
|
|
|
64,337
|
|
|
Income tax expense (benefit)
|
588
|
|
|
(21,711)
|
|
|
Net income (loss)
|
(6,349)
|
|
|
86,048
|
|
|
Less: Accretion of redeemable convertible preferred stock
|
(3,722)
|
|
|
(3,883)
|
|
|
Less: Undistributed earnings attributable to participating securities
|
—
|
|
|
(19,148)
|
|
|
Net income (loss) attributable to common stockholders
|
$
|
(10,071)
|
|
|
$
|
63,017
|
|
|
Net income (loss) per share(2)
|
|
|
|
|
Basic
|
$
|
(0.13)
|
|
|
$
|
0.79
|
|
|
Diluted
|
$
|
(0.13)
|
|
|
$
|
0.70
|
|
|
Weighted-average shares used in computing net income (loss) per share(2)
|
|
|
|
|
Basic
|
79,337
|
|
|
79,651
|
|
|
Diluted
|
79,337
|
|
|
94,156
|
|
|
Pro forma net income per share (unaudited)(2)
|
|
|
|
|
Basic
|
|
|
|
|
Diluted
|
|
|
|
|
Weighted-average shares used in computing pro forma net income per share (unaudited)(2)
|
|
|
|
|
Basic
|
|
|
106,085
|
|
|
Diluted
|
|
|
118,591
|
|
|
Other Financial Information:
|
|
|
|
|
Adjusted EBITDA (3)
|
$
|
9,366
|
|
|
$
|
80,133
|
|
________________
(1)Includes stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2019
|
|
2020
|
|
|
(in thousands)
|
|
Cost of revenue
|
$
|
119
|
|
|
$
|
73
|
|
|
Sales and marketing
|
1,031
|
|
|
704
|
|
|
Research and development
|
3,159
|
|
|
3,050
|
|
|
General and administrative
|
2,431
|
|
|
1,925
|
|
|
Total stock-based compensation
|
$
|
6,740
|
|
|
$
|
5,752
|
|
(2)See Note 3 in our audited consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate basic and diluted net income (loss) per share, pro forma net income per share, and the weighted-average number of shares used in the computation of the per share amounts.
(3)Adjusted EBITDA is not a measure of our financial performance under GAAP and should not be considered as an alternative to net income (loss), income (loss) from operations, or any other measures derived in accordance with GAAP. For a definition of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA, see "Non-GAAP Financial Measures."
Selected Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2019
|
|
2020
|
|
2020
|
|
|
Actual
|
|
Actual
|
|
Pro Forma(1)
|
|
|
(in thousands)
|
|
Cash
|
$
|
35,529
|
|
|
$
|
114,539
|
|
|
|
|
Working capital(2)
|
(5,518)
|
|
|
73,309
|
|
|
|
|
Total assets
|
117,724
|
|
|
212,129
|
|
|
|
|
Long-term borrowing
|
10,000
|
|
|
—
|
|
|
|
|
Convertible notes and accrued interest with related parties
|
—
|
|
|
25,371
|
|
|
|
|
Total liabilities
|
107,062
|
|
|
125,569
|
|
|
|
|
Redeemable convertible preferred stock
|
132,973
|
|
|
136,856
|
|
|
|
|
Total stockholders' equity (deficit)
|
$
|
(122,311)
|
|
|
$
|
(50,296)
|
|
|
|
______________
(1)The pro forma column reflects (a) the redesignation of 78,088,075 shares of our outstanding common stock into 78,088,075 shares of Class B common stock outstanding as of December 31, 2020 as if such redesignation occurred on December 31, 2020, (b) the conversion of 2,271,437 shares of our Series A convertible preferred stock and 6,030,706 shares of our Series B convertible preferred stock outstanding as of December 31, 2020 into 24,202,202 shares of our Class B common stock as if such conversion occurred on December 31, 2020, (c) the conversion of the principal amount of the convertible notes and accrued interest thereon with related parties outstanding as of December 31, 2020 into 3,055,007 shares of Class B common stock at a conversion price of $8.2909 per share (which is the maximum price per share at which the convertible notes are convertible by their terms, as further described within the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Convertible Notes with Related Parties”) as if such conversion occurred on December 31, 2020; provided that to the extent that the volume-weighted average price on the first day of trading following our Direct Listing is less than $11.05 per share, then the convertible notes and contractual accrued interest will convert at 75% of the volume weighted average price, which would result in the issuance of additional shares of Class B common stock upon conversion, (d) vesting and settlement of 1,225,890 RSUs, into the same number of shares of Class B common stock, for which the service-based vesting condition was satisfied as of December 31, 2020 and for which RSUs our board of directors has waived the liquidity event-based vesting condition effective as of the earlier of first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022 as if our board of directors had waived the liquidity event-based condition and such RSUs settled as of December 31, 2020, (e) stock-based compensation expense of $30.7 million associated with RSUs for which the service-based vesting condition was satisfied as of December 31, 2020 and for which our board of directors has waived the liquidity event-based vesting condition effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022, as if our board of directors had waived the liquidity event-based condition and such RSUs settled as of December 31, 2020, based on the estimated fair value of the RSUs on the date that the liquidity event-based event condition was waived and which stock-based compensation expense is reflected as an increase to additional paid-in capital and accumulated deficit, (f) a cash payment of $10.0 million to Ian Siegel, our chief executive officer, as further described in the section titled “Executive Compensation—CEO Letter Agreement” which is reflected as a reduction in cash, working capital and total assets and a
corresponding increase to stockholders’ deficit and (g) approximately $ in transaction expenses related to the listing of our Class A Common Stock on the New York Stock Exchange.
(2)Working capital is defined as current assets less current liabilities. See our consolidated financial statements and the accompanying notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.
Key Operating Metrics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, 2019
|
|
Three Months Ended
December 31, 2020
|
|
Quarterly Paid Employers(1)
|
102,541
|
|
|
89,636
|
|
|
Revenue per Paid Employer(1)
|
$
|
1,098
|
|
|
$
|
1,276
|
|
____________
(1)See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics and Non-GAAP Financial Measures” included elsewhere in this prospectus for definitions of these metrics.
Non-GAAP Financial Measures
We collect and analyze operating and financial data to evaluate the health of our business and assess our performance. In addition to revenue, net income (loss), income (loss) from operations, and other results under GAAP, we use Adjusted EBITDA and Adjusted EBITDA margin to evaluate our business. We have included these non-GAAP financial measures in this prospectus because they are key measures used by our management to evaluate our operating performance. Accordingly, we believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors. Our calculation of these non-GAAP financial measures may differ from similarly-titled non-GAAP measures, if any, reported by our peer companies. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
We define Adjusted EBITDA as our net income (loss) before total other income (expense), net, income tax expense (benefit) and depreciation and amortization, adjusted to eliminate stock-based compensation expense. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenue for the same period.
We believe Adjusted EBITDA and Adjusted EBITDA margin are helpful to investors, analysts and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, these measures are frequently used by analysts, investors and other interested parties to evaluate and assess performance.
The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2019
|
|
2020
|
|
|
(in thousands, except percentages)
|
|
GAAP net income (loss)
|
$
|
(6,349)
|
|
|
$
|
86,048
|
|
|
Stock-based compensation
|
6,740
|
|
|
5,752
|
|
|
Depreciation and amortization
|
8,944
|
|
|
9,949
|
|
|
Total other (income) expense, net
|
(557)
|
|
|
95
|
|
|
Income tax expense (benefit)
|
588
|
|
|
(21,711)
|
|
|
Adjusted EBITDA
|
$
|
9,366
|
|
|
$
|
80,133
|
|
|
Adjusted EBITDA margin
|
2
|
%
|
|
19
|
%
|
RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, before making a decision to invest in our Class A common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. If any of the following risks occur, our business, financial condition, operating results, and future prospects could be materially and adversely affected. In that event, the price of our Class A common stock could decline, and you could lose part or all of your investment.
Risk Related to Our Business
Operational Risks
We face intense competition and could lose market share to our competitors, which could adversely affect our business, operating results, and financial condition.
We face intense competition from many well-established online job sites such as CareerBuilder, Craigslist, Glassdoor, Indeed, LinkedIn and Monster and may face additional competition from newer entrants such as Google or Facebook. Many of our existing and potential competitors are considerably larger or more established than we are and have larger work forces and more substantial marketing and financial resources. Price competition for job marketplaces such as ours is likely to remain high, which could limit our ability to maintain or increase our market share, revenue and/or profitability.
Many of our larger competitors have long-standing relationships or access to employers, including our Paid Employers, as well as those whom we may wish to pursue. Some employers may be hesitant to use a new platform and prefer to upgrade products offered by these incumbent platforms for reasons that include price, quality, sophistication, familiarity, and global presence. These platforms could offer competing products on a standalone basis at a low price or bundled as part of a larger product sale.
Many of our competitors are able to devote greater resources to the development, promotion, sale, and support of their products and services. Furthermore, our current or potential competitors may be acquired by third parties with greater available resources and the ability to initiate or withstand substantial price competition. Our competitors may also establish cooperative relationships among themselves or with third parties to enhance their product offerings or resources. If our competitors’ products, platforms, services or technologies maintain or achieve greater market acceptance than ours, if they are successful in bringing their products or services to market earlier than ours, or if their products, platforms or services are more technologically capable than ours, then our revenue could be adversely affected. Also, some of our competitors may offer their products and services at a lower price. If we cannot optimize pricing, our operating results may be negatively affected. Pricing pressures and increased competition could result in reduced sales, reduced margins, losses or a failure to maintain or improve our competitive market position, any of which could adversely affect our business.
The number of employers distributing their job posting service purchases among a broader group of competitors may increase which may make it more difficult to retain or maintain our current share of business with existing Paid Employers. We also face the risk that employers may decide to provide similar services internally or reduce or redirect their efforts to recruit job seekers through online job advertisements. As a result, there can be no assurance that we will not encounter increased competition in the future.
COVID-19 has caused significant uncertainty and disruption in our business operations. The ongoing effects of the COVID-19 pandemic continue to be unpredictable, and may have an adverse effect on our business, results of operations, and financial condition.
COVID-19 has caused significant uncertainty. Public health problems resulting from COVID-19 and precautionary measures instituted by governments and businesses to mitigate its spread, including travel restrictions and quarantines, could continue to contribute to a general economic slowdown, adversely impact our employers and job seekers and other business partners, and disrupt our operations.
As a result of the COVID-19 pandemic, in March 2020, we transitioned our entire staff to a remote working environment, which impacts productivity and our business operations. We have had to expend, and expect to continue to expend, resources to respond to the COVID-19 pandemic, including to develop and implement internal policies and procedures and track changes in laws. The remote working environment may also create increased vulnerability to cybersecurity incidents, including breaches of information systems security, which could damage our reputation and commercial relationships. Changes in our operations in response to COVID-19 or employee illnesses resulting from COVID-19 may also result in inefficiencies or delays, and additional costs related to business continuity initiatives, that cannot be fully mitigated through succession and business continuity planning, employees working remotely or using teleconferencing technologies. Any prolonged diversion of resources may have an adverse effect on our operations. Over time, such remote operations may decrease the cohesiveness of our teams and our ability to maintain our culture, both of which are critical to our success. Additionally, a remote working environment may impede our ability to undertake new business projects, foster a creative environment, and hire and retain team members. Such effects may adversely affect the productivity of our team members and overall operations, which could have a material adverse effect on our business, results of operations, financial condition, and future prospects.
The impact of the ongoing COVID-19 pandemic is severe, widespread, and continues to evolve. The extent to which the COVID-19 pandemic will continue to impact our business will depend on future developments, which are highly uncertain and cannot be predicted at this time, including:
•the duration and spread of the pandemic, including any additional resurgences;
•the timing, distribution and efficacy of COVID-19 vaccines;
•governmental, business, and individuals’ actions taken in response to the pandemic, including business closures and any shelter in-place guidelines;
•the impact of the pandemic on national and global economic activity, unemployment levels, and capital and financial markets, including the possibility of a national or global recession;
•the impact of the pandemic on the financial circumstances and employment needs of our employers and job seekers;
•other business disruptions that affect our workforce; and
•actions taken to contain the pandemic or treat its impact.
To the extent the COVID-19 pandemic or a similar public health threat has an impact on our business, results of operations, and financial condition, it is likely also to have the effect of heightening many of the other risks described in this “Risk Factors” section.
Our business is significantly affected by fluctuations in general economic conditions, which have been adversely affected by the COVID-19 pandemic. There is risk that any economic recovery may be short-lived and uneven, and may not result in increased demand for our services.
Our business depends on the overall demand for labor and on the economic health of current and prospective employers and job seekers that use our marketplace. Demand for recruiting and hiring
services is significantly affected by the general level of economic activity and employment in the United States and the other countries in which we operate. Any significant weakening of the economy in the United States or the global economy, increased unemployment, reduced credit availability, reduced business confidence and activity, decreased government spending, economic uncertainty, financial turmoil affecting the banking system or financial markets, trade wars and higher tariffs, and other adverse economic or market conditions may adversely impact our business and operating results. Significant swings in economic activity historically have had a disproportionately negative impact on hiring activity and related efforts to find candidates. In addition, as a result of the adverse impact of the COVID-19 pandemic on economic activity, many employers have significantly decreased the number of candidates they are hiring, implemented hiring freezes or were forced to cease operations altogether, each of which has resulted in a decrease in the number of job seekers and Paid Employers in our marketplace. We may also experience more pricing pressure during periods of economic downturn.
The COVID-19 pandemic has caused significant volatility in financial markets and has caused what may be an extended global recession. There is a risk that as overall global conditions improve, we could continue to experience declines in all, or in portions, of our business. Recoveries are difficult to predict, and may be short-lived, slow, or uneven, with some regions, or countries within a region, continuing to experience declines or weakness in economic activity while others improve. Differing economic conditions and patterns of economic growth or contraction in the geographical regions in which we operate may affect demand for our marketplace. As global economic conditions improve, we may not experience uniform, or any, increases in demand for our marketplace within the markets where our business is concentrated.
Economic uncertainty may cause some of our current or potential employers to curtail spending in our marketplace and may ultimately result in cost challenges to our operations. These adverse conditions could result in reductions in revenue, increased operating expenses, longer sales cycles, slower adoption of new technologies, and increased competition. We cannot predict the timing, strength, or duration of any economic slowdown or any subsequent recovery generally. There is also risk that when overall global economic conditions are positive, our business could be negatively impacted by a decreased demand for job postings and our services. If general economic conditions significantly deviate from present levels, our business, financial condition, and operating results could be adversely affected.
Substantially all of our revenue is generated by our business operations in the United States. Prior to the recent COVID-19 pandemic, the United States had largely experienced positive economic and employment trends since our founding in 2010 and therefore we do not have a significant operating history in periods of weak economic environments and cannot predict how our business will perform in such periods. Any significant economic downturn in the United States or other countries in which we operate could have a material adverse effect on our business, financial condition and results of operations.
Our marketplace functions on software that is highly technical and complex and if it fails to perform properly, our reputation could be adversely affected, our market share could decline and we could be subject to liability claims.
Our marketplace functions on software that is highly technical and complex and may now or in the future contain undetected errors, bugs, or vulnerabilities. Some errors in our software code may be discovered only after the code has been deployed. Any errors, bugs, or vulnerabilities discovered in our code after deployment, inability to identify the cause or causes of performance problems within an acceptable period of time, or difficulty maintaining and improving the performance of our marketplace could result in damage to our reputation or brand, loss of employers and job seekers, loss of revenue, or liability for damages, any of which could adversely affect our business and results of operations.
As the usage of our marketplace grows, we will need an increasing amount of technical infrastructure, including network capacity and computing power, to continue to operate our marketplace. If we cannot continue to effectively scale and grow our technical infrastructure to accommodate these increased
demands, it may adversely affect our user experience. We also rely on third-party software and infrastructure, including the infrastructure of the internet, to provide our marketplace. Any failure of or disruption to this software and infrastructure could also make our marketplace unavailable to our users.
Our marketplace is constantly changing with new updates, which may contain undetected errors when first introduced or released. Any errors, defects, disruptions in service, or other performance or stability problems with our marketplace, or the insufficiency of our efforts to adequately prevent or timely remedy errors or defects, could result in negative publicity, loss of or delay in market acceptance of our marketplace, loss of competitive position, our inability to timely and accurately maintain our financial records, inaccurate or delayed invoicing of Paid Employers, delay of payment to us, claims by users for losses sustained by them, corrective action taken by gatekeepers of components integral to our marketplace, or investigation and corrective action taken by a regulatory agency. In such an event, we may be required, or may choose, for user relations or other reasons, to expend additional resources to help resolve the issue. Accordingly, any errors, defects, or disruptions in our marketplace could adversely impact our brand and reputation, revenue, and operating results.
Because of the large amount of data that our Paid Employers collect and manage by means of our services, it is possible that failures or errors in our systems could result in data loss or corruption, or cause the information that we or our Paid Employers collect to be incomplete or contain inaccuracies that our Paid Employers regard as significant. Furthermore, the availability or performance of our marketplace could be adversely affected by a number of factors, including users’ inability to access the internet or to send or receive email messages, the failure of our network or software systems, security breaches or variability in user traffic for our services. We may be required to issue credits or refunds for prepaid amounts related to unused services or otherwise be liable to our users for damages they may incur resulting from certain of these events. In addition to potential liability, if we experience interruptions in the availability of our marketplace, our reputation could be adversely affected and we could lose employers and job seekers.
Our errors and omissions insurance may be inadequate or may not be available in the future on acceptable terms, or at all. In addition, our policy may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention.
Our future success depends in part on employers purchasing and renewing subscriptions and performance-based services from us. Any decline in our user renewals or performance-based services could harm our future operating results.
Many of our Paid Employers pay for access to our marketplace on a per-job-per-day basis, rather than entering into new longer term paid time-based job posting plans, renewing their paid time-based job posting plans when such contract terms expire, or purchasing performance-based services from us. Employers who enter into paid plans have no obligation to renew their plans after the expiration of their contract period, which typically range from one day to twelve months. In addition, employers may renew for lower subscription amounts or for shorter contract lengths. Historically, some of our Paid Employers have elected not to renew their agreements with us and as we expand into new products and markets, we have a limited ability to reliably predict future renewal rates. Our future renewal rates for both existing and potential new products may be lower, possibly significantly lower, than historical trends.
Our future success also depends in part on our ability to sell upsell services to employers who use our marketplace. If employers do not purchase upsell services from us, our revenue may decline and our operating results may be harmed.
Our Paid Employer subscription renewals, performance-based services, and upsells may decline or fluctuate as a result of a number of factors, including user usage, user satisfaction with our services and user support, our prices, the prices of competing services, mergers and acquisitions affecting our user base, the effects of global economic conditions, or reductions in our Paid Employers’ spending levels generally.
We have experienced growth in recent periods and expect to continue to invest in our growth for the foreseeable future. If we cannot manage our growth effectively, our business, operating results, and financial condition could be adversely affected.
We have experienced growth in a relatively short period of time. For example, although our total revenue for the year ended December 31, 2020 was $418.1 million, reflecting a 3% decrease from the year ended December 31, 2019 primarily due to the impacts of the COVID-19 pandemic, our total revenue for the year ended December 31, 2019 was $429.6 million, representing a year-over-year growth rate of 18% over the year ended December 31, 2018. Over time, we expect to expand our operations and personnel significantly. Sustaining our growth will place significant demands on our management as well as on our administrative, operational, and financial resources. To manage our growth, we must continue to improve our operational, financial, and management information systems; expand, motivate, and effectively manage and train our work force; and effectively collaborate with our third-party partners. If we cannot manage our growth successfully, our business, operating results, financial condition, and ability to successfully advertise our marketplace and serve our employers and job seekers could be adversely affected.
Our historical growth should not be considered indicative of our future performance. We have encountered in the past, and will encounter in the future, risks, challenges, and uncertainties frequently experienced by growing companies in rapidly changing industries. If our assumptions regarding these risks, challenges, and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our financial condition and operating results could differ materially from our expectations, our growth rates may slow, and our business would be adversely impacted.
Significant segments of the market for job advertisements services may have hiring needs and service preferences that are subject to greater volatility than the overall economy.
The employers in the United States’ private sector are heterogeneous across a number of business characteristics, including company size, geography, and industry, among other factors. Hiring activity may vary significantly among businesses with different characteristics and accordingly, any concentration we may have among businesses with certain characteristics may subject us to high volatility in our financial results. Smaller businesses, for example, typically have less persistent hiring needs and may experience greater volatility in their need for job advertisement services and preferences among providers of such services. Along with a relatively shorter sales cycle, smaller businesses may be more likely to change platforms based on short-term differences in perceived price, value, service level, or other factors. Difficulty in acquiring and/or retaining these employers may adversely affect our operating results.
Our efforts and ability to sell to a broad mix of businesses could adversely affect our operating results in a given period.
Our ability to increase revenue and maintain profitability depends, in part, on widespread acceptance and utilization of our marketplace by businesses of all sizes and types. Because our customers reflect a wide variety of businesses, we face a variety of challenges, including but not limited to, pricing pressure, cost variances and marketing strategies that vary based on the business type and size, varying lengths of sales cycles, and less predictability in completing some of our sales. For example, some of our larger prospective customers may need us to provide greater levels of education regarding the use and benefits of our marketplace and services, because the prospective customer’s decision to use our marketplace and services may be a company-wide decision. We are in the nascent stages of developing the analytical tools that will allow us to definitively determine how prospective customers can be most effectively directed within, and addressed by, our sales organizations. As a result, we may not always approach new opportunities in the most cost-effective manner or with the most appropriate resources. Developing and successfully implementing these tools will be important as we seek to efficiently capitalize on new and expanding market opportunities. In addition, because we are a relatively new company with a limited operating history when compared to some of our existing competitors, our target employers and job
seekers may prefer to use offerings from more established competitors that are more tailored to their specific requirements.
Our business depends largely on our ability to attract and retain talented employees, including senior management and key personnel. If we lose the services of Ian Siegel, our Chief Executive Officer, or other members of our senior management team, we may not be able to execute on our business strategy.
Our future success depends in large part on the continued services of our senior management and other key personnel and our ability to retain and motivate them. In particular, we are dependent on the services of Ian Siegel, our Chief Executive Officer, and our technology, marketplace, future vision, and strategic direction could be compromised if he were to take another position, become ill or incapacitated, or otherwise become unable to serve as our Chief Executive Officer. We rely on our leadership team in the areas of marketing, sales, finance, support, product development, human resources, and technology. Our senior management and other key personnel are all employed on an at-will basis, which means that they could terminate their employment with us at any time, for any reason, and without notice. If we lose the services of senior management or other key personnel, or if we cannot attract, train, and retain the highly-skilled personnel we need, our business, operating results, and financial condition could be adversely affected.
Our future success also depends on our continuing ability to attract, train, and retain highly skilled personnel, including software engineers and sales personnel. We face intense competition for qualified personnel from numerous software and other technology companies. This competition for highly skilled personnel is especially intense in the regions where we have significant operations, and we may incur significant costs to attract and retain them. We have, from time to time, experienced, and we expect to continue to experience, difficulty in hiring and retaining highly skilled employees with appropriate qualifications. We may incur significant costs to attract and retain highly skilled personnel, and we may lose new employees to our competitors or other technology companies before we realize the benefit of our investment in recruiting and training them. To the extent we move into new geographies, we would need to attract and recruit skilled personnel in those areas. In addition, job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity or equity awards declines, it may adversely affect our ability to retain highly skilled employees. If we cannot attract and retain suitably qualified individuals who are capable of meeting our growing technical, operational, and managerial requirements, on a timely basis or at all, our business may be adversely affected.
If internet search engines’ methodologies or other channels that we use to direct traffic to our website are modified to our disadvantage, or our search result page rankings decline for other reasons, our user growth could decline.
We depend in part on various internet search engines, such as Google, as well as other channels to direct a significant amount of traffic to our website. Our ability to maintain the number of visitors directed to our website is not entirely within our control. For example, our competitors’ search engine optimization and other efforts such as paid search may result in their websites receiving a higher search result page ranking than ours; internet search engines or other channels that we utilize to direct traffic to our website could revise their methodologies in a manner that adversely impacts traffic to our website, or we may make changes to our website that adversely impact our search engine optimization rankings and traffic. As a result, links to our website may not be prominent enough to drive sufficient traffic to our website, and we may not be able to influence the results.
Search engines and other channels that we use to drive employers and job seekers to our website periodically change their algorithms, policies, and technologies, sometimes in ways that cause traffic to our website to decline. These changes can also result in an interruption in their ability to access our website or a drop in our search ranking, or have other adverse impacts that negatively affect our ability to maintain and grow the number of employers and job seekers that visit our website. We may also be
forced to significantly increase marketing expenditures in the event that market prices for online advertising and paid listings escalate or our organic ranking decreases. Any of these changes could have an adverse impact on our business, user acquisition, and operating results.
Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business, which makes our future results difficult to predict.
Our quarterly results of operations, including the levels of our revenue, gross margin, and profitability, may vary significantly in the future and period to period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. We also have a limited operating history and make pricing and other changes from time to time, all of which make it difficult to forecast our future results. As a result, you should not rely upon our past quarterly operating results as indicators of future performance.
Factors that may cause fluctuations in our quarterly financial results include, without limitation, those listed below:
•our ability to attract new employers and job seekers;
•Paid Employer renewal rates;
•Paid Employers purchasing upsell services;
•the addition or loss of large Paid Employers, including through acquisitions or consolidations;
•the timing of recognition of revenue;
•the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;
•network outages or security breaches;
•general economic, industry and market conditions;
•changes in our pricing policies or those of our competitors;
•seasonal variations in sales of our products, which has historically been most pronounced in the fourth quarter of our fiscal year;
•the timing and success of new product or service introductions by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors or strategic partners; and
•the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies.
Our success depends on our ability to maintain the value and reputation of the ZipRecruiter brand.
We believe that our brand is important to attracting and retaining both employers and job seekers. Maintaining, protecting, and enhancing our brand depends largely on the success of our marketing efforts, ability to provide a compelling job marketplace, including services, features, content, and support related to our marketplace, and our ability to successfully secure, maintain, and defend our rights to use the “ZipRecruiter” mark, our logo, and other trademarks important to our brand. We believe that the importance of our brand will increase as competition further intensifies and brand promotion activities may require substantial expenditures. Our brand could be harmed if we cannot achieve these objectives or if our public image were to be tarnished by negative publicity. Unfavorable publicity about us could diminish confidence in our marketplace and services. Such negative publicity also could have an adverse effect on
the volume, engagement and loyalty of our employers and job seekers and could have an adverse effect on our business.
If we are not able to provide successful enhancements, new products, services, and features, our business could be adversely affected.
The market for job-posting marketplaces is characterized by frequent product and service introductions and enhancements, changing user demands, and rapid technological change. The introduction of products and services embodying new technologies can quickly make existing products and services obsolete and unmarketable. The success of our business will depend, in part, on our ability to adapt and respond effectively and timely to these changes. We invest substantial resources in researching and developing new products and services and enhancing our marketplace by incorporating additional features, improving functionality, and adding other improvements to meet our employers’ and job seekers’ evolving demands in our highly competitive industry. If we cannot provide enhancements and new features or services that achieve market acceptance or that keep pace with rapid technological developments and the competitive landscape, our business could be adversely affected. The success of any enhancements or improvements to, or new features of, our marketplace or any new products and services depends on several factors, including timely completion, competitive pricing, adequate quality testing, integration with new and existing technologies in our marketplace and third-party partners’ technologies, overall market acceptance, and resulting user activity that is consistent with the intent of such products or services. We cannot be sure that we will succeed, either timely or cost effectively, in developing, marketing, and delivering enhancements or new features, products and services to our marketplace that respond to continued changes in the market for job placement services, nor can we be sure that any enhancements or new features to our existing or any new products and services will achieve market acceptance or produce the intended effect. In addition, if new technologies emerge that allow our competitors to deliver similar services at lower prices, more efficiently, more conveniently, or more securely, such technologies could adversely impact our ability to compete.
Additionally, because our marketplace operates on a variety of third-party systems and platforms, we will need to continuously modify and enhance our offerings to keep pace with changes in internet-related hardware, operating systems, cloud computing infrastructure, and other software, communication, browser and open source technologies. We may not be successful in either developing these modifications and enhancements or in bringing them to market timely. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our research and development expenses. Parts of the technology stack supporting our marketplace may also become difficult to maintain and service as there become fewer software engineers who are skilled with respect to the programming languages used to build such pieces of software. Any failure of our marketplace to operate effectively with future network systems and technologies could reduce the demand for our marketplace, result in user dissatisfaction and adversely affect our business.
Our efforts to sell to a broad mix of businesses could adversely affect our operating results in a given period.
Our ability to increase revenue and maintain profitability depends, in part, on widespread acceptance of our marketplace by businesses of all sizes and types. Because our customers reflect a wide variety of businesses, we face a variety of challenges, including but not limited to, pricing pressure, cost variance depending on the business type and size, varying lengths of sales cycles and less predictability in completing some of our sales. For some of our larger prospective customers, the prospective customer’s decision to use our marketplace and services may be a company-wide decision and, therefore, these types of sales require us to provide greater levels of education regarding the use and benefits of our marketplace and services. In addition, because we are a relatively new company with a limited operating history when compared to some of our existing competitors, our target employers and job seekers may prefer to use offerings from more established competitors that are more tailored to their specific requirements.
Issues with the use of artificial intelligence (including machine learning) in our marketplace may result in reputational harm or liability.
Artificial intelligence, or AI, is enabled by or integrated into some of our marketplace and is a significant element of our business. As with many developing technologies, AI presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. AI algorithms may be flawed. Datasets may be insufficient, of poor quality, or contain biased information. Inappropriate or controversial data practices by data scientists, engineers, and end-users of our systems or elsewhere could impair the acceptance of AI solutions and could result in burdensome new regulations that may limit our ability to use existing or new AI technologies. If the recommendations, forecasts, or analyses that AI applications assist in producing are deficient or inaccurate, we could be subjected to competitive harm, potential legal liability, and brand or reputational harm. Some AI scenarios present ethical issues. If we enable or offer AI solutions that are controversial because of their purported or real impact on human rights, privacy, employment, or other social issues, we may experience brand or reputational harm.
The forecasts of growth of online recruitment may prove to be inaccurate, and even if the market in which we compete achieves the forecasted growth, we cannot assure you that our business will grow at a similar rate, if at all.
Growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not ultimately be accurate and are not under our control. The forecasts relating to the expected growth of the online recruitment market may prove to be inaccurate. Even if the market experiences the growth we forecast, we may not grow our business at a similar rate, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the forecasts of market growth included in this prospectus should not be taken as indicative of our future growth.
The growth of our marketplace depends in part on the success of our strategic relationships with our Job Distribution Partners and Job Acquisition Partners.
To grow our business and the number of job seekers and employers in our marketplace, we anticipate that we will continue to depend, in part, on relationships with Job Distribution Partners and Job Acquisition Partners. Our competitors may be effective in providing incentives to these job boards and other similar third parties to favor their products or services or to prevent or reduce engagement with our marketplace. In addition, acquisitions of the Job Distribution Partners and Job Acquisition Partners that we partner with by our competitors could reduce the number of our current and potential employers and job seekers as well as the number of job postings accessible by our marketplace. We cannot guarantee that the Job Distribution Partners and Job Acquisition Partners with which we have strategic relationships will continue to offer the services for which we rely on them, devote the resources necessary to expand our reach, or support an increased number of employers and job seekers and associated use cases. Further, some of our Job Distribution Partners and Job Acquisition Partners offer, or could offer, competing products and services or also work with our competitors. They may also choose to develop alternative products and services in addition to, or in lieu of, our marketplace, either on their own or in collaboration with others, including our competitors.
While these relationships have not generated substantial revenue in recent periods and are not expected to generate substantial revenue in the future, they are strategically important in ensuring an appropriate balance of and interaction between jobs and job seekers in our marketplace. If we are unsuccessful in establishing or maintaining our relationships with our Job Distribution Partners and Job Acquisition Partners, or if such Job Distribution Partners or Job Acquisition Partners choose to end their relationships with us, our ability to compete with our competitors and grow our marketplace could be impaired and our operating results may be negatively impacted.
Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity, and teamwork fostered by our culture, and our business may be harmed.
We believe that our corporate culture has been a key contributor to our success. If we do not continue to develop our corporate culture as we grow and evolve, it could harm our ability to foster the innovation, creativity, and teamwork we believe that we need to support our growth. As our organization grows and we are required to implement more complex organizational structures, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture, which could negatively impact our future success.
Technological advances may significantly disrupt the labor market and weaken demand for human capital at a rapid rate.
Our success is directly dependent on our employers’ demands for talent. As technology continues to evolve, more tasks currently performed by people may be replaced by automation, robotics, machine learning, artificial intelligence and other technological advances outside of our control. This trend poses a risk to the job posting and distribution industry as a whole, particularly in lower-skill job categories that may be more susceptible to such replacement.
Our business is seasonal.
Our business is seasonal, reflecting typical behavior in hiring markets, where hiring activity tends to decelerate in the fourth quarter. Such seasonality also causes our revenue to vary from quarter to quarter depending on the variability in the overall job market. This seasonality can make forecasting more difficult and may adversely affect our ability to predict financial results accurately.
We track certain performance metrics with internal tools and do not independently verify such metrics. Certain of our performance metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.
We track certain performance metrics, including quarterly Paid Employers and revenue per quarterly Paid Employer, which are not independently verified by any third party. Our internal tools have a number of limitations and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our metrics, including the metrics we report. If the internal tools we use to track these metrics undercount or overcount performance or contain algorithmic or other technical errors, the data we report may not be accurate. In addition, limitations or errors with respect to how we measure data (or the data that we measure) may affect our understanding of certain details of our business, which could affect our longer-term strategies. If our performance metrics are not accurate representations of our business, user base, or traffic levels; if we discover material inaccuracies in our metrics; or if the metrics we rely on to track our performance do not provide an accurate measurement of our business, our reputation may be harmed, we may be subject to legal or regulatory actions, and our operating and financial results could be adversely affected.
We derive substantially all of our revenue from job advertisements.
We derive substantially all of our revenue from sales of products and services related to the distribution of job advertisements to job seekers across the internet. As such, any factor adversely affecting the sale of these products and services, including market acceptance, product competition, performance and reliability, reputation, price competition, intellectual property claims and economic and market conditions, could harm our business and operating results.
Failure to effectively expand our sales and marketing capabilities could harm our ability to increase our user base and achieve broader market acceptance of our services.
Our ability to increase our Paid Employer base and achieve broader market acceptance of our marketplace will depend significantly on our ability to continue to expand our sales and marketing operations. We plan to expand our sales force and to dedicate significant and increasing resources to sales and marketing programs. We are expanding our sales and marketing capabilities to target additional potential Paid Employer, including some larger organizations, but there is no guarantee that we will be successful attracting and maintaining these businesses as users, and even if we are successful, these efforts may divert our resources away from and negatively impact our ability to attract and maintain our current Paid Employer base. All of these efforts will require us to invest significant financial and other resources. If we cannot find efficient ways to deploy our marketing spend or to hire, develop, and retain talented sales personnel in numbers required to maintain and support our growth, if our new sales personnel cannot achieve desired productivity levels in a reasonable period of time, or if our sales and marketing programs are not effective, our ability to increase our Paid Employer base and achieve broader market acceptance of our services could be harmed.
Paid Employers may demand more configuration and integration services, or customized features and functions that we do not offer, which could adversely affect our business and operating results.
Our current and future Paid Employers may demand more configuration and integration services, which would increase our upfront investment in sales and deployment efforts, with no guarantee that these Paid Employers will increase their use of our services. As a result of these factors, we may need to devote a significant amount of sales support and professional services resources to individual Paid Employers, which may increase the cost and time required to complete sales. If prospective Paid Employers require customized features or functions that we do not offer, and that would be difficult for them to deploy themselves, then the market for our marketplace will be more limited and our business could suffer. As a result, we may need to devote resources to continue to develop features and technology which may impact our operating results.
Any failure to offer high-quality technical support services may adversely affect our relationships with our Paid Employers and our financial results.
Once our products and services are deployed, our Paid Employers depend on our technical support organization to assist Paid Employers with service support and optimization, and resolve technical issues. We may be unable to respond quickly enough to accommodate short-term increases in demand for support services. We also may be unable to modify the format of our support services to compete with changes in support services provided by our competitors. Increased demand for these services, without corresponding revenue, could increase costs and adversely affect our operating results. In addition, our sales process is highly dependent on our services and business reputation and on positive recommendations from our existing Paid Employers. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our reputation, our ability to sell our services to existing and prospective Paid Employers, and our business, operating results and financial position.
We have a history of net losses, anticipate increasing our operating expenses in the future, and may not sustain profitability.
We have a history of incurring net losses. While we earned net income of $86.0 million for the year ended December 31, 2020, for the years ended December 31, 2019 and 2018, we incurred net losses of $6.3 million and $25.4 million, respectively. As of December 31, 2020, we had an accumulated deficit of $71.4 million. We expect to make significant future expenditures related to the development and expansion of our business, including investing in our technology to improve our marketplace; investing in sales and marketing channels to enhance our brand promotion efforts; and in connection with legal,
accounting, and other administrative expenses related to operating as a public company. These efforts may prove more expensive than we currently anticipate, and we may not succeed in increasing our revenue sufficiently to offset these higher expenses. If our revenue declines or fails to grow at a rate faster than increases in our operating expenses, we will not be able to maintain profitability in future periods. As a result, we may generate losses. We cannot ensure that we will continue to achieve profitability in the future or that we can sustain profitability.
We rely on Amazon Web Services, or AWS, to host our marketplace, and any disruption of service from AWS or material change to our arrangement with AWS could adversely affect our business.
We currently host our marketplace and support most of our operations using AWS, a provider of cloud infrastructure services. We do not control the operations of AWS’s facilities. AWS’s facilities are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cyber security attacks, terrorist attacks, power losses, telecommunications failures, and similar events or could be subject to break-ins, computer viruses, sabotage, intentional acts of vandalism, and other misconduct. The occurrence of any of these events, a decision to close the facilities or cease or limit providing services to us without adequate notice, or other unanticipated problems could result in interruptions to our marketplace, which may be lengthy. Our marketplace’s continuing and uninterrupted performance is critical to our success and employers and job seekers may become dissatisfied by service interruption. Sustained or repeated system failures could reduce the attractiveness of our marketplace to employers and job seekers, cause employers and job seekers to decrease their use of or stop using our marketplace, and adversely affect our business. Moreover, negative publicity from disruptions could damage our reputation.
AWS does not have an obligation to renew its agreements with us on commercially reasonable terms, or at all. If we cannot renew our agreement or are unable to renew on commercially reasonable terms, we may experience costs or downtime in connection with the transfer to, or the addition of, new cloud infrastructure or other data center. If these providers charge high costs for or increase the cost of their services, we will experience higher costs to operate our business and may have to increase the fees to use our marketplace and our operating results may be adversely impacted.
Upon expiration or termination of our agreement with AWS, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us, and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete. Switching our operations from AWS to another cloud or other data center provider would also be technically difficult, expensive, and time consuming.
Many people are using mobile devices to access the internet. If we cannot optimize our websites for mobile access or offer a compelling mobile app, we may not remain competitive and could lose employers and job seekers.
Many employers and job seekers access our marketplace through our mobile website and mobile app. We must ensure that the experience for our mobile offerings is optimized to ensure a positive experience. It requires us to develop and enhance our offerings to be specifically designed for mobile devices, such as social media job postings. If we cannot optimize our websites and apps cost effectively and improve the monetization capabilities of our mobile services, we may not remain competitive, which may negatively affect our business and results of operations.
Additionally, there is no guarantee that employers and job seekers will use our apps rather than competing marketplaces. We are dependent on the interoperability of our mobile apps with popular third-party mobile operating systems such as Google's Android and Apple's iOS, and their placement in popular app stores like the Google Play Store and the Apple App Store, and any changes in such systems that degrade our apps’ functionality or give preferential treatment or app store placement to competitive apps could adversely affect the access and usage of our apps on mobile devices. If it is more
difficult for employers and job seekers to access and use our apps on their mobile devices, our growth and engagement levels could be harmed.
Legal and Regulatory Risks
If we or our third-party partners experience a security breach, such as a hacking or phishing attack, or other data privacy or security incident, our marketplace may be perceived as not being secure, our reputation may be harmed, demand for our marketplace may be reduced, our operations may be disrupted, we may incur significant legal costs or liabilities, and our business could be adversely affected.
Our business involves the storage, processing, and transmission of proprietary, confidential, and personal information as well as the use of third-party partners and vendors who also store, process, and transmit such user information. We also maintain certain other proprietary and confidential information relating to our business and personal information of our personnel. We have previously experienced multiple data security incidents involving the unauthorized access to personal information of job seekers utilizing our services as well as affecting our business clients’ accounts, some of which have required us to notify affected individuals and/or regulators. In addition, any future data security breach, such as a hacking or phishing attack, or other data privacy or security incident, whether intentionally or unintentionally caused by us or by third parties, that we experience could result in unauthorized access to, misuse of, or unauthorized acquisition of our, our personnel’s, or our users’ data; the loss, corruption, or alteration of this data; interruptions in our operations; or damage to our computers or systems or those of our users. Any of these could expose us to claims, litigation, fines, other potential liability, and reputational harm.
An increasing number of online services have also disclosed security breaches, some of which involved sophisticated and highly targeted attacks. Additionally, malware, viruses, social engineering (including business email compromise), and general hacking in our industry have become more prevalent and more complex. Further, due to the current COVID-19 pandemic, there is an increased risk that we may experience cybersecurity related incidents as a result of our employees, service providers, and third parties working remotely on less secure systems during government mandated shelter-in-place orders. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not foreseeable or recognized until launched against a target, we and our third-party partners and vendors may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our or our third party partners’ or vendors’ security or privacy or other data privacy or security incident occurs, public perception of the effectiveness of our security measures and brand could be harmed, and we could lose users and business.
Data security breaches and other data privacy and security incidents may also result from non-technical means, for example, through human error. Any such security compromise could result in a violation of applicable data privacy, security, breach notification and other laws, regulatory or other governmental investigations, enforcement actions, litigation, and legal and financial exposure, including potential contractual liability. We may need to expend significant resources to protect against, and to address issues created by, security breaches and other privacy and security incidents. These liabilities may exceed the amounts covered by our insurance or our insurance coverage may not extend to or be adequate for liabilities actually incurred, or our insurance may not continue to be available to us on economically reasonable terms, or at all. Any such compromise could also result in damage to our reputation and a loss of confidence in our security measures. Our systems, and the systems of our vendors and third-party partners, may also be vulnerable to computer viruses and other malicious software, physical or electronic break-ins, or weakness resulting from intentional or unintentional service provider actions, and similar disruptions that could make all or portions of our website or applications unavailable for periods of time. Any of these effects could adversely impact our business.
We face payment and fraud risks that could adversely impact our business.
Requirements in our marketplace relating to user authentication and fraud detection are complex. If our user authentication and fraud detection measures are not effective, our marketplace may be perceived as not being secure, our reputation may be harmed, and our business may be adversely impacted. In addition, bad actors use increasingly sophisticated methods to engage in illegal activities involving personal information, such as unauthorized or fraudulent use of another’s identity, payment information, or other information; misrepresentation of the user’s identity or skills, including using accounts that they have purchased, sold, or leased; and acquisition or use of credit or debit card details and bank account information. This conduct in our marketplace could result in any of the following, each of which could adversely impact our business:
•bad actors may use our marketplace, including our payment processing and disbursement methods, to engage in unlawful or fraudulent conduct, such as identity theft, money laundering, terrorist financing, fraudulent sale of services, bribery, breaches of security, leakage of data, piracy or misuse of software and other copyrighted or trademarked content, and other misconduct;
•we may be held liable for the unauthorized use of an account holder’s credit card or bank account number and required by card issuers or banks to return the funds at issue and pay a chargeback or return fee, and if our chargeback or return rate becomes excessive, credit card networks may also require us to pay fines or other fees and the California Department of Business Oversight may require us to hold cash reserves;
•we may be subject to additional risk and liability exposure, including for negligence, fraud, or other claims, if employees or third-party service providers fraudulently misappropriate our banking or other information or user information;
•employers and job seekers that are subjected or exposed to the unlawful or improper conduct of other employers and job seekers or other third parties, or law enforcement or administrative agencies, may seek to hold us responsible for the conduct of employers and job seekers, may lose confidence in our marketplace, decrease or cease use of our marketplace, seek to obtain damages and costs, or impose fines and penalties;
•we may be subject to additional risk if employers in our marketplace cannot pay hired job seekers for services rendered, as such job seekers may seek to hold us responsible for the employers’ conduct and may lose confidence in our marketplace, may decrease or cease use of our marketplace, or seek to obtain damages and costs; and
•we may suffer reputational damage as a result of the occurrence of any of the above.
Despite measures we have taken to detect, prevent, and mitigate these risks, we do not have control over the employers and job seekers in our marketplace and cannot ensure that any of our measures will stop or minimize the use of our marketplace for, or to further, illegal or improper purposes. We may receive complaints from employers, job seekers and other third parties concerning misuse of our marketplace and wrongful conduct of other employers and job seekers. We may also bring claims against employers and job seekers and other third parties for their misuse of our marketplace in the future. Even if these claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the attention and resources of our management and adversely affect our business and operating results.
Changes in laws or regulations relating to data privacy or the protection, collection, storage, processing, transfer, or use of personal data, or any actual or perceived failure by us to comply with such laws and regulations or our privacy policies, could adversely affect our business.
We receive, collect, store, process, transfer, and use personal information and other user data. There are numerous federal, state, local, and international laws and regulations regarding data privacy, data protection, information security, and the collection, storing, sharing, use, processing, transfer, disclosure, and protection of personal information and other content. The scope of these laws and regulations is changing, subject to differing interpretations, and may be inconsistent among countries, or conflict with other laws and regulations.
We are also subject to the terms of our privacy policies and obligations to third parties related to privacy, data protection, and information security. The regulatory framework for privacy and data protection worldwide is uncertain and complex, and that these or other actual or alleged obligations may be interpreted and applied in ways we do not anticipate or that is inconsistent from one jurisdiction to another and may conflict with other rules or our practices. Further, any significant change to applicable laws, regulations, or industry practices regarding the collection, use, retention, security, or disclosure of the data of our employers and job seekers, employees, contractors, or others, or their interpretation, or any changes regarding the manner in which the express or implied consent of employers and job seekers for the collection, use, retention, or disclosure of such data must be obtained, could increase our costs and require us to modify our services and features, which may be material or not cost-effective, and may limit our storage and processing of user data or develop new services and features.
We also expect that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions. For example, in 2018, European legislators adopted the General Data Protection Regulation, or the GDPR, which imposes more stringent European Union, or EU, data protection requirements, and provides for significant penalties for noncompliance. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. Compliance with the GDPR has been and will be a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business practices, and may subject us to governmental investigations or enforcement actions, fines and penalties, claims, litigation, and reputational harm in connection with any European activities. Further, the United Kingdom, or the UK, has enacted the UK GDPR, which, together with the amended UK Data Protection Act 2018, or DPA, retains the GDPR in UK national law. Fines for certain breaches of the GDPR and the UK data protection regime are significant e.g., fines for certain breaches of the GDPR or the UK GDPR are up to the greater of 20 million Euros (17.5 million GBP) or 4% of total global annual turnover. Additionally, the California Consumer Privacy Act, or the CCPA, which provides new data privacy rights for consumers and new operational requirements for companies, came into force in 2020, and also provides for fines for noncompliance. The costs of compliance with, and other burdens imposed by, the GDPR, the UK GDPR, the DPA and CCPA may limit the use and adoption of our products and services and could have an adverse impact on our business. As a result, we may need to modify the way we treat such information.
Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to employers and job seekers, employees, contractors, or other third parties, or any other legal obligations or regulatory requirements relating to privacy, data protection, or information security may result in governmental and regulatory investigations or enforcement and/or assessment notices (for a compulsory audit), orders to cease or change our processing of our data, litigation, claims (including representative actions and other class action type litigation, where individuals have suffered harm), or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our employers and job seekers to lose trust in us, and otherwise have an adverse effect on our reputation and business. Furthermore, the costs of compliance with such laws, regulations and policies may limit the adoption and use of, and reduce the overall demand for, our marketplace.
Failure to comply with anti-corruption and anti-money laundering laws, including the Foreign Corrupt Practices Act, or FCPA, and similar laws associated with our activities outside of the United States, could subject us to penalties and other adverse consequences.
We have voluntarily implemented policies and procedures designed to allow us to comply with U.S. economic sanctions laws and prevent our marketplace from being used to facilitate business in countries or with persons or entities included on designated lists promulgated by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or OFAC, and equivalent foreign authorities. We may be subject to fines or other penalties in one or more jurisdictions levied by federal, state or local regulators, in the event that we engage in any conduct, intentionally or not, that facilitates money laundering, terrorist financing, or other illicit activity, or that violates sanctions or otherwise constitutes sanctionable activity.
Regulators continue to increase their scrutiny of compliance with these obligations, which may require us to further revise or expand our compliance program, including the procedures that we use to verify the identity of our users and to monitor our marketplace for potential illegal activity. In addition, any policies and procedures that we implement to comply with OFAC regulations may not be effective, including in preventing users from using our services within the OFAC-sanctioned countries of North Korea, Syria, and Iran, and the Crimea region of Ukraine. Given the technical limitations in developing controls to prevent, among other things, the ability of users to publish in our marketplace false or deliberately misleading information or to develop sanctions-evasion methods, it is possible that we may inadvertently and without our knowledge provide services to individuals or entities that have been designated by OFAC or are located in a country subject to an embargo by the United States that may not be in compliance with the economic sanctions regulations administered by OFAC.
Consequences for failing to comply with applicable rules and regulations could include fines, criminal and civil lawsuits, forfeiture of significant assets, or other enforcement actions. We could also be required to make changes to our business practices or compliance programs as a result of regulatory scrutiny. In addition, any perceived or actual breach of compliance by us, our employers and job seekers, or payment partners with respect to applicable laws, rules, and regulations could have a significant impact on our reputation and could cause us to lose existing employers and job seekers, prevent us from obtaining new employers and job seekers, cause other payment partners to terminate or not renew their agreements with us, require us to expend significant funds to remedy problems caused by violations and to avert further violations, and expose us to legal risk and potential liability, all of which may adversely affect our business, operating results, and financial condition and may cause the price of our common stock to decline.
We are also subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and the UK Bribery Act 2010, and may be subject to other anti-bribery, anti-money laundering, and sanctions laws in countries in which we conduct activities or have employers and job seekers. The FCPA prohibits providing, offering, promising, or authorizing, directly or indirectly, anything of value to government officials, political parties, or political candidates for the purposes of obtaining or retaining business or securing any improper business advantage. The provisions of the Bribery Act extend beyond bribery of government officials and create offenses in relation to commercial bribery including private sector recipients. The provisions of the Bribery Act also create offenses for accepting bribes in addition to bribing another person. We face significant risks if we cannot comply with the FCPA, the Bribery Act and other applicable anti-corruption laws. We have implemented an anti-corruption compliance policy, but we cannot ensure that all of our employees, employers and job seekers, and agents, as well as those contractors to which we outsource certain of our business operations, will not take actions in violation of our policies or agreements and applicable law, for which we may be ultimately held responsible.
Any violation of the FCPA, the Bribery Act, other applicable anti-corruption laws, and other laws could result in investigations and actions by federal or state attorneys general or foreign regulators, loss of export privileges, severe criminal or civil fines and penalties or other sanctions, forfeiture of significant assets, debarment from government contracts, whistleblower complaints, and adverse media coverage,
which could have an adverse effect on our reputation, business, operating results, and prospects. In addition, responding to any enforcement action or internal investigation related to alleged misconduct may result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.
We are subject to a wide variety of foreign and domestic laws. As we look to expand our international footprint over time and as new domestic laws are implemented, we may become obligated to comply with additional laws and regulations of the countries or markets in which we operate or have employers and job seekers.
We and our employers and job seekers are subject to a wide variety of foreign and domestic laws. Laws, regulations, and standards governing issues that may affect us, such as employment, payments, whistleblowing and worker confidentiality obligations, intellectual property, consumer protection, taxation, privacy, data security, benefits, unionizing and collective action, arbitration agreements and class action waiver provisions, unfair competition, terms of service, website accessibility, background checks, and escheatment are often complex and subject to varying interpretations, and, as a result, their application in practice may change or develop over time through judicial decisions or as new guidance or interpretations are provided by regulatory and governing bodies. Many of these laws do not contemplate or address the unique issues of the internet, mobile, and related technologies. Other laws and regulations in response to internet, mobile, and related technologies may also be adopted, implemented, or interpreted to apply to us and other online services marketplaces or our users. Likewise, these laws affect our users, and their application, or uncertainty around their application, may affect demand for our marketplace.
New approaches to policymaking and legislation may also produce unintended harms for our business, which may impact our ability to operate our business in the manner in which we are accustomed. Any of these regulations could negatively impact our users, including perceptions regarding their use of our marketplace, or have a material adverse effect on the demand for job postings in our marketplace or on how we operate our marketplace.
As we look to expand our international footprint over time, we may become obligated to comply with additional laws and regulations of the countries or markets in which we operate or have customers or job seekers. We may be harmed if we are found to be subject to new or existing laws and regulations or if those laws are interpreted and applied to us in a manner that harms our business or is inconsistent with the application of U.S. laws, including with respect to those subjects mentioned above. In addition, contractual provisions that are designed to protect and mitigate against risks, including terms of service, arbitration and class action waiver provisions, disclaimers of warranties, limitations of liabilities, releases of claims, and indemnification provisions, could be deemed unenforceable as to the application of these laws and regulations by a court, arbitrator, or other decision-making body. If we cannot comply with these laws and regulations or manage the complexity of global operations and support an international user base successfully or cost effectively, or if these laws and regulations are deemed to apply to our users or cause a decline in demand for our marketplace, our business, operating results, and financial condition could be adversely affected.
We plan to expand our international operations which could subject us to additional costs and risks, and our continued expansion internationally may not be successful.
We plan to expand our operations internationally in the future. Outside of the United States, we currently have operations in the United Kingdom, Israel, and Canada. There are significant costs and risks inherent in conducting business in international markets, including:
•establishing and maintaining effective controls at foreign locations and the associated costs;
•adapting our marketplace to non-U.S. employers’ and job seekers’ preferences and customs;
•increased competition from local providers;
•longer sales or collection cycles in some countries;
•compliance with foreign laws and regulations, including data privacy frameworks like the GDPR;
•adapting to doing business in other languages or cultures;
•compliance with local tax regimes, including potential double taxation of our international earnings, and potentially adverse tax consequences due to U.S. and foreign tax laws as they relate to our international operations;
•compliance with anti-bribery laws, such as the FCPA and the Bribery Act;
•currency exchange rate fluctuations and related effects on our operating results;
•economic and political instability in some countries;
•the uncertainty of obtaining and protecting intellectual property rights in some countries and practical difficulties of enforcing rights abroad; and
•other costs of doing business internationally.
These factors and other factors could harm our international operations and, consequently, materially impact our business, operating results, and financial condition.
Further, we may incur significant operating expenses as a result of our international expansion, and it may not be successful. We have limited experience with regulatory environments and market practices internationally, and we may not be able to penetrate or successfully operate in new markets. We also have more limited brand recognition in certain parts of the world, leading to delayed acceptance of our marketplace by international employers and job seekers. If we cannot continue to expand internationally and manage the complexity of our global operations successfully, our financial condition and operating results could be adversely affected.
Privacy concerns and laws or other domestic or foreign regulations may reduce the effectiveness of our marketplace, disrupt our communication processes, and adversely affect our business.
In order to use our marketplace, employers, job seekers, and, to a lesser extent, other third parties including advertisers, partners, and our own employees, entrust us to collect, use, and store their personal information. Our ability to leverage this information and to effectively and efficiently provide our services, including by communicating electronically and otherwise with employers and job seekers of our marketplace is critical to our business. By way of example, our services may include the sending and receiving of emails, SMS/text messages and push notifications on mobile devices. Certain federal, state and foreign government bodies and agencies have adopted, and others are considering adopting, or may adopt in the future, laws and regulations regarding the collection, use, transfer, storage and disclosure of personal information obtained from consumers and individuals, and the conditions under which businesses may communicate with consumers and other third parties. The costs of compliance with, and other burdens imposed by, such laws and regulations that are applicable to the businesses of our employers and job seekers may limit the use of our marketplace and reduce overall demand, or lead to significant fines, penalties or liabilities for any noncompliance with such privacy laws. Moreover, third party gatekeepers and service providers and their interpretation and application of privacy and data protection laws, rules, regulations, and best practices, may limit, disrupt, or require alteration of our operations, service offerings, and ability to communicate with and among employers and job seekers, and may adversely affect our business.
From time to time, we may be subject to legal proceedings, regulatory disputes, and governmental investigations that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results.
From time to time, we may be subject to claims, lawsuits (including class actions), government investigations, arbitrations and other proceedings involving competition and antitrust, intellectual property, privacy, consumer protection, securities, tax, labor and employment, commercial disputes, and other matters that could adversely affect our business operations and financial condition. The outcome of any legal proceeding, regardless of its merits, is inherently uncertain. Regardless of the merits, pending or future legal proceedings could result in a diversion of management’s attention and resources and reputational harm, and we may be required to incur significant expenses defending against these claims or pursuing claims against third parties to protect our rights. If we do not prevail in litigation, we could incur substantial liabilities. We may also determine in certain instances that a settlement may be a more cost-effective and efficient resolution for a dispute.
Where we can make a reasonable estimate of the liability relating to pending litigation and determine that it is probable, we record a related liability. As additional information becomes available, we assess the potential liability and revise estimates as appropriate. However, because of uncertainties relating to litigation, the amount of our estimates could be wrong as determining reserves for pending legal proceedings is a complex, fact-intensive process that is subject to judgment calls. The results of legal and regulatory proceedings cannot be predicted with certainty, and determining reserves for pending litigation and other legal and regulatory matters requires significant judgment. There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business. Any adverse determination related to legal proceedings or a settlement agreement could require us to change our technology or our business practices in costly ways, prevent us from offering certain products or services, require us to pay monetary damages, fines, or penalties, or require us to enter into royalty or licensing arrangements, and could adversely affect our operating results and cash flows, harm our reputation, or otherwise negatively impact our business.
Our failure or inability to protect our intellectual property rights, or claims by others that we are infringing upon or unlawfully using their intellectual property could diminish the value of our brand and weaken our competitive position, and adversely affect our business, financial condition, operating results, and prospects.
Our success depends in large part on our proprietary technology and other intellectual property rights, or IPR. We currently rely on a combination of copyright, trademark, trade secret, and unfair competition laws, as well as confidentiality agreements and procedures and licensing arrangements, to establish and protect our IPR. We currently do not own any patents. We have devoted substantial resources to the development of our proprietary technologies and related processes. To protect our proprietary technologies and processes, we rely in part on trade secret laws and confidentiality agreements with our employees, licensees, independent contractors, commercial partners, and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. We cannot be certain that the steps taken by us to protect our IPR will be adequate to prevent infringement of such rights by others. Additionally, the process of obtaining protection for trademarks and other IPR is expensive and time-consuming, and we may not be able to apply for all necessary or desirable trademark and other IPR applications at a reasonable cost or in a timely manner. Additionally, the process of obtaining patent or trademark protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications or apply for all necessary or desirable trademark applications at a reasonable cost or in a timely manner. Moreover, intellectual property protection may be unavailable or limited in some foreign countries where laws or law enforcement practices may not protect our IPR as fully as in the United States, and it may be more difficult for us to successfully challenge the unauthorized use of our IPR by other parties in these countries. Costly and time-consuming litigation
could be necessary to enforce and determine the scope of our IPR, and our failure or inability to obtain or maintain IPR protection or otherwise protect our IPR could adversely affect our business.
We may in the future be subject to patent infringement and trademark claims and lawsuits in various jurisdictions, and we cannot be certain that our products or activities do not violate the patents, trademarks, or other IPR of third-party claimants. Companies in the technology industry and other patent, copyright, and trademark holders seeking to profit from royalties in connection with grants of licenses own large numbers of patents, copyrights, trademarks, domain names, and trade secrets and frequently commence litigation based on allegations of infringement, misappropriation, or other violations of intellectual property or other rights. As we face increasing competition and gain an increasingly high profile, the likelihood of IPR claims against us has grown and will likely continue to grow.
Further, from time to time, we may receive letters from third parties alleging that we are infringing upon their IPR or inviting us to license their IPR. Successful infringement claims against us could result in significant monetary liability, prevent us from selling some of our products and services, or require us to change our branding. In addition, resolution of claims may require us to redesign our products, license rights from third parties at a significant expense, or cease using those rights altogether. We may in the future bring claims against third parties for infringing our IPR. Costs of supporting such litigation and disputes may be considerable, and there can be no assurances that a favorable outcome will be obtained. Patent infringement, trademark infringement, trade secret misappropriation, and other intellectual property claims and proceedings brought against us or brought by us, whether successful or not, could require significant attention of our management and resources and have in the past and could further result in substantial costs, harm to our brand, and have an adverse effect on our business.
Adverse tax laws or regulations could be enacted or existing laws could be applied to us or our employers and job seekers, which could increase the costs of our services and adversely impact our business.
The application of federal, state, local and international tax laws to services provided electronically is evolving. New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time (possibly with retroactive effect), and could be applied solely or disproportionately to services provided over the internet. These enactments could adversely affect our sales activity due to the inherent cost increase the taxes would represent and ultimately result in a negative impact on our operating results and cash flows.
In addition, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us (possibly with retroactive effect), which could require us or our employers and job seekers to pay additional tax amounts, as well as require us or our employers and job seekers to pay fines or penalties and interest for past amounts. If we are unsuccessful in collecting such taxes from our employers and job seekers, we could be held liable for such costs, thereby adversely impacting our operating results and cash flows.
Other Risks Related to Our Business
Our business is subject to the risk of earthquakes, fire, power outages, floods, public health crises, including the current COVID-19 pandemic, and other catastrophic events, and to interruption by man-made problems such as terrorism.
Our business is vulnerable to damage or interruption from earthquakes, fires, floods, power losses, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins, public health crises, including the COVID-19 pandemic, and similar events. Additionally, the third-party systems and operations, such as the data centers and online services we use in our company operations, are subject to similar risks. Our insurance policies may not cover losses from these events or may provide insufficient compensation that does not cover our total losses. For example, the COVID-19 pandemic has resulted in a widespread global health crisis and adversely affected global economies and financial markets, and similar public health threats could do so in the future. Such events have impacted, and could in the future
impact, demand for products sold in our marketplace, which in turn could adversely affect our revenue and results of operations. In addition, acts of terrorism, which may be targeted at metropolitan areas that have higher population density than rural areas, could also cause disruptions in our business or the economy as a whole. A significant portion of our technology team is located in Israel, which is located in a region of the world that historically has experienced elevated levels of geopolitical instability. Our corporate offices and our primary data center facilities are located in California, a state that frequently experiences earthquakes and wildfires. We may not have sufficient protection or recovery plans. As we rely heavily on our data center facilities, computer and communications systems, and the internet to conduct our business and provide high-quality user service, these disruptions could negatively impact our ability to run our business.
Covenants in the loan and security agreement governing our revolving credit facility may restrict our operations, and if we do not effectively manage our business to comply with these covenants, our financial condition could be adversely impacted.
We entered into the Second Amended and Restated Loan and Security Agreement with Silicon Valley Bank in September 2020, which amended and restated the loan and security agreement that we previously entered into in March 2017, and provides for a $35.0 million secured revolving line of credit. The revolving credit facility contains various restrictive covenants, including, among other things, minimum liquidity and revenue requirements, restrictions on our ability to dispose of assets, make acquisitions or investments, incur debt or liens, make distributions to our stockholders, or enter into certain types of related party transactions. These restrictions may restrict our current and future operations, particularly our ability to respond to certain changes in our business or industry, or take future actions. Pursuant to the agreement, we granted Silicon Valley Bank thereto a security interest in substantially all of our assets. See Note 9 of the notes to our consolidated financial statements and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources.”
Our ability to meet these restrictive covenants can be impacted by events beyond our control and we may be unable to do so. Our loan and security agreement provides that our breach or failure to satisfy certain covenants constitutes an event of default. Upon the occurrence of an event of default, the lender could elect to declare all amounts outstanding under its debt agreements to be immediately due and payable. In addition, the lender would have the right to proceed against the assets we provided as collateral pursuant to the loan and security agreement. If the debt under our loan and security agreement was to be accelerated, we may not have sufficient cash on hand or be able to sell sufficient collateral to repay it, which would have an immediate adverse effect on our business and financial condition.
We may engage in merger and acquisition activities, which could require significant management attention, disrupt our business, dilute stockholder value, consume resources that are necessary to sustain our business, and adversely affect our operating results.
As part of our business strategy, we may make investments in other companies, products, or technologies. At any given time, we may be engaged in discussions or negotiations with respect to one or more of these types of transactions. Any acquisition, investment, or business relationship may result in unforeseen or additional operating difficulties, risks, and expenditures. We may not be able to find suitable acquisition candidates and we may not be able to complete acquisitions on favorable terms, if at all. If we do complete acquisitions in the future, we may not ultimately strengthen our competitive position or achieve our goals, and any acquisitions we complete could be viewed negatively by employers and job seekers. In addition, if we cannot successfully integrate such acquisitions, or the assets, technologies or personnel associated with such acquisitions, into our company, the anticipated benefits of any acquisition, investment, or business relationship may not be realized. Additionally, we may be exposed to unknown or additional risks and liabilities.
We may in the future seek to acquire or invest in additional businesses, products, technologies, or other assets. We also may enter into relationships with other businesses to expand our marketplace or
our ability to provide our marketplace in foreign jurisdictions, which could involve preferred or exclusive licenses, additional channels of distribution, discount pricing, or investments in other companies. Negotiating these transactions can be time consuming, difficult, and expensive, and our ability to close these transactions may often be subject to approvals that are beyond our control. Consequently, these transactions, even if undertaken and announced, may not close. Acquisitions may disrupt our ongoing operations, divert management from their primary responsibilities, dilute our corporate culture, subject us to additional liabilities, increase our expenses, and adversely impact our business, financial condition, operating results, and cash flows. We may not successfully evaluate or use the acquired technology and accurately forecast the financial impact of an acquisition transaction, including accounting charges. We may have to pay cash, incur debt, or issue equity securities to pay for any such acquisition, each of which could affect our financial condition, could result in dilution to our stockholders or increase our fixed obligations.
We may require additional capital to support business growth and objectives, and this capital might not be available to us on reasonable terms, if at all, and may result in stockholder dilution.
We expect that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for the foreseeable future. However, we intend to continue to make investments to support our business growth and may require additional capital to fund our business and to respond to competitive challenges, including the need to promote and enhance our marketplace, develop new products and services, enhance our operating infrastructure, and potentially to acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. There can be no assurance that such additional funding will be available on terms attractive to us, or at all. Our inability to obtain additional funding when needed could have an adverse effect on our business, financial condition, and operating results. If additional funds are raised through the issuance of equity or convertible debt securities, holders of our Class A common stock could suffer significant dilution, and any new shares we issue could have rights, preferences, and privileges superior to those of our Class A common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
The requirements of being a public company, including maintaining adequate internal control over our financial and management systems, may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the rules subsequently implemented by the SEC, the rules and regulations of the listing standards of the New York Stock Exchange and other applicable securities rules and regulations. Compliance with these rules and regulations has increased our legal and financial compliance costs and strains our financial and management systems, internal controls, and employees.
The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results. Moreover, the Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal control over financial reporting. We will be required to make a formal assessment and provide an annual management report on the effectiveness of our internal control over financial reporting beginning with our annual report for the fiscal year ending December 31, 2022. We have not identified any material weaknesses in our internal control over financial reporting during 2019 and 2020. However, to maintain and, if required, improve our disclosure controls and procedures, and internal control over financial reporting to meet the standards of the Sarbanes-Oxley Act, additional and potentially significant resources and management oversight may be required.
Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties
encountered in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we may eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on our stock price.
The new rules and regulations applicable to public companies, and stockholder litigation brought against recently public companies, have made it more expensive for us to obtain and maintain director and officer liability insurance, and we may be required to incur substantially higher costs to obtain and maintain the same or similar coverage.
Our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. We are subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These obligations and constituents require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, financial condition, and operating results.
Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States are subject to interpretation by the Financial Accounting Standards Board (FASB), the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results and could affect the reporting of transactions completed before the announcement of a change.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our operating results could be adversely affected.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and stockholders’ equity/deficit, and the amount of revenue and expenses that are not readily apparent from other sources. Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our operating results to fall below the expectations of securities analysts and investors, resulting in a decline in the price of our Class A common stock.
Fluctuations in currency exchange rates could harm our operating results and financial condition.
Transactions generated in countries other than the United States as well as those incurred by our international subsidiaries are often denominated in the currencies of the local countries. As a result, our consolidated U.S. dollar financial statements are subject to fluctuations due to changes in exchange rates as the financial results of our international subsidiaries are translated from local currencies into U.S. dollars. Our financial results are also subject to changes in exchange rates that impact the settlement of transactions in non-local currencies. To date, we have not engaged in currency hedging activities to limit
the risk of exchange fluctuations and, as a result, our financial condition and operating results could be adversely affected by such fluctuations.
Risks Related to the Ownership of Our Class A Common Stock
The registration and listing of our Class A common stock differs significantly from an underwritten initial public offering.
This listing is not an underwritten initial public offering of our Class A common stock. In addition, the registration and listing of our Class A common stock on the New York Stock Exchange differs from an underwritten initial public offering in several significant ways, which include the following:
•There are no underwriters. Consequently, prior to the opening of trading of our Class A common stock on the New York Stock Exchange, there will be no book building process and no price at which underwriters initially sold shares to the public to help inform efficient and sufficient price discovery with respect to the opening trades on the New York Stock Exchange. Therefore, buy and sell orders submitted prior to and at the opening of trading of our Class A common stock on the New York Stock Exchange will not have the benefit of being informed by a published price range or a price at which the underwriters initially sold shares to the public, as would be the case in an underwritten initial public offering. Moreover, there will be no underwriters assuming risk in connection with resales of shares of our Class A common stock. Additionally, because there are no underwriters, there is no underwriters’ option to purchase additional shares to help stabilize, maintain, or affect the public price of our Class A common stock on the New York Stock Exchange immediately after the listing. In an underwritten initial public offering, the underwriters may engage in “covered” short sales in an amount of shares representing the underwriters’ option to purchase additional shares. To close a covered short position, the underwriters purchase shares in the open market or exercise the underwriters’ option to purchase additional shares. In determining the source of shares to close the covered short position, the underwriters typically consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the underwriters’ option to purchase additional shares. Purchases in the open market to cover short positions, as well as other purchases underwriters may undertake for their own accounts, may have the effect of preventing a decline in the market price of shares. Given that there will be no underwriters’ option to purchase additional shares and no underwriters engaging in stabilizing transactions, there could be greater volatility in the public price of our Class A common stock during the period immediately following the listing. See also “—Market volatility may affect the value of an investment in our Class A common stock and could subject us to litigation.”
•There is no fixed or determined number of shares of Class A common stock available for sale in connection with the registration and listing of the Class A common stock on the New York Stock Exchange, except we expect approximately shares of our Class A common stock to be sold on our first trading day in order to fund the tax withholding and remittance obligations arising in connection with the RSUs that may settle on that day in the event that the board of directors waives the liquidity-based vesting condition of our outstanding RSUs. Therefore, there can be no assurance that any existing stockholders will sell any of their shares of Class A common stock and there may initially be a lack of supply of, or demand for, shares of Class A common stock on the New York Stock Exchange. Alternatively, we may have a large number of existing stockholders who choose to sell their shares of Class A common stock in the near term, including holders of RSUs that may settle on the first day of trading, resulting in potential oversupply of our Class A common stock, which could adversely impact the price of our Class A common stock.
•None of our existing stockholders have entered into contractual lock-up agreements or other contractual restrictions on transfer. In an underwritten initial public offering, it is customary for an issuer’s officers, directors, and most or all of its other stockholders to enter into a 180-day contractual lock-up arrangement with the underwriters to help promote orderly trading
immediately after such initial public offering. Consequently, any of our stockholders, including our directors, officers and other significant stockholders, may sell any or all of their shares of Class A common stock, including shares of Class B common stock convertible into Class A common stock at the time of sale (subject to any restrictions under applicable law), including immediately upon listing. If such sales were to occur in a significant volume in a short period of time, it may result in an oversupply of our Class A common stock in the market, which could adversely impact the price of our Class A common stock. See also “None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, the sales or distribution of substantial amounts of our Class A common stock, or the perception that such sales or distributions might occur, could cause the market price of our Class A common stock to decline.”
•We will not conduct a traditional “roadshow” with underwriters prior to the opening of trading of our Class A common stock on the New York Stock Exchange. Instead, we intend to host an investor day and engage in certain other investor education meetings. In advance of the investor day, we will announce the date for such day over financial news outlets in a manner consistent with typical corporate outreach to investors. We intend to prepare an electronic presentation for this investor day, which will have content similar to a traditional roadshow presentation, and to make a version of the presentation publicly available, without restrictions, on our website. There can be no guarantee that the investor day and other investor education meetings will have the same impact on investor education as a traditional “roadshow” conducted in connection with an underwritten initial public offering. As a result, there may not be efficient or sufficient price discovery with respect to our Class A common stock or sufficient demand among potential investors immediately after our listing, which could result in a more volatile price of our Class A common stock.
•Since we are not conducting an underwritten initial public offering for our Class A common stock, the market price for our Class A common stock may be volatile and trading volume may be uncertain, which may adversely affect your ability to sell any Class A common stock that you may purchase. Because of the relatively novel listing process and the broad consumer awareness and brand recognition of our company, individual investors, retail, or otherwise, may have greater influence in setting the opening public price and subsequent public prices of our Class A common stock on the New York Stock Exchange and may participate more in our initial trading than is typical for an underwritten initial public offering. These factors could result in a public price of our Class A common stock that is higher than other investors (such as institutional investors) are willing to pay, which could cause volatility in the trading price of our Class A common stock and an unsustainable trading price if the price of our Class A common stock significantly rises upon listing and institutional investors believe our Class A common stock is worth less than retail investors, in which case the price of our Class A common stock may decline over time. Further, if the public price of our Class A common stock is above the level that investors determine is reasonable for our Class A common stock, some investors may attempt to short our Class A common stock after trading begins, which would create additional downward pressure on the public price of our Class A common stock.
An active, liquid, and orderly market for our Class A common stock may not develop or be sustained. You may be unable to sell your shares of Class A common stock at or above the price at which you purchased them.
We currently expect our Class A common stock to be listed and traded on the New York Stock Exchange. Prior to the listing of our Class A common stock on the New York Stock Exchange, there has been no public market for our Class A common stock. Moreover, consistent with Regulation M and other federal securities laws applicable to our listing, we have not consulted with our existing stockholders regarding their desire or plans to sell shares in the public market following the listing or discussed with potential investors their intentions to buy our Class A common stock in the open market. While our Class A common stock may be sold after our listing of the Class A common stock on the New York Stock
Exchange by our existing stockholders in accordance with Rule 144 of the Securities Act, unlike an underwritten initial public offering, there can be no assurance that any of our existing stockholders will sell any of their shares of Class A common stock. As a result, there may initially be a lack of supply of, or demand for, Class A common stock on the New York Stock Exchange. Conversely, there can be no assurance that our existing stockholders will not sell all of their shares of Class A common stock, resulting in an oversupply of our Class A common stock on the New York Stock Exchange. In the case of a lack of supply of our Class A common stock, the trading price of our Class A common stock may rise to an unsustainable level. Further, institutional investors may be discouraged from purchasing our Class A common stock if they are unable to purchase a block of our Class A common stock in the open market due to a potential unwillingness of our existing stockholders to sell a sufficient amount of Class A common stock at the price offered by such institutional investors and the greater influence individual investors have in setting the trading price. If institutional investors are unable to purchase our Class A common stock, the market for our Class A common stock may be more volatile without the influence of long-term institutional investors holding significant amounts of our Class A common stock. In the case of a lack of demand for our Class A common stock, the trading price of our Class A common stock could decline significantly and rapidly after the listing of our Class A common stock on the New York Stock Exchange. Therefore, an active, liquid, and orderly trading market for our Class A common stock may not initially develop or be sustained, which could significantly depress and result in significant volatility in the price of our Class A common stock. This could affect your ability to sell your shares of Class A common stock.
The trading price of our Class A common stock, upon listing on the New York Stock Exchange, may have little or no relationship to the historical sales prices of our capital stock in private transactions, and such private transactions have been limited.
Prior to the registration and listing of our Class A common stock on the New York Stock Exchange, there has been no public market for our capital stock. The historical sales prices of our capital stock are primarily from sales of shares of our capital stock in private transactions. In the section titled “Sale Price History of our Capital Stock,” we have provided the historical sales prices of our capital stock in private transactions. However, given the limited history of sales, among other factors, this information may have little or no relation to broader market demand for our Class A common stock and thus the price of our Class A common stock. As a result, you should not place undue reliance on these historical sales prices as they may differ materially from the opening price of the Class A common stock and subsequent prices of our Class A common stock. For more information about how the initial listing price of the Class A common stock on the New York Stock Exchange will be determined, see the section titled “Plan of Distribution.”
None of our stockholders are party to any contractual lock-up agreement or other contractual restrictions on transfer. Following our listing, the sales or distribution of substantial amounts of our Class A common stock, or the perception that such sales or distributions might occur, could cause the market price of our Class A common stock to decline.
In addition to the supply and demand and volatility factors discussed above, the sale or distribution of a substantial number of shares of our Class A common stock, particularly sales by us or our directors, executive officers, and principal stockholders, could cause the market price of our Class A common stock to decline.
As of December 31, 2020, giving effect to the conversion and reclassification of 2,271,437 shares of our Series A convertible preferred stock and 6,030,706 shares of our Series B convertible preferred stock outstanding as of December 31, 2020 into 24,202,202 shares of our Class B common stock, which will occur in connection with the effectiveness of the registration statement of which this prospectus forms a part, and giving effect to the conversion of our outstanding convertible promissory notes and interest due June 2023 into 3,055,007 shares of Class B common stock, the conversion of which will occur immediately following the first trading day of this listing, assuming a conversion price of $8.2909 per share (which is the maximum price per share at which the convertible promissory notes are convertible by their terms, as further described within the section titled “Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Liquidity and Capital Resources—Convertible Notes with Related Parties”), we have 105,345,284 shares of Class B common stock outstanding, all of which are “restricted securities” (as defined in Rule 144 under the Securities Act). This excludes 1,225,890 shares of Class B common stock related to the RSUs for which the service-based vesting condition was satisfied as of December 31, 2020 and for which our board of directors has waived the liquidity event-based vesting condition effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022. Approximately 9,955,446 shares of Class B common stock may be converted to Class A common stock and then immediately sold either by the existing stockholders pursuant to this prospectus or by our other existing stockholders under Rule 144 since such shares held by such other stockholders will have been beneficially owned by non-affiliates for at least one year. Moreover, once we have been a reporting company subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for 90 days and assuming the availability of certain public information about us, (1) non-affiliates who have beneficially owned our common stock for at least six months may rely on Rule 144 to sell their shares of Class A common stock, and (2) our directors, executive officers, and other affiliates who have beneficially owned our common stock for at least six months, including certain of the shares of Class A common stock covered by this prospectus to the extent not sold hereunder, will be entitled to sell their shares of our Class A common stock subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements.
Further, as of December 31, 2020, we had outstanding options to purchase 19,587,667 shares of Class B common stock. Additionally, as of December 31, 2020, 5,450,663 shares of Class B common stock were issuable upon vesting of outstanding RSUs. All of the shares of Class A common stock and Class B common stock issuable upon the exercise of stock options, settlement of RSUs, and reserved for future issuance under our equity incentive plans, will be registered for public resale under the Securities Act. Accordingly, these shares will be able to be freely sold in the public market upon issuance, subject to applicable vesting requirements and compliance by affiliates with Rule 144.
Our board of directors has waived the liquidity event-based vesting condition on our RSUs effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022. If our board of directors had waived the liquidity event-based condition as of December 31, 2020, it would have resulted in the vesting and settlement of approximately 1,225,890 RSUs held by our current and former employees and other service providers as of December 31, 2020. We expect approximately shares of our Class A common stock from the vesting and settlement of RSUs (which assumes the sale of shares of Class A common stock on our first trading day in order to fund the tax withholding and remittance obligations arising in connection with the vesting and settlement of RSUs) to be available for sale as early as the first day of trading. See the section titled “RSU Sales.” A potential oversupply of shares due to sales by holders of RSUs could also adversely impact the trading price of our Class A common stock.
None of our stockholders are subject to any contractual lock-up or other contractual restriction on the transfer or sale of their shares.
Following the effectiveness of the registration statement of which this prospectus forms a part, the holders of up to 27,257,209 shares of our Class B common stock will have rights, subject to some conditions, to require us to file registration statements for the public resale of the Class A common stock issuable upon conversion of such shares or to include such shares in registration statements that we may file for us or other stockholders. Any registration statement we file to register additional shares, whether as a result of registration rights or otherwise, could cause the market price of our Class A common stock to decline or be volatile.
Market volatility may affect the value of an investment in our Class A common stock and could subject us to litigation.
Technology stocks have historically experienced high levels of volatility. The price of our Class A common stock also could be subject to wide fluctuations in response to the risk factors described in this prospectus and others beyond our control, including:
•the number of shares of our Class A common stock and Class B common stock publicly owned and available for trading;
•actual or anticipated fluctuations in our financial condition, operating results and other operating and non-GAAP metrics;
•our actual or anticipated operating performance and the operating performance of our competitors;
•changes in the projected operational and financial results we provide to the public or our failure to meet those projections;
•any major change in our board of directors, management, or key personnel;
•the economy as a whole and market conditions in our industry;
•rumors and market speculation involving us or other companies in our industry;
•announcements by us or our competitors of significant innovations, new products, services, features, integrations or capabilities, acquisitions, strategic investments, partnerships, joint ventures, or capital commitments;
•lawsuits threatened or filed against us;
•other events or factors, including those resulting from the COVID-19 pandemic, war, incidents of terrorism, or responses to these events; and
•sales or expected sales of our Class A common stock by us, and our officers, directors, and principal stockholders.
Moreover, to the extent the trading value of our Class A common stock diverge, holders of our Class A common stock may engage in hedging and other activities which could result in additional volatility in the price of our Class A common stock and could result in significant declines in the price of our Class A common stock.
Furthermore, the stock market has recently experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies and financial services and technology companies in particular. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions such as recessions, interest rate changes, or international currency fluctuations, may negatively impact the market price of our Class A common stock. These fluctuations may be even more pronounced in the trading market for our Class A common stock shortly following the listing of our Class A common stock on the New York Stock Exchange as a result of the supply and demand forces described above. If the market price of our Class A common stock after our listing does not exceed the opening public price, you may not realize any return on your investment in us and may lose some or all of your investment. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could harm our business.
The dual class structure of our common stock will have the effect of concentrating voting control with those stockholders who held our capital stock prior to our listing, including our directors, executive officers, and 5% stockholders who will hold in the aggregate 86.7% of the voting power of our capital stock following the registration and listing of our Class A common stock on the New York Stock Exchange, which will limit or preclude your ability to influence corporate matters, including the election of directors and the approval of any change of control transaction.
Our Class B common stock has twenty votes per share and our Class A common stock has one vote per share. As of December 31, 2020, our directors, executive officers, and holders of more than 5% of our common stock, and their respective affiliates, held 86.7% of the voting power of our capital stock. Because of the twenty-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively control a substantial majority of the combined voting power of our common stock and therefore are able to control all matters submitted to our stockholders for approval until the earlier of (1) the first business day falling on or after 180 days after the date on which Ian Siegel beneficially owns less than 4,000,000 shares of Class B common stock, (2) the date which is (a) 90 days after the date of death or disability of Mr. Siegel or (b) such later date, not to exceed a total period of 180 days after the date of death or disability of Mr. Siegel, as may be approved prior to the date that is 90 days after the date of death or disability of Mr. Siegel by a majority of our independent directors then in office, and (3) the first business day falling on or after the date on which Mr. Siegel elects to convert all then-outstanding shares of Class B common stock into shares of Class A common stock. This concentrated control limits or precludes your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are in your best interest as one of our stockholders.
Future transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock, subject to limited exceptions, such as certain permitted transfers, including certain transfers to family members, trusts solely for the benefit of the stockholder or their family members, affiliates under common control with the stockholder, and partnerships, corporations, and other entities exclusively owned by the stockholder or their family members, in each case as fully described in our restated certificate of incorporation to be in effect following the completion of this offering. The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term.
The dual class structure of our common stock may adversely affect the trading market for our Class A common stock.
Certain stock index providers, such as S&P Dow Jones, exclude companies with multiple classes of shares of common stock from being added to certain stock indices, including the S&P 500. In addition, several stockholder advisory firms and large institutional investors oppose the use of multiple class structures. As a result, the dual class structure of our common stock may prevent the inclusion of our Class A common stock in such indices, may cause stockholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure, and may result in large institutional investors not purchasing shares of our Class A common stock. Any exclusion from stock indices could result in a less active trading market for our Class A common stock. Any actions or publications by stockholder advisory firms or institutional investors critical of our corporate governance practices or capital structure could also adversely affect the value of our Class A common stock.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common stock and trading volume could decline.
The trading market for our Class A common stock depends in part on the research and reports that securities or industry analysts publish about us or our business, our market, and our competitors. We do not have control over these securities analysts. If industry analysts cease coverage of us, the trading price for our Class A common stock would be negatively affected. If one or more of the analysts who cover us downgrade our Class A common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price would likely decline. If one or more of these analysts cease coverage of us or cannot publish reports on us regularly, demand for our Class A common stock could decrease, which might cause our Class A common stock price and trading volume to decline.
We are an “emerging growth company” and intend to take advantage of the reduced disclosure requirements applicable to emerging growth companies which may make our Class A common stock less attractive to investors.
We are an “emerging growth company” as defined in the JOBS Act. We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more; (2) the last day of the fiscal year following the fifth anniversary of the date of the effectiveness of the registration statement of which this prospectus forms a part; (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; and (4) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC. For so long as we remain an emerging growth company, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not “emerging growth companies,” including:
•not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;
•reduced disclosure obligations regarding executive compensation; and
•exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We currently intend to take advantage of the available exemptions described above. We have taken advantage of reduced reporting burdens in this prospectus. We cannot predict if investors will find our Class A common stock less attractive if we rely on these exemptions. If some investors find our Class A common stock less attractive as a result of these decisions, there may be a less active trading market for our Class A common stock and the price of our Class A common stock may be more volatile.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. Additionally, our ability to pay dividends on our common stock is limited by the restrictions under the terms of our loan and security agreement. We anticipate that for the foreseeable future we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may limit attempts by our stockholders to replace or remove our current management.
Provisions in our restated certificate of incorporation and restated bylaws that will be in effect upon the registration and listing of our Class A common stock on the New York Stock Exchange may have the effect of delaying or preventing a merger, acquisition, or other change of control of our company that the stockholders may consider favorable. In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Among other things, our restated certificate of incorporation and restated bylaws include provisions that:
•provide that our board of directors will be classified into three classes of directors with staggered three-year terms;
•permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships;
•require super-majority voting to amend some provisions in our restated certificate of incorporation and restated bylaws, including provisions relating to the classified board, the size of the board, removal of directors, special meetings, actions by written consent, and designation of our preferred stock;
•authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;
•provide that only the chairman of our board of directors, our chief executive officer, or a majority of our board of directors will be authorized to call a special meeting of stockholders;
•eliminate the ability of our stockholders to call special meetings of stockholders;
•prohibit cumulative voting;
•provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;
•provide for a dual class common stock structure in which holders of our Class B common stock may have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets;
•prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
•provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws; and
•establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Moreover, Section 203 of the Delaware General Corporate Law, or DGCL, may discourage, delay, or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations, and other transactions between us and holders of 15% or more of our common stock. See the section titled “Description of Capital Stock” for additional information.
Our restated certificate of incorporation and our restated bylaws will contain exclusive forum provisions for certain claims, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees.
Our restated certificate of incorporation, to the fullest extent permitted by law, will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation, or our restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Moreover, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder and our restated bylaws will provide that the U.S. federal district courts will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or a Federal Forum Provision. Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder and neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities will be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit our stockholders’ ability to bring a claim in a judicial forum they find favorable for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find the choice of forum provision contained in our restated certificate of incorporation or restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results, and financial condition.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. All statements contained in this prospectus other than statements of historical fact, including statements regarding our future operating results and financial position, our business strategy and plans, market growth, and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “potential,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements.
Forward-looking statements contained in this prospectus include, but are not limited to, statements about:
•our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses including changes in research and development, sales and marketing, and general and administrative expenses (including any components of the foregoing), and our ability to maintain future profitability;
•effects of the COVID-19 pandemic on our business, the employment market, and the economy generally;
•our business plan and our ability to effectively manage our growth;
•our ability to compete with well-established competitors and new entrants;
•our ability to enhance our marketplace and introduce new and improved offerings;
•our ability to increase the number of employers and job seekers in our marketplace;
•our ability to strengthen our technology that underpins our marketplace;
•our ability to attract and retain qualified employees and key personnel;
•our ability to execute our strategy;
•beliefs and objectives for future operations;
•the effects of seasonal trends on our results of operations;
•our ability to expand to new markets;
•our ability to maintain, protect, and enhance our brand and intellectual property;
•our ability to stay in compliance with laws and regulations that currently apply or become applicable to our business;
•economic and industry trends, projected growth, or trend analysis; and
•increased expenses associated with being a public company.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus.
We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any
factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this prospectus or to conform these statements to actual results or revised expectations, except as required by law.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.
MARKET AND INDUSTRY DATA
This prospectus contains statistical data, estimates, and forecasts that are based on industry publications or reports generated by third-party providers, or other publicly available information, as well as other information based on internal estimates. Unless otherwise indicated, information contained in this prospectus concerning the employment market, our general expectations, and our opportunity, is based on information from publicly available sources as well as assumptions that we have made that are based on those data and other similar sources, and on our knowledge of our marketplace. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. While we believe the market position, market opportunity, and market size information included in this prospectus is generally reliable, information of this sort is inherently imprecise.
Certain information included in this prospectus concerning aided brand awareness is based on our ZipRecruiter Brand Awareness Survey, 2020, an internal company-designed survey of 602 participants, which included (1) certain persons who had been involved in hiring processes and had used, or intended to use, online job posting websites within the preceding two years in connection with such hiring processes, (2) decision makers at hiring sites or systems, or influencers in the process of hiring candidates and (3) business owners, human resource managers, and non-human resource managers for various small, medium and large U.S.-based companies. The survey responses were used to measure brand health dimensions for us within the U.S. employer market and to explore how we benchmark against our competition. We designed the Brand Awareness Survey in accordance with what we believe are best practices for conducting a survey. Nevertheless, while we believe this survey is reliable, it involves a number of assumptions and limitations, and no independent sources have verified such survey.
In addition, projections, assumptions, and estimates of our future performance and the future performance of the industry in which we operate is necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
USE OF PROCEEDS
Registered stockholders may, or may not, elect to sell shares of our Class A common stock covered by this prospectus. To the extent any registered stockholder chooses to sell shares of our Class A common stock covered by this prospectus, we will not receive any proceeds from any such sales of our Class A common stock. See the section titled “Principal and Registered Stockholders.”
RSU SALES
We have granted restricted stock units, or RSUs, that vest upon the satisfaction of both a service condition and a liquidity event condition. We determine the grant-date fair value of the RSUs based on the fair value of our common stock at the grant date.
The service-based vesting condition for the majority of the RSUs is satisfied over four years and the liquidity event-based vesting condition for the RSUs is satisfied upon the occurrence of a qualifying event, which is generally defined as a change in control event or a public offering. The liquidity event must occur before the expiration of the RSU award, which generally is no more than seven years from the grant date.
The listing and public trading of our Class A common stock on the New York Stock Exchange will not satisfy the liquidity event-based vesting condition. However, our board of directors has waived the liquidity event-based vesting condition effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022. If such waiver had occurred as of December 31, 2020, it would have resulted in the vesting and settlement of approximately 1,225,890 RSUs held by our current and former employees and other service providers as of December 31, 2020, assuming the first day of trading of our Class A common stock occurred on or prior to December 31, 2020. To fund the personal tax withholding and remittance obligations arising in connection with the RSUs that will vest and settle on such day, we expect that current and former employees will use a broker or brokers to sell a portion of such shares into the market on the first trading day. The proceeds of such sales will be remitted either to us or directly to the relevant taxing authorities, in either case, to be applied towards such tax obligations. We expect that approximately shares of our Class A common stock will be sold throughout the first trading day in order to fund such tax obligations, based on each RSU holder’s applicable tax rate. The number of shares expected to be sold to fund the personal tax withholding and remittance obligations will be determined based on the estimated weighted-average price for the shares of Class A common stock on the first day of trading on the New York Stock Exchange. Because that price will not be known until trading closes, the price per share for purposes of this estimate has been based on management’s estimate of fair value as of April 19, 2021 of $25.04 per share of our Class A common stock.
In order to meet our obligation to remit withholding taxes on behalf of certain of our employees and former employees on a timely basis, we may use our own cash reserves to satisfy such tax remittance obligations prior to receiving the proceeds from such market sales. We do not currently know the amount of cash that would be used to satisfy these tax withholding obligations because it would be dependent on a number of factors, including the share price at the time of settlement. After the first trading day, additional RSUs typically would vest and settle on the 15th day of the third month of each quarter and RSU holders will sell a portion of such shares into the market to fund the personal tax withholding and remittance obligations arising in connection with the RSUs that will vest and settle on such date. Based on the number of RSUs then outstanding and the vesting schedules then in effect, as of December 31, 2020, we expect that approximately , , and RSUs will vest on , 2021, , 2021, and , 2021, respectively. Shares of common stock received upon the vesting and settlement of RSUs will not be subject to lock-up agreements and may be sold at any time, subject to compliance with applicable securities laws and, if applicable, our insider trading policies.
If the market price of our Class A common stock on the New York Stock Exchange is volatile or if there is an oversupply of shares of Class A common stock and holders of RSUs are unable to sell their shares, holders of RSUs would still be responsible for funding the tax withholding and remittance obligations arising in connection with the vesting and settlement of their RSUs and could have to fund such amounts with their own cash.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. Our obligation to pay a dividend on our Class A common stock or Class B common stock is subject to our board of directors declaring such a payment. We are not obligated to pay any dividends on our Class A common stock or Class B common stock and we currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our capital stock in the foreseeable future. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions, and other factors that our board of directors may deem relevant. In addition, our loan and security agreement contains restrictions on our ability to pay cash dividends on our capital stock. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information.
CAPITALIZATION
The following table sets forth our cash and cash equivalents, and our capitalization as of December 31, 2020 on:
•an actual basis; and
•a pro forma basis to give effect to (1) the redesignation of 78,088,075 shares of our outstanding common stock into 78,088,075 shares of Class B common stock outstanding as of December 31, 2020 as if such redesignation occurred on December 31, 2020, (2) the conversion of 2,271,437 shares of our Series A convertible preferred stock and 6,030,706 shares of our Series B convertible preferred stock outstanding as of December 31, 2020 into 24,202,202 shares of our Class B common stock as if such conversion occurred on December 31, 2020, (3) the conversion of the principal amount of the convertible notes and accrued interest outstanding as of December 31, 2020 into 3,055,007 shares of Class B common stock, assuming a conversion price of $8.2909 per share (which is the maximum price per share at which the convertible notes are convertible by their terms, as further described within the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Convertible Notes with Related Parties”), as if such conversion occurred on December 31, 2020, (4) the vesting and settlement of 1,225,890 RSUs into the same number of shares of Class B common stock, for which RSUs the service-based vesting condition was satisfied as of December 31, 2020 and for which our board of directors has waived the liquidity event-based vesting condition effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022 as if our board of directors had waived the liquidity event-based condition and such RSUs settled as of December 31, 2020, (5) stock-based compensation expense of $30.7 million associated with RSUs for which the service-based vesting condition was satisfied as of December 31, 2020 and for which our board of directors has waived the liquidity event-based vesting condition effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022, as if our board of directors had waived the liquidity-based condition and such RSUs settled as of December 31, 2020, based on the estimated fair value of the RSUs on the date that the liquidity event-based vesting condition was waived and which is reflected as an increase to additional paid-in capital and accumulated deficit, (6) a cash payment of $10.0 million to Ian Siegel, our chief executive officer, as further described in the section titled “Executive Compensation—CEO Letter Agreement” which is reflected as a reduction in cash and a corresponding increase to accumulated deficit, and (7) approximately $ in transaction expenses related to the listing of our Class A Common Stock on the New York Stock Exchange.
Between December 31, 2020 and April 23, 2021, the Company granted an additional 3,009,500 RSUs. With respect to all modified RSUs outstanding as of April 19, 2021, the date the liquidity event-based vesting condition was waived, we estimate that we will record $41.7 million of stock-based compensation expense related to the vesting and settlement of 1,665,863 RSUs for which the service-based vesting condition was satisfied as of April 19, 2021 using the estimated fair value of the RSUs on the date that the liquidity event-based vesting condition was waived.
You should read this table together with our consolidated financial statements and the accompanying notes, and the sections titled “Selected Consolidated Financial and Operating Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” that are included elsewhere in this prospectus.
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As of December 31, 2020
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|
|
Actual
|
|
Pro Forma
|
|
|
(dollars in thousands)
|
|
Cash and cash equivalents
|
$
|
114,539
|
|
|
|
|
Convertible notes, due June 2023
|
25,371
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|
|
|
|
Redeemable Convertible Preferred Stock, $0.00001 par value per share; 8,422,757 shares authorized, 8,302,143 shares issued, and outstanding, actual; 50,000,000 authorized, no shares issued and outstanding, pro forma
|
136,856
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|
|
|
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Stockholders’ (deficit) equity:
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|
|
|
|
Common stock, $0.00001 par value per share: 137,800,000 shares authorized, 78,283,408 shares issued and 78,088,075 outstanding, actual; no shares authorized, issued and outstanding, pro forma
|
—
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|
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|
|
Class A common stock, $0.00001 par value per share: no shares authorized, issued, and outstanding, actual; 700,000,000 shares authorized, and no shares issued and outstanding, pro forma
|
—
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|
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|
|
Class B common stock, $0.00001 par value per share: no shares authorized, issued, and outstanding, actual; 700,000,000 shares authorized and 106,766,507 shares issued and 106,571,174 outstanding, pro forma
|
—
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|
|
|
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Additional paid-in capital
|
21,732
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|
|
|
|
Accumulated deficit
|
(71,384)
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|
|
|
|
Treasury stock, 195,333 shares outstanding, actual; 195,333 shares outstanding, pro forma
|
(644)
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|
|
|
|
Total stockholders’ (deficit) equity:
|
(50,296)
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|
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|
|
Total capitalization
|
$
|
111,931
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|
|
|
The number of shares of our Class A common stock and Class B common stock outstanding as of December 31, 2020 excludes the following:
•19,372,667 shares of our Class B common stock issuable upon the exercise of options outstanding as of December 31, 2020, with a weighted-average exercise price of $2.089 per share, including options to purchase shares issued pursuant to our 2012 Stock Plan, or the 2012 Plan, and 2014 Stock Incentive Plan, or the 2014 Plan;
•215,000 shares of our Class B common stock issuable upon the exercise of options outstanding as of December 31, 2020, with a weighted-average exercise price of $3.70 per share, issued outside of the 2012 Plan and the 2014 Plan;
▪4,224,773 shares of our Class B common stock issuable upon the vesting and settlement of RSUs, for which the service condition was not satisfied, outstanding as of December 31, 2020, pursuant to the 2014 Plan;
•3,009,500 shares of our Class B common stock issuable upon the vesting and settlement of RSUs, granted after December 31, 2020 through April 23, 2021, pursuant to the 2014 Plan, of which RSUs subject to 3,000 shares of our Class B common stock were cancelled; and
•14,938,695 shares of our Class A common stock reserved for future issuance under our equity compensation plans, consisting of: (1) 2,941,160 shares of our Class A common stock reserved for future issuance under our 2014 Plan, as of December 31, 2020 (which reserve does not reflect the options to purchase shares of our Class B common stock and RSUs settleable for shares of our Class B common stock granted after December 31, 2020), (2) 10,664,476 shares of our Class A common stock reserved for future issuance under our 2021 Equity Incentive Plan, and (3) 1,333,059 shares of our Class A common stock reserved for future issuance under our
2021 Employee Stock Purchase Plan, each of which will become effective on the date immediately prior to the date of this prospectus.
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following tables represent selected consolidated financial and operating data for our business. The selected consolidated statements of operations data for the years ended December 31, 2019 and 2020 and the selected consolidated balance sheet data as of December 31, 2019 and 2020 have been derived from our audited consolidated financial statements included elsewhere in this prospectus.
You should read the following selected consolidated financial and operating data together with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and the related notes included elsewhere in this prospectus. The selected consolidated financial and operating data in this section are not intended to replace our audited consolidated financial statements and the related notes and are qualified in their entirety by our audited consolidated financial statements and the related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of our results in any future period.
Consolidated Statements of Operations Data
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Year Ended December 31,
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2019
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2020
|
|
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(in thousands, except per share data)
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Revenue
|
$
|
429,559
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|
|
$
|
418,142
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|
|
Cost of revenue(1)
|
54,778
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|
|
54,163
|
|
|
Gross profit
|
374,781
|
|
|
363,979
|
|
|
Operating expenses:
|
|
|
|
|
Sales and marketing(1)
|
276,197
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|
|
191,141
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|
|
Research and development(1)
|
65,410
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|
|
69,408
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|
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General and administrative(1)
|
39,492
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|
|
38,998
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|
|
Total operating expenses
|
381,099
|
|
|
299,547
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|
|
Income (loss) from operations
|
(6,318)
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|
|
64,432
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|
|
Other income (expense):
|
|
|
|
|
Interest expense
|
(575)
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|
|
(1,037)
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|
|
Sublease income
|
1,170
|
|
|
1,051
|
|
|
Other expense, net
|
(38)
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|
|
(109)
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|
|
Total other income (expense), net
|
557
|
|
|
(95)
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|
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Income (loss) before income taxes
|
(5,761)
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|
|
64,337
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|
|
Income tax expense (benefit)
|
588
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|
|
(21,711)
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|
|
Net income (loss)
|
(6,349)
|
|
|
86,048
|
|
|
Less: Accretion of redeemable convertible preferred stock
|
(3,722)
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|
|
(3,883)
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|
|
Less: Undistributed earnings attributable to participating securities
|
—
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|
|
(19,148)
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|
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Net income (loss) attributable to common stockholders
|
$
|
(10,071)
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|
|
$
|
63,017
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|
|
Net income (loss) per share(2)
|
|
|
|
|
Basic
|
$
|
(0.13)
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|
|
$
|
0.79
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Diluted
|
$
|
(0.13)
|
|
|
$
|
0.70
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|
|
Weighted-average shares used in computing net income (loss) per share(3)
|
|
|
|
|
Basic
|
79,337
|
|
|
79,651
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|
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Diluted
|
79,337
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|
|
94,156
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|
|
Pro forma net income per share (unaudited)(2)
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|
|
|
|
Basic
|
|
|
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Diluted
|
|
|
|
|
Weighted-average shares used in computing pro forma net income per share (unaudited)(2)
|
|
|
|
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Basic
|
|
|
106,085
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|
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Diluted
|
|
|
118,591
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|
|
Other Financial Information:
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|
|
|
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Adjusted EBITDA (3)
|
$
|
9,366
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|
|
$
|
80,133
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|
________________
(1)Includes stock-based compensation expense as follows:
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Year Ended December 31,
|
|
|
2019
|
|
2020
|
|
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(in thousands)
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|
Cost of revenue
|
$
|
119
|
|
|
$
|
73
|
|
|
Sales and marketing
|
1,031
|
|
|
704
|
|
|
Research and development
|
3,159
|
|
|
3,050
|
|
|
General and administrative
|
2,431
|
|
|
1,925
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|
|
Total stock-based compensation
|
$
|
6,740
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|
|
$
|
5,752
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|
________________
(2)See Note 3 in our audited consolidated financial statements included elsewhere in this prospectus for an explanation of the method used to calculate basic and diluted net income (loss) per share, pro forma net income per share, and the weighted-average number of shares used in the computation of the per share amounts.
(3)Adjusted EBITDA is not a measure of our financial performance under GAAP and should not be considered as an alternative to net income (loss), income (loss) from operations, or any other measures derived in accordance with GAAP. For a definition of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA, see "Non-GAAP Financial Measures."
Selected Consolidated Balance Sheet Data
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Year Ended December 31,
|
|
|
2019
|
|
2020
|
|
2020
|
|
|
Actual
|
|
Actual
|
|
Pro Forma (1)
|
|
|
(in thousands)
|
|
Cash
|
$
|
35,529
|
|
|
$
|
114,539
|
|
|
|
|
Working capital(2)
|
(5,518)
|
|
|
73,309
|
|
|
|
|
Total assets
|
117,724
|
|
|
212,129
|
|
|
|
|
Long-term borrowing
|
10,000
|
|
|
—
|
|
|
|
|
Convertible notes and accrued interest with related parties
|
—
|
|
|
25,371
|
|
|
|
|
Total liabilities
|
107,062
|
|
|
125,569
|
|
|
|
|
Redeemable convertible preferred stock
|
132,973
|
|
|
136,856
|
|
|
|
|
Total stockholders' equity (deficit)
|
$
|
(122,311)
|
|
|
$
|
(50,296)
|
|
|
|
________________
(1)The pro forma column reflects (a) the redesignation of 78,088,075 shares of our outstanding common stock into 78,088,075 shares of Class B common stock outstanding as of December 31, 2020 as if such redesignation occurred on December 31, 2020, (b) the conversion of 2,271,437 shares of our Series A convertible preferred stock and 6,030,706 shares of our Series B convertible preferred stock outstanding as of December 31, 2020 into 24,202,202 shares of our Class B common stock as if such conversion occurred on December 31, 2020, (c) the conversion of the principal amount of the convertible notes and accrued interest thereon with related parties outstanding as of December 31, 2020 into 3,055,007 shares of Class B common stock at a conversion price of $8.2909 per share (which is the maximum price per share at which the convertible notes are convertible by their terms, as further described within the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Convertible Notes with Related Parties”) as if such conversion occurred on December 31, 2020; provided that to the extent that the volume-weighted average price on the first day of trading following our Direct Listing is less than $11.05 per share, then the convertible notes and contractual accrued interest will convert at 75% of the volume weighted average price, which would result in the issuance of additional shares of Class B common stock upon conversion, (d) vesting and settlement of 1,225,890 RSUs, into the same number of shares of Class B common stock, for which the service-based vesting condition was satisfied as of December 31, 2020 and for which RSUs our board of directors has waived the liquidity event-based vesting condition effective as of the earlier of first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022 as if our board of directors had waived the liquidity event-based condition and such RSUs settled as of December 31, 2020, (e) stock-based compensation expense of $30.7 million associated with RSUs for which the service-based vesting condition was satisfied as of December 31, 2020 and for which our board of directors has waived the liquidity event-based vesting condition effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022, as if our board of directors had waived the liquidity event-based condition and such RSUs settled as of December 31, 2020, based on the estimated fair value of the RSUs on the date that the liquidity event-based event condition was waived and which stock-based compensation expense is reflected as an increase to additional paid-in capital and accumulated deficit, (f) a cash payment of $10.0 million to Ian Siegel, our chief executive officer, as further described in the section titled “Executive Compensation—CEO Letter Agreement” which is reflected as a reduction in cash, working capital and total assets and a
corresponding increase to stockholders’ deficit and (g) approximately $ in transaction expenses related to the listing of our Class A Common Stock on the New York Stock Exchange.
(2)Working capital is defined as current assets less current liabilities. See our consolidated financial statements and the accompanying notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.
Key Operating Metrics
|
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|
|
Three Months Ended
December 31, 2019
|
|
Three Months Ended
December 31, 2020
|
|
Quarterly Paid Employers(1)
|
102,541
|
|
|
89,636
|
|
|
Revenue per Paid Employer(1)
|
$
|
1,098
|
|
|
$
|
1,276
|
|
____________
(1)See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Operating Metrics and Non-GAAP Financial Measures“ included elsewhere in this prospectus for definitions of these metrics.
Non-GAAP Financial Measures
We collect and analyze operating and financial data to evaluate the health of our business and assess our performance. In addition to revenue, net income (loss), income (loss) from operations, and other results under GAAP, we use Adjusted EBITDA and Adjusted EBITDA margin to evaluate our business. We have included these non-GAAP financial measures in this prospectus because they are key measures used by our management to evaluate our operating performance. Accordingly, we believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team and board of directors. Our calculation of these non-GAAP financial measures may differ from similarly-titled non-GAAP measures, if any, reported by our peer companies. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.
We define Adjusted EBITDA as our net income (loss) before total other income (expense), net, income tax expense (benefit) and depreciation and amortization, adjusted to eliminate stock-based compensation expense. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenue for the same period.
We believe Adjusted EBITDA and Adjusted EBITDA margin are helpful to investors, analysts and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, these measures are frequently used by analysts, investors and other interested parties to evaluate and assess performance.
The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated:
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Year Ended December 31,
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|
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2019
|
|
2020
|
|
|
(in thousands, except percentages)
|
|
GAAP net income (loss)
|
$
|
(6,349)
|
|
|
$
|
86,048
|
|
|
Stock-based compensation
|
6,740
|
|
|
5,752
|
|
|
Depreciation and amortization
|
8,944
|
|
|
9,949
|
|
|
Total other (income) expense, net
|
(557)
|
|
|
95
|
|
|
Income tax expense (benefit)
|
588
|
|
|
(21,711)
|
|
|
Adjusted EBITDA
|
$
|
9,366
|
|
|
$
|
80,133
|
|
|
Adjusted EBITDA margin
|
2
|
%
|
|
19
|
%
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the section titled “Selected Consolidated Financial and Operating Data” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should read the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
OVERVIEW
ZipRecruiter is a two-sided marketplace for work. Since the founding of our company in 2010, over 2.8 million businesses and 110 million job seekers have come to ZipRecruiter for their hiring and job search needs. Employers spend more than $205 billion per year in the United States alone to recruit talent.11 Online recruitment alone represents over $13 billion of this opportunity.12 The online segment of the U.S. recruiting market is expected to grow at a compound annual growth rate, or CAGR, of 14.1% from 2016 to 2025 compared to a CAGR of 0.2% for the rest of the recruiting market during that same period. The online segment of the recruiting market in the U.S. is expected to continue expanding its share of the recruiting market, with online share increasing from 3% in 2016 to 6% in 2020 and to 8% in 2025.13
Our Mission. To actively connect people to their next great opportunity.
The Problem. Twenty years after moving online, the job market remains painfully inefficient. Job seekers are required to navigate on their own in order to find the right jobs to apply to, usually across multiple sites, and without effective tools for monitoring new opportunities. Employers in turn are overwhelmed by the complexity of modern recruiting given the abundance of job boards, search engines, and social networks to source talent from. Neither side is an expert at their role. Neither side enjoys the process.
Our Business. We founded ZipRecruiter to simplify the job market for both job seekers and employers. Unlike traditional online job sites, ZipRecruiter works like a matchmaker curating job opportunities for job seekers, and candidates for employers.
Creating Value for Job Seekers. For job seekers across all industries and levels of seniority, we operate like a dedicated recruiter. That means presenting strong fit job opportunities, proactively pitching potential candidates to employers, and providing job seekers with updates on the status of their
11 According to the following reports published by IBISWorld: Office Staffing & Temp Agencies in the US - Market Size 2001–2026, Updated December 28, 2020, https://www.ibisworld.com/industry-statistics/market-size/office-staffing-temp-agencies-united-states/ and Employment & Recruiting Agencies in the US - Market Size 2005–2026, Updated March 23, 2021, https://www.ibisworld.com/industry-statistics/market-size/employment-recruiting-agencies-united-states/ (each last visited April 21, 2021).
12 According to the following report published by IBISWorld: Online Recruitment Sites in the US - Market Size 2005–2027, Updated March 23, 2021, https://www.ibisworld.com/industry-statistics/market-size/online-recruitment-sites-united-states/ (last visited April 21, 2021).
13 Based on the following published reports: (1) IBISWorld Inc., Office Staffing & Temp Agencies in the US, December 2020, (2) IBISWorld Inc., Employment & Recruiting Agencies in the US, March 2021, and (3) IBISWorld Inc., Online Recruitment Sites, March 2021.
applications. This makes job seekers feel supported while searching for work. That’s why ZipRecruiter has been the #1 rated job seeker app on iOS and Android for the past four years.14
Creating Value for Employers. For employers, we focus on building technology to rapidly deliver quality candidates to companies of all sizes and across all industries. Our algorithms alert the best job seekers in our marketplace when a job goes live. Employers posting jobs often get their first quality candidate before they can get up from their chair. 80% of employers posting in our marketplace receive a quality candidate within the first 24 hours. That’s why ZipRecruiter is the #1 rated employment marketplace by G2.15
Unique Data and Artificial Intelligence Provide Better Outcomes for Employers and Job Seekers. With a relevant data pipeline created from billions of interactions between job seekers and employers, we are uniquely positioned to harness that data to fuel the advanced artificial intelligence behind our matching, recommendation, and marketplace optimization capabilities. Through our deep learning based natural language processing, we understand job seekers’ and employers’ nuanced needs. We model and analyze clicks, applications, hiring signals, and numerous other interactions to improve outcomes for all participants in our marketplace. Our advanced technology stack processes the data generated by our highly engaged user base to continuously improve our matchmaking. Our climbing satisfaction metrics on both sides of our marketplace over the past few years give us confidence that these technology investments are yielding results for employers and job seekers alike. The Thumbs Up Rate on candidates has increased from 39% in December 2017 to 56% as of December 2020, highlighting the improved quality of our matching algorithms over time.
Accelerating Network Effects. Increasing the number of jobs in our marketplace attracts more job seekers. A greater number of job seekers attracts more employers who in turn post more job opportunities in our marketplace. These natural, self-perpetuating network effects increase our data and thereby accelerate the rate at which our matching technology gets smarter over time.
Compelling Financial Results. The combination of the scale on both sides of our marketplace, our efficient go-to-market strategy, and intelligent use of technology has resulted in compelling financial results. For the year ended December 31, 2019, our revenue was $429.6 million. For the year ended December 31, 2019, we generated a net loss of $6.3 million and Adjusted EBITDA of $9.4 million. For the year ended December 31, 2020, our revenue was $418.1 million. For the year ended December 31, 2020, we generated a net income of $86.0 million and Adjusted EBITDA of $80.1 million. Adjusted EBITDA is a financial measure not presented in accordance with GAAP. For a definition of Adjusted EBITDA, an explanation of our management’s use of this measure and a reconciliation of net income (loss) to Adjusted EBITDA, see the section titled “Summary Consolidated Financial and Operating Data.”
14 Based on ratings information for the Google Play Store and Apple Store from the AppFollow platform during the period of March 2017 to March 2021 for the job seeker apps of ZipRecruiter, CareerBuilder, Craigslist, Glassdoor, Indeed, LinkedIn, and Monster.
15 Based on G2 satisfaction ratings as set forth in G2, Best Job Boards Software, https://www.g2.com/categories/job-boards?utf8=%E2%9C%93&order=top_shelf (last visited January 25, 2021).
OUR BUSINESS MODEL
We generate substantially all of our revenue from fees paid by employers to post jobs and access other features in our marketplace. We offer our employers flat rate pricing on terms ranging from a day to a year, or performance-based pricing, such as cost-per-click, to align with the employer’s hiring needs.
ZipRecruiter is free to use for job seekers. Job seekers come to ZipRecruiter in search of their next opportunity. After establishing a profile, job seekers are able to apply to jobs with a single click. Our automated recruiter curates jobs and proactively sends alerts for new opportunities where they are a Great Match. As our matching technology learns more about job seekers’ preferences and attributes, our technology offers increasingly higher quality matches.
We plan to continue to invest aggressively in our marketplace to drive growth for the foreseeable future. We have made significant investments in our business to expand our employer and job seeker footprints, increase their engagement, and enhance our datasets and machine learning.
KEY OPERATING METRICS AND NON-GAAP FINANCIAL MEASURES
In addition to the measures presented in our consolidated financial statements, we use the following key operating metrics and non-GAAP financial measures to identify trends affecting our business, formulate business plans, and make strategic decisions:
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Three Months Ended
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March
31,
2019
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June
30,
2019
|
|
September
30,
2019
|
|
December
31,
2019
|
|
March
31,
2020
|
|
June
30,
2020
|
|
September
30,
2020
|
|
December
31,
2020
|
|
Quarterly Paid Employers
|
101,671
|
|
|
110,445
|
|
|
112,655
|
|
|
102,541
|
|
|
98,456
|
|
|
76,867
|
|
|
89,810
|
|
|
89,636
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|
|
Revenue per Paid Employer
|
$
|
942
|
|
|
$
|
983
|
|
|
$
|
1,000
|
|
|
$
|
1,098
|
|
|
$
|
1,151
|
|
|
$
|
1,140
|
|
|
$
|
1,145
|
|
|
$
|
1,276
|
|
|
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|
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|
|
|
Three Months Ended
|
|
|
March
31,
2019
|
|
June
30,
2019
|
|
September
30,
2019
|
|
December 31,
2019
|
|
March
31,
2020
|
|
June
30,
2020
|
|
September
30,
2020
|
|
December 31,
2020
|
|
Adjusted EBITDA
|
$
|
(4,138)
|
|
|
$
|
6,837
|
|
|
$
|
1,976
|
|
|
$
|
4,691
|
|
|
$
|
(6,382)
|
|
|
$
|
25,601
|
|
|
$
|
26,653
|
|
|
$
|
34,261
|
|
|
Adjusted EBITDA margin
|
(4%)
|
|
6%
|
|
2%
|
|
4%
|
|
(6%)
|
|
29%
|
|
26%
|
|
30%
|
Quarterly Paid Employers
We quantify the revenue-generating customer base as the number of Paid Employers in our marketplace. The Paid Employer metric includes all actively recruiting employers (or entities acting on behalf of employers), on a paying subscription plan or performance marketing campaign for at least one day in a given calendar quarter. In the quarter ended December 31, 2020, we had 89,636 Paid Employers in our marketplace. Paid Employers excludes employers from our Job Distribution Partners or other indirect channels, employers who are not actively recruiting, employers on free-trials, and employers with jobs not in our marketplace. This group of employers excluded from our Paid Employer count does not contribute a significant amount of revenue and consisted of 27,975 employers in the quarter ended December 31, 2020. The following table shows the number of Paid Employers in our marketplace for each quarter of fiscal years 2018 through 2020:
We typically experience a decline in the Paid Employers in our marketplace during the fourth quarter as a result of seasonal hiring dynamics. For example, the number of Quarterly Paid Employers in the quarter ended December 31, 2019 declined by 9% as compared to the quarter ended September 30, 2019. Notably, we did not experience this seasonal decline in 2020. We believe the continued improvement in macroeconomic factors in the fourth quarter of 2020 helped offset the typical seasonal decline.
Revenue per Paid Employer
We evaluate Revenue per Paid Employer as a key indicator of our efforts to increase value provided to employers in our marketplace. We define Revenue per Paid Employer as total company revenue in a given period divided by Quarterly Paid Employers in the same period. For the quarter ended December 31, 2020, our Revenue per Paid Employer was approximately $1,276. The following table shows the Revenue per Paid Employer in our marketplace for each quarter of fiscal years 2018 through 2020:
Except for the second quarter of 2020, which was significantly impacted by the COVID-19 pandemic, Revenue per Paid Employer has increased every quarter from the quarter ended March 31, 2018 to the quarter ended December 31, 2020. As employers use our marketplace and see positive results first-hand, many will choose to list an increasing number of job postings in our marketplace. Employers also often sign up for enhancement products and services to increase their job posting’s visibility and reach, generating additional revenue for ZipRecruiter. Revenue per Paid Employer will fluctuate quarterly based on the overall employer hiring needs.
Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as our net income (loss) before total other income, net, income tax expense and depreciation and amortization, adjusted to eliminate stock-based compensation expense. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA for a period by revenue for the same period.
We believe Adjusted EBITDA and Adjusted EBITDA margin are helpful to investors, analysts and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, these measures are frequently used by analysts, investors and other interested parties to evaluate and assess performance.
See the section titled “Selected Consolidated Financial and Operating Data—Non-GAAP Financial Measures” for information regarding the limitations of using Adjusted EBITDA and Adjusted EBITDA margin as financial measures and for a reconciliation of net income (loss), the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA.
Our Adjusted EBITDA and Adjusted EBITDA margin fluctuate from quarter to quarter depending on a variety of factors including, but not limited to, our investments in research and development, sales and marketing, headcount and our ability to generate revenue. For the year ended December 31, 2019, we had Adjusted EBITDA of approximately $9.4 million with an Adjusted EBITDA margin of 2%. For the year ended December 31, 2020, Adjusted EBITDA improved to $80.1 million with an Adjusted EBITDA margin of 19%.
FACTORS AFFECTING OUR PERFORMANCE
We believe that the growth and future success of our business depends on many factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth, improve our results of operations, and maintain or increase profitability.
Attract More Employers
Our ability to maintain and grow an expansive universe of employers and job opportunities in our marketplace is critical to our business’s future. We acquire new employers primarily through marketing programs and our sales teams.
Our ability to cost effectively attract both employers and job seekers is critical to our success. Given that our marketplace remains free for job seekers, employers’ spending funds our continued investment in matching technology. The majority of our marketing efforts to date have been toward reaching employers. Our investment over the last several years of over $600 million in employer-specific marketing has driven a significant increase in brand awareness. Our aided brand awareness among employers has grown to 82% as of December 31, 2020. We believe scaling our brand has a positive impact on our ability to attract both employers and job seekers to our marketplace. We plan to continue to invest in the sales and marketing channels that we believe will drive further brand awareness and preference amongst both employers and job seekers. We are focused on the effectiveness of our sales and marketing spend and will continue to be disciplined in how we measure and re-invest in growing both sides of our marketplace.
Most of the employers in our marketplace use our self-serve tools to gain access to our marketplace and do not require a salesperson to help them. Other employers have more sophisticated needs or require greater assistance from our sales team. As a result, despite our expectation that our sales team will continue to use technology to become more efficient over time, we expect to grow our sales team significantly over several years in order to be able to cover every business that requires individualized assistance with their hiring needs. Additionally, we expect our sales and marketing expense will continue to grow but is likely to decline as a percentage of total revenue over time.
While our Payback Period will vary among Cohorts, our 2016 to 2020 Cohorts’ Payback Period averaged less than 16 months, meaning that the Cohort’s Employer Acquisition Expense was, on average, recovered by the end of April in the following calendar year. Additionally, even with COVID-19’s negative impact on revenue in 2020, our Payback Period for the 2019 Cohort was 19 months, meaning the 2019 Cohort’s cumulative revenue had equaled the Cohort’s Employer Acquisition Expense by July 31, 2020. In response to COVID-19, we reduced our Employer Acquisition Expense in 2020 by 29% compared to 2019. By focusing our spend on high-performing marketing channels our Cohort Payback Period dropped to just over 14 months, meaning the 2020 Cohort's cumulative revenue had exceeded the Cohort's Employer Acquisition Expense by March 31, 2021. Our Employer Acquisition Expense represented 61% and 63% of total sales and marketing expenses in 2019 and 2020, respectively. The
attractive and consistent Payback Periods of our Cohorts give us confidence to continue investing in employer acquisition and scale our marketplace.
To the extent that we successfully speed up the hiring process for employers, this may naturally decrease both the average duration a job stays posted in our marketplace as well as the average time an employer may stay in our marketplace. This, in turn, could have an adverse effect on our revenue, all other things being equal. However, we believe that by delivering faster results, higher-quality candidates, increased reach, and greater confidence in the hiring process, we will increase our Revenue per Paid Employer over time through greater customer loyalty, which we believe over the long-term will offset the financial impact of any decrease in Quarterly Paid Employers.
Create More Value for Employers
While our marketplace serves a wide variety of employers, all employers benefit from finding the right candidate quickly. Our employers rate the value of candidates we deliver to them, and positive ratings have increased over time. Our Employer Thumbs Up Rate and our Average Monthly Revenue per Paid Employer have both increased over time while the average duration that jobs remain posted has decreased over time.
Employer Thumbs Up Rate
We actively measure the frequency with which an employer gives a “thumbs up” to a potential job seeker. This allows us to highlight our ability to serve the employer with high quality job seekers. The Thumbs Up Rate on candidates has increased from 39% in December 2017 to 56% as of December 2020, demonstrating the improved quality of our matching algorithms over time.
Quarterly Average Number of Days Job Stays Posted
In the quarter ended December 31, 2020, the Average Number of Days a Job Stays Posted in our marketplace was 16 days, a 59% decrease since the quarter ended December 31, 2016. This trend, coupled with the increasing Thumbs Up Rate by employers, shows that our marketplace is driving faster and better results. We believe we will continue to see the quarterly Average Number of Days a Job Stays Posted go down as our matching technology gets smarter.
Average Monthly Revenue per Paid Employer by Employer Cohort Start Year
Employers reward us for the value we create. Those with recurring hiring needs remain active in our marketplace over time and tend to increase their spend each year, posting additional jobs and purchasing job enhancement products. For example, the Average Monthly Revenue per Paid Employer in Year 1 among our 2014 Cohort has increased by over 7.0 times at Year 7, with increases in each consecutive year. Additionally, we have seen an increase in Year 1 Average Monthly Revenue per Paid Employer in each calendar year shown above, which we believe is attributable to improvements in our marketplace over the years. Year 1 Average Monthly Revenue per Paid Employer among our 2020 Cohort is nearly 3.0 times that of the 2014 Cohort.
Revenue per Annual Paid Employer Cohort by Calendar Year
($ in millions with Percent of Total for 2020)
We have grown revenue by both engaging our existing employers as well as bringing on new employers to our marketplace. Our employers’ needs vary greatly by their industry, size and geographic footprint. While some of these companies hire consistently and may be more isolated from macroeconomic changes, others tend to hire intermittently. Moreover, various businesses have dramatically different spend profiles over time. Despite this fact, when we evaluate the performance of our annual Cohorts, we see consistent revenue contributions for years after they initially use our marketplace. In 2019 and 2020, 74% and 76% of revenue, respectively, was generated by employers that had started using our marketplace in prior years. This trend provides us with a high degree of predictability over time.
Cohorts joining prior to 2016 have contributed consistent revenue for years 2 and beyond. In 2016, we increased the subscription prices of our service to better align with the increasing value we were providing to our customers. The effective price increase more than offset the decline in new employer signups. These improved unit economics allowed us to increase our marketing spend through the second half of 2016, driving disproportionately more new employers toward the end of the year and, thus, strong growth in 2017 when compared to revenue generated by that same Cohort of employers in 2016. Since 2017, product improvements have continued to accelerate positive results for our employers. Our monetization strategies have evolved to better align with the value we create, resulting in more of a given Cohort’s lifetime revenue being earned during the earlier years of its long lifetime.
Attract More Job Seekers
For job seekers, we operate like a personal recruiter going as far as presenting potential candidates to employers before they have applied. Our ability to cost effectively grow the number of job seekers and increase their engagement in our marketplace is critical to strengthen our marketplace. We compete for job seekers on many fronts, including our ability to surface unique and attractive jobs, our ability to simplify the hiring process, the transparent feedback job seekers receive on the status of their applications, and our trusted brand. We believe our offering to job seekers compares favorably versus alternatives due to the combination of our large and unique set of jobs to choose from, plus our proven matching technology that continues to get smarter over time. In 2020 alone we engaged with over 36 million Active Job Seekers. Historically, we have largely focused our marketing spend on employers, and despite being the highest rated mobile app for job seekers, we are not yet the most well-known.
We will continue to invest in growing the number of job seekers in our marketplace that are either actively or passively open to evaluating new opportunities.
Investments in Technology
The technology that drives high quality matches between our job seekers and employers remains a significant investment priority. We are continuously improving our data science models, leveraging the billions of interactions taking place in our marketplace to drive meaningful improvements in the quality of matches we share with our users. Our continued improvement of the technology underpinning our marketplace and product experience is paramount to our user experience, driving our ability to attract and retain employers and job seekers, improve the rate at which we make Great Matches, and generate revenue. As such, we will continue to invest in our technology to continue to evolve our marketplace to provide improved experiences and impact for both employers and job seekers.
We have invested in research and development to improve our matching technology and deliver a high-quality experience to employers and job seekers. In 2019 and 2020, we spent $65.4 million and $69.4 million, or 15% and 17% of total revenue, respectively, on research and development. We believe the return on these investments will create operating leverage over time while continuing to drive top-line growth.
Seasonality
Our business is seasonal, reflecting typical behavior in hiring markets. Hiring activity tends to decelerate in the fourth quarter. In 2019, for example, sequential revenue growth was 13% and 4% for the quarters ended June 30 and September 30, respectively. Sequential growth decelerated to 0% in the quarter ended December 31, 2019. In 2020, we experienced a decrease in sequential revenue of 23% in the quarter ended June 30, 2020 as a result of the COVID-19 pandemic, but saw consecutive quarters of revenue growth of 17% and 11% in the third and fourth quarters of 2020 as employers started to return to and join our marketplace. Revenue in the second half of the year represented 52% of total annual revenue in 2018, 2019 and 2020.
Impact of COVID-19
The COVID-19 pandemic has had, and continues to have, a significant impact on the U.S. economy and hiring. The onset of the COVID-19 pandemic began to impact our business starting in March 2020. The adverse economic impact on businesses, and the resulting rise of unemployment in the United States, led to a decrease in Quarterly Paid Employers, a decrease in open job opportunities in our marketplace, and a decrease in Active Job Seekers. We anticipated and experienced a decrease in sequential revenue of 23% in the quarter ended June 30, 2020 and, in response, we reduced our operating expenses, such as personnel, marketing and general and administrative expenses, by 51% in the quarter ended June 30, 2020 compared to the quarter ended March 31, 2020. This included downsizing our workforce by approximately 40% to 791 employees as of March 31, 2020.
In the quarter ended September 30, 2020, we delivered $102.9 million in revenue, a 17% increase compared to the quarter ended June 30, 2020 reflecting strong execution across product, marketing and operations, and the beginning of an economic recovery. Revenue in the quarter ended September 30, 2020 reflects a 9% decrease from the quarter ended September 30, 2019, indicating the lingering macroeconomic effect of COVID-19. We saw employers in our marketplace increase by 17% in the quarter ended September 30, 2020 versus the quarter ended June 30, 2020 as macroeconomic conditions improved and we increased our marketing investments.
While the nature of the COVID-19 pandemic has reduced the number of people searching for work in the short term, we believe there will be an increase in job seeking activity once the economy fully reopens. We believe we will be a significant beneficiary of this anticipated increase in job seeking activity.
Components of Our Results of Operations
Revenue
We generate revenue primarily from fees paid by employers to post and distribute jobs in our marketplace, as well as multiple sites managed by Job Distribution Partners, including job boards, classifieds, search engines and social networks.
Our subscription revenue consists of time-based job posting plans, upsells which complement or expand visibility and prominence to job posting plans, and resume database plans.
We offer job posting plans with terms ranging from a day to a year on a flat rate subscription basis to access our marketplace, where customers may create and manage job postings and review incoming candidate applications. We recognize revenue ratably over the subscription period beginning on the date the subscription service is made available to the customer. Our nonrefundable subscriptions are typically subject to renewal at the end of the subscription term.
Our upsell services complement or expand visibility to job posting plans and are typically sold on a subscription basis. Upsell services revenue is recognized ratably over the term of the agreement beginning on the date the upsell services are made available to the customer. Additionally, upsell services include job posting enhancements which are applied to individual job postings to provide customers with a temporary boost in the prominence of their job postings. Revenue from job posting enhancements is recognized as the customer uses the enhancements on their job postings.
Resume database plans allow our customers to search and view resumes and revenue is recognized ratably over the subscription period.
Performance-based revenue is recognized when a candidate clicks on or applies to a job distributed by ZipRecruiter on behalf of a customer. For performance-based revenue, our customers pay an amount per click or per job application usually capped at a contractual maximum per job recruitment campaign.
We may distribute jobs to candidates from sources who have job seeker or candidate databases. When a job seeker from a candidate source clicks on or applies to a job posting, we pay the candidate source a percentage of the revenue we earn from our customer for the click or application according to the terms of the revenue share agreement. In these arrangements, we have the responsibility for advertising the customer’s job postings, discretion in how and where we choose to advertise the customer’s job postings, and discretion in establishing the price paid by the customer. We recognize the fees we receive from our customers as revenue and the revenue share due is recorded in cost of revenue in the Consolidated Statements of Operations.
For a description of our revenue accounting policies, see the section titled “Critical Accounting Policies and Estimates” below.
Cost of Revenue and Gross Profit
Cost of Revenue
Cost of revenue consists of third-party hosting, credit card processing fees, personnel related costs (including salaries, bonuses, benefits, and stock-based compensation) for customer support employees, partner revenue share amounts, job distribution costs from performance-based revenue, and amortization of capitalized software costs associated with our marketplace technology to provide services for our customers. In addition, we allocate a portion of overhead costs, such as rent, IT costs, supplies and depreciation and amortization to cost of revenue based on headcount.
We expect cost of revenue to increase in absolute dollars in future periods due to payment processing fees, third-party hosting fees, personnel related costs to support additional transaction volume, and amortization expense associated with our capitalized internal-use software and development
cost. Our cost of revenue may fluctuate in absolute dollars from period to period based on the amount and timing of all of these items.
Gross Profit and Gross Margin
Our gross profit and gross margin may fluctuate from period to period. Such fluctuations may be influenced by our revenue, timing and amount of investments to expand hosting capacity, our continued investments in our support teams, and the amortization expense associated with our capitalized internal-use software and development cost.
Costs and Operating Expenses
Sales and Marketing
Sales and marketing expense consists of personnel related costs (including salaries, sales commissions, bonuses, benefits, and stock-based compensation) for our sales and marketing employees, marketing activities, and related allocated overhead costs. Marketing activities include advertising, online lead generation, customer and industry events, and candidate acquisition. We allocate a portion of overhead costs, such as rent, IT costs, supplies and depreciation and amortization to sales and marketing expense based on headcount.
We expect that sales and marketing expenses will increase on an absolute dollar basis and may vary from period to period as a percentage of revenue for the foreseeable future as we plan to continue to invest in sales and marketing to attract both employers and job seekers to our marketplace and to increase our brand awareness. We expect that these expenses will continue to be our largest operating expense category for the foreseeable future as we continue to expand on our sales and marketing efforts. Our marketing expense will continue to grow, but is likely to decline as a percentage of total revenue over time.
Research and Development
Research and development expense consists of personnel related costs (including salaries, bonuses, benefits, and stock-based compensation) for our research and development employees, amortization of capitalized software costs associated with the development of the databases supporting our marketplace, and the cost of certain third-party service providers. We allocate a portion of overhead costs, such as rent, IT costs, supplies and depreciation and amortization to research and development expenses based on headcount. Research and development costs, other than software development costs qualifying for capitalization, are expensed as incurred.
We believe continued investments in research and development are important to attain our strategic objectives, and expect research and development expense to increase in absolute dollars. This expense may vary as a percentage of total revenue for the foreseeable future as we continue to invest in research and development activities related to ongoing improvements to, and maintenance of, our marketplace, expansion of our services, as well as other research and development programs, including the hiring of engineering, product development, and design employees to support these efforts. Our research and development expense will continue to grow, but is likely to decline as a percentage of total revenue over time.
General and Administrative
General and administrative expense consists of personnel related costs (including salaries, bonuses, benefits, and stock-based compensation) for employees in our executive, finance, human resource and administrative departments, and fees for third party professional services, including consulting, legal and accounting services. In addition, we allocate a portion of overhead costs, such as rent, IT costs, supplies and depreciation and amortization to general and administrative expense based on headcount.
We expect to invest in corporate infrastructure and incur additional expenses associated with transitioning to and operating as a public company, including expenses related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, and higher expenses for investor relations costs, professional services, and director and officer insurance. As a result, we expect general and administrative expense to increase in absolute dollars in future periods, but this expense may vary as a percentage of total revenue.
Direct Listing Related Expenses
In connection with this listing, we expect to incur certain non-recurring costs as part of our transition to a publicly-traded company, consisting of professional fees and other expenses. These fees are being expensed in the period incurred in general and administrative expenses. We expect to incur $ million in legal, accounting and other costs relating to this offering. In addition, in the quarter of the listing of our Class A common stock on the New York Stock Exchange, we expect to incur approximately $ million in fees paid to our financial advisors and associate financial advisors.
Additionally, commencing in the second quarter of 2021, we will recognize stock-based compensation expense in cost of revenue, research and development, sales and marketing and general and administrative expenses related to our RSUs which vest as a result of our board of directors’ waiver of the liquidity event-based vesting condition. In addition, we will recognize additional on-going stock-based compensation expense related to our RSU awards over the remaining service period. For further information, see the section titled “Critical Accounting Policies and Estimates”. Immediately following the completion of this offering, we expect to record a bonus due to Ian Siegel, our chief executive officer of $10.0 million in general and administrative expense.
Interest Expense
Interest expense consists of interest costs associated with our outstanding borrowings, undrawn fees associated with our credit facility, and payment-in-kind interest on our convertible notes with related parties.
Sublease Income
Sublease income consists of income earned from a noncancelable sublease agreement for one of our office facilities. The agreement terminates in March 2021.
Other Expense, net
Other income (expense) consists primarily of gains and losses from foreign currency exchange transactions. We have foreign currency exposure primarily related to personnel related expenses that are denominated in currencies other than the U.S. Dollar, principally the Canadian Dollar, British Pound, and the Israeli New Shekel.
Income Tax Expense (Benefit)
For 2019, we had a full valuation allowance for net U.S. deferred tax assets, including net operating loss carryforwards and tax credits related primarily to research and development. Accordingly, our income tax expense primarily related to income taxes in certain foreign jurisdictions in which we conduct business. As a result of our current earnings in 2020 and forecasted taxable income, we released our valuation allowance against our net deferred tax assets, which resulted in an income tax benefit for 2020.
Results of Operations
The following table sets forth our consolidated results of operations for each of the periods presented and as a percentage of revenue for those periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2019
|
|
2020
|
|
|
(in thousands)
|
|
Revenue (1)
|
$
|
429,559
|
|
|
$
|
418,142
|
|
|
Cost of revenue(2)
|
54,778
|
|
|
54,163
|
|
|
Gross profit
|
374,781
|
|
|
363,979
|
|
|
Operating expenses:
|
|
|
|
|
Sales and marketing(2)
|
276,197
|
|
|
191,141
|
|
|
Research and development(2)
|
65,410
|
|
|
69,408
|
|
|
General and administrative(2)
|
39,492
|
|
|
38,998
|
|
|
Total operating expenses
|
381,099
|
|
|
299,547
|
|
|
Income (loss) from operations
|
(6,318)
|
|
|
64,432
|
|
|
Other income (expense):
|
|
|
|
|
Interest expense
|
(575)
|
|
|
(1,037)
|
|
|
Sublease income
|
1,170
|
|
|
1,051
|
|
|
Other expense, net
|
(38)
|
|
|
(109)
|
|
|
Total other income (expense), net
|
557
|
|
|
(95)
|
|
|
Income (loss) before income taxes
|
(5,761)
|
|
|
64,337
|
|
|
Income tax expense (benefit)
|
588
|
|
|
(21,711)
|
|
|
Net income (loss)
|
$
|
(6,349)
|
|
|
$
|
86,048
|
|
____________
(1)Comprises revenue as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2019
|
|
2020
|
|
|
(in thousands)
|
|
Subscription revenue
|
$
|
373,863
|
|
|
$
|
346,781
|
|
|
Performance-based revenue
|
55,696
|
|
|
71,361
|
|
|
Total revenue
|
$
|
429,559
|
|
|
$
|
418,142
|
|
(2)Includes stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2019
|
|
2020
|
|
|
(in thousands)
|
|
Cost of revenue
|
$
|
119
|
|
|
$
|
73
|
|
|
Sales and marketing
|
1,031
|
|
|
704
|
|
|
Research and development
|
3,159
|
|
|
3,050
|
|
|
General and administrative
|
2,431
|
|
|
1,925
|
|
|
Total stock-based compensation
|
$
|
6,740
|
|
|
$
|
5,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2019
|
|
2020
|
|
Revenue
|
100
|
%
|
|
100
|
%
|
|
Cost of revenue
|
13
|
|
|
13
|
|
|
Gross profit
|
87
|
|
|
87
|
|
|
Operating expenses:
|
|
|
|
|
Sales and marketing
|
64
|
|
|
46
|
|
|
Research and development
|
15
|
|
|
17
|
|
|
General and administrative
|
9
|
|
|
9
|
|
|
Total operating expenses
|
89
|
|
|
72
|
|
|
Income (loss) from operations
|
(1)
|
|
|
15
|
|
|
Other income (expense):
|
|
|
|
|
Interest expense
|
*
|
|
*
|
|
Sublease income
|
*
|
|
*
|
|
Other income (expense)
|
*
|
|
*
|
|
Total other income, net
|
*
|
|
*
|
|
Income (loss) before income taxes
|
(1)
|
|
|
15
|
|
|
Income tax expense (benefit)
|
*
|
|
(5)
|
|
|
Net income (loss)**
|
(1)
|
%
|
|
21
|
%
|
_____________
*Percentage is less than 0.5% of revenue.
** Percentages may not sum due to rounding.
Comparison of the Years Ended December 31, 2019 and 2020
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2019
|
|
2020
|
|
$ Change
|
|
% Change
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Total revenue
|
$
|
429,559
|
|
|
$
|
418,142
|
|
|
$
|
(11,417)
|
|
|
(3)
|
%
|
Revenue decreased by $11.4 million, or 3%, in 2020 compared to 2019. The decrease was primarily driven by the impacts of the COVID-19 pandemic as both total Paid Employers and the number of open job opportunities in our marketplace declined. Throughout each of the quarters in 2020, Quarterly Paid Employers was between 3% and 30% lower than the Quarterly Paid Employers for the same quarters in 2019. However, the decline in the volume of employers in our marketplace was offset by higher Revenue per Paid Employer in each of the quarters in 2020 as compared to the same quarters in 2019.
Our subscription revenue decreased by $27.1 million in 2020 compared to 2019 primarily due to the adverse economic impact of COVID-19 on our business. This was partially offset by our performance-based revenue, which increased $15.7 million, or 28%, in 2020 compared to 2019. The increase in performance-based revenue was primarily due to a 24% increase in the number of paid engagements (paid clicks and paid applications) attributable to the onboarding of new customers who run sophisticated recruitment marketing campaigns with consistent budgets throughout the full year. The number of paid engagements for which we recognized performance-based revenue was approximately 132 million and 164 million in 2019 and 2020, respectively. The corresponding revenue per paid engagement was $0.42 and $0.44 in 2019 and 2020, respectively.
Cost of Revenue and Gross Margin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2019
|
|
2020
|
|
$ Change
|
|
% Change
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Cost of revenue
|
$
|
54,778
|
|
|
$
|
54,163
|
|
|
$
|
(615)
|
|
|
(1)
|
%
|
|
Total gross margin
|
87
|
%
|
|
87
|
%
|
|
|
|
|
Cost of revenue decreased by $0.6 million, or 1%, in 2020 compared to 2019. The decrease was primarily due to lower third-party hosting services costs, driven by the decline in marketplace engagement starting in March 2020, and decreases in personnel related costs for customer support employees.
Total gross margin remained flat at 87% in 2019 and 2020 and reflects our continued commitment to operational efficiencies and maintaining costs proportionate to revenue growth.
Sales and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2019
|
|
2020
|
|
$ Change
|
|
% Change
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Sales and marketing
|
$
|
276,197
|
|
|
$
|
191,141
|
|
|
$
|
(85,056)
|
|
|
(31)
|
%
|
|
Percentage of revenue
|
64
|
%
|
|
46
|
%
|
|
|
|
|
Sales and marketing expenses decreased by $85.1 million, or 31%, in 2020 compared to 2019. The decrease was primarily attributable to a decrease of $71.4 million in advertising, online lead generation, customer and industry events and candidate acquisition expenses, a decrease of $10.0 million in personnel related costs for our sales and marketing employees and a decrease of $4.5 million in non-essential travel and entertainment expenses as we implemented virtual meetings and other cost-saving measures directly as a result of the COVID-19 pandemic. These decreases were partially offset by one-time restructuring costs related to our reduction in force of $3.7 million.
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2019
|
|
2020
|
|
$ Change
|
|
% Change
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Research and development
|
$
|
65,410
|
|
|
$
|
69,408
|
|
|
$
|
3,998
|
|
|
6
|
%
|
|
Percentage of revenue
|
15
|
%
|
|
17
|
%
|
|
|
|
|
Research and development expenses increased by $4.0 million, or 6%, in 2020 compared to 2019. The increase was primarily due to an increase of $2.4 million in amortization of capitalized software costs associated with the development of the databases supporting our marketplace and $1.0 million of severance costs in connection with our reduction in force.
General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2019
|
|
2020
|
|
$ Change
|
|
% Change
|
|
|
(dollars in thousands)
|
|
|
|
|
|
General and administrative
|
$
|
39,492
|
|
|
$
|
38,998
|
|
|
$
|
(494)
|
|
|
(1)
|
%
|
|
Percentage of revenue
|
9
|
%
|
|
9
|
%
|
|
|
|
|
General and administrative expenses decreased by $0.5 million, or 1%, in 2020 compared to 2019. The decrease was primarily due to decreases of $1.8 million of personnel related costs, partially offset by
one-time restructuring costs of $1.0 million related to our reduction in force and an increase of $0.2 million in legal and accounting related costs.
Other Income (Expense), Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2019
|
|
2020
|
|
$ Change
|
|
% Change
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Other income (expense), net
|
$
|
557
|
|
|
$
|
(95)
|
|
|
$
|
(652)
|
|
|
(117)
|
%
|
|
Percentage of revenue
|
—
|
%
|
|
*
|
|
|
|
|
______________
*Percentage not meaningful.
Other income decreased by $0.7 million, or 117% in 2020 as compared to 2019. The decrease is primarily attributable to an increase in interest expense of $0.5 million due to a higher amount of outstanding borrowings from our lines of credit and convertible notes in 2020 as compared to 2019.
Income Tax Expense (Benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2019
|
|
2020
|
|
$ Change
|
|
% Change
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Income tax expense (benefit)
|
$
|
588
|
|
|
$
|
(21,711)
|
|
$
|
(22,299)
|
|
|
*
|
|
Effective tax rate
|
(10)
|
%
|
|
(34)
|
%
|
|
|
|
|
______________
*Percentage not meaningful.
Income tax expense decreased by $22.3 million in 2020, as compared to 2019 primarily due to the release during the fourth quarter of 2020 of our valuation allowance against our net U.S. deferred tax assets. Based on our current earnings in 2020 and forecasted taxable income, we determined that it was more likely than not that those assets will be realized.
For the year ended December 31, 2020, our annual effective tax rate of (34)% differed from the U.S. federal statutory rate of 21% primarily because of the release of our valuation allowance and research and development tax credits, offset partially by an increase in estimated state taxes. For the year ended December 31, 2019, our annual effective tax rate of (10)% differed from the U.S. federal statutory rate of 21% primarily because of our deferred tax valuation allowance and research and development tax credits.
Quarterly Results of Operations
The following table sets forth our unaudited quarterly consolidated statements of operations data for each of the quarterly periods for the years ended December 31, 2019 and 2020. The unaudited quarterly statements of operations data have been prepared on the same basis as our audited consolidated financial statements included elsewhere in this prospectus and includes all adjustments, consisting only of normal recurring adjustments that, in our opinion, are necessary to state fairly the results of operations for these periods. Our historical results are not necessarily indicative of the results that may be expected in the future and the results of a particular quarter or other interim period are not necessarily indicative of the results for a full year. The following unaudited quarterly consolidated results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March
31,
2019
|
|
June
30,
2019
|
|
September
30,
2019
|
|
December
31,
2019
|
|
March
31,
2020
|
|
June
30,
2020
|
|
September
30,
2020
|
|
December
31,
2020
|
|
|
(in thousands)
|
|
Revenue (1)
|
$
|
95,769
|
|
|
$
|
108,528
|
|
|
$
|
112,693
|
|
|
$
|
112,569
|
|
|
$
|
113,292
|
|
|
$
|
87,655
|
|
|
$
|
102,851
|
|
|
$
|
114,344
|
|
|
Cost of revenue(2)
|
12,327
|
|
|
13,322
|
|
|
14,251
|
|
|
14,878
|
|
|
14,472
|
|
|
11,840
|
|
|
12,949
|
|
|
14,902
|
|
|
Gross profit
|
83,442
|
|
|
95,206
|
|
|
98,442
|
|
|
97,691
|
|
|
98,820
|
|
|
75,815
|
|
|
89,902
|
|
|
99,442
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing(2)
|
67,187
|
|
|
67,101
|
|
|
73,044
|
|
|
68,865
|
|
|
78,880
|
|
|
28,069
|
|
|
41,713
|
|
|
42,479
|
|
|
Research and development(2)
|
14,784
|
|
|
15,311
|
|
|
17,340
|
|
|
17,975
|
|
|
19,226
|
|
|
16,306
|
|
|
16,863
|
|
|
17,013
|
|
|
General and administrative(2)
|
9,315
|
|
|
9,857
|
|
|
10,065
|
|
|
10,255
|
|
|
11,488
|
|
|
9,792
|
|
|
8,232
|
|
|
9,486
|
|
|
Total operating expenses
|
91,286
|
|
|
92,269
|
|
|
100,449
|
|
|
97,095
|
|
|
109,594
|
|
|
54,167
|
|
|
66,808
|
|
|
68,978
|
|
|
Income (loss) from operations
|
(7,844)
|
|
|
2,937
|
|
|
(2,007)
|
|
|
596
|
|
|
(10,774)
|
|
|
21,648
|
|
|
23,094
|
|
|
30,464
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
(143)
|
|
|
(144)
|
|
|
(144)
|
|
|
(144)
|
|
|
(279)
|
|
|
(367)
|
|
|
(179)
|
|
|
(212)
|
|
|
Sublease income
|
318
|
|
|
281
|
|
|
287
|
|
|
284
|
|
|
282
|
|
|
275
|
|
|
226
|
|
|
268
|
|
|
Other income (expense), net
|
34
|
|
|
(159)
|
|
|
(169)
|
|
|
256
|
|
|
(144)
|
|
|
(68)
|
|
|
152
|
|
|
(49)
|
|
|
Total other income (expense), net
|
209
|
|
|
(22)
|
|
|
(26)
|
|
|
396
|
|
|
(141)
|
|
|
(160)
|
|
|
199
|
|
|
7
|
|
|
Income (loss) before income taxes
|
(7,635)
|
|
|
2,915
|
|
|
(2,033)
|
|
|
992
|
|
|
(10,915)
|
|
|
21,488
|
|
|
23,293
|
|
|
30,471
|
|
|
Income tax expense (benefit)
|
155
|
|
|
135
|
|
|
139
|
|
|
159
|
|
|
167
|
|
|
165
|
|
|
187
|
|
|
(22,230)
|
|
|
Net income (loss)
|
$
|
(7,790)
|
|
|
$
|
2,780
|
|
|
$
|
(2,172)
|
|
|
$
|
833
|
|
|
$
|
(11,082)
|
|
|
$
|
21,323
|
|
|
$
|
23,106
|
|
|
$
|
52,701
|
|
____________
(1)Comprises revenue as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March
31,
2019
|
|
June
30,
2019
|
|
September
30,
2019
|
|
December
31,
2019
|
|
March
31,
2020
|
|
June
30,
2020
|
|
September
30,
2020
|
|
December
31,
2020
|
|
Subscription revenue
|
$
|
84,429
|
|
|
$
|
94,828
|
|
|
$
|
98,231
|
|
|
$
|
96,375
|
|
|
$
|
95,365
|
|
|
$
|
74,002
|
|
|
$
|
84,839
|
|
|
$
|
92,575
|
|
|
Performance based revenue
|
11,340
|
|
|
13,700
|
|
|
14,462
|
|
|
16,194
|
|
|
17,927
|
|
|
13,653
|
|
|
18,012
|
|
|
21,769
|
|
|
Total revenue
|
$
|
95,769
|
|
|
$
|
108,528
|
|
|
$
|
112,693
|
|
|
$
|
112,569
|
|
|
$
|
113,292
|
|
|
$
|
87,655
|
|
|
$
|
102,851
|
|
|
$
|
114,344
|
|
(2)Includes stock-based compensation expense as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March
31,
2019
|
|
June
30,
2019
|
|
September
30,
2019
|
|
December
31,
2019
|
|
March
31,
2020
|
|
June
30,
2020
|
|
September
30,
2020
|
|
December
31,
2020
|
|
|
(in thousands)
|
|
Cost of revenue
|
$
|
32
|
|
|
$
|
31
|
|
|
$
|
30
|
|
|
$
|
26
|
|
|
$
|
24
|
|
|
$
|
18
|
|
|
$
|
16
|
|
|
$
|
15
|
|
|
Sales and marketing
|
290
|
|
|
337
|
|
|
226
|
|
|
178
|
|
|
306
|
|
|
119
|
|
|
134
|
|
|
145
|
|
|
Research and development
|
900
|
|
|
741
|
|
|
763
|
|
|
755
|
|
|
861
|
|
|
712
|
|
|
737
|
|
|
740
|
|
|
General and administrative
|
633
|
|
|
637
|
|
|
589
|
|
|
572
|
|
|
767
|
|
|
497
|
|
|
369
|
|
|
292
|
|
|
Total stock-based compensation
|
$
|
1,855
|
|
|
$
|
1,746
|
|
|
$
|
1,608
|
|
|
$
|
1,531
|
|
|
$
|
1,958
|
|
|
$
|
1,346
|
|
|
$
|
1,256
|
|
|
$
|
1,192
|
|
The following table sets forth our unaudited quarterly consolidated statements of operations data as a percentage of revenue for each of the quarterly periods for the years ended December 31, 2019 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March
31,
2019
|
|
June
30,
2019
|
|
September
30,
2019
|
|
December
31,
2019
|
|
March
31,
2020
|
|
June
30,
2020
|
|
September
30,
2020
|
|
December
31,
2020
|
|
Revenue
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
Cost of revenue
|
13
|
|
|
12
|
|
|
13
|
|
|
13
|
|
|
13
|
|
|
14
|
|
|
13
|
|
|
13
|
|
|
Gross profit
|
87
|
|
|
88
|
|
|
87
|
|
|
87
|
|
|
87
|
|
|
86
|
|
|
87
|
|
|
87
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
70
|
|
|
62
|
|
|
65
|
|
|
61
|
|
|
70
|
|
|
32
|
|
|
41
|
|
|
37
|
|
|
Research and development
|
15
|
|
|
14
|
|
|
15
|
|
|
16
|
|
|
17
|
|
|
19
|
|
|
16
|
|
|
15
|
|
|
General and administrative
|
10
|
|
|
9
|
|
|
9
|
|
|
9
|
|
|
10
|
|
|
11
|
|
|
8
|
|
|
8
|
|
|
Total operating expenses
|
95
|
|
|
85
|
|
|
89
|
|
|
86
|
|
|
97
|
|
|
62
|
|
|
65
|
|
|
60
|
|
|
Income (loss) from operations
|
(8)
|
|
|
3
|
|
|
(2)
|
|
|
1
|
|
|
(10)
|
|
|
25
|
|
|
22
|
|
|
27
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
Sublease income
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
Other income (expense), net
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
Total other income (expense), net
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
Income (loss) before income taxes
|
(8)
|
|
|
3
|
|
|
(2)
|
|
|
1
|
|
|
(10)
|
|
|
25
|
|
|
23
|
|
|
27
|
|
|
Income tax expense (benefit)
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
*
|
|
(19)
|
|
|
Net income (loss)**
|
(8)
|
%
|
|
3
|
%
|
|
(2)
|
%
|
|
1
|
%
|
|
(10)
|
%
|
|
24
|
%
|
|
22
|
%
|
|
46
|
%
|
_____________
* Percentage is less than 0.5% of revenue.
** Percentages may not sum due to rounding.
The following table presents a reconciliation of net income (loss) to Adjusted EBITDA for each of the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March
31,
2019
|
|
June
30,
2019
|
|
September
30,
2019
|
|
December
31,
2019
|
|
March
31,
2020
|
|
June
30,
2020
|
|
September
30,
2020
|
|
December
31,
2020
|
|
GAAP net income (loss)
|
$
|
(7,790)
|
|
|
$
|
2,780
|
|
|
$
|
(2,172)
|
|
|
$
|
833
|
|
|
$
|
(11,082)
|
|
|
$
|
21,323
|
|
|
$
|
23,106
|
|
|
$
|
52,701
|
|
|
Stock-based compensation
|
1,855
|
|
|
1,746
|
|
|
1,608
|
|
|
1,531
|
|
|
1,958
|
|
|
1,346
|
|
|
1,256
|
|
|
1,192
|
|
|
Depreciation and amortization
|
1,851
|
|
|
2,154
|
|
|
2,375
|
|
|
2,564
|
|
|
2,434
|
|
|
2,607
|
|
|
2,303
|
|
|
2,605
|
|
|
Total other (income) expense, net
|
(209)
|
|
|
22
|
|
|
26
|
|
|
(396)
|
|
|
141
|
|
|
160
|
|
|
(199)
|
|
|
(7)
|
|
|
Income tax expense (benefit)
|
155
|
|
|
135
|
|
|
139
|
|
|
159
|
|
|
167
|
|
|
165
|
|
|
187
|
|
|
(22,230)
|
|
|
Adjusted EBITDA
|
$
|
(4,138)
|
|
|
$
|
6,837
|
|
|
$
|
1,976
|
|
|
$
|
4,691
|
|
|
$
|
(6,382)
|
|
|
$
|
25,601
|
|
|
$
|
26,653
|
|
|
$
|
34,261
|
|
|
Adjusted EBITDA margin
|
(4)
|
%
|
|
6
|
%
|
|
2
|
%
|
|
4
|
%
|
|
(6)
|
%
|
|
29
|
%
|
|
26
|
%
|
|
30
|
%
|
Quarterly Trends
Revenue
Our revenue increased on a quarterly basis during the first three quarters of 2019. The increase in revenue was due to an increase in new customers acquired, increased engagement from existing customers and expanding our product offerings. The slight decrease in revenue during the fourth quarter of 2019 was due to seasonality as hiring activity tends to decelerate towards the end of the year.
Our revenue increased during the first quarter of 2020 primarily due to an increase in sales and marketing expenses driving an increase in Quarterly Paid Employers. The remaining three quarters of 2020 were significantly affected by the COVID-19 pandemic which resulted in a rise in unemployment and a decrease of hiring activity. Quarterly Paid Employers decreased from 98,456 in the first quarter of 2020 to 76,867 in the second quarter of 2020 due to the immediate macroeconomic impact of COVID-19 and, in response thereto, we decreased our sales and marketing by 64% in the second quarter of 2020 compared to the first quarter of 2020. After the initial effects of the economic downturn in the second quarter of 2020, which negatively impacted both subscription-based and performance-based revenue, employers started to return to and join our marketplace. The accelerating economic recovery and our increased sales and marketing efforts resulted in sequential increases in the number of our Quarterly Paid Employers. This resulted in consecutive quarters of revenue growth of 17% and 11% in the third and fourth quarters of 2020, respectively. This total revenue growth was driven by both subscription-based and performance-based revenue. Revenue per Paid Employer also showed sequential growth in the third and fourth quarter of 2020 due to a mix shift toward more tenured Paid Employers.
Cost of Revenue and Gross Margin
On a quarterly basis, cost of revenue increased for all quarters presented in 2019 primarily due to the growth from new customers and an increase in open job opportunities in our marketplace. Cost of revenue decreased in the first half of 2020 as a result of less revenue activity stemming from the COVID-19 pandemic which led to less web hosting services utilized. Throughout all quarters in 2019 and 2020, total gross margin remained relatively flat and reflects our continued commitment to operational efficiencies and maintaining costs proportionate to revenue growth.
Sales and Marketing
On a quarterly basis throughout 2019 and the first quarter of 2020, sales and marketing expenses remained consistent at over 60% as a percentage of revenue as we continued to invest in marketing targeted to bring on new Paid Employers, and to further increase brand awareness. In the second quarter of 2020, we reduced our sales and marketing costs by implementing a strategy to decrease marketing
spend across all advertising platforms, including television, direct mail, radio and podcast due to the economic downturn resulting from the COVID-19 pandemic. Additionally, we implemented a reduction in workforce which reduced our personnel-related costs through the remainder of the year. As a result of the improved outlook in the latter half of the year, we increased marketing spend and started new marketing campaigns targeted at employers and job seekers. Sales and marketing expense as a percentage of revenue has decreased since the second quarter of 2020 as a result of our strategy to reduce marketing campaigns and our reduction in personnel costs.
Research and Development
On a quarterly basis, our research and development expenses increased for all quarters during 2019 and the first quarter of 2020, primarily driven by personnel related expenses from increased headcount. Our research and development expenses decreased in the second quarter of 2020 due to decreased personnel related costs resulting from the reduction in force. Research and development expenses as a percentage of revenue remained generally consistent in both 2019 and 2020, with the exception of the second quarter of 2020, when we experienced a 23% decrease in sequential revenue in the quarter ended June 30, 2020.
General and Administrative
On a quarterly basis, our general and administrative expenses increased for all quarters in 2019 and the first quarter of 2020 primarily due to personnel related expenses driven by increased headcount and an increase in professional services fees to support the growth in our business. In response to the impact of the COVID-19 pandemic, we reduced non-essential expenditures and implemented a reduction in workforce which significantly decreased our general and administrative expense in the second and third quarters of 2020. General and administrative expense as a percentage of revenue remained generally consistent in both 2019 and 2020, with the exception of the second quarter of 2020, where we experienced a 23% decrease in sequential revenue in the quarter ended June 30, 2020.
Income Tax Expense (Benefit)
On a quarterly basis, our income tax expense has remained relatively consistent, with the exception of the fourth quarter of 2020 when we fully released our valuation allowance of $37.7 million against our net deferred tax assets.
Liquidity and Capital Resources
As of December 31, 2020 we had cash totaling $114.5 million, and $27.9 million available in unused borrowing capacity under our revolving credit facility. We have financed our operations and capital expenditures primarily through cash generated from operations, sales of shares of common and preferred stock and from bank loans and convertible notes. As of December 31, 2020, we had no amounts outstanding under our revolving credit facility and $25.4 million outstanding under our convertible notes with related parties, including accrued interest.
We believe our existing cash, cash flow from operations, and amounts available for borrowing under our bank loan agreement will be sufficient to meet our working capital requirements for at least the next twelve months. To the extent existing cash, cash from operations, and amounts available for borrowing are insufficient to fund future activities, we may need to raise additional funds. In the future, we may attempt to raise additional capital through the sale of equity securities or through equity-linked or debt financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, the ownership of our existing stockholders will be diluted. If we raise additional financing by the incurrence of additional indebtedness, we may be subject to increased fixed payment obligations and could also be subject to additional restrictive covenants, such as limitations on our ability to incur additional debt, and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could be unfavorable to equity investors. There can be no
assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives.
Revolving Credit Facility
We have a loan and security agreement with a financial institution that provides a revolving credit facility, or the Revolving Line.
In September 2020, we amended and restated our loan and security agreement, or the Second Amended and Restated Loan and Security Agreement. The maturity date of the Revolving Line is September 2, 2022 and the modified interest rate is the floating per annum rate equal to the greater of (1) 0.25% above the bank’s Prime Rate and (2) 4.5%.
The Second Amended and Restated Loan and Security Agreement provides for an unused revolving line facility fee in an amount equal to 0.5% per annum of the average unused portion of the Revolving Line. The amount available under the Revolving Line is reduced by letters of credit outstanding, which relates to various leased office spaces, which was $6.9 million as of December 31, 2020. The amount available under the Revolving Line is also reduced by outstanding business credit card balances, which was $0.2 million as of December 31, 2020. Pursuant to the Second Amended and Restated Loan and Security Agreement, if there are any letters of credit outstanding on the maturity date of the Revolving Line, we are required to provide cash collateral in the amount equal to at least 105% of the letters of credit. The Second Amended and Restated Loan and Security Agreement is collateralized by security interests in substantially all of our assets.
The Revolving Line contains financial covenants and other customary affirmative and negative covenants, including, among other terms and conditions, delivering financial statements and other information by certain due dates, achieving certain EBITDA targets, minimum remaining months liquidity requirement, restrictions on changes in business, management, control of business locations, indebtedness, dispositions of certain business or property, mergers or acquisitions, subordinated debt, maintenance of collateral accounts and payment of dividends or distributions.
We have no amounts outstanding under the Revolving Line and are in compliance with our debt covenants as of December 31, 2020.
Convertible Notes with Related Parties
In June 2020, we issued subordinated secured convertible promissory notes, or the Convertible Notes, to related parties who are holders of our Redeemable Convertible Preferred Stock. The Convertible Notes totaled $25.0 million and have a maturity date of June 22, 2023. Principal and interest under the Convertible Notes are due and payable in full on or after the maturity date, unless earlier converted to shares of our capital stock. The interest on the Convertible Notes is equal to the lower of (1) 2.5% per annum until June 2022, 3.0% per annum until December 2022, and 3.5% per annum until maturity; and (2) the maximum non-usurious rate of interest in effect from time to time under applicable laws.
The Convertible Notes will automatically convert into shares of a new series of preferred stock upon a Qualified Financing Event (defined as raising gross proceeds of at least $40.0 million), or upon a Liquidity Event (defined as a change in control, a qualified initial public offering yielding gross proceeds of at least $50.0 million, or a Direct Listing to register existing shares of capital stock of the Company for resale on a major U.S. based stock exchange not pursuant to an underwritten public offering). The Convertible Notes may convert into shares of a new series of preferred stock upon a Nonqualified Financing Event (defined as a sale of shares of preferred stock that does not constitute a Qualified Financing Event) or after the maturity date at the option of the note holders.
The conversion price triggered upon these events, with the exception of the Direct Listing event and conversion at Maturity Date, is the lower of (1) 75% of the price per share paid by the purchasers for the
event and (2) $8.2909 per share (subject to appropriate adjustments). In connection with a Direct Listing, the conversion price is equal to the lower of (1) 75% of the volume-weighted average price of our common stock on the first trading day following such listing and (2) $8.2909 per share (subject to appropriate adjustments). After the Maturity Date (if not earlier converted), at the option of the holders, the Convertible Notes are convertible into a new series of preferred stock at a conversion price of $6.6327 per share which shares of preferred stock shall have the same rights and preferences as the Series B convertible preferred stock, except per share liquidation preference and dividend rights will be based on the conversion price of $6.6327 per share.
The Convertible Notes provide for certain events of default such as nonpayment of principal and interest when due, insolvency, or if there is a liquidation, dissolution or winding up of the Company. Upon an event of default, all unpaid principal and accrued interest becomes immediately due and payable.
Cash Flows
The following table summarizes our cash flows for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2019
|
|
2020
|
|
|
(in thousands)
|
|
Net cash provided by (used in) operating activities
|
$
|
(2,135)
|
|
|
$
|
88,013
|
|
|
Net cash used in investing activities
|
(10,364)
|
|
|
(7,373)
|
|
|
Net cash provided by (used in) financing activities
|
945
|
|
|
(1,630)
|
|
|
Net increase (decrease) in cash
|
$
|
(11,554)
|
|
|
$
|
79,010
|
|
Operating Activities
The primary source of operating cash inflows is cash collected from our customers for our services. Our primary uses of cash from operating activities are for personnel related expenditures, marketing costs and third-party costs incurred to support our marketplace.
For the year ended December 31, 2020, cash provided by operating activities was $88.0 million resulting from our net income of $86.0 million, adjusted by net non-cash charges of $1.9 million and a net decrease of $0.1 million in our operating assets and liabilities. The non-cash charges primarily resulted from $22.9 million related to the change of our deferred tax assets driven by the release of our valuation allowance, $9.9 million pertaining to depreciation and amortization of intangible assets, capitalized software development costs and property and equipment, $5.8 million for stock-based compensation expense, and $5.6 million pertaining to noncash lease expense.
For the year ended December 31, 2019, cash used in operating activities was $2.1 million resulting from our net loss of $6.3 million, adjusted by non-cash charges of $22.7 million and a net decrease of $18.5 million in our operating assets and liabilities. The non-cash charges primarily resulted from $8.9 million pertaining to depreciation and amortization of intangible assets, capitalized software development costs and property and equipment, $6.7 million for stock-based compensation expense, and $5.7 million pertaining to noncash lease expense. The net decrease in our operating assets and liabilities was primarily the result of a $9.9 million increase in accounts receivable and $3.9 million increase in deferred commissions due to our growth, and $6.2 million resulting from a change in operating lease liabilities due to cash payments.
Investing Activities
For the year ended December 31, 2020, investing activities used $7.4 million in cash primarily as a result of an increase in capitalized software development costs of $6.0 million and an increase in capital expenditures of $1.4 million to purchase property and equipment.
For the year ended December 31, 2019, investing activities used $10.4 million in cash primarily as a result of an increase in capitalized software development costs of $7.8 million and an increase in capital expenditures of $2.5 million to purchase property and equipment.
Financing Activities
For the year ended December 31, 2020, cash used in financing activities was $1.6 million, which consisted of $19.0 million for the repurchase of common stock from some of the founders and $10.0 million of net repayment on our term loan, partially offset by net proceeds of $25.0 million from the issuance of convertible notes with related parties and $2.4 million of proceeds from the exercise of stock options.
For the year ended December 31, 2019, financing activities provided $0.9 million in cash primarily as a result of proceeds from the exercise of stock options.
Obligations and Other Commitments
See Note 11 of the notes to our consolidated financial statements included elsewhere in this prospectus for our future minimum commitments related to certain software service agreements. Through December 31, 2020, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
(1)
Quantitative and Qualitative Disclosures about Market Risk
We have operations both within the United States and internationally, and we are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate and foreign currency exchange rates.
Interest Rate Risk
We are subject to interest rate risk in connection with our revolving line of credit which bears a floating interest rate. We have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our consolidated financial statements.
In June 2020, we issued $25.0 million in convertible notes with related parties whereby interest is equal to the lower of fixed amounts as described above within the section titled “Liquidity and Capital Resources—Convertible Notes with Related Parties” and the maximum non-usurious rate of interest in effect from time to time under applicable laws. As the interest rate is subject to the fixed percentages described above, we do not have significant financial statement risk associated with changes in interest rates pertaining to our convertible notes with related parties.
Foreign Currency Risk
We are exposed to fluctuations in foreign exchange risk related primarily to expenses denominated in currencies other than the U.S. Dollar, principally the Canadian Dollar, British Pound, and Israeli New Shekel. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. We have experienced, and will continue to experience, fluctuations in our net income (loss) as a result of transaction gains and losses related to the remeasurement of our asset and liability balances that are denominated in currencies other than the U.S. Dollar. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have had a material impact on our consolidated financial statements.
Critical Accounting Policies and Estimates
Critical accounting policies and estimates are both the most important to the portrayal of our net assets and results of operations and require difficult, subjective, or complex judgments. We often need to make estimates about the effect of matters that are inherently uncertain and these estimates are developed based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.
Critical accounting estimates are accounting estimates where the nature of the estimates are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and the impact of the estimates on financial condition or operating performance is material.
The critical accounting policies and estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
Revenue Recognition
We derive our revenue primarily from fees for subscription services and performance-based job posting activities. Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
•Identification of the contract, or contracts, with a customer
•Identification of all performance obligations in the contract
•Determination of the transaction price
•Allocation of the transaction price to the performance obligations in the contract
•Recognition of revenue when, or as, the performance obligation or obligations are satisfied
We identify enforceable contracts when the terms are agreed to by the customer. Some of our contracts with customers contain multiple performance obligations. For these contracts, we account for performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. We determine the standalone selling prices based on our overall pricing objectives, taking into consideration market conditions and other factors, including the value of our contracts, the products sold, and the number and types of users within our contracts.
Revenue is recognized as performance obligations are satisfied and is presented net of sales allowances.
We derive our revenues from the following sources:
Subscription Revenue
Subscription revenue consists of time-based job posting plans, upsells which complement or expand visibility and prominence to job posting plans, and resume database plans. Plans are priced at a flat rate based on plan size and depending on the length of the term. Customer contracts are typically subject to renewal at the end of the subscription term and are nonrefundable.
Time-based job posting plans: Job posting plans provide customers access to cloud-based software services, where they may create job postings that are posted to our marketplace in addition to numerous other job sites or partner networks with job seeker communities. Customers may also access our software
to review job applications and manage job postings. We recognize revenue from job posting plans ratably over the term of the agreement beginning on the date the subscription service is made available to the customer. Once a customer requests a cancellation of their subscription, the open job postings are closed at the end of the term; however, the customer may still access the software to review past job postings or prior applications received under a separate upsell subscription. Job posting plans are billed in advance of the subscription period, which typically ranges from one to twelve months, except for daily subscription plans, which are billed in arrears based on how many days the customer uses the services.
Upsell services: Additional features to complement or expand visibility to job posting plans may be purchased as an upsell service. For these services, we bill the customers in advance and recognize revenue ratably over the term of the agreement beginning on the date the upsell services are made available to the customer, which typically ranges from one to twelve months.
Upsell services also include job posting enhancements which are applied to individual job postings, and provide customers with a temporary boost in the prominence of their open jobs. Individual job posting enhancements may be purchased by a customer when needed, or in recurring monthly prepaid bundles to complement their job posting subscription plan, and are billed in advance of use. Typically these prepaid bundles can be used over a period ranging from one to twelve months. Revenue from job posting enhancements is recognized as the customer uses the enhancement on their job postings. Unused prepaid job enhancements are not refundable, and we recognize revenue for the estimated portion of prepaid job enhancements that are expected to expire unused, or breakage, based on estimates considering historical breakage levels for similarly sized customers and upsell plans. Breakage is recognized as revenue in proportion to the pattern of actual usage by customers.
Resume database plans: Access to our resume database is purchased on a subscription basis and allows a customer to search for and view resumes. Resume database plans are priced based on how many resumes the customer would like to view in a month and may be purchased independent of, or in addition to, a job posting plan. Resume database plans are billed in advance of the subscription period, which typically ranges from one to twelve months. Revenue is recognized ratably over the subscription period.
Performance-based Revenue
Performance-based revenue consists of customers who pay on a per click by job applicant or per job application basis for the job postings customers wish to distribute through our software. Customers pay an amount per click or per application that is usually capped at a contractual maximum per recruitment campaign, with campaigns typically lasting from one to three months. Customers on this pricing model do not have access to our applicant tracking software for subscription customers though they may purchase resume database subscription plans separately. Customers that use a performance-based revenue plan are typically companies with consistent hiring needs and sophisticated recruitment campaigns where they manage incoming applications and job postings on their own applicant tracking systems.
We may distribute jobs to candidates from sources who have job seeker or candidate databases. When a job seeker from a candidate source clicks on or applies to a job posting, we pay the candidate source a percentage of the revenue we earn from our customer for the click or application according to the terms of the revenue share agreement. In these arrangements, we have the responsibility for advertising the customer’s job postings, discretion in how and where we choose to advertise the customer’s job postings, and discretion in establishing the price paid by the customer. We recognize the fees we receive from our customers as revenue and the revenue share due is recorded in cost of revenue in the Consolidated Statements of Operations.
Performance-based revenue is typically billed monthly, in arrears, and revenue is recognized as job applicants click on or apply to the distributed job postings, up to the contractual maximum per recruitment campaign.
Sales Allowance
We establish a sales allowance to estimate refunds and credits that we may grant to customers in the future for cancellations of subscriptions and concessions to customers who are not satisfied with services received. While subscriptions are noncancelable once the contract term has commenced, we may at times allow customers who miss their cancellation window prior to an autorenewal to cancel their contract, and we may issue refunds or credits to maintain overall customer satisfaction. The sales allowance is estimated by considering historical results and trends and is accounted for as a reduction to revenue or deferred revenue for contracts where payments are received upfront and revenue is recognized over time.
Stock-Based Compensation
Compensation expense related to stock-based awards is measured and recognized in the financial statements based on the fair value of the awards granted. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model. We have elected to treat stock-based awards with graded vesting schedules and time-based service conditions as a single award and recognize stock-based compensation expense on a straight-line basis over the requisite service period.
For awards that contain both performance and service vesting conditions, the grant date fair value is recognized as compensation expense using a graded vesting attribution model. No expense is recognized for awards with performance conditions until the performance condition is probable of being met.
The Black-Scholes option pricing model requires us to make certain assumptions including:
Fair Value of our Common Stock. See the section titled “—Determination of the Fair Value of Common Stock on Grant Dates” below.
Expected Term. Given that we do not have sufficient exercise history to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior, we determine the expected term for our “plain vanilla” stock options using the simplified method, which is calculated as the midpoint of the stock option vesting term and the expiration date of the stock option. For stock options that contain a performance condition, we are using the contractual term as the expected term as those awards were only granted to nonemployees.
Expected Volatility. Because our common stock has no publicly traded history, we estimate the expected volatility of the awards from the historical volatility of selected public companies that represent similar but alternative investment opportunities to an investment in us. Characteristics considered in identifying guideline public companies include similarity in size, lines of business, market capitalization, revenue and financial leverage. We determined the expected volatility assumption using the frequency of daily historical prices of comparable public company common stock for a period equal to the expected term of the option. We periodically assess the comparable companies and other relevant factors used to measure expected volatility for stock option grants.
Risk-free Rate. The risk-free interest rate assumption is based upon observed interest rates on the U.S. government securities appropriate for the expected term of our employee stock options.
Dividend Yield. The dividend yield assumption is based on our history and expectation of dividend payouts. We have never declared nor paid any cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future.
The determination of stock-based compensation is inherently uncertain and subjective and involves the application of valuation models and assumptions requiring the use of judgment. If we have made different assumptions, our stock-based compensation expense, and our results of operations for the years ended December 31, 2019 and 2020 may have been significantly different.
Determination of the Fair Value of Common Stock on Grant Dates
Because our common stock is not publicly traded, our board of directors exercises significant judgment in determining the fair value of our common stock on the date of each stock-based grant, with input from management and the assistance from an independent third-party valuation firm based on several objective and subjective factors. The valuations of our common stock were determined in accordance with the guidelines outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. In determining the fair market value of our common stock, the board of directors considered the following:
•the prices of our redeemable convertible preferred stock sold to outside investors in arms-length transactions;
•the rights, preferences and privileges of our redeemable convertible preferred stock relative to our common stock;
•our operating and financial performance;
•the present value of our anticipated future cash flows;
•our stage of development and current business conditions and projections affecting our business, including the introduction of new products and services;
•the likelihood of achieving a liquidity event for the shares of common stock underlying these stock options, such as an initial public offering or sale of our company, in light of prevailing market conditions;
•any adjustment necessary to recognize a lack of a liquid trading market for our common stock;
•the market performance of comparable publicly traded companies; and
•the overall U.S. economic, regulatory and capital market conditions.
In valuing our common stock, our board of directors determined the equity value of our business using various valuation methods including market and income approaches with input from management.
The market approaches we use are the Guideline Public Company Method and the Guideline Transaction Method. The Guideline Public Company Method estimates our equity value by applying a representative market value multiple from comparable companies to our financial forecasts. The Guideline Transaction Method estimates our equity value by using pricing multiples derived from sales of companies with similar characteristics to us. Under the income approach, a Discounted Cash Flow, or DCF, model is used, where net cash flows attributable to our business and an assumed terminal value are discounted to present value using a discount rate, based on our estimated weighted average cost of capital that reflects the risks inherent in the cash flows.
After determining our equity value, we then allocate the equity value to our classes of stock using either an Option Pricing Method, or OPM, or a hybrid of OPM and Probability Weighted Expected Return Method, or PWERM.
The OPM allocates values to each equity class by creating a series of call options on our equity value, with exercise prices based on the liquidation preferences, participation rights, and strike prices of the equity instruments. In determining the estimated fair value of our common stock, we consider the fact that our stockholders could not freely trade our common stock in the public markets. Accordingly, we also applied a discount for lack of marketability to the equity value.
Under the hybrid OPM and PWERM, the allocation is based on the likelihood of a near-term liquidity exit or an alternative exit scenario. For a near-term liquidity scenario, the allocation is based on the
expected pricing and timing of the liquidity event. For the alternative exit scenario, an OPM with an appropriate time to liquidity is used to estimate the fair value of the share classes assuming the near-term liquidity scenario does not occur, with the resulting share values under each scenario weighted by management’s estimate of their respective probabilities. We also applied a discount for lack of marketability.
In valuing our common stock at various dates in 2019 through September 30, 2020, our board of directors determined the equity value of our business using the Guideline Public Company Method and the Guideline Transaction Method when comparable recent market transactions existed, and the equity value was then allocated to our classes of stock using an OPM given the uncertainty with regards to the timing and type of future exit scenario. The Guideline Transaction Method was not used in our March 31, 2020 and June 30, 2020 valuation of our equity due to the absence of recent market transactions as a result of the uncertainty and market disruption caused by the COVID-19 pandemic.
In valuing our common stock as of December 31, 2020, our board of directors determined the equity value of our business using the Guideline Public Company Method, the Guideline Transaction Method, and a DCF. The equity value was then allocated to our classes of stock using the hybrid OPM and PWERM based on management’s estimate of the likelihood of a near-term liquidity event or an alternative exit scenario.
Application of these approaches involves the use of estimates, judgment, and assumptions that are highly complex and subjective, such as those regarding our expected future revenue and costs, future cash flows, discount rates, market multiples, the selection of comparable companies, and the probability of possible future exit events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common stock.
For stock awards granted after the effectiveness of the registration statement of which this prospectus forms a part, our board of directors intends to determine the fair value of each share of underlying common stock based on the closing price of our common stock as reported on the date of grant.
As of December 31, 2020, we had $6.2 million of unrecognized stock-based compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 1.0 year.
We have granted RSUs, which vest upon the satisfaction of both a service condition and a liquidity event performance condition. The performance condition will be satisfied upon the occurrence of a qualifying event, which is generally defined as a change of control transaction or after the Company’s effective registration statement under the Securities Act for the offer and sale of shares by the Company. Because no qualifying events have occurred, we have not recognized any stock-based compensation expense for the RSUs. Upon a qualifying event occurring, we will incur a significant one-time charge and additional on-going stock-based compensation expense related to the future amortization of RSUs. The recognition of such stock-based compensation will affect our cost of revenue and our research and development, sales and marketing and general and administrative operating expenses.
A direct listing in which the Company does not sell its equity securities does not satisfy the liquidity event performance condition. As of December 31, 2020, there were 5,450,663 RSUs outstanding. On April 19, 2021, our board of directors waived the liquidity event-based vesting condition such that the RSUs that had satisfied the service condition would vest upon the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022. As the satisfaction of the performance condition was not probable for accounting purposes prior to the waiver, the waiver of the liquidity event-based performance condition resulted in the incremental fair value on the date of the waiver being equal to the fair value of the modified RSUs. To estimate the grant date fair value for the modified RSUs, management considered all data points available at the time of modification which included the results of the March 31, 2021 independent third party valuation, expectations regarding the initial public offering price and the reference price used in the executive compensation RSU grant on April
19, 2021. Management concluded that the estimated fair value of the common stock on the date of modification was $25.04 per share. As of April 19, 2021, the fair value of the then outstanding modified RSUs is approximately $172.6 million. We expect to record stock-based compensation cost of approximately $41.7 million on the date of the waiver related to vested RSUs and $130.9 million over a weighted average remaining service period of the RSUs of 1.5 years.
Income Taxes
We account for income taxes in accordance with Accounting Standards Codification, or ASC, 740, Income Taxes. Current tax liabilities and assets are recognized for the estimated taxes payable or refundable, respectively, on the tax returns for the current year. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
We record valuation allowances against our deferred tax assets, when necessary. Realization of deferred tax assets (such as net operating loss carry-forwards) is dependent on future taxable earnings and is therefore uncertain. At least quarterly, we assess the likelihood that our deferred tax asset balance will be recovered from future taxable income. To the extent we believe that recovery is not likely, we establish a valuation allowance against our net deferred tax asset, which increases our income tax expense in the period when such determination is made. During the fourth quarter of 2020, based on the current earnings and forecasted taxable income, we determined that it was more likely than not that those assets will be realized. Accordingly, we released the valuation allowance of $37.7 million against our deferred tax assets.
On a quarterly basis, we evaluate the probability a tax position will be effectively sustained, and the appropriateness of the amount recognized for uncertain tax positions based on factors including changes in facts or circumstances, changes in tax law, settled audit issues and new audit activity. Changes in our assessment may result in the recognition of a tax benefit or an additional charge to the tax provision in the period our assessment changes. We recognize interest and penalties related to income tax matters in income tax expense.
JOBS Act Accounting Election
We meet the definition of an emerging growth company under the JOBS Act, which permits us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.
Recent Accounting Pronouncements
See Note 2 of the notes to our consolidated financial statements included elsewhere in this prospectus for recently issued accounting pronouncements not yet adopted as of the date of this prospectus.
BUSINESS
Before we begin, we first want to recognize the impact of the COVID-19 pandemic. The toll on the health, safety, economic security and emotional well-being of the global community is ongoing and will take years to fully appreciate. Amidst all the stories of the true heroes who have helped manage through the pandemic and those who will bring the pandemic to its end, we feel incredibly grateful and fortunate to tell our story, about a growing business doing our part to help power the economic recovery to come.
Businesses and people need to get back to work after the pandemic. We are committed to helping in that great and noble effort.
Overview
ZipRecruiter is a two-sided marketplace for work. Since the founding of our company in 2010, over 2.8 million businesses and 110 million job seekers have come to ZipRecruiter for their hiring and job search needs. Employers spend more than $205 billion per year in the United States alone to recruit talent.16 Online recruitment alone represents over $13 billion of this opportunity.17 The online segment of the U.S. recruiting market is expected to grow at a CAGR of 14.1% from 2016 to 2025 compared to a CAGR of 0.2% for the rest of the recruiting market during that same period. The online segment of the recruiting market in the U.S. is expected to continue expanding its share of the recruiting market, with online share increasing from 3% in 2016 to 6% in 2020 and to 8% in 2025.18
Our Mission. To actively connect people to their next great opportunity.
The Problem. Twenty years after moving online, the job market remains painfully inefficient. Job seekers are required to navigate on their own in order to find the right jobs to apply to, usually across multiple sites, and without effective tools for monitoring new opportunities. Employers in turn are overwhelmed by the complexity of modern recruiting given the abundance of job boards, search engines, and social networks to source talent from. Neither side is an expert at their role. Neither side enjoys the process.
Our Business. We founded ZipRecruiter to simplify the job market for both job seekers and employers. Unlike traditional online job sites, ZipRecruiter works like a matchmaker curating job opportunities for job seekers, and candidates for employers.
Creating Value for Job Seekers. For job seekers across all industries and levels of seniority, we operate like a dedicated recruiter. That means presenting strong fit job opportunities, proactively pitching potential candidates to employers, and providing job seekers with updates on the status of their applications. This makes job seekers feel supported while searching for work. That’s why ZipRecruiter has been the #1 rated job seeker app on iOS and Android for the past four years.19
Creating Value for Employers. For employers, we focus on building technology to rapidly deliver quality candidates to companies of all sizes and across all industries. Our algorithms alert the best job seekers in our marketplace when a job goes live. Employers posting jobs often get their first quality
16 According to the following reports published by IBISWorld: Office Staffing & Temp Agencies in the US - Market Size 2001–2026, Updated December 28, 2020, https://www.ibisworld.com/industry-statistics/market-size/office-staffing-temp-agencies-united-states/ and Employment & Recruiting Agencies in the US - Market Size 2005–2026, Updated March 23, 2021, https://www.ibisworld.com/industry-statistics/market-size/employment-recruiting-agencies-united-states/ (each last visited April 21, 2021).
17 According to the following report published by IBISWorld: Online Recruitment Sites in the US - Market Size 2005–2027, Updated March 23, 2021, https://www.ibisworld.com/industry-statistics/market-size/online-recruitment-sites-united-states/ (last visited April 21, 2021).
18 Based on the following published reports: (1) IBISWorld Inc., Office Staffing & Temp Agencies in the US, December 2020, (2) IBISWorld Inc., Employment & Recruiting Agencies in the US, March 2021, and (3) IBISWorld Inc., Online Recruitment Sites, March 2021.
19 Based on ratings information for the Google Play Store and Apple Store from the AppFollow platform during the period of March 2017 to March 2021 for the job seeker apps of ZipRecruiter, CareerBuilder, Craigslist, Glassdoor, Indeed, LinkedIn, and Monster.
candidate before they can get up from their chair. 80% of employers posting in our marketplace receive a quality candidate within the first 24 hours. That’s why ZipRecruiter is the #1 rated employment marketplace by G2.20
Unique Data and Artificial Intelligence Provide Better Outcomes for Employers and Job Seekers. With a relevant data pipeline created from billions of interactions between job seekers and employers, we are uniquely positioned to harness that data to fuel the advanced artificial intelligence behind our matching, recommendation, and marketplace optimization capabilities. Through our deep learning-based natural language processing, we understand job seekers’ and employers’ nuanced needs. We model and analyze clicks, applications, hiring signals, and numerous other interactions to improve outcomes for all participants in our marketplace. Our advanced technology stack processes the data generated by our highly engaged user base to continuously improve our matchmaking. Our climbing satisfaction metrics over the past few years give us confidence that these technology investments are yielding results for employers and job seekers alike. The Thumbs Up Rate on candidates has increased from 39% in December 2017 to 56% as of December 2020, highlighting the improved quality of our matching algorithms over time.
Accelerating Network Effects. Increasing the number of jobs in our marketplace attracts more job seekers. A greater number of job seekers attracts more employers who in turn post more job opportunities in our marketplace. These natural, self-perpetuating network effects increase our data and thereby accelerate the rate at which our matching technology gets smarter over time.
Compelling Financial Results. The combination of the scale on both sides of our marketplace, our efficient go-to-market strategy, and intelligent use of technology has resulted in compelling financial results. For the year ended December 31, 2019, our revenue was $429.6 million. For the year ended December 31, 2019, we generated a net loss of $6.3 million and Adjusted EBITDA of $9.4 million. For the year ended December 31, 2020, our revenue was $418.1 million. For the year ended December 31, 2020, we generated a net income of $86.0 million and Adjusted EBITDA of $80.1 million. Adjusted EBITDA is a financial measure not presented in accordance with GAAP. For a definition of Adjusted EBITDA, an explanation of our management’s use of this measure, and a reconciliation of net income (loss) to Adjusted EBITDA, see the section titled “Summary Consolidated Financial and Operating Data.”
The Future of Work is at an Inflection Point
Today, more than 20% of working Americans, or over 40 million individuals, change jobs every year.21 Additionally, more than half of those currently working employees are either actively searching for new jobs or passively exploring new career opportunities.22
Employees are changing jobs faster. Median tenure of Millennials at a single organization is now only 2.8 years, down from a median of 10 years for the Baby Boomer generation of employees.23 Recruiting is becoming an “always on” reality for an increasing percentage of businesses. Over 75% of employers report using an online job board in 2020.24
We anticipate these trends will continue for the foreseeable future, with tens of millions of job seekers continuing to seek out tens of millions of new jobs each year. As has been the case since our founding in 2010, we believe we will continue to grow the share of that job seeking activity that we enable. But more recent developments, especially those driven by the global pandemic, are also introducing new disruptive forces into the traditional work paradigm.
20 Based on G2 satisfaction ratings as set forth in G2, Best Job Boards Software, https://www.g2.com/categories/job-boards?utf8=%E2%9C%93&order=top_shelf (last visited January 25, 2021).
21 U.S. Bureau of Labor Statistics, Employee Tenure Summary - Employee Tenure in 2020, September 22, 2020 (20% - 24% of Americans change jobs every year). Referred to hereinafter as the U.S. BOL Employee Tenure Summary.
22 Gallup Inc., State of the American Workplace, 2017.
23 U.S. BOL Employee Tenure Summary.
24 ZipRecruiter Brand Awareness Survey, 2020. Referred to hereinafter as the Brand Awareness Survey. For more information about the Brand Awareness Survey, see the section titled “Market and Industry Data.”
COVID-19 dramatically suppressed the job market and put an end to a 10 year run of job growth.25 Multiple high volume hiring categories like hospitality, tourism, and live events have gone dormant. Further, in spite of there having been over 20 million people unemployed or under-employed due to the pandemic, according to our internal data, job seekers are currently searching for work in our marketplace at 20% below pre-pandemic levels.
We believe distribution of vaccines for COVID-19 will drive a broad-based and extended recovery in the hiring market on both sides of our marketplace. We further believe that the future of work, and by extension recruiting, has been irreversibly changed.
The percentage of workers around the world that are permanently working from home is expected to double in 2021 as employers and workers alike have realized productivity increases during the COVID-19 pandemic.26 Removing a geographic constraint from the definition of a qualified applicant will be a significant change for those executing talent searches. For most new work from home jobs, the qualified candidate pool will increase by orders of magnitude. Trying to select from the hundreds, or even thousands, of candidates resulting from a nationwide job posting would be painfully inefficient for employers.
We believe this dramatic increase in available quality applicants per job opening will tilt employers towards tools with the ability to identify and selectively recruit talent from across the nation. Our advanced matching and existing process tools for employers are well suited to meet the challenges of this dynamic new opportunity.
We believe that the confluence of all the trends above will provide a significant tailwind for our faster, smarter marketplace.
Opportunities to Meet the Challenges Employers Face
Companies have been searching for candidates on the internet for decades, but unlike the vast majority of other internet-enabled services, such as shopping, entertainment, or booking travel, the task of finding the right candidate remains complicated. Employers face a series of challenges that make the process of selecting the best candidate frustrating and inefficient.
•Access to all job seekers. Employers want to feel confident they have reached a critical mass of potential candidates.
•Surfacing highly qualified applicants. Choosing the right candidate to hire starts with evaluating all applicants to assess if they are a potential Great Match for the role. According to a recent study, the average corporate job receives 250 applications27 with some of the world’s largest employers, such as large technology companies, receiving more than 35 applications per minute.28 With so many applicants to review, identifying the quality candidates is tedious and employers often miss potential Great Matches.
•Quickly engaging potential Great Match candidates. According to the U.S. Bureau of Labor Statistics (BLS), the average job seeker submits applications to approximately 14 different jobs.29 The best candidates are in high demand and engaging those candidates before the window of opportunity closes is critical. 27% of hires had applied to a job within the first two days of the job’s posting.30
25 U.S. Bureau of Labor Statistics, Total Nonfarm Employment, Seasonally Adjusted.
26 Thomson Reuters Corporation, Permanently remote workers seen doubling in 2021 due to pandemic productivity: survey, October 2020.
27 Graham, Dawn, Forbes.com, Here’s Why Career Switchers Have a Huge Advantage in This Job Market, April 23, 2020.
28 Shendrunk, Amanda, World Economic Forum, Amazon has become the world’s fifth largest employer, December 4, 2020.
29 U.S. Bureau of Labor Statistics, Dalton, Michael R. and Groen, Jeffrey A., How do jobseekers search for jobs? New data on applications, interviews, and job offers, Beyond the Numbers, Vol. 9, No. 14, November 2020.
30 Bryan, Chandlee, Startwire, The Early Bird Gets the Job, June 2, 2011.
Opportunities to Meet the Challenges Job Seekers Face
If there is a job seeker out there who loves the traditional job search process, we have not found them yet. Searching for a job is hard and time consuming. We believe technology designed for job seekers can uncover more great opportunities with less effort and rejection.
•Access to all jobs. There is no single place to find all jobs. Job seekers often need to search broadly to find the right position, replicating the same search across multiple sites to find the opportunities for which they are a good fit. Approximately 66% of job seekers looking for work online use multiple job sites to find opportunities.31
•Surfacing those jobs that could be a Great Match. Amidst the millions of jobs that are searchable, finding those that fit best is cumbersome. Spending hours reading job descriptions and lists of required qualifications can make the job search process long and frustrating.
•Providing feedback on where a job application stands. Most job seekers who apply to a job never hear anything back from the employer. Job seekers describe this experience as “the black hole.” This addresses the #1 complaint we hear from job seekers: applying to a job and then hearing nothing back.32
What We Do
We enable work by connecting job seekers and employers in our marketplace. The volume of activity in our marketplace has enabled us to build a proprietary data asset that allows us to optimize matching and dynamically adapt recommendations to actual behavior. Since the founding of our company in 2010, over 2.8 million businesses and 110 million job seekers have come to ZipRecruiter for their hiring and job search needs.
How We Work for Employers
ZipRecruiter is focused on meaningfully reducing the time associated with making a new hire. Our technology delivers high-quality matches immediately after a job goes live and provides tools to streamline the vetting process.
We offer employers the ability to post jobs in our marketplace through both flat rate or performance-based pricing, such as cost-per-click, to align with the employer’s hiring needs and budget constraints.
Quality Candidates Fast
•Job distribution. Jobs posted on ZipRecruiter are distributed to well over 1,000 sites managed by our Job Distribution Partners. This includes job boards, newspaper classifieds, search engines, social networks, talent communities, and resume services. The diversity and depth of our partner network enables employers to reach an especially broad job seeker audience.
•Instant alerts to qualified potential candidates. When employers post a job, ZipRecruiter’s matching technology immediately identifies and sends an alert to the best job seekers in our marketplace.
•Direct recruitment messages from the employer. Immediately after a job is posted, ZipRecruiter’s matching technology presents the employer with a list of the best potential candidates in the market. The employer can then, with a single click, personally invite the most qualified potential candidates to apply. These recruitment messages directly from the employer drive the highest quality candidates ever delivered through ZipRecruiter. Nearly 70% of these applicants receive a "thumbs up” rating by the employer once they have applied.
31 Brand Awareness Survey. For more information about the Brand Awareness Survey, see the section titled “Market and Industry Data.”
32 Id.
•Matching that learns. When an employer gives an applicant a “thumbs up” rating, our technology searches for other job seekers with similar profiles to that candidate and proactively encourages them to apply. Overall Thumbs Up Rate of applicants has improved from 39% to 56% over the last three years. Our matching will continue to improve over time as we collect more data and our technology applies the learnings embedded in the data.
•Access to an expansive database of job seekers. We provide employers with access to 14 million monthly Active Job Seekers with broad skill sets and a range of experiences.
Efficient Candidate Vetting
•All the applicants in one place. For employers who do not already have an established process to manage hiring, job applicants from all these different sites are captured inside the ZipRecruiter ATS. Our ATS centralizes and simplifies the decision-making process. Inside this system, hiring teams can review, rate, and ultimately decide which candidate to hire. For employers already using a third-party ATS, we seamlessly populate candidates into their existing workflow.
•Great Match sorting. Our technology sorts applicants identified as a Great Match to the top of the list to help hiring managers avoid missing high quality candidates.
•In-demand candidate alerts. We apply an “Act Fast!” label to notify employers when their candidates have received interest from other employers, encouraging them to reach out quickly. In a tight, competitive market for top-quality talent, these notifications prompt hiring managers to move quickly to avoid losing out on a potentially great hire.
Flexible Pricing
•Flexible pricing based on customer needs. We provide a variety of pricing plans to best suit an employer’s specific needs, including flat rate pricing on terms ranging from a day to a year, as well as performance-based pricing for employers that run sophisticated recruitment marketing campaigns.
How We Work for Job Seekers
For job seekers, we make finding work easier.
Process Efficiency
•Search millions of jobs in one place. ZipRecruiter provides job seekers with access to millions of jobs from all over the internet. Job seekers can filter this vast array of opportunities by using numerous criteria to find the handful of best potential matches.
•Simple, one-click applications. On ZipRecruiter, job seekers create a profile and can then apply for opportunities with a single click. Our one-click application works across both our marketplace and our Job Distribution Partners to remove barriers between a job seeker and their next opportunity. This is particularly useful for job seekers on mobile devices where a resume can’t be easily created or uploaded. In our marketplace, nearly two-thirds of job applications now happen on a mobile device.33
•Job application tracking. Job seekers apply to numerous opportunities throughout the course of their search. Our simple, user-friendly dashboard aggregates their application history so job seekers can track opportunities.
33 Brand Awareness Survey. For more information about the Brand Awareness Survey, see the section titled “Market and Industry Data.”
Personalized Recruiter Assistance
•Pitched to employers as a potential candidate. After a new job is posted, ZipRecruiter matching technology immediately presents strong-fit in-market job seekers to the employer for consideration. Employers can then directly invite the job seekers they like best to apply. This allows candidates to passively gain interest from employers without needing to directly apply, and results in increased attention from prospective employers. While job seekers typically do not like the process of applying to jobs, the feeling of affirmation from being recruited to a particular job drives greater engagement. We offer this for free for all job seekers. Over 35% of new job seekers on ZipRecruiter are recruited by an employer within 30 days of signing up.
•“Phil,” your personal (automated) recruiter. Our automated recruiter “Phil” curates and presents opportunities to job seekers for which they are a Great Match. Phil engages in positive, personalized dialogue with candidates, inviting them to apply for new open positions. Phil sends on average more than 65 million messages per month.
•Job alerts. ZipRecruiter delivers a digest of relevant new opportunities from across the web on a daily basis, enabling job seekers to monitor the full breadth of our marketplace offerings.
•Match scoring. Match scores highlight best-fit opportunities for job seekers. This allows job seekers to see how well they match with available jobs so they can focus their energy on the right opportunities. The scores are delivered in an easy-to-understand format including “Great Match,” “Good Match,” “Fair Match,” and “Not a Match.”
•Application updates. Our technology notifies job seekers when an employer either views their application or gives them a “thumbs up” rating. This addresses the #1 complaint we hear from job seekers: applying to a job and then hearing nothing back.
Our Strengths
Transforming how people find work requires a combination of world-class skills. Our core competitive advantages that have been critical to our success include:
•Large and unique set of jobs. With over 90 million job postings available for matching in 2020 alone34, technology brings both jobs listed directly in our marketplace as well as those from our Job Acquisition Partners together. ZipRecruiter was the canonical source for millions of these jobs, which means a job seeker’s search is incomplete unless they access our marketplace.
•Engaged job seeker community. Over 36 million Active Job Seekers engaged in the ZipRecruiter marketplace in 2020. Those job seekers come to us directly and through our network of well over 1,000 sites managed by our Job Distribution Partners.
•Powerful artificial intelligence powered technology. Our technology captures insights from billions of user interactions facilitated by our marketplace, driving meaningful increases in the quality of matches we can enable over time. We do this by leveraging cutting edge software tools to ingest and analyze candidate behavior, including resume data, searches, and certifications, to find the most relevant jobs for each candidate on the ZipRecruiter network.
•Designed for simplicity and speed. We thrive on taking unnecessarily complex processes and simplifying them. This product design philosophy permeates our entire company. We focus on continually making ZipRecruiter faster and simpler for employers and job seekers to use.
•Metrics-driven culture. We are a metrics and data-driven company. We are disciplined about setting quantitative operating goals and then finding innovative ways to achieve those goals.
34 According to internal data tracking the number of unique job postings, based on hiring company, job title, and location, available on our marketplace during 2020.
•Powerful network effects. The scale of matching activity in our marketplace provides us with a unique and growing data set consisting of billions of signals which help drive superior matching. More jobs, more job seekers, and better matching technology over time create more high-velocity hiring activity in our marketplace, fueling a self-perpetuating cycle of network effects.
•Our brand. Since our founding, we have invested over $600 million in building the ZipRecruiter brand. We are proud that our investment in our brand has led to 82% aided brand awareness among U.S. employers.35
Our Growth Strategy
Our strategy is to use technology to consistently grow our marketplace in three key areas: more jobs, more job seekers, and better matching. These three growth vectors will both directly grow our business and also strengthen the network effects that serve as a competitive advantage. Several specific growth initiatives fit well into our overall strategy:
•Increasing the number of employers in our marketplace. We believe the marketplace we have built serves employers of all sizes, regions and industries. We see an opportunity to continue to meaningfully grow our employer footprint, from small businesses to large global enterprises. There are over 7.5 million employers in the United States alone, of which only approximately 90,000 were active Paid Employers in our marketplace in the fourth quarter of 2020.36 Expanding our base of Paid Employers is a significant growth opportunity.
•Increasing the number of job seekers in our marketplace. We historically focused our marketing efforts on employers. Thus, despite being one of the highest rated sites for job seekers, we believe there is a significant opportunity to grow our mindshare among job seekers. By being top-of-mind, we believe we can continue to drive a greater volume of Active Job Seekers to our marketplace as well as innovate ways to engage job seekers that are more passively open to evaluating new opportunities.
•Strengthening our artificial intelligence powered technology. Our artificial intelligence and matching algorithms continually improve as we ingest incremental data. The signals across our marketplace train our recommendations, increasing utility for both job seekers and employers. Despite our progress, we believe there remains a significant opportunity to continue to further improve our matching with ongoing investment in technology and an increase in the number and quality of data signals we collect over time.
35 Brand Awareness Survey. For more information about the Brand Awareness Survey, see the section titled “Market and Industry Data.”
36 U.S. Census Bureau.
•Continuing to optimize performance-based pricing. Employers’ willingness to pay for recruitment varies by company and by each job opening. We believe we have multiple pricing optimization opportunities that will provide more flexibility to employers of different sizes. We will also strive to deliver higher levels of service to employers in the marketplace by adding new, innovative features that will create value for the marketplace and will monetize over time. This will enable us to meet employers’ needs while improving Revenue per Paid Employer over time.
•Expanding our global footprint. Beyond the United States, we have already established a presence in Canada and the United Kingdom. Our experience in all three of our existing markets has strengthened our belief that employers and job seekers everywhere can benefit from a simpler and faster hiring process. We believe our strengths as a company, especially our purpose-built technology for bringing job seekers and employers together, can be leveraged in additional markets as we continue to expand our geographic footprint. Many of our over 1,000 Job Distribution Partners already operate in other markets which will accelerate our ability to expand internationally.
•Building an enduring brand. Since our founding, we have invested over $600 million in establishing ZipRecruiter as a go-to brand for anyone that wants to work. We are proud that our investment in our brand has led to an 82% aided brand awareness among U.S. employers. We plan to increase our brand investment to ensure ZipRecruiter further develops as a category-defining, enduring brand for employers and job seekers alike.
Our Competition
Hiring is a vast, competitive, and highly fragmented market. We compete in varying degrees with other online job sites including CareerBuilder, Craigslist, Glassdoor, Indeed, LinkedIn, Monster, and hundreds of others.
Competition for Employers
Employers have a range of options when posting job opportunities. We compete to attract and retain employers to advertise their jobs in our marketplace. We compete for employers based on several factors including the pricing and features of our offerings, the speed of receiving great candidates, the size of our job seeker community, the simplicity of our user experience, and our trusted brand. We believe that our employers are able to cost-effectively attract the right job seekers in our marketplace compared to other online recruiting sites due to the combination of the strength of our marketplace and our diverse pricing models.
Competition for Job Seekers
Job seekers have a variety of choices when searching for their next great job opportunity. We compete for job seekers on many fronts, including our ability to surface unique and attractive jobs, our ability to simplify the hiring process, the transparent feedback job seekers receive on the status of their applications, and our trusted brand. Our marketplace is free to job seekers. We believe our offering to job seekers compares favorably versus alternatives due to the combination of our large and unique pool of job opportunities to choose from, and our proven matching technology that continues to get smarter over time.
Our Employees and Human Capital Resources
As of December 31, 2020, we had 772 individuals across the United States, primarily in California and Arizona. Internationally, we had 68 employees in the United Kingdom, Canada and Israel. We also engage independent contractors and consultants. Collectively, we view the team at ZipRecruiter as our greatest asset, and we take great pride in having been recognized by Comparably as one of the highest-rated companies for Best Company Culture, Best Companies for Diversity and Best CEO in 2020. In 2019 Fast Company recognized us as one of the World’s Most Innovative Companies.
Several aspects of how we operate our business have been critical to building our team:
•We use ZipRecruiter. We utilize the power of the marketplace we have built to connect to our next great employees.
•We foster an entrepreneurial culture of safety and innovation. We believe a safe professional environment empowers people to take risks and be their best selves. Our employees are encouraged to champion great ideas, embrace innovative approaches, and use data to advocate for their point of view.
•We embrace diversity & inclusion (D&I): We believe our company is strengthened by a culture that embraces diversity and inclusion. Our employee-led and executive-sponsored Diversity & Inclusion Council drives initiatives around training, recruiting, people analytics, and employee resource groups. Our commitment to D&I is aligned with our mission to actively connect people from all backgrounds to their next opportunity.
•We reward high performance. We focus on attracting and retaining results-oriented employees who are passionate about our mission. We use a variety of compensation tools to reward employees whose achievements exceed our high expectations.
•We are committed to our employee’s career development. We invest in our people so that ZipRecruiter is not just a great place to work, but also a great place to advance and grow a rewarding career.
Go-to-market Strategy
Being top-of-mind when any employer needs to find a new employee or job seekers begin a search for their next great opportunity is critical to our success. Our level of investment in marketing over time reflects the level of importance we place on being synonymous with hiring or getting hired. We have invested over $600 million over the past decade, resulting in 82% aided brand awareness among U.S. employers as of the fourth quarter of 2020.
Many employers self-serve through both purchasing our service and utilizing the tools we provide to post jobs. Additionally, our team of over 300 sales professionals help onboard employers requiring additional assistance to launch and optimize their recruiting campaigns. For larger enterprises with unique needs, our dedicated sales and account management teams utilize their deep industry knowledge to help optimize toward sophisticated performance goals.
Our Technology
Our research and development efforts are focused on delivering great products through data driven systems, machine learning technology, and robust infrastructure to ensure that our marketplace is sophisticated, low latency, resilient, and available to our users at all times.
Our research and development organization is built around small, cross functional development teams, arranged in larger divisions. These development teams foster greater agility, which enables us to develop new, innovative product features as well as iterate quickly on new capabilities and optimizations. Our development teams design, build and continue to expand our ATS, mobile apps, data processing and analysis pipelines, marketplace functionality, search and matching, email and messaging, and third-party product integrations as well as the software infrastructure that supports best practices such as high frequency deployment, orchestrating containers, and leveraging open-source technologies. Our systems are currently operated entirely on cloud services.
As of December 31, 2020, our technology departments had 223 engineers, product managers and data scientists, primarily located in Santa Monica, California and Tel Aviv, Israel. We intend to continue to invest in our research and development capabilities to extend our marketplace and connect job seekers and employers to a broader range of applications, geographies and customers.
Regulatory Matters
We are subject to many varying laws and regulations in the United States, Canada, the European Union, the United Kingdom and throughout the world, including those related to privacy, data protection, content regulation, intellectual property, consumer protection, e-commerce, marketing, advertising, messaging, rights of publicity, health and safety, employment and labor, product liability, accessibility, competition, and taxation. These laws and regulations are constantly evolving and may be interpreted, applied, created, or amended in a manner that could harm or require us to change our current or future business and operations. In addition, it is possible that certain governments may seek to block or limit our products and services or otherwise impose other restrictions that may affect the accessibility or usability of any or all of our products and services for an extended period of time or indefinitely.
Data Privacy and Security Laws
We are subject to various federal, state and international laws and regulations relating to the privacy and security of consumer, customer and employee personal information. These laws often require companies to implement specific information security controls to protect certain types of data (such as personal data, “special categories of personal data” or health data), and/or impose specific requirements relating to the collection or processing of such data.
In the United States, the Federal Trade Commission, or the FTC, the Department of Commerce, and various states continue to call for greater regulation of the collection of personal data, as well as restrictions for certain targeted advertising practices. Section 5(a) of the FTC Act empowers the agency to enforce against “unfair or deceptive acts or practices in or affecting commerce,” and the FTC has used this authority extensively to hold businesses to fair and transparent privacy and security standards. Numerous states have also enacted or are proposing legislation to enact state-level data privacy laws and regulations governing the collection, use, and processing of state residents’ personal information. For example, the California Consumer Privacy Act, or CCPA, came into force in California in 2020. The CCPA establishes a new privacy framework for covered businesses such as ours, creates new privacy rights for consumers residing in the state, and requires us to modify our data processing practices and policies and incur compliance related costs and expenses. In November 2020, California voters passed the California Privacy Rights and Enforcement Act of 2020, or CPRA, which further expands the CCPA with additional data privacy compliance requirements and rights of California consumers effective January 1, 2023, and establishes a regulatory agency dedicated to enforcing those requirements.
In Canada, the federal Personal Information Protection and Electronic Documents Act, or PIPEDA, sets forth ten principles that are designed to protect the personal information of individuals in Canada, and places obligations on companies that process personal information. PIPEDA applies to organizations that collect, use or disclose personal information in the course of commercial activities, where such activities take place within a Canadian province that does not otherwise have “substantially similar” legislation. Alberta, British Columbia and Québec are the only provinces that have enacted comprehensive private sector privacy statutes that have each been deemed “substantially similar” to PIPEDA. As such, PIPEDA will not apply to commercial organizations operating within Alberta, British Columbia and Québec, although the data protection obligations throughout Canada are substantially the same.
In the European Union, the General Data Protection Regulation, or the GDPR, became effective on May 25, 2018. The GDPR is intended to create a single legal framework in relation to the collection, control, processing, sharing, disclosure and other use of data relating to an identifiable living individual that applies across all EU member states. However, the GDPR allows for derogations where EU member states can deviate from the requirements in their own legislation, including for example, introducing measures that apply in specific situations and implementing rules regarding legal basis of processing. It is therefore likely that we will need to comply with these local regulations in addition to the GDPR, where we operate or provide services in those EU member state jurisdictions. Local supervisory authorities are able to impose fines for non-compliance and have the power to carry out audits, require companies to cease or
change processing, request information, and obtain access to premises. The GDPR created more stringent operational requirements for processors and controllers of personal data, including, for example, granting new rights for data subjects as well as enhancing existing rights, requiring enhanced disclosures to data subjects about how personal data is processed (including information about the profiling of individuals and automated individual decision-making), records of processing activities, limiting retention periods of personal data, requiring mandatory data breach notification to data protection regulators or supervisory authorities (and in certain cases, to the affected individuals), and requiring additional policies and procedures to comply with the accountability principle under the GDPR.
In the United Kingdom, the UK Data Protection Act 2018, is the UK’s implementation of the GDPR, which also became effective on May 25, 2018. However, the UK left the EU on January 31, 2020 and entered a transition period, which ended on December 31, 2020. The UK Government is seeking an adequacy decision from the European Commission. In the absence of adequacy decisions, transfers from the European Economic Area, or EEA, to the UK will need to comply with EU GDPR transfer restrictions, since the UK is currently viewed by the EU as a “third country.” As a result, we now have compliance obligations under the EU’s GDPR and the UK’s GDPR. In addition, the relationship between the UK and the EU in relation to certain aspects of data protection law remains unclear, and there is uncertainty around how UK data protection laws and regulations will develop, for example in relation to data transfers.
In any event, we are subject to laws, rules, and regulations regarding cross-border transfers of personal data, including laws relating to the transfer of personal data outside the EEA and the UK. Recent legal developments in the EEA and the UK have created complexity and uncertainty regarding transfers of personal information from the EEA and the UK to “third countries”, especially the United States. For example, last year the Court of Justice of the European Union, or CJEU, invalidated the EU-U.S. Privacy Shield Framework (a mechanism for the transfer of personal information from the EEA to the United States). The CJEU also made clear that reliance on standard contractual clauses (another mechanism for the transfer of personal data outside the EEA) alone may not be sufficient in all circumstances. We currently rely on standard contractual clauses and these changes are therefore causing us to review our current compliance approach and may result in additional compliance costs or the inability to transfer personal data outside of the EEA and/or the United Kingdom.
We are also subject to evolving EU and UK privacy laws on cookies and e-marketing. In the EU and the UK, regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem and current national laws that implement the e-Privacy Directive are highly likely to be replaced by an EU regulation known as the e-Privacy Regulation which will significantly increase fines for non-compliance. Informed consent is required for the placement of a cookie or similar technologies on a user’s device and for direct electronic marketing. The GDPR also imposes conditions on obtaining valid consent, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. In addition, the current national laws that implement the e-Privacy Directive are highly likely to be replaced by an EU regulation known as the e-Privacy Regulation which will significantly increase fines for non-compliance. The text of the e-Privacy Regulation is still under development, and recent EU regulatory guidance and court decisions have created uncertainty about the level to which such laws and regulations will be enforced, which may require us to review our compliance approach and increase compliance costs.
Similarly, other jurisdictions are instituting privacy and data security laws, rules, and regulations, or may do so in the future, which could increase our risk and compliance costs.
Intellectual Property
We rely on a combination of trademarks and trade secrets, as well as contractual provisions and restrictions, to protect our intellectual property.
As of December 31, 2020, we owned two U.S. and 18 international trademark registrations for the mark ZIPRECRUITER. We also own one pending trademark application, and numerous domain names, including www.ziprecruiter.com.
We rely primarily on trade secrets and confidential information to develop and maintain our competitive position. We seek to protect our trade secrets and confidential information through a variety of methods, including confidentiality agreements with employees, third parties, and others who may have access to our proprietary information. We also require employees to sign invention assignment agreements with respect to inventions arising from their employment, and strictly control access to our proprietary technology.
Legal Proceedings
We are and, from time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that in the opinion of our management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.
Facilities
Our corporate headquarters are located in Santa Monica, California, where we currently lease approximately 60,000 square feet under agreements that expire in 2023 and 2025. We also lease facilities in Arizona and Israel. We intend to procure additional space as we add employees and expand geographically. We believe that our facilities are adequate to meet our needs for the immediate future and that suitable additional space will be available to accommodate any expansion of our operations as needed.
MANAGEMENT
Executive Officers, Key Employees, and Directors
The following table provides information regarding our executive officers, key employees, and directors as of March 31, 2021:
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Name
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Age
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Position(s)
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Executive Officers
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Ian Siegel
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47
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Chief Executive Officer and Chairperson of the Board
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Renata Dionello
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46
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Chief People Officer
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Ryan Eberhard
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44
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Chief Product Officer
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Qasim Saifee
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41
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Chief Marketing Officer
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Ryan Sakamoto
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47
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General Counsel and Secretary
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Boris Shimanovsky
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47
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Chief Technology Officer
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David Travers
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44
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Chief Financial Officer
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Timothy Yarbrough
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37
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Chief Business Officer
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Jeff Zwelling
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54
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Chief Operating Officer
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Key Employees
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Marguerite Bui
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54
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Associate General Counsel
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Amy Garefis
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39
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Senior Vice President, Accounting
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Erich Gazaui
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46
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Senior Vice President, Technology Operations
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Jennifer Ringel
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39
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Senior Vice President, Product
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Yaniv Shalev
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43
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Senior Vice President, Engineering
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Elliot Wilson
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39
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Senior Vice President, Sales and Support
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Non-Employee Directors
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Emilie Choi
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42
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Director
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Cipora Herman(1)(2)
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47
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Lead Independent Director
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Blake Irving(2)(3)
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61
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Director
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Brian Lee(1)(3)
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50
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Director
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Eric Liaw(1)(2)
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43
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Director
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(1)Member of the audit committee.
(2)Member of the compensation committee.
(3)Member of the nominating and corporate governance committee.
Executive Officers
Ian Siegel, 47, has served as our President, Chief Executive Officer and member of our board of directors since June 2010. From 1998 to 2001, Mr. Siegel served as the Vice President of Web Development of Stamps.com Inc., an internet-based mailing and shipping services company. From 2001 to 2006, Mr. Siegel served as the Vice President of Web Development at Rent.com, an online apartment marketplace. From 2006 to 2009 Mr. Siegel served as Vice President of Product and Technology of Pictage, Inc., an online platform for photographers. From July 2009 until January 2011 Mr. Siegel served as Chief Product Officer for MyLife.com, an information brokerage firm. Mr. Siegel holds a B.A. in Sociology with a minor in English from Oberlin College. We believe that Mr. Siegel’s experience in the software industry and his perspective and experience as our Chief Executive Officer qualify him to serve on our board of directors.
Renata Dionello, 46, has served as our Chief People Officer since September 2020. From April 2015 to April 2018, Ms. Dionello served as the Head of Strategic Initiatives, and from April 2018 to August 2020 Mr. Dionello served as the Head of Corporate Development, each at Sony Interactive Entertainment, Inc.,
an entertainment company. From 2013 to 2015, Ms. Dionello served as Senior Director and Head of Planning and Strategic Initiatives of eBay Marketplaces at eBay, Inc., an e-commerce company. From 2011 to 2013, Ms. Dionello served as Head of Market Development at PayPal Holdings, Inc., an online payment systems company. From 2009 to 2011, Ms. Dionello served as Chief of Staff to the CEO at eBay, Inc. From 2008 to 2009, Ms. Dionello served as Director of Consumer Business Development at PayPal Holdings, Inc. From 2006 to 2008, Ms. Dionello served as VP of Marketing and Senior Director of Product Management at Pictage, Inc. From 2005 to 2006, Ms. Dionello served as Head of Strategy at Rent.com. From 2002 to 2005, Ms. Dionello served as a Manager of Corporate Strategic Planning at the Walt Disney Company, an entertainment conglomerate. From 1999 to 2000, Ms. Dionello served as a Project Manager at Universal Music Group, a music entertainment company. From 1997 to 1999, Ms. Dionello served as an Associate at Boston Consulting Group, a management consulting firm. Ms. Dionello holds an M.Eng. from the University of Oxford and an M.B.A. from Harvard Business School.
Ryan Eberhard, 44, has served as our Chief Product Officer since July 2019. Prior to assuming his current role, Mr. Eberhard held other management positions with us, including Senior Vice President of Product from July 2017 to July 2019 and Vice President of Product from September 2014 to July 2017. From 2012 to 2014, Mr. Eberhard served as the Chief Executive Officer of Cult Cosmetics, Inc., a social media community for the cosmetics category. From 2010 to 2012, Mr. Eberhard served as Head of eCommerce & Online Marketing at Murad, Inc., a skincare company. From 2007 to 2010, Mr. Eberhard served as Director of Acquisition Products at MyLife.com, Inc. Mr. Eberhard holds a B.S. in Logic and Computation and an M.B.A. from Carnegie Mellon University.
Qasim Saifee, 41, first joined us as Vice President of Marketplace Strategy in June 2018 and has served as our Chief Marketing Officer since January 2020. From February 2017 to June 2018, Mr. Saifee served as Senior Vice President of Publishing at Scopely, Inc., an entertainment and mobile gaming company. From 2008 to February 2017, Mr. Saifee served as Senior Vice President and General Manager of Monetization at OpenX Software Ltd., a programmatic advertising company. From 2005 to 2008, Mr. Saifee served as Senior Director at Yahoo! Inc., a web services provider. From June to August 2004, Mr. Saifee was a consultant at Bain & Company, Inc., a management consulting firm. From 2000 to 2003, Mr. Saifee served as a Senior Analyst of Corporate Strategic Planning at the Walt Disney Company. Mr. Saifee holds a B.S. in Industrial Engineering from Stanford University and an M.B.A. from Harvard Business School.
Ryan Sakamoto, 47, has served as our General Counsel since September 2016 and Secretary since January 2021. From June 2015 to September 2016, Mr. Sakamoto served as General Counsel at Realty Mogul, Co., a real estate investment company. From 2011 to 2015, Mr. Sakamoto served as General Counsel and Chief Administrative Officer at Wedbush, Inc., a financial services and investment firm. From 2006 to 2011, Mr. Sakamoto served as Senior Vice President and General Counsel at Madison Tyler Holdings, LLC, a financial services company. From 2003 to 2004, Mr. Sakamoto served as Vice President and General Counsel at Coast Asset Management, LLC, an investment bank. From 2001 to 2003, Mr. Sakamoto worked as an attorney at McDermott, Will & Emery LLP, a law firm. From 1998 to 2001, Mr. Sakamoto worked as an attorney at Riordan & McKinzie LLP, a law firm. Mr. Sakamoto holds an A.B. in Social Studies from Harvard University, an M.B.A. from the University of California, Los Angeles, Anderson School of Management, and a J.D. from University of California, Berkeley School of Law.
Boris Shimanovsky, 47, has served as our Chief Technology Officer since June 2020. From April to June 2020, Mr. Shimanovsky served as Senior Vice President of Engineering at Foursquare Labs, Inc., a location data platform. From August 2008 to April 2020, Mr. Shimanovsky served as the Chief Technology Officer at Factual, Inc., a location data company. From 1998 to 2008, Mr. Shimanovsky served as Chief Technology Officer at Xap Corporation, an education company. From 1995 to 1998, Mr. Shimanovsky co-founded and worked at Chronos Software Group, a company that operated a suite of websites focused on software. Mr. Shimanovsky holds a B.S. in Physiological Science and an M.S. in Computer Science from the University of California, Los Angeles.
David Travers, 44, has served as our Chief Financial Officer since December 2015. Mr. Travers is the Managing Partner of Basepoint Ventures, where he has served since August 2014, and is a Partner at Rustic Canyon Partners, where he has served since 2005, both of which are venture capital firms. From 2002 to 2003, Mr. Travers served as an Executive Assistant to the National Security Advisor in the White House. From 1999 to 2002, Mr. Travers served as a Strategic Planning Senior Analyst at the Walt Disney Company. Mr. Travers holds a B.A. in International Relations from Stanford University and an M.B.A. from Harvard Business School.
Timothy Yarbrough, 37, has served as our Chief Business Officer since September 2020. Prior to assuming his current role, Mr. Yarbrough held other management positions with us, including Senior Vice President of Finance from February 2017 to September 2020 and Vice President of Finance from November 2014 to January 2017. From 2013 to 2014, Mr. Yarbrough served as the Director of Finance at Convertro, Inc., a business intelligence platform. Mr. Yarbrough previously has also held multiple financial, strategic and operational positions across several business segments at Qualcomm Inc., a semiconductor and telecommunications company, including as a Manager of Financial Planning and Analysis from 2011 to 2013, Finance Manager in Wireless Connectivity from 2009 to 2011, and as a Strategy & Finance Professional in the Strategic Finance group of FLO TV (a subsidiary of Qualcomm) from 2006 to 2009. Mr. Yarbrough holds a B.S. in Accounting from Oral Roberts University and an M.B.A. from the University of Wisconsin-Madison School of Business.
Jeff Zwelling, 54, has served as our Chief Operating Officer since January 2015. From 2009 to 2014, Mr. Zwelling served as the Chief Executive Officer of Convertro, Inc. From 2001 to 2008, Mr. Zwelling served as the Chief Executive Officer of YDesign Group, LLC, a retailer of modern lighting. From 2005 to 2006, Mr. Zwelling served as the President of EchoSign, Inc., an on-demand sales tool for contract management. From 2000 to 2005, Mr. Zwelling served as President of Pathway Ventures LLC, a strategic consulting firm. From 1999 to 2000, Mr. Zwelling served as Director of Business Strategy at GeoCities, a web hosting service. From 1995 to 1999, Mr. Zwelling served as Head of Product Development, Producer, and Executive Producer at Crystal Dynamics, Inc., a video game company. From 1994 to 1995, Mr. Zwelling was an intellectual property attorney at Loeb & Loeb LLP, a law firm. Mr. Zwelling holds a B.A. from the University of California, Los Angeles and a J.D. from the University of San Francisco Law School.
Key Employees
Marguerite Bui, 54, and has served as our Associate General Counsel since October 2018. Ms. Bui previously served as our Vice President and Senior Counsel from May 2017 to September 2018. From 2003 to May 2017, Ms. Bui served as Corporate Counsel for the Automobile Club of Southern California, an American Automobile Association affiliate. From 2000 to 2003, Ms. Bui served as a Partner at Perkins Coie LLP, a law firm. From 1994 to 2000, Ms. Bui served as an Associate and Partner at Loeb & Loeb LLP, a law firm. From 1991 to 1994, Ms. Bui served as an Associate at Latham & Watkins LLP, a law firm. Ms. Bui holds a B.A. in Economics and East Asian Studies from Stanford University and a J.D. from the University of California, Berkeley, School of Law.
Amy Garefis, 39, has served as Senior Vice President and our Controller since November 2013. From 2011 to 2013, Ms. Garefis served as Vice President and Controller at Wedbush Securities, Inc., a financial services and investment firm. From 2008 to 2011, Ms. Garefis worked as an Accounting Manager at Sony Pictures Entertainment, Inc., an entertainment company. From 2002 to 2008, Ms. Garefis served as an Accounting Manager at Montgomery & Co., LLC, an investment bank. Ms. Garefis is a Certified Public Accountant and holds a B.A. in Economics from the University of California, Santa Barbara.
Erich Gazaui, 46, has served as our Senior Vice President of Technology Operations since January 2020 and as our Vice President, Technology Operations from April 2019 to December 2019. From June 2018 to February 2019, Mr. Gazaui served as the Chief Information Officer at Fashion Nova, Inc., a retail company. From September 2017 to June 2018, Mr. Gazaui served as the Chief Information Officer and
from September 2016 to September 2017 served as Vice President, Business Systems at Loot Crate, Inc., a pop culture subscription service. From 2015 to September 2016, Mr. Gazaui served as the Executive Director of Technology Services at Beachbody LLC, a health and fitness company. From 2011 to 2015, Mr. Gazaui served as Senior Director of the Enterprise Platform at TrueCar, Inc., an online automotive marketplace. From 2005 to 2011, Mr. Gazaui served as President at Chartscape, LLC, an electronic medical records firm. Mr. Gazaui also founded and worked at NDP Managed Security, a security firm, from 1998 to 2005. Mr. Gazaui holds a B.A. in Economics from the University of California, San Diego.
Jennifer Ringel, 38, has served as our Senior Vice President of Product Management since January 2021. Ms. Ringel previously served as our Vice President of Product Management from July 2018 to January 2021, our Senior Director of Product Management from July 2017 to June 2018, our Director of Product Management from July 2016 to July 2017, and our Senior Product Manager from March 2015 to June 2016. From 2012 to 2015, Ms. Ringel was the Co-Founder and Chief Executive Officer of MomAssembly, an education platform for mothers. From 2011 to 2012, Ms. Ringel served as a Principal at Brave New Ventures LLC, a venture capital firm. From 2004 to 2011, Ms. Ringel served as a Senior Project Manager at MTV New Media and a Film Development Coordinator at MTV Films, both of which are entertainment companies and subdivisions of ViacomCBS Inc. Ms. Ringel holds an A.B. in Sociology from Harvard University.
Yaniv Shalev, 43, has served as our Senior Vice President of Engineering since March 2017. From 2015 to March 2017, Mr. Shalev served as Vice President of AOL Inc., a web services provider. From 2011 to 2015, Mr. Shalev held multiple positions at Convertro, Inc., including as Director of Engineering and Chief Technology Officer. From 2008 to 2011, Mr. Shalev served as a Manager and Architect at LivePerson Inc., an artificial intelligence company. From 2004 to 2008, Mr. Shalev served as a Manager and Architect at Orange S.A., a telecommunications company. From 2001 to 2004, Mr. Shalev served as a Senior Developer at Amdocs Limited, a software services provider. From 2000 to 2001, Mr. Shalev served as an Engineer for Aliroo Ltd., a software company. Mr. Shalev holds a B.S.C. in Mathematics and Computer Science from Bar-Ilan University.
Elliot Wilson, 39, has served as our Senior Vice President of Sales and Support since September 2020. Mr. Wilson previously served as our Senior Vice President of Operations from March 2019 to September 2020, our Vice President of Operations from November 2017 to March 2019, and our Director of Strategic Operations from February 2017 to November 2017. From July 2016 to February 2017, Mr. Wilson served as the Area Director of Distribution for the Reno, Nevada area at Sherwin-Williams Company, a paint and coating manufacturing company. From 2009 to 2015, Mr. Wilson held several positions at Lovejoy, Inc., a power transmission equipment manufacturer, including as President, General Manager, and Director of Operations. From 2007 to 2009, Mr. Wilson served as Senior Product Manager at Pictage, Inc. From 2004 to 2007, Mr. Wilson served as a Project Manager for the U.S. Air Force. Mr. Wilson holds a B.S. in Computer Engineering from the U.S. Air Force Academy, a M.S. in Systems Engineering from Loyola Marymount University, and an M.B.A. from Loyola Marymount University, College of Business Administration.
Non-Employee Directors
Emilie Choi, 42, has served as a member of our board of directors since April 2018. Ms. Choi currently serves as President and Chief Operating Officer at Coinbase Global, Inc., where she has worked since March 2018, previously as Vice President of Corporate and Business Development from March 2018 until May 2019. Ms. Choi also serves as a member of the board of directors of Naspers Limited and Prosus N.V., a subsidiary of Naspers Limited. Previously, Ms. Choi served as the Vice President and Head of Corporate Development at LinkedIn Corp. from December 2009 to March 2018. Ms. Choi served as a Manager of Corporate Business Development and Strategy from 2007 to 2008 and as Director of Digital Business Strategy and Operations from 2008 to 2009 at Warner Bros. Entertainment, Inc. from 2007 to 2009. Ms. Choi also served as a Senior Analyst of Corporate Development and Strategy at Yahoo!, Inc. from 2003 to 2005, and as a Senior Analyst in Investment
Banking at Legg Mason Wood Walker, Inc. from 2000 to 2003. Ms. Choi holds a B.A. in Economics from Johns Hopkins University and an M.B.A from the Wharton School. Ms. Choi was selected to serve on our board of directors because of her operational expertise and management experience.
Cipora Herman, 47, has served as a member of our board of directors since October 2018. Since January 2021, Ms. Herman has served as the Chief Financial Officer for LA28, The Los Angeles Organizing Committee for the Olympic and Paralympic Games 2028. She has served as a philanthropic and executive adviser to the Global Sports Initiative, Athlete’s Voices at Harvard University since June 2020. Ms. Herman has served as a member of the board of directors of Opendoor Technologies, Inc., an online real estate company, since December 2020, and previously served on the board of directors for Social Capital Hedosophia Holdings Corp II, a special purpose acquisition corporation that merged with Opendoor Technologies in December 2020. Ms. Herman also previously served on the board of directors of MINDBODY, Inc., a software-as-a-service company from October 2016 to February 2019, and Memery, Inc., a technology startup, from April 2015 to January 2021. From February 2017 until June 2018, Ms. Herman served as Chief Financial Officer of Mori, Inc., a social e-reader platform. From October 2012 to April 2016, Ms. Herman served as the Chief Financial Officer of the National Football League’s San Francisco 49ers, a professional sports team. From 2007 to 2012, Ms. Herman served as the Vice President & Treasurer of Facebook, Inc., a social media company. From 2003 to 2007, Ms. Herman held several positions at Yahoo!, Inc., a web services provider, including Director of Corporate Treasury, Assistant Treasurer, and Vice President of Finance and Treasurer. From 1996 to 2003, Ms. Herman held finance positions at Franklin Templeton Investments, an investment firm, Hewlett-Packard Company, a public hardware technology and services company, Agilent Technologies, an analytical instrumentation development and manufacturing company, and Siebel Systems, Inc., a software company. Ms. Herman holds a A.B. in International Relations, a M.A. in International Development Policy and an M.B.A, each received from Stanford University. Ms. Herman was selected to serve on our board of directors because of her financial expertise and experience as a director of publicly and privately held companies.
Blake Irving, 61, has served as a member of our board of directors since October 2018. Mr. Irving currently serves as a member of the board of directors of Autodesk and DocuSign, Inc. and is an advisor to the McLaren Formula One team. From 2012 to January 2018, Mr. Irving served as the CEO of GoDaddy, Inc., a domain registrar and web hosting company. From 2010 to 2012, Mr. Irving served as Executive Vice President and Chief Product Officer at Yahoo!, Inc., a web services company. From 2009 to 2010, Mr. Irving served as a professor at Pepperdine’s Graziadio Business School. From 1992 to 1998, Mr. Irving served as General Manager, and from 1999 to 2007 Mr. Irving served as Corporate Vice President of Global Cloud Platforms, each at Microsoft Corporation, a technology company. Mr. Irving holds a B.A. in Art from San Diego State University and an M.B.A. from Pepperdine Graziadio Business School. Mr. Irving was selected to serve on our board of directors because of his experience in management and as a director of publicly held technology companies.
Brian Lee, 50, has served as a member of our board of directors since April 2015. Mr. Lee is the co-founder and Managing Director of BAM Ventures and has served in this capacity since 2015, and currently serves as a board member at the Lowell Milken Institute of Business Law and Policy at the University of California, Los Angeles. Mr. Lee has founded and served as CEO or President of several companies. Mr. Lee co-founded The Honest Co., a consumer goods company, where he served as Chief Executive Officer from 2013 to May 2017. In 2009, Mr. Lee co-founded ShoeDazzle.com Inc., an ecommerce website for women’s shoes, where he served as Chief Executive Officer. In 2000, Mr. Lee co-founded LegalZoom.com, Inc., an online legal services platform, where he served as the company’s President. Mr. Lee holds a B.A. in Economics and Business and a J.D., each from the University of California, Los Angeles. Mr. Lee was selected to serve on our board of directors because of his expertise in building and operating companies as a serial entrepreneur.
Eric Liaw, 43, has served as a member of our board of directors since August 2014. Mr. Liaw is a General Partner at Institutional Venture Partners, or IVP, a venture capital and private equity firm, where he has worked since 2011. Mr. Liaw serves on the boards of directors of a number of privately held
companies. Mr. Liaw previously served as a member of the board of directors of MINDBODY, Inc., a software-as-a-service company that was publicly traded from 2014 to 2019. From 2003 to 2011, Mr. Liaw served as Vice President at Technology Crossover Ventures, a venture capital firm. From 2001 to 2003, Mr. Liaw served as a Technology Investment Banker at Morgan Stanley, an investment bank. Mr. Liaw holds a B.A. in Economics with a minor in Computer Science and an M.S. in Management Science and Engineering from Stanford University. Mr. Liaw was selected to serve on our board of directors because of his experience in the venture capital industry and as a director of both publicly and privately held technology companies.
Appointment of Officers
Our executive officers are appointed by, and serve at the discretion of, our board of directors. There are no family relationships among any of our executive officers or directors.
Board of Directors Composition
Our board of directors currently consists of six members. Pursuant to our restated certificate of incorporation, as in effect prior to the effectiveness of the registration statement of which this prospectus forms a part, and amended and restated voting agreement, Mr. Siegel, Mr. Liaw, Ms. Choi, Mr. Irving, Mr. Lee, and Ms. Herman have been designated to serve as members of our board of directors. Pursuant to our amended and restated voting agreement (1) the seat occupied by Mr. Siegel is elected by the holders of a majority of our Class A common stock, voting exclusively and as a separate series, as the designees of the holders of our Class A common stock, (2) the seat occupied by Mr. Lee is elected by the holders of a majority of our preferred stock, voting exclusively and as a separate class, as the designee of the holders of preferred stock, (3) the seat occupied by Mr. Liaw is elected by the holders of a majority of our preferred stock, voting exclusively and as a separate class, as the designee of Institutional Venture Partners XIV, L.P. and (4) the seats occupied by Ms. Choi, Mr. Irving, and Ms. Herman are elected by the holders of a majority of our Class A common stock and preferred stock, as the designees of the holders of our Class A common stock and preferred stock.
The provisions of our restated certificate of incorporation and the amended and restated voting agreement by which the directors are currently elected will terminate shortly following the effectiveness of the registration statement of which this prospectus forms a part and there will be no contractual obligations regarding the election of our directors. Each of our current directors will continue to serve until the election and qualification of his or her successor, or his or her earlier death, resignation, or removal.
Classified Board of Directors
In accordance with our restated certificate of incorporation that will be effective shortly following the effectiveness of the registration statement of which this prospectus forms a part, our board of directors will be divided into three classes with staggered three-year terms. Upon expiration of the term of a class of directors, directors for that class will be elected for three-year terms at the annual meeting of stockholders in the year in which that term expires. As a result, only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Each director’s term will continue until the election and qualification of his or her successor, or his or her earlier death, resignation, or removal. Our directors will be divided among the three classes as follows:
•Class I directors, whose initial term will expire at the annual meeting of stockholders to be held in 2022, will consist of Ian Siegel and Cipora Herman;
•Class II directors, whose initial term will expire at the annual meeting of stockholders to be held in 2023, will consist of Brian Lee and Eric Liaw; and
•Class III directors, whose initial term will expire at the annual meeting of stockholders to be held in 2024, will consist of Blake Irving and Emilie Choi.
Our restated certificate of incorporation and restated bylaws that will be effective shortly following the effectiveness of the registration statement of which this prospectus forms a part, provide that only our board of directors may fill vacancies on our board. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors.
The classification of our board of directors may have the effect of delaying or preventing changes in our control or management. See the section titled “Description of Capital Stock—Anti-Takeover Provisions—Restated Certificate of Incorporation and Restated Bylaws Provisions” for additional information.
Director Independence
Our Class A common stock will be listed on the New York Stock Exchange. Under the rules of the New York Stock Exchange, independent directors must comprise a majority of a listed company’s board of directors within a specified period of such company’s listing of its shares. In addition, rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and corporate governance committees be independent. Under the rules of the New York Stock Exchange, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries. We intend to satisfy the audit committee independence requirements of Rule 10A-3 as of the effectiveness of the registration statement of which this prospectus forms a part.
Our board of directors has undertaken a review of the independence of each director and considered whether each director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our board of directors determined that each of Emilie Choi, Cipora Herman, Blake Irving, Brian Lee, and Eric Liaw are “independent directors” as defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the New York Stock Exchange. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and current and prior relationships as they may relate to us and our management, including the beneficial ownership of our capital stock by each non-employee director and the transactions involving them described in the section titled “Certain Relationships and Related Party Transactions.”
Committees of the Board of Directors
Our board of directors has established an audit committee, a compensation committee, and a nominating and corporate governance committee, each of which will have the composition and responsibilities described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors. Each committee will operate under a written charter approved by our board of directors that satisfies the applicable rules of the SEC and the listing standards of the New York Stock Exchange. Copies of each committee’s charter will be posted on the Investor Relations section of our website.
Audit Committee
Our audit committee is comprised of Brian Lee, Cipora Herman, and Eric Liaw. Ms. Herman is the chairperson of our audit committee. Ms. Herman, Mr. Lee and Mr. Liaw each meet the requirements for independence under the current New York Stock Exchange listing standards and SEC rules and regulations. In addition, our board of directors has determined that Ms. Herman is an “audit committee financial expert” as defined in Item 407(d) of Regulation S-K promulgated under the Securities Act. This designation does not impose on her any duties, obligations, or liabilities that are greater than are generally imposed on members of our audit committee and our board of directors. Each member of our audit committee is financially literate. Our audit committee is directly responsible for, among other things:
•selecting a firm to serve as the independent registered public accounting firm to audit our consolidated financial statements;
•ensuring the independence of the independent registered public accounting firm;
•discussing the scope and results of the audit with the independent registered public accounting firm and reviewing, with management and that firm, our interim and year-end operating results;
•establishing procedures for employees to anonymously submit concerns about questionable accounting or audit matters;
•considering the adequacy of our internal controls and internal audit function;
•inquiring about significant risks, reviewing our policies for risk assessment and risk management, and assessing the steps management has taken to control these risks;
•reviewing and overseeing our policies related to compliance risks;
•reviewing related party transactions that are material or otherwise implicate disclosure requirements; and
•approving or, as permitted, pre-approving all audit and non-audit services to be performed by the independent registered public accounting firm.
Compensation Committee
Our compensation committee is comprised of Eric Liaw, Cipora Herman, and Blake Irving. Mr. Liaw is the chairperson of our compensation committee. The composition of our compensation committee meets the requirements for independence under the current New York Stock Exchange listing standards and SEC rules and regulations. Each member of this committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act. Our compensation committee is responsible for, among other things:
•reviewing and approving, or recommending that our board of directors approve, the compensation and the terms of any compensatory agreements of our executive officers;
•reviewing and recommending to our board of directors the compensation of our directors;
•administering our stock and equity incentive plans;
•reviewing and approving, or making recommendations to our board of directors with respect to, incentive compensation and equity plans; and
•establishing our overall compensation philosophy.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee is comprised of Blake Irving and Brian Lee. Mr. Irving is the chairperson of our nominating and corporate governance committee. The composition of our nominating and corporate governance committee meets the requirements for independence under the current New York Stock Exchange listing standards and SEC rules and regulations. Our nominating and corporate governance committee is responsible for, among other things:
•identifying and recommending candidates for membership on our board of directors;
•recommending directors to serve on board committees;
•reviewing and recommending our corporate governance guidelines and policies;
•reviewing succession plans for senior management positions, including the chief executive officer;
•reviewing proposed waivers of the code of business conduct and ethics for directors, executive officers, and employees (with waivers for directors or executive officers to be approved by the board of directors);
•evaluating, and overseeing the process of evaluating, the performance of our board of directors and individual directors; and
•advising our board of directors on corporate governance matters.
Board Diversity
Each year, our nominating and corporate governance committee will review, with the board of directors, the appropriate characteristics, skills, and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates, our nominating and corporate governance committee will consider factors including, without limitation, an individual’s character, integrity, judgment, potential conflicts of interest, other commitments, and diversity. While we have no formal policy regarding board diversity for our board of directors as a whole nor for each individual member, the nominating and corporate governance committee does consider such factors as gender, race, ethnicity and experience, area of expertise, as well as other individual attributes that contribute to the total diversity of viewpoints and experience represented on the board of directors.
Code of Business Conduct and Ethics
Our board of directors has adopted a code of business conduct and ethics that applies to all of our employees, officers, and directors upon the effectiveness of the registration statement of which this prospectus forms a part. The full text of our code of business conduct and ethics will be posted on the Investor Relations section of our website. The reference to our website address in this prospectus does not include or incorporate by reference the information on our website into this prospectus. We intend to disclose future amendments to certain provisions of our code of business conduct and ethics, or waivers of these provisions, on our website or in public filings.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee is or has been an officer or employee of our company. None of our executive officers currently serves, or during the year ended December 31, 2020 served, as a member of the board of directors, or as a member of the compensation or similar committee, of any entity that has one or more of its executive officers serving on our board of directors or compensation committee.
Non-Employee Director Compensation
The table below provides information regarding the total compensation of the non-employee members of our board of directors who served on our board of directors during the year ended December 31, 2020. All compensation that we paid to Mr. Siegel, our only employee director, is set forth in the table below in “Executive Compensation—Summary Compensation Table.” During the year ended December 31, 2020, we did not pay any fees to, make any equity awards or non-equity awards to, or pay any other compensation to the non-employee members of our board of directors.
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Name
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Fees Earned or Paid in Cash
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Option Awards(1)(2)
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Stock Awards
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Total
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Emilie Choi
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$
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—
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$
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—
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$
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—
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$
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—
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Cipora Herman
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—
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—
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—
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—
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Blake Irving
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—
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—
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—
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—
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Brian Lee
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—
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—
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—
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—
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Eric Liaw
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—
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—
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—
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—
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____________
(1)The following table sets forth information the aggregate number of shares of our common stock underlying outstanding stock options held by our non-employee directors as of December 31, 2020 and the aggregate number of unvested shares of our common stock underlying outstanding stock options held by our non-employee directors as of December 31, 2020:
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Name
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Number of Shares Underlying Stock Options Granted in the Year Ended December 31, 2020
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Number of Shares Underlying Stock Options Held as of December 31, 2020
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Number of Shares Underlying Unvested Stock Options Held as of December 31, 2020
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Number of Shares Underlying RSUs Held as of December 31, 2020
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Emilie Choi
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—
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220,000
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73,334
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—
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Cipora Herman
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—
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220,000
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100,834
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3,350
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Blake Irving
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—
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220,000
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100,834
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1,420
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Brian Lee
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—
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220,000
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—
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4,540
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Eric Liaw
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—
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—
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—
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—
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(2)The amounts reported in the “Option Awards” column in the table above represent the grant date fair value of the stock options granted to our non-employee directors during the year ended December 31, 2020 as computed in accordance with FASB Accounting Standards Codification Topic 718. The assumptions used in calculating the grant date fair value of the stock options reported in the Option Awards column are set forth in Note 13 of the notes to our consolidated financial statements included elsewhere in this prospectus. Note that the amounts reported in this column reflect the accounting cost for these stock options and do not correspond to the actual economic value that may be received by our non-employee directors from the stock options.
Non-Employee Director Compensation Policy
Before the effectiveness of the registration statement of which this prospectus forms a part, we did not have a formal policy to provide any cash or equity compensation to our non-employee directors for their service on our board of directors or committees of our board of directors. Our board of directors has approved a non-employee director compensation policy, pursuant to which our non-employee directors will be eligible to receive certain cash retainers and equity awards. This policy is designed to attract, retain and reward non-employee directors.
Under this non-employee director compensation policy, each non-employee director will receive the cash and equity compensation for board services described below. We also will continue to reimburse our non-employee directors for reasonable, customary and documented travel expenses to board of directors meetings. The policy provides that in any fiscal year, no non-employee director may be issued cash
payments and equity awards with a combined value greater than $750,000. The maximum limits do not reflect the intended size of any potential compensation or equity awards to our non-employee directors.
Cash Compensation
Effective as of the effective date of the policy, each of our non-employee directors shall receive the following annual fees, which shall be paid quarterly in arrears and shall be pro-rated for partial quarters served, including for the initial quarter in which the policy was adopted:
•General Board Service Fee: $50,000
•Non-Executive Chairperson Fee (in addition to General Board Service Fee; in lieu of Lead Independent Director Service Fee set forth below): $30,000
•Lead Independent Director Service Fee (in addition to General Board Service Fee; not in addition to Non-Executive Chairperson Fee): $10,000
•Committee Chair Service Fee (in addition to General Board Service Fee):
◦Audit Committee chair: $20,000
◦Compensation Committee chair: $16,000
◦Nominating and Governance Committee chair: $10,000
Equity Compensation
Initial Award. Each new non-employee director appointed to our board of directors following this listing will be granted on the date of the non-employee director’s appointment to our board of directors a grant of RSUs, or the Initial Award, with an aggregate value of $155,000. The number of shares subject to the Initial Award will be determined by dividing the value of the Initial Award by the average fair market value of a share of our Class A common stock for the 10 business days ending on the day preceding the grant date of the Initial Award, rounded down to the nearest whole share. The Initial Award will vest as to one-third of the shares subject to the Initial Award on the earlier of (1) each annual anniversary of the grant date of the Initial Award or (2) each annual meeting of our stockholders following the grant date of the Initial Award, in each case, so long as the non-employee director continues to provide services to the us through such date. In the event of a Corporate Transaction, as defined in our 2021 Plan, each outstanding Initial Award will vest in full.
Annual Award. On the date of each annual meeting of our stockholders (commencing with the first annual meeting of our stockholders following this listing), each non-employee director who is serving on our board of directors prior to, and will continue to serve on our board of directors following, such annual meeting will receive a grant of RSUs, or an Annual Award, covering a number of shares of our Class A common stock with an aggregate value of $155,000. The number of shares subject to the Annual Award will be determined by dividing the value of the Annual Award by the average fair market value of a share of our Class A common stock for the 10 business days ending on the day preceding the grant date of the Annual Award, rounded down to the nearest whole share. Each Annual Award shall fully vest on the earlier of (1) the date of the next annual meeting of our stockholders and (2) the date that is one year following the grant date of the Annual Award, in each case, so long as the non-employee director continues to provide services to us through the applicable vesting date. In the event of a Corporate Transaction, as defined in our 2021 Plan, each outstanding Annual Award will vest in full.
Employee directors will receive no additional compensation for their service as a director.
EXECUTIVE COMPENSATION
As an “emerging growth company,” we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act. This section provides an overview of the compensation awarded to, earned by, or paid to each individual who served as our principal executive officer during the year ended December 31, 2020, and our next two most highly compensated executive officers in respect of their service to our company during the year ended December 31, 2020. We refer to these individuals as our named executive officers. Our named executive officers for the year ended December 31, 2020 who appear in the 2020 Summary Compensation Table are:
•Ian Siegel, our Chief Executive Officer;
•Boris Shimanovsky, our Chief Technology Officer; and
•Renata Dionello, our Chief People Officer
2020 Summary Compensation Table
The following table presents summary information regarding the total compensation for services rendered in all capacities that was awarded to and earned by our named executive officers during the year ended December 31, 2020.
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Name and Principal
Position(1)
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Fiscal
Year
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Salary
($)
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Bonus
($)
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Stock Awards ($)(2)
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Option Awards ($)
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Non-
Equity
Incentive
Plan
Compensation
($)(3)
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All
Other compensation ($)(4)
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Total
($)
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Ian Siegel
Chief Executive Officer
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2020
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458,333
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—
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—
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—
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160,417
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7,885
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626,635
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Boris Shimanovsky
Chief Technology Officer
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2020
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179,105
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100,000
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(5)
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2,546,495
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—
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62,655
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(6)
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3,148
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2,891,403
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Renata Dionello
Chief People Officer
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2020
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107,240
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—
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2,289,596
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—
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37,413
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(7)
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2,177
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2,436,426
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________________
(1)Mr. Shimanovsky and Ms. Dionello joined us in June 2020 and September 2020, respectively.
(2)The amounts reported in the “Stock Awards” column represent the grant date fair value of restricted stock units, or RSUs, granted to our named executive officers during Fiscal Year 2020 as computed in accordance with FASB ASC Topic 718 and excluding the effect of estimated forfeitures. Note that the amounts reported in this column reflect the accounting cost for these RSUs and do not correspond to the actual economic value that may be received by our named executive officers from such RSUs. The grants made in this column reflect equity awards granted pursuant to the terms of the offer letter for each named executive officer.
(3)The amounts reported represent performance-based cash bonuses under our Annual Incentive Plan. For additional information regarding non-equity incentive plan compensation, see the section titled “—Non-Equity Incentive Plan Compensation.”
(4)The amounts reported represent internet allowances, medical waiver, commuter allowances, cellphone allowances, and contributions to our 401(k) plan.
(5)The amount reported represents a sign-on bonus paid upon the commencement of Mr. Shimanovsky’s employment with us pursuant to the terms of Mr. Shimanovsky’s offer letter.
(6)The amount reported for Mr. Shimanovsky’s cash bonus amount equaled 140% of his target level of annual bonus, prorated based on his partial year of service as our Chief Technology Officer.
(7)The amount reported for Ms. Dionello’s cash bonus amount equaled 140% of her target level of annual bonus, prorated based on her partial year of service as our Chief People Officer.
Non-Equity Incentive Plan Compensation
For the year ended December 31, 2020, each of our named executive officers was eligible to receive a cash bonus based on our achievement of certain performance metrics established by the compensation committee of our board of directors, including certain corporate and individual performance goals. The compensation committee established target and maximum levels of performance for each metric and following the year ended December 31, 2020, reviewed the level of achievement of each performance
goal against the pre-established targets, and approved the payment of the bonuses set forth in the 2020 Summary Compensation Table above.
Executive Employment Arrangements
We have entered into amended and restated offer letters with our named executive officers in connection with this listing. These offer letters provide for at-will employment and provide that each named executive officer shall receive an annual base salary subject to periodic review, standard employee benefit plan participation, and change in control and severance payment benefits pursuant to a change in control and severance agreement.
CEO Letter Agreement
In April 2021, we entered into a letter agreement with Ian Siegel, our chief executive officer, which provides that, upon the earlier to occur of (1) (a) the first trading day following our initial public offering or direct listing pursuant to an effective registration statement under the Securities Act or (b) the consummation of a merger, acquisition or other business combination involving us and a publicly traded special purpose acquisition company, that results in us or our business becoming a publicly traded company or (2) a Change of Control, as defined in the 2014 Plan, Mr. Siegel will be entitled to a special bonus in an amount equal to $10.0 million provided that Mr. Siegel is employed by us at the time of either event.
Equity Compensation
From time to time, we have granted equity awards in the form of stock options or RSUs, to our named executive officers, which are generally subject to vesting based on each of our named executive officer’s continued service with us. Two of our named executive officers, Boris Shimanovsky and Renata Dionello, currently hold outstanding RSUs for our Class B common stock that were granted under our 2014 Plan, as set forth in the “—Outstanding Equity Awards at Year-End Table” below.
CEO Restricted Stock Award
In April 2021, we issued an RSU award, or the CEO Grant, to Ian Siegel, our chief executive officer, which provides for a grant of 1,398,000 RSUs. The CEO Grant will be eligible to vest based on the achievement of certain performance milestones, as further described below, subject to a minimum period of service as described therein, while Mr. Siegel remains our chief executive officer and before the expiration date, as described therein, or earlier termination thereof pursuant to the terms of the 2014 Plan or the CEO Grant.
The performance milestones, which are further described in the CEO Grant, are as follows:
•If the liquid price per share, as defined in the CEO Grant, is at least 2.7 times the reference price, as defined in the CEO Grant, 20% of the RSUs subject to the CEO Grant will vest; provided that the minimum service period, as defined in the CEO Grant, is satisfied through the first anniversary of the grant date, as defined in the CEO Grant.
•If the liquid price per share is at least 3.3 times the reference price, 20% of the RSUs subject to the CEO Grant will vest; provided that the minimum service period is satisfied through the second anniversary of the grant date.
•If the liquid price per share is at least 4.1 times the reference price, 20% of the RSUs subject to the CEO Grant will vest; provided that the minimum service period is satisfied through the third anniversary of the grant date.
•If the liquid price per share is at least 5.1 times the reference price, 20% of the RSUs subject to the CEO Grant will vest; provided that the minimum service period is satisfied through the fourth anniversary of the grant date.
•If the liquid price per share is at least 6.3 times the reference price, 20% of the RSUs subject to the CEO Grant will vest; provided that the minimum service period is satisfied through the fifth anniversary of the grant date.
Potential Payments upon Change of Control
We have entered into change in control and severance agreements with each of our executive officers, including our named executive officers, which provide for the following benefits if the executive is terminated by us without cause (as such term is defined in the change in control and severance agreement) outside of a change in control (as such term is defined in the change in control and severance agreement) in exchange for a customary release of claims: (1) a lump sum severance payment of six months’ base salary for our executive officers, (2) a lump sum payment equal to the executive officer’s then-current target bonus opportunity on a pro-rated basis, and (3) payment of premiums for continued medical benefits (or equivalent cash payment if applicable law so requires) for a period of twelve months.
If the executive officer’s employment is terminated by us without cause or by the executive for good reason within the three months preceding a change in control or within the 12 months following a change in control, the change in control and severance agreements provide the following benefits in exchange for a customary release of claims: (1) a lump sum severance payment of twelve months base salary, (2) a lump sum payment equal to 100% of the executive officer’s then-current target bonus opportunity on a pro-rated basis, (3) 100% acceleration of any then-unvested equity awards, other than awards that vest on the satisfaction of performance criteria; provided however, with respect to any outstanding equity awards that would vest only upon satisfaction of performance criteria, such awards shall accelerate and become vested and exercisable as if such awards had been achieved at the greater of (x) actual achievement (if measurable on the date of termination) or (y) target levels, and (4) payment of premiums for continued medical benefits (or equivalent cash payment if applicable law so requires) for a period of twelve months.
Each change in control and severance agreement is in effect for three years, with automatic renewal unless we notify such executive officer of non-renewal at least three months prior to expiration. The benefits under the change in control and severance agreements are payable only to the extent greater than and not in duplication of any other cash severance and vesting acceleration arrangements.
Outstanding Equity Awards at Year-End Table
The following table sets forth information regarding outstanding equity awards held by our named executive officers as of December 31, 2020. For additional information regarding incentive plan awards, please refer to “—Current and Prior Equity Plans” below.
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Option Awards
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Stock Awards (1)(2)
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Name
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Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
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Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
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Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
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Option
Exercise
Price
($)
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Option
Expiration
Date
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Number
of Shares
or Units
of Stock
That
Have Not
Vested
(#)
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Market
Value of
Shares
or Units
of Stock
That
Have
Not
Vested
($)
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Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
(#)
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Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That Have
Not Vested
($)
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Ian Siegel
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—
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—
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—
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—
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N/A
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—
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—
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—
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—
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Boris Shimanovsky
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—
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—
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—
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—
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N/A
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—
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—
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550,000(3)
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2,546,495
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Renata Dionello
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—
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—
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—
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—
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N/A
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—
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|
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—
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360,000(4)
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2,289,596
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________________
(1)All outstanding RSU awards were granted under the 2014 Plan and are for shares of Class B common stock.
(2)The amounts reported in the “Stock Awards” column represent the grant date fair value of restricted stock units granted to our named executive officers during the year ended December 31, 2020 as computed in accordance with FASB ASC Topic 718 and excluding the effect of estimated forfeitures. Note that the amounts reported in this column reflect the accounting cost for
these restricted stock unit awards and do not correspond to the actual economic value that may be received by our named executive officers from such restricted stock unit awards. The grants made in this column reflect equity awards granted pursuant to the terms of the offer letter for each named executive officer.
(3)The RSU awards will vest subject to the satisfaction of time- and service-based requirements, as well as achievement of certain liquidity event requirements. With respect to the time and service based requirements, the RSU awards will vest with respect to 1/4th of the shares of our Class B common stock subject to the restricted stock unit award on June 22, 2021 and the remaining 3/4th of the shares will vest as to 1/16th of the shares subject to RSU award quarterly thereafter, subject to Mr. Shimanovsky’s continued service to us as of each vesting date. The liquidity event requirement, or the Liquidity Event Requirement, will be satisfied upon the earlier to occur of: (a) the first trading day following the expiration of the lock-up period applicable to an initial public offering, or the Initial Public Offering, pursuant to an effective registration statement under the Securities Act covering the offer and sale of our equity securities by us; (b) March 15th of the calendar year following the year in which the Initial Public Offering was declared effective; or (c) a change in control, as such term is defined in the 2014 plan.
(4)The RSU awards will vest subject to the satisfaction of time- and service-based requirements, as well as the Liquidity Event Requirement. With respect to the time- and service-based requirements, the RSU awards will vest with respect to 1/4th of the shares of our Class B common stock subject to the restricted stock unit award on September 8, 2021, and the remaining 3/4th of the shares will vest as to 1/16th of the shares subject to the RSU award quarterly thereafter, subject to Ms. Dionello’s continued service to us as of each vesting date.
Employee Benefit Plans
We believe that our ability to grant equity-based awards is a valuable compensation tool that enables us to attract, retain, and motivate our employees, consultants, and directors by aligning their financial interests with those of our stockholders. The principal features of our equity incentive plans are summarized below. Our compensation committee, or our board of directors in place of the compensation committee, has authority to administer these plans. These summaries are qualified in their entirety by reference to the actual text of the plans, which are filed as exhibits to the registration statement of which this prospectus forms a part.
Current and Prior Equity Plans
2012 Stock Plan
Our 2012 Plan was initially adopted by our board of directors and approved by our stockholders in June 2012. The 2012 Plan was succeeded by our 2014 Plan (described below) in March 2014. No awards were granted under the 2012 Plan following the adoption of the 2014 Plan and awards outstanding under the 2012 Plan shall continue to be subject to the terms and conditions of the 2012 Plan and their applicable award agreements until such awards are exercised or until they terminate or expire by their terms.
Outstanding Awards under the 2012 Plan. As of December 31, 2020, (1) no options to purchase shares of our Class A common stock remained outstanding and (2) options to purchase 2,491,524 shares of our Class B common stock remained outstanding, with a weighted-average exercise price of $0.061 per share.
2014 Equity Incentive Plan
Our 2014 Plan was initially adopted by our board of directors and approved by our stockholders in March 2014, as a successor to our 2012 Plan. We expect to terminate the 2014 Plan and will cease granting awards thereunder upon the effective date of our 2021 Equity Incentive Plan (described below), which is the date immediately prior to the effective date of the registration statement of which this prospectus forms a part. Any outstanding awards will continue to be subject to the terms of the 2014 Plan and their applicable award agreements until such awards are exercised or until they terminate or expire by their terms.
Outstanding Awards under the 2014 Plan. As of December 31, 2020, we had 36,774,779 shares of our Class B common stock authorized for issuance pursuant to grants under our 2014 Plan, of which 2,941,160 shares remained available for grant. As of December 31, 2020, options to purchase 16,881,143 shares of our Class B common stock remained outstanding, with a weighted-average
exercise price of $2.388 per share. As of December 31, 2020, 5,450,663 shares of our Class B common stock were subject to outstanding RSUs granted under our 2014 Plan.
Option Terms. The 2014 Plan provided for the grant of both (1) incentive stock options, intended to qualify for tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended, or the Code, which may be granted only to employees and (2) non-qualified stock options, which may be granted to our employees, directors and consultants. Pursuant to the 2014 Plan, options must be granted with a per share exercise price at least equal to the fair market value of each underlying share as of the date of grant and the per share exercise price of incentive stock options granted to any individual who holds, directly or by attribution, more than 10% of the total combined voting power of all classes of our capital stock as of the date of grant must be at least 110% the fair market value of each underlying share as of the date of grant.
Options granted under the 2014 Plan generally vest subject to continued service. The administrator may provide for options to be exercised only as they vest or to be immediately exercisable, with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. In the event of a participant’s termination of service, an option is generally exercisable, to the extent vested, for a period of 12 months in the case of termination due to the participant’s death or disability, or such longer or shorter period as the administrator may provide, but in any event no later than the expiration date of the stock option. Stock options generally terminate upon a participant’s termination of employment for cause. The maximum permitted term of options granted under our 2014 Plan is 10 years from the date of grant, except that the maximum permitted term of incentive stock options granted to an individual who owns more than 10% of the total combined voting power of all classes of our capital stock as of the date of grant is five years.
Restricted Stock Units. The 2014 Plan provided for the grant of RSUs, which represented the right to receive shares of our Class B common stock at a specified date in the future and may be subject to vesting based on service or achievement of performance conditions. Such RSUs may be settled in cash, shares of our common stock or a combination of both as soon as practicable following vesting or on a later date subject to the terms of the 2014 Plan.
RSUs granted under the 2014 Plan generally vest subject to a continued service requirement along with a liquidity event requirement. For the majority of our RSUs, in the event of a participant’s termination of service, an RSU that has met all or a portion of the continued service requirement remains outstanding until the earlier to occur of the expiration date of such RSU or the date of settlement following satisfaction of the liquidity event requirement.
Change in Control. In the event that we are subject to a merger, or other combination constituting a change in control (as defined in the 2014 Plan), or another unusual or nonrecurring transaction or event, as determined by the administrator, outstanding awards may be (1) canceled in exchange for a payment to the participants equal to (x) the amount that could have been obtained upon the exercise or settlement of such award, or (y) the amount that could have been obtained had such award been fully vested as of the date of such transaction, provided, in each case, if the amount that could have been obtained was equal to or less than zero, then no payment would be issued in consideration of such award; (2) subjected to full vesting acceleration; (3) assumed by the surviving corporation or its parent; (4) substituted by the surviving corporation or its parent; (5) continued by the company subject to any necessary adjustments in the number, type of shares (or other property), and other terms, of such awards; (6) replaced with other rights or property as determined by the administrator; or (7) canceled without payment of any consideration. Awards need not be treated in an identical manner and may be accelerated in full or in part at the discretion of the administrator.
Adjustments. In the event that a dividend or other distribution, reorganization, merger, consolidation, combination, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of our assets, or an exchange of our Class A common stock, issuance of warrants or other rights to purchase our Class A common stock, or other similar corporate transaction
or event, affects our Class A common stock such that the administrator of our 2014 Plan determines that an adjustment is appropriate then, in such case, proportional adjustments will, to the extent determined appropriate by the administrator, be made to (1) the number and class of shares reserved for issuance under our 2014 Plan, and (2) the exercise prices, number and class of shares subject to outstanding awards under the Prior Plans, and any other applicable terms and conditions of any awards (including, without limitation, any applicable performance conditions), subject to any required action by our board or our stockholders and compliance with applicable laws.
Equity Restructurings. In connection with any equity restructuring (as defined in the 2014 Plan), the administrator will equitably adjust each outstanding award under the 2014 Plan, which adjustments may include adjustments to the number and type of securities subject to each outstanding award and/or the exercise price or grant price thereof, if applicable. Such adjustments may also take the form of grants of new awards and/or cash payments.
Limited Transferability. Unless otherwise determined by the administrator, awards under our 2014 Plan generally may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will, the laws of descent and distribution.
Sub-Plans. Our Board has also adopted a UK Sub-Plan of the 2014 Plan, or the UK Sub-Plan, to permit grants in the United Kingdom and a Canada Sub-Plan of the 2014 Plan, or the Canada Sub-Plan, permit grants in Canada. The UK Sub-Plan allows us to grant non-tax advantaged options to our UK employees under generally similar terms to those in the 2014 Plan provided, however, that such grants may be made subject to the applicable employee agreeing to enter into certain tax-related elections with the relevant UK tax authorities. The Canada Sub-Plan allows us to grant options to Canadian service providers under similar terms to those in the 2014 Plan. Additionally, our Board has adopted an Israeli Sub-Plan of the 2014 Plan, or the Israeli Sub-Plan, to permit grants in Israel. The Israeli Sub-Plan allows us to grant options under a capital gains track to our Israeli employees under generally similar terms to those in the 2014 Plan, provided that such grants are held by a tax trustee for a certain period and are subject to additional terms in order to qualify for capital gains tax. In addition, options granted under our Israeli Sub-Plan may be granted with per share exercise prices that are less than the fair market value of each underlying share as of the date of grant.
2021 Equity Incentive Plan
In April 2021, our board of directors and our stockholders approved our 2021 Equity Incentive Plan, or the 2021 Plan, as a successor to our 2014 Plan that will become effective on the date immediately prior to the effectiveness of the registration statement of which this prospectus forms a part. The 2021 Plan authorizes the award of both incentive stock options, which are intended to qualify for tax treatment under Section 422 of the Code, and non-qualified stock options, as well for the award of restricted stock awards, or RSAs, stock appreciation rights, or SARs, RSUs, and performance and stock bonus awards. Pursuant to the 2021 Plan, incentive stock options may be granted only to our employees. We may grant all other types of awards to our employees, directors, and consultants.
Shares Reserved. We have initially reserved 10,664,476 shares of our Class A common stock, plus any reserved shares not issued or subject to outstanding grants under the 2014 Plan on the effective date of the 2021 Plan, for issuance pursuant to awards granted under our 2021 Plan. The number of shares reserved for issuance under our 2021 Plan will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 5% of the aggregate number of outstanding shares of all classes of our common stock as of the immediately preceding December 31, or a lesser number as may be determined by our compensation committee, or by our board of directors acting in place of our compensation committee.
In addition, the shares set forth below will again be available for issuance pursuant to awards granted under our 2021 Plan:
•shares subject to options or SARs granted under our 2021 Plan that cease to be subject to the option or SAR for any reason other than exercise of the option or SAR;
•shares subject to awards granted under our 2021 Plan that are subsequently forfeited or repurchased by us at the original issue price;
•shares subject to awards granted under our 2021 Plan that otherwise terminate without such shares being issued;
•shares subject to awards granted under our 2021 Plan that are surrendered, canceled, or exchanged for cash or a different award (or combination thereof);
•shares issuable upon the exercise of options or subject to other awards granted under our 2012 Plan or our 2014 Plan, also referred to as the Prior Plans, that cease to be subject to such options or other awards, by forfeiture or otherwise, after the effective date of the 2021 Plan;
•shares subject to awards granted under our Prior Plans that are forfeited or repurchased by us at the original price after the effective date of the 2021 Plan; and
•shares subject to awards under our Prior Plans or our 2021 Plan that are used to pay the exercise price of an option or withheld to satisfy the tax withholding obligations related to any award.
The shares of Class B common stock underlying awards granted under the 2014 Plan that are forfeited, canceled, or otherwise returned to the 2021 Plan pursuant to the foregoing will be converted to shares of our Class A common stock before becoming available for grant and issuance under the 2021 Plan.
Administration. Our 2021 Plan will be administered by our compensation committee, or by our board of directors acting in place of our compensation committee. Subject to the terms and conditions of the 2021 Plan, the administrator will have the authority, among other things, to select the persons to whom awards may be granted, construe and interpret our 2021 Plan as well as to determine the terms of such awards and prescribe, amend and rescind the rules and regulations relating to the plan or any award granted thereunder. The 2021 Plan provides that the administrator may delegate its authority, including the authority to grant awards, to one or more executive officers to the extent permitted by applicable law, provided that awards granted to non-employee directors may only be determined by our board of directors.
Options. The 2021 Plan provides for the grant of both incentive stock options intended to qualify under Section 422 of the Code, and non-qualified stock options to purchase shares of our Class A common stock at a stated exercise price. Incentive stock options may only be granted to employees, including officers and directors who are also employees. The exercise price of stock options granted under the 2021 Plan must be at least equal to the fair market value of our Class A common stock on the date of grant. Incentive stock options granted to an individual who holds, directly or by attribution, more than 10% of the total combined voting power of all classes of our capital stock must have an exercise price of at least 110% the fair market value of our Class A common stock on the date of grant.
Options may vest based on service or achievement of performance conditions, as determined by the administrator. The administrator may provide for options to be exercised only as they vest or to be immediately exercisable, with any shares issued on exercise being subject to our right of repurchase that lapses as the shares vest. In the event of a participant’s termination of service, an option is generally exercisable, to the extent vested, for a period of 12 months in the case of termination due to the participant’s death or disability, or such longer or shorter period as the administrator may provide, but in
any event no later than the expiration date of the stock option. Stock options generally terminate upon a participant’s termination of employment for cause. The maximum term of options granted under our 2021 Plan is 10 years from the date of grant, except that the maximum permitted term of incentive stock options granted to an individual who holds, directly or by attribution, more than 10% of the total combined voting power of all classes of our capital stock is five years from the date of grant.
Restricted Stock Awards. An RSA is an offer by us to grant or sell shares of our Class A common stock subject to restrictions, which may lapse based on the satisfaction of service or achievement of performance conditions. The price, if any, of an RSA will be determined by the administrator. Holders of RSAs, unlike holders of options, will have the right to vote and any dividends or distributions paid with respect to such shares be subject to the same vesting terms and other restrictions as the RSA and will be accrued and paid when the vesting terms on such shares lapse. Unless otherwise determined by the administrator, vesting will cease on the date the participant no longer provides services to us and unvested shares may be forfeited to or repurchased by us.
Stock Appreciation Rights. A SAR provides for a payment, in cash or shares of our Class A common stock (up to a specified maximum of shares, if determined by the administrator), to the participant based upon the difference between the fair market value of our Class A common stock on the date of exercise and a predetermined exercise price, multiplied by the number of shares. The exercise price of a SAR must be at least the fair market value of a share of our Class A common stock on the date of grant. SARs may vest based on service or achievement of performance conditions. No SAR may have a term that is longer than 10 years from the date of grant.
Restricted Stock Units. RSUs represent the right to receive shares of our Class A common stock at a specified date in the future and may be subject to vesting based on service or achievement of performance conditions. RSUs may be settled in cash, shares of our common stock or a combination of both as soon as practicable following vesting or on a later date subject to the terms of the 2021 Plan. No RSU may have a term that is longer than 10 years from the date of grant.
Performance Awards. Performance awards granted pursuant to the 2021 Plan may be in the form of a cash bonus, or an award of performance shares or performance units denominated in shares of our Class A common stock that may be settled in cash, property or by issuance of those shares, subject to the satisfaction or achievement of specified performance conditions.
Stock Bonus Awards. A stock bonus award provides for payment in the form of cash, shares of our Class A common stock or a combination thereof, based on the fair market value of shares subject to such award as determined by the administrator. The awards may be granted as consideration for services already rendered, or at the discretion of the administrator, may be subject to vesting restrictions based on continued service or performance conditions.
Dividend Equivalents Rights. Dividend equivalent rights may be granted at the discretion of the administrator and represent the right to receive the value of dividends, if any, paid by us in respect of the number of shares of our Class A common stock underlying an award. Dividend equivalent rights will be subject to the same vesting or performance conditions as the underlying award and will be paid only when the underlying award becomes vested or may be deemed to have been reinvested by the company. Dividend equivalent rights, if any, will be credited to participants in the form of additional whole shares.
Change of Control. Our 2021 Plan provides that, in the event of a corporate transaction that constitutes a change of control of our company under the terms of the plan, outstanding awards will be subject to the agreement evidencing the change of control, which need not treat all outstanding awards in an identical manner, and may include one or more of the following: (1) the continuation of the outstanding awards; (2) the assumption of the outstanding awards by the surviving corporation or its parent; (3) the substitution by the surviving corporation or its parent of new options or equity awards for the outstanding awards; (4) the full or partial acceleration of exercisability or vesting or lapse of the company’s right to repurchase or other terms of forfeiture and accelerated expiration of the award; (5) outstanding awards
may be terminated for no consideration; or (6) the settlement of the full value of the outstanding awards (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity with a fair market value equal to the required amount, as determined in accordance with the 2021 Plan, which payments may be deferred until the date or dates the award would have become exercisable or vested. Notwithstanding the foregoing, upon a change in control the vesting of all awards granted to our non-employee directors will accelerate and such awards will become exercisable, to the extent applicable, and vested in full immediately prior to the consummation of the change of control.
Adjustment. In the event of a change in the number of outstanding shares of our Class A common stock without consideration by reason of a stock dividend, extraordinary dividend or distribution, recapitalization, stock split, reverse stock split, subdivision, combination, consolidation reclassification, spin-off or similar change in our capital structure, proportional adjustments will be made to (1) the number and class of shares reserved for issuance under our 2021 Plan; (2) the exercise prices, number and class of shares subject to outstanding options or SARs; and (3) the number and class of shares subject to other outstanding awards, subject to any required action by the board or our stockholders and compliance with applicable laws.
Exchange, Repricing and Buyout of Awards. The administrator may, without prior stockholder approval, (1) reduce the exercise price of outstanding options or SARs without the consent of any participant and (2) pay cash or issue new awards in exchange for the surrender and cancellation of any, or all, outstanding awards, subject to the consent of any affected participant to the extent required by the terms of the 2021 Plan.
Director Compensation Limits. No non-employee director may receive awards under our 2021 Plan with a grant date value that when combined with cash compensation received for his or her service as a director, exceeds $750,000 in a calendar year.
Clawback; Transferability. All awards will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by our board of directors or required by law during the term of service of the participant, to the extent set forth in such policy or applicable agreement. Except in limited circumstances, awards granted under our 2021 Plan may generally not be transferred in any manner other than by will or by the laws of descent and distribution.
Sub-Plans. Subject to the terms of the 2021 Plan, the plan administrator may establish a sub-plan under the 2021 Plan and/or modify the terms of awards granted to participants outside of the United States to comply with any of the laws or regulations applicable to any such jurisdiction.
Amendment and Termination. Our board of directors or compensation committee may amend our 2021 Plan at any time, subject to stockholder approval as may be required. Our 2021 Plan will terminate 10 years from the date our board of directors adopts the plan, unless it is terminated earlier by our board of directors. No termination or amendment of the 2021 Plan may adversely affect any then-outstanding award without the consent of the affected participant, except as is necessary to comply with applicable laws or as otherwise provided by the terms of the 2021 Plan.
2021 Employee Stock Purchase Plan
In April 2021, our board of directors and our stockholders approved our 2021 Employee Stock Purchase Plan, or ESPP, that will become effective upon the date the registration statement of which this prospectus forms a part becomes effective to enable eligible employees to purchase shares of our common stock with accumulated payroll deductions. Our ESPP is intended to qualify under Section 423 of the Code, provided that the administrator may adopt sub-plans under the ESPP designed to be outside of the scope of Section 423 for participants who are non-U.S. residents.
We have initially reserved 1,333,059 shares of our Class A common stock for issuance and sale under the ESPP. The number of shares reserved for issuance and sale under our ESPP will increase automatically on January 1 of each of 2022 through 2031 by the number of shares equal to 1% of the
aggregate number of outstanding shares of all classes of our common stock as of the immediately preceding December 31, or a lesser number as may be determined by our compensation committee, or by our board of directors acting in place of our compensation committee. Subject to stock splits, recapitalizations, or similar events, no more than 13,330,590 shares of our Class A common stock may be issued over the term of the ESPP.
Administration. Our ESPP will be administered by our compensation committee, or by our board of directors acting in place of our compensation committee, subject to the terms and conditions of the ESPP. Among other things, the administrator will have the authority to determine eligibility for participation in the ESPP, designate separate offerings under the plan, and construe, interpret and apply the terms of the plan.
Eligibility. Employees eligible to participate in any offering pursuant to the ESPP generally include any employee that is employed by us or certain of our designated subsidiaries at the beginning of the offering period. However, the administrator may exclude employees who have been employed for less than two years, are customarily employed for 20 hours or less per week, are customarily employed for five months or less in a calendar year or certain highly-compensated employees as determined in accordance with applicable tax laws. In addition, any employee who owns (or is deemed to own because of attribution rules) 5% or more of the total combined voting power or value of all classes of our capital stock, or the capital stock of one of our qualifying subsidiaries, or who will own such amount because of participation in the ESPP, will not be eligible to participate in the ESPP. The administrator may impose additional restrictions on eligibility from time to time.
Offerings. Under our ESPP, eligible employees will be offered the option to purchase shares of our Class A common stock at a discount over a series of offering periods through accumulated payroll deductions over the period. Each offering period may itself consist of one or more purchase periods. No offering period may be longer than 27 months. The purchase price for shares purchased under the ESPP during any given purchase period will be 85% of the lesser of the fair market value of our common stock on (1) the first trading day of the applicable offering period or (2) the last trading day of the purchase period.
No participant may purchase more than 5,000 shares of our Class A common stock during any one purchase period, and may not subscribe for more than $25,000 in fair market value of shares of our common stock (determined as of the date the offering period commences) in any calendar year in which the offering is in effect. The administrator in its discretion, may set a lower maximum number of shares which may be purchased.
Adjustments Upon Recapitalization. If the number of outstanding shares of our common stock is changed by stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in our capital structure without consideration, then the administrator will proportionately adjust the number and class of common stock that is available under the ESPP, the purchase price and number of shares any participant has elected to purchase as well as the maximum number of shares which may be purchased by participants.
Change of Control. If we experience a change of control transaction as determined under the terms of the ESPP, any offering period then in effect will be shortened and terminated on a final purchase date established by the administrator. The final purchase date will occur on or prior to the effective date of change of control transaction, and our ESPP will terminate on the closing of the change of control.
Transferability. Participants may generally not assign, transfer, pledge or otherwise dispose of payroll deductions credited to his or her account, or any rights with regard to an election to purchase shares pursuant to the ESPP other than by will or the laws of descent or distribution.
Amendment; Termination. The board of directors or compensation committee may amend, suspend or terminate the ESPP at any time without stockholder consent, except as to the extent such amendment would increase the number of shares available for issuance under the ESPP, change the class or
designation of employees eligible for participation in the plan or otherwise as required by law. If the ESPP is terminated, the administrator may elect to terminate all outstanding offering periods immediately, upon the next purchase date (which may be sooner than originally scheduled) or upon the last day of such offering period. If any offering period is terminated prior to its scheduled completion, all amounts credited to participants which have not been used to purchase shares will be returned to participants as soon as administratively practicable. Unless earlier terminated, the ESPP will terminate upon the earlier to occur of the issuance of all shares of common stock reserved for issuance under the ESPP, or the 10th anniversary of the effective date.
401(k) Plan
We sponsor a broad-based 401(k) plan intended to provide eligible U.S. employees with an opportunity to defer eligible compensation up to certain annual limits. As a tax-qualified retirement plan, contributions (if any) made by us are deductible by us when made, and contributions and earnings on those amounts are generally not taxable to the employees until withdrawn or distributed from the 401(k) plan. Our named executive officers are eligible to participate in our employee benefit plans, including our 401(k) plan, on the same basis as our other employees.
Limitations on Liability and Indemnification Matters
Our restated certificate of incorporation that will become effective shortly following the effectiveness of the registration statement of which this prospectus forms a part contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by the DGCL.
Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:
•any breach of the director’s duty of loyalty to us or our stockholders;
•any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
•unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or
•any transaction from which the director derived an improper personal benefit.
Our restated certificate of incorporation that will become effective shortly following the effectiveness of the registration statement of which this prospectus forms a part will require us to indemnify our directors and officers to the maximum extent not prohibited by the DGCL and allow us to indemnify other employees and agents as set forth in the DGCL. Subject to certain limitations, our restated bylaws also require us to advance expenses incurred by our directors and officers for the defense of any action for which indemnification is required or permitted.
We have entered, and intend to continue to enter, into separate indemnification agreements with our directors, officers, and certain of our other employees, in addition to the indemnification provided for in our restated certificate of incorporation and restated bylaws. These agreements, among other things, require us to indemnify our directors, officers, and key employees for certain expenses, including attorneys’ fees, judgments, penalties, fines, and settlement amounts actually incurred by these individuals in any action or proceeding arising out of their service to us or any of our subsidiaries or any other company or enterprise to which these individuals provide services at our request. Subject to certain limitations, our indemnification agreements also require us to advance expenses incurred by our directors, officers, and key employees for the defense of any action for which indemnification is required or permitted. From time to time we have indemnified and may in the future indemnify our directors and officers pursuant to these indemnification agreements in connection legal or regulatory proceedings.
We believe that provisions of our restated certificate of incorporation, restated bylaws, and indemnification agreements are necessary to attract and retain qualified directors, officers, and key employees. We also maintain directors’ and officers’ liability insurance.
The limitation of liability and indemnification provisions in our restated certificate of incorporation and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by these indemnification provisions.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, executive officers, or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the compensation arrangements discussed in the sections titled “Management” and “Executive Compensation,” the following is a description of each transaction since January 1, 2018 and each currently proposed transaction in which:
•we have been or are to be a participant;
•the amount involved exceeded or will exceed $120,000; and
•any of our directors, executive officers, or holders of more than 5% of our capital stock, or any immediate family member of, or person sharing the household with, any of these individuals, had or will have a direct or indirect material interest.
2018 Secondary Sale
In May 2018, we entered into an agreement with certain holders of our capital stock pursuant to which we agreed to waive certain transfer restrictions in connection with, and assist in the administration of a secondary offering of our capital stock, or the secondary offering. The secondary offering involved the following transactions:
•The Siegel Family Trust, an entity affiliated with Ian Siegel, our Chief Executive Officer and a member of our board of directors, and a beneficial holder of more than 5% of our outstanding capital stock, sold (1) 638,298 shares of our capital stock to entities affiliated with Institutional Venture Partners, or IVP, (2) 638,298 shares of our capital stock to Hadley Harbor Master Investors (Cayman) II L.P., or Wellington, (3) 79,169 shares of our capital stock to Basepoint Ventures Opportunity II, LLC, or Basepoint, (4) 32,987 shares of our capital stock to Industry Ventures Secondary VII, L.P., or Industry Ventures, and (5) 29,688 shares of our capital stock to Harvest Growth Capital II LLC, or Harvest Growth, in each case, at a purchase price of $7.05 per share, for an aggregate purchase price of approximately $10.0 million.
•Joseph Edmonds, a beneficial holder of more than 5% of our outstanding capital stock, sold (1) 1,276,596 shares of our capital stock to entities affiliated with IVP, (2) 1,276,596 shares of our capital stock to Wellington, (3) 158,338 shares of our capital stock to Basepoint, (4) 65,974 shares of our capital stock to Industry Ventures, and (5) 59,377 shares of our capital stock to Harvest Growth, in each case, at a purchase price of $7.05 per share, for an aggregate purchase price of approximately $20.0 million.
•The Redd Family Trust, a beneficial holder of more than 5% of our outstanding capital stock, sold (1) 1,276,596 shares of our capital stock to entities affiliated with IVP, (2) 1,276,596 shares of our capital stock to Wellington, (3) 158,338 shares of our capital stock to Basepoint, (4) 65,974 shares of our capital stock to Industry Ventures, and (5) 59,377 shares of our capital stock to Harvest Growth, in each case, at a purchase price of $7.05 per share, for an aggregate purchase price of approximately $20.0 million.
•Certain entities affiliated with Ward Poulos, a beneficial holder of more than 5% of our outstanding capital stock, sold (1) 1,276,596 shares of our capital stock to entities affiliated with IVP, (2) 1,276,596 shares of our capital stock to Wellington, (3) 158,338 shares of our capital stock to Basepoint, (4) 65,974 shares of our capital stock to Industry Ventures, and (5) 59,376 shares of our capital stock to Harvest Growth, in each case, at a purchase price of $7.05 per share, for an aggregate purchase price of approximately $20.0 million.
Each of IVP, together with its affiliates, and Wellington is a beneficial holder of more than 5% of our outstanding capital stock. In addition, Eric Liaw, a member of our board of directors, serves as General Partner of IVP. David Travers, our Chief Financial Officer, serves as the Managing Partner of Basepoint.
2018 Tender Offer
In August 2018, we entered into an agreement with certain holders of our capital stock pursuant to which we agreed to waive certain transfer restrictions in connection with, and assist in the administration of, a tender offer that such holders proposed to commence. In September 2018, these holders commenced a tender offer to purchase shares of our outstanding capital stock at an as-converted to Class B common stock price per share of $7.05, less transaction costs, pursuant to an offer to purchase to which we were not a party.
An aggregate of 5,150,520 shares of our capital stock were tendered pursuant to the tender offer, of which (1) entities affiliated with IVP purchased 2,317,734 shares for a total price of approximately $16.3 million, (2) Wellington purchased a total of 2,317,734 shares for a total price of approximately $16.3 million, and (3) Basepoint purchased 288,249 shares for a total price of approximately $2.0 million.
David Travers participated in the tender offer and tendered 170,000 shares for approximately $1.2 million in gross proceeds. Jeff Zwelling participated in the tender offer and tendered 1,005,429 shares for approximately $7.1 million in gross proceeds. Ryan Eberhard participated in the tender offer and tendered 87,000 shares for approximately $0.6 million in gross proceeds. Ryan Sakamoto participated in the tender offer and tendered 68,000 shares for approximately $0.5 million in gross proceeds. Timothy Yarbrough participated in the tender offer and tendered 100,000 shares for approximately $0.7 million in gross proceeds.
IVP, together with its affiliates, is a beneficial holder of more than 5% of our outstanding capital stock. In addition, Eric Liaw, a member of our board of directors, serves as General Partner of IVP. Wellington is a beneficial holder of more than 5% of our outstanding capital stock. David Travers serves as the Managing Partner of Basepoint. Each of David Travers, Jeff Zwelling, Ryan Eberhard, Ryan Sakamoto, and Timothy Yarbrough currently serve as executive officers.
Unsecured Convertible Promissory Note Financing
In June 2020, we issued unsecured convertible promissory notes, or the Convertible Notes, to certain of our existing stockholders in an aggregate principal amount of $25.0 million, at an interest rate of 2.5% per year, compounded annually; which interest rate increases by 0.5% to 3.0% per annum on the two-year anniversary of the initial closing of the note financing and further increases by an additional 0.5% on each six-month anniversary thereafter. Entities affiliated with IVP purchased $10.0 million of such convertible notes. IVP, together with its affiliates, is a beneficial holder of more than 5% of our outstanding capital stock. In addition, Eric Liaw, a member of our board of directors, serves as General Partner of IVP. Wellington purchased $15.0 million of such convertible notes. Wellington, together with its affiliates, is a beneficial holder of more than 5% of our outstanding capital stock.
The maturity date of the Convertible Notes is the earliest to occur of: (1) June 22, 2023 or (2) an event of default under the Convertible Notes. The Convertible Notes are subordinate to our existing credit facility with Silicon Valley Bank.
The Convertible Notes will convert into shares of our Class B common stock on the first day of trading of our Class A common stock on the New York Stock Exchange.
2020 Share Repurchases
In November 2020, we repurchased an aggregate of 2,987,420 shares of our Class B common stock from certain holders of more than 5% of our outstanding capital stock, at a price of $6.36 per share and a total purchase price of approximately $19.0 million, consisting of: (1) 786,163 shares of our Class B common stock from Joseph Edmonds, a beneficial holder of more than 5% of our outstanding capital stock, at a price of $6.36 per share for a total purchase price of approximately $5.0 million; (2) 628,930 shares of our Class B common stock from entities affiliated with Willis Redd, a beneficial holder of more than 5% of our outstanding capital stock, at a price of $6.36 per share for a total purchase price of
approximately $4.0 million; and (3) 1,572,327 shares of our Class B common stock from entities affiliated with Ward Poulos, a beneficial holder of more than 5% of our outstanding capital stock, at a price of $6.36 per share for a total purchase price of approximately $10.0 million. The purchase price per share for each repurchase transaction was the fair market value as determined by our board of directors at the time of the repurchase.
Omnibus Amendment to the Financing Documents
In April 2021, we entered into an omnibus amendment to certain financing documents, referred to herein as the Omnibus Amendment, with certain holders of our convertible preferred stock, including IVP, Wellington and Basepoint, each of which is a holder of more than 5% of our capital stock. The Omnibus Amendment amended (1) that certain Right of First Refusal and Co-Sale Agreement, dated as of November 7, 2017, by and among us and the other parties thereto, or the ROFR and Co-Sale Agreement, (2) that certain Voting Agreement, dated as of November 7, 2017, as amended by the First Amendment to Amended and Restated Voting Agreement dated as of April 11, 2018, by and among us and other parties thereto, collectively, or the Voting Agreement, (3) that certain Management Rights Agreement, dated as of August 12, 2014, by and between us and Institutional Venture Partners XIV, L.P., or the First IVP Letter, and (4) that certain Management Rights Agreement, dated as of November 7, 2017, by and between us and Institutional Venture Partners XV, L.P., collectively or the Second IVP Letter, and along with the ROFR and Co-Sale Agreement, the Voting Agreement and the First IVP Letter, the Financing Documents. The Omnibus Amendment amended the Financing Documents such that each Financing Document shall terminate upon the effectiveness of a registration statement filed with the SEC in connection with a direct listing to register existing shares of our capital stock for resale.
Amended and Restated Investors’ Rights Agreement
In April 2021, we entered into an amended and restated investors’ rights agreement, or the Rights Agreement, with certain holders of our convertible preferred stock, including IVP, Wellington and Basepoint, each of which is a holder of more than 5% of our capital stock. These stockholders are entitled to rights with respect to the registration of their shares following the effectiveness of the registration statement of which this prospectus forms a part. For a description of these registration rights, see the section titled “Description of Capital Stock—Registration Rights.”
CEO Letter Agreement
In April 2021, we entered into a letter agreement with Ian Siegel, our chief executive officer, which provides that, upon the earlier to occur of (1) (a) the first trading day following our initial public offering or direct listing pursuant to an effective registration statement under the Securities Act or (b) the consummation of a merger, acquisition or other business combination involving us and a publicly traded special purpose acquisition company, that results in us or our business becoming a publicly traded company or (2) a Change of Control, as defined in the 2014 Plan, Mr. Siegel will be entitled to a special bonus in an amount equal to $10.0 million, provided that Mr. Siegel is employed by us at the time of either event.
CEO Restricted Stock Unit Award
In April 2021, we issued an RSU award, or the CEO Grant, to Ian Siegel, our chief executive officer, which provides for a grant of 1,398,000 RSUs. The CEO Grant will be eligible to vest based on the achievement of certain performance milestones, as further described below, subject to a minimum period of service as described therein, while Mr. Siegel remains our chief executive officer and before the expiration date, as described therein, or earlier termination thereof pursuant to the terms of the 2014 Plan or the CEO Grant.
The performance milestones, which are further described in the CEO Grant, are as follows:
•If the liquid price per share, as defined in the CEO Grant, is at least 2.7 times the reference price, as defined in the CEO Grant, 20% of the RSUs subject to the CEO Grant will vest; provided that the minimum service period, as defined in the CEO Grant, is satisfied through the first anniversary of the grant date, as defined in the CEO Grant.
•If the liquid price per share is at least 3.3 times the reference price, 20% of the RSUs subject to the CEO Grant will vest; provided that the minimum service period is satisfied through the second anniversary of the grant date.
•If the liquid price per share is at least 4.1 times the reference price, 20% of the RSUs subject to the CEO Grant will vest; provided that the minimum service period is satisfied through the third anniversary of the grant date.
•If the liquid price per share is at least 5.1 times the reference price, 20% of the RSUs subject to the CEO Grant will vest; provided that the minimum service period is satisfied through the fourth anniversary of the grant date.
•If the liquid price per share is at least 6.3 times the reference price, 20% of the RSUs subject to the CEO Grant will vest; provided that the minimum service period is satisfied through the fifth anniversary of the grant date.
Indemnification Agreements
We have entered into, and plan on entering into, indemnification agreements with each of our current and future directors and executive officers. The indemnification agreements, our restated certificate of incorporation, and our restated bylaws, which will become effective shortly following the effectiveness of the registration statement of which this prospectus forms a part, will require us to indemnify our directors to the fullest extent not prohibited by Delaware law. Subject to certain limitations, our restated bylaws also require us to advance expenses incurred by our directors and officers. For more information regarding these arrangements, see the section titled “Executive Compensation—Limitations on Liability and Indemnification Matters.”
Review, Approval or Ratification of Transactions with Related Parties
In April 2021, we adopted written policies for the review and approval of transactions with related persons, consisting of a director conflicts and investment policy, administered by our audit and compliance committee, and our employee conflicts and investment policy, administered by our internal legal department. In addition, our practice has been to have all related party transactions reviewed and approved by a majority of the disinterested members of our board of directors, including the transactions described above. In connection with the effectiveness of the registration statement of which this prospectus forms a part, we have amended our existing policies in order to comply with applicable rules and regulations of the SEC and the listing requirements and rules of the New York Stock Exchange.
Our written related party transactions policy, to be in effect upon the effectiveness of the registration statement of which this prospectus forms a part, requires that any transaction with a related person that must be reported under applicable rules of the SEC must be reviewed and approved or ratified by our audit committee, unless the related party is, or is associated with, a member of that committee, in which event the transaction must be reviewed and approved by our nominating and corporate governance committee.
Prior to the effectiveness of the registration statement of which this prospectus forms a part, we had no formal, written policy or procedure for the review and approval of related party transactions. However, our practice has been to have all related party transactions reviewed and approved by a majority of the disinterested members of our board of directors, including the transactions described above.
PRINCIPAL AND REGISTERED STOCKHOLDERS
The following table sets forth certain information with respect to the beneficial ownership of our Class A common stock and Class B common stock as of December 31, 2020, by:
•each of our named executive officers;
•each of our directors;
•all of our directors and executive officers as a group;
•each stockholder known by us to be the beneficial owner of more than 5% of our outstanding shares of Class A common stock or Class B common stock; and
•the number of shares of Class A common stock and Class B common stock held by the registered stockholders and registered as Class A common stock for resale by means of this prospectus.
The registered stockholders include (1) our affiliates and certain other stockholders with “restricted securities” (as defined in Rule 144 under the Securities Act) who, because of their status as affiliates pursuant to Rule 144 or because they acquired their shares of Class A common stock or Class B common stock from an affiliate or from us within the prior 12 months, would be unable to sell their securities pursuant to Rule 144 until we have been subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for a period of at least 90 days, and (2) our non-executive officer service providers who acquired shares of Class A common stock or Class B common stock from us within the prior 12 months under Rule 701 and hold “restricted securities” (as defined in Rule 144 under the Securities Act). The registered stockholders may, or may not, elect to sell their shares of Class A common stock covered by this prospectus, as and to the extent they may determine. Sales of our Class A common stock, if any, will be made through brokerage transactions on the New York Stock Exchange at prevailing market prices. As such, we will have no input if and when any registered stockholder may, or may not, elect to sell their shares of common stock or the prices at which any such sales may occur. Prior to any sales of shares of Class A common stock, registered stockholders who hold Class B common stock must convert their shares of Class B common stock into shares of Class A common stock. See the section titled “Plan of Distribution.”
Our board of directors waived the liquidity event-based vesting condition effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022 which will result in the vesting and settlement of approximately 1,225,890 RSUs that will be held by our current and former employees and other service providers, calculated as of December 31, 2020. To fund the tax withholding and remittance obligations arising in connection with the RSUs that will vest and settle on that day, we expect that current and former employees would use a broker or brokers to sell a portion of such shares into the market on the first trading day. The proceeds of such sales will be remitted either to us or directly to the relevant taxing authorities, in either case, to be applied towards such tax obligations. Approximately shares of our Class A common stock are expected to be sold throughout the first trading day in order to fund such tax obligations, based on each RSU holder’s applicable tax rate.
Information concerning the registered stockholders may change from time to time and any changed information will be set forth in supplements to this prospectus, if and when necessary. Because the registered stockholders who hold Class B common stock may convert their shares of Class B common stock into Class A common stock at any time and the registered stockholders may sell all, some, or none of the shares of Class A common stock covered by this prospectus, we cannot determine the number of such shares of Class A common stock that will be sold by the registered stockholders, or the amount or percentage of shares of common stock that will be held by the registered stockholders, either as Class A common stock or Class B common stock, upon consummation of any particular sale. In addition, the registered stockholders listed in the table below may have sold, transferred, or otherwise disposed of, or
may sell, transfer, or otherwise dispose of, at any time and from time to time, shares of Class A common stock or Class B common stock in transactions exempt from the registration requirements of the Securities Act, after the date on which they provided the information set forth in the table below. The registered stockholders have not, nor have they within the past three years had, any position, office, or other material relationship with us, other than as disclosed in this prospectus. See the sections titled “Management” and “Certain Relationships and Related Party Transactions” for further information regarding the registered stockholders.
After the listing of our Class A common stock on the New York Stock Exchange, certain of the registered stockholders are entitled to registration rights with respect to their shares of Class A common stock or Class B common stock as described in the section titled “Description of Capital Stock—Registration Rights.”
We intend to use our reasonable efforts to keep the registration statement of which this prospectus forms a part effective for a period of 90 days after the effectiveness of the registration statement. As a result, we have registered shares of Class A common stock underlying shares of Class B common stock currently held by registered stockholders, as well as by our affiliates, that can vest and settle while the registration statement of which this prospectus forms a part is effective.
We are not party to any arrangement with any registered stockholder or any broker-dealer with respect to sales of the shares of Class A common stock by the registered stockholders. However, we have engaged financial advisors with respect to certain other matters relating to the listing of our Class A common stock on the New York Stock Exchange. See the section titled “Plan of Distribution.”
We have determined beneficial ownership in accordance with the rules of the SEC. Unless otherwise indicated below, to our knowledge, based on information furnished to us, the persons and entities named in the table have sole voting and investment power with respect to all shares that they beneficially own, subject to applicable community property laws. Shares of our Class A common stock and Class B common stock subject to stock options that are currently exercisable or exercisable within 60 days of December 31, 2020 or issuable pursuant to RSUs which are subject to vesting and settlement conditions expected to occur within 60 days of December 31, 2020 (assuming the waiver of the liquidity event-based vesting condition had occurred effective as of December 31, 2020) are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
We have based our calculation of the percentage ownership of our common stock prior to the effectiveness of the registration statement on no shares of our Class A common stock outstanding and 105,345,284 shares of our Class B common stock outstanding as of December 31, 2020, which includes 24,202,202 shares of our Class B common stock resulting from the conversion of 2,271,437 shares of our Series A convertible preferred stock and 6,030,706 shares of our Series B convertible preferred stock outstanding as of December 31, 2020 occurring upon the effectiveness of the registration statement of which this prospectus forms a part; and 3,055,007 shares of our Class B common stock resulting from the conversion of our Convertible Notes occurring immediately following the first day of trading of our Class A common stock on the New York Stock Exchange and assuming a conversion price of $8.2909 per share (which is the maximum price per share at which the convertible promissory notes are convertible by their terms, as further described within the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Convertible Notes with Related Parties”), as if such conversions had occurred as of December 31, 2020. This excludes 1,225,890 shares of Class B common stock related to the RSUs for which the service-based vesting condition was satisfied as of December 31, 2020 for which our board of directors has waived the liquidity event-based vesting condition effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022. Unless otherwise indicated, the address of each beneficial owner in the table below is c/o ZipRecruiter, Inc., 604 Arizona Avenue, Santa Monica, California 90401.
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Shares Beneficially Owned Prior to the Effectiveness of the Registration Statement
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Percent of Total Voting Power %
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Shares of Class A Common Stock Registered
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Class A
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Class B
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Number
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%
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Number
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%
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Named Executive Officers and Directors:
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Ian Siegel(1)
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—
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—
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%
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14,417,283
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13.7
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%
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13.7
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%
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Boris Shimanovsky(2)
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—
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—
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%
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—
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—
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%
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—
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%
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Renata Dionello(3)
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—
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—
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%
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—
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—
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%
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—
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%
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Emilie Choi(4)
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—
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—
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%
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155,833
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*
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*
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Cipora Herman(5)
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—
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—
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%
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131,883
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*
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*
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Blake Irving(6)
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—
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—
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%
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129,753
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*
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*
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Brian Lee(7)
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—
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—
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%
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224,540
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*
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*
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Eric Liaw(8)
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—
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—
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%
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22,685,739
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21.5
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%
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21.5
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%
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All executive officers and directors as a group (14 persons)(9)
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—
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%
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50,849,564
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46.2
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%
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46.2
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%
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Other 5% Stockholders:
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Entities affiliated with Institutional Venture Partners(10)
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—
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—
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%
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22,685,739
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21.5
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%
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21.5
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%
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Entities affiliated with Wellington(11)
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—
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—
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%
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11,326,612
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10.8
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%
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10.8
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%
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Entities affiliated with Ward Poulos(12)
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—
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—
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%
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11,347,481
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10.8
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%
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10.8
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%
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Entities affiliated with Willis Redd(13)
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—
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—
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%
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12,385,777
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11.8
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%
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11.8
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%
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Joseph Edmonds(14)
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—
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—
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%
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12,239,044
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11.6
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%
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11.6
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%
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Other Registered Stockholders:
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Non-Executive Officer and Non-Director Service Providers
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All Other Registered Stockholders
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______________
* Represents beneficial ownership of less than 1% of the outstanding shares of our common stock.
(1)Represents (a) 6,753,785 shares of Class B common stock held by The Whittier Trust Company of Nevada, Inc., Trustee of the IHS Trust No.1 dated June 15, 2017; (b) 310,958 shares of Class B common stock held by The Whittier Trust Company of Nevada, Inc., Trustee of the IHS Trust No. 2 dated June 15, 2017; (c) 6,753,785 shares of Class B common stock held by The Whittier Trust Company of Nevada, Inc., Trustee of the RTS Trust No. 1 dated June 15, 2017; (d) 310,958 shares of Class B common stock held by The Whittier Trust Company of Nevada, Inc., Trustee of the RTS Trust No. 2 dated June 15, 2017; (e) 105,532 shares of Class B common stock held by Michael M. Siegel and Sheila J. Siegel, Trustees of The Siegel Community Property Trust dated April 27, 1995, As Amended; (f) 55,626 shares of Class B common stock held by Robert Eugene Tortorete; (g) 42,213 shares of Class B common stock held by Matthew Siegel; (h) 42,213 shares of Class B common stock held by Robert Francis Tortorete; and (i) 42,213 shares of Class B common stock held by Ruth Tortorete. Ian Siegel has sole voting and investment power with respect to the shares held by Robert Eugene Tortorete, Matthew Siegel, Robert Francis Tortorete, and Ruth Tortorete. Michael Siegel and Sheila Siegel serve as trustees of The Siegel Community Property Trust. Ruth Tortorete has sole voting and investment power over The Siegel Community Property Trust and all entities associated with the Whittier Trust Company of Nevada, subject to the terms of the trusts.
(2)Mr. Shimovsky joined us as our Chief Technology Officer in June 2020.
(3)Ms. Dionello joined us as our Chief People Officer in September 2020.
(4)Represents 155,833 shares underlying options to purchase Class B common stock that are exercisable within 60 days of December 31, 2020.
(5)Represents 128,333 shares underlying options to purchase Class B common stock that are exercisable within 60 days of December 31, 2020 and 3,550 shares of Class B common stock subject to RSUs for which the service-based vesting condition will be satisfied within 60 days of December 31, 2020.
(6)Represents 128,333 shares underlying options to purchase Class B common stock that are exercisable within 60 days of December 31, 2020 and 1,420 shares of Class B common stock subject to RSUs for which the service-based vesting condition will be satisfied within 60 days of December 31, 2020.
(7)Represents 220,000 shares underlying options to purchase Class B common stock that are fully vested as of December 31, 2020 and 4,540 shares of Class B common stock subject to RSUs for which the service-based vesting condition will be satisfied within 60 days of December 31, 2020.
(8)Represents 22,685,739 shares of Class B common stock held by entities affiliated with Institutional Venture Partners, as reflected in footnote 10 below. Mr. Liaw, a member of our board of directors, is a general partner of Institutional Venture Partners, and therefore, may be deemed to share voting and investment power with regard to the shares held directly by Institutional Venture Partners. The address for Mr. Liaw is c/o Institutional Venture Partners, 3000 Sand Hill Road, Bldg. 2, Suite 250 Menlo Park, California 94025.
(9)Represents (a) 44,049,401 shares of Class B common stock; (b) 4,483,325 shares underlying options to purchase shares of Class B common stock that are exercisable within 60 days of December 31, 2020; and (c) 594,097 shares of Class B common stock subject to RSUs for which the service-based vesting condition will be satisfied within 60 days of December 31, 2020.
(10)Represents (a) 14,287,862 shares of Class B common stock outstanding, and 813,457 shares of our Class B common stock resulting from the conversion of a convertible note held by Institutional Venture Partners XIV, L.P., occurring immediately following the first day of trading of our Class A common stock on the New York Stock Exchange and assuming a conversion price of $8.2909 per share; (b) 37,974 shares of Class B common stock outstanding, and 2,162 shares of our Class B common stock resulting from the conversion of a convertible note held by Institutional Venture Partners XV Executive Fund, L.P., occurring immediately following the first day of trading of our Class A common stock on the New York Stock Exchange and assuming a conversion price of $8.2909 per share; and (c) 7,137,900 shares of Class B common stock outstanding, and 406,384 shares of our Class B common stock resulting from the conversion of a convertible note held by Institutional Venture Partners XV, L.P., occurring immediately following the first day of trading of our Class A common stock on the New York Stock Exchange and assuming a conversion price of $8.2909 per share. Mr. Liaw, a member of our board of directors, is a general partner of Institutional Venture Partners, and therefore, may be deemed to share voting and investment power with regard to the shares held directly by Institutional Venture Partners. Institutional Venture Management XIV, LLC is the general partner of Institutional Venture Partners XIV, L.P. Todd C. Chaffee, Norman A. Fogelsong, Stephen J. Harrick, Jules A. Maltz, J. Sanford Miller and Dennis B. Phelps are the managing directors of Institutional Venture Management XIV, LLC and share voting and dispositive power over the shares held by Institutional Venture Partners XIV, L.P. Institutional Venture Management XV, LLC is the general partner of Institutional Venture Partners XV, L.P. Todd C. Chaffee, Somesh Dash, Norman A. Fogelsong, Stephen J. Harrick, Eric Liaw, Jules A. Maltz, J. Sanford Miller and Dennis B. Phelps are the managing directors of Institutional Venture Management XV, LLC and share voting and dispositive power over the shares held by Institutional Venture Partners XV, L.P. Institutional Venture Management XV, LLC is the general partner of Institutional Venture Partners XV Executive Fund, L.P. Todd C. Chaffee, Somesh Dash, Norman A. Fogelsong, Stephen J. Harrick, Eric Liaw, Jules A. Maltz, J. Sanford Miller and Dennis B. Phelps are the managing directors of Institutional Venture Management XV, LLC and share voting and dispositive power over the shares held by Institutional Venture Partners XV Executive Fund, L.P. The address for each of these entities is 3000 Sand Hill Road, Bldg. 2, Suite 250 Menlo Park, California 94025.
(11)Represents 9,493,608 shares of Class B common stock outstanding, and 1,833,004 shares of our Class B common stock resulting from the conversion of a convertible note held by Hadley Harbor Master Investors (Cayman) II L.P., or Wellington, occurring immediately following the first day of trading of our Class A common stock on the New York Stock Exchange and assuming a conversion price of $8.2909 per share. Wellington Management Company LLP, a registered investment company under the Investment Advisors Act of 1940, as amended, is the investment adviser to Hadley Harbor Master Investors (Cayman) II L.P. Wellington Management Company LLP is an indirect subsidiary of Wellington Management Group LLP. Wellington Management Group LLP and Wellington Management Company LLP may be deemed beneficial owners (within the meaning of Rule 13d-3 promulgated under the Exchange Act) with shared investment and voting power over the shares held by Hadley Harbor Master Investors (Cayman) II L.P. The address for Wellington is 280 Congress Street Boston, Massachusetts 02210.
(12)Represents (a) 20,800 shares of Class B common stock held by Stephen Bassett; (b) 20,800 shares of Class B common stock held by Sue E. Poulos; (c) 20,800 shares of Class B common stock held by Ward E. Poulos; (d) 460,474 shares of Class B common stock held by W & S Poulos Family Trust; (e) 4,933,751 shares of Class B common stock held by The Whittier Trust Company of Nevada, Inc., Trustee of the SSP Trust No. 1 dated July 11, 2017; (f) 478,553 shares of Class B common stock held by The Whittier Trust Company of Nevada, Inc., Trustee of the SSP Trust No. 2 dated July 11, 2017; (g) 4,933,750 shares of Class B common stock held by The Whittier Trust Company of Nevada, Inc., Trustee of the WAP Trust No. 1 dated July 11, 2017; and (h) 478,553 shares of Class B common stock held by The Whittier Trust Company of Nevada, Inc., Trustee of the WAP Trust No. 2 dated July 11, 2017. Ward Poulos has sole voting power with respect to the shares held by Stephen Basset and Sue E. Poulos, and with respect to the W & S Poulos Family Trust, sole voting and investment power. The Trustee of each of the foregoing trusts is John O’Connor, an individual, who has sole voting and investment power with respect to each trust, subject to the terms of each trust.
(13)Represents (a) 10,248,351 shares of Class B common stock held by The Redd Family Trust; (b) 805,126 shares of Class B common stock held by Willis Redd 2019 Grantor Retained Annuity Trust; (c) 15,750 shares of Class B common stock held by Richard Redd; (d) 15,750 shares of Class B common stock held by Marilyn Redd; (e) 14,400 shares of Class B common stock held by Jeff Carstetter; (f) 14,400 shares of Class B common stock held by Kathy Carstetter; (g) 14,400 shares of Class B common stock held by Abigail Carstetter; (h) 14,400 shares of Class B common stock held by Scott Carstetter; (i) 14,400 shares of Class B common stock held by Janise Rodgers; (j) 14,400 shares of Class B common stock held by Dane Rodgers; (k) 14,400 shares of Class B common stock held by Ben Redd; and (l) 1,200,000 shares of Class B common stock held by the Redd Irrevocable Trust. Willis Redd has sole voting power with respect to the shares held by Richard Redd, Marilyn Redd, Jeff Carstetter, Abigail Carstetter, Scott Carstetter, Janise Rodgers, Dane Rodgers, and Ben Redd. Willis Redd and Kelly Redd serve as Trustees of The Redd Family Trust and have shared voting and investment power with respect to the trust, subject to the terms of the trust. Will Redd serves as Trustee of Willis Redd 2019 Grantor Retained Annuity Trust and has sole voting and investment power with respect to the trust, subject to the terms of the trust. Jeff Carsetter and Kathy Carstetter serve as Trustees of Redd Irrevocable Trust, dated March 4, 2019 and have shared voting and investment power with respect to the trust, subject to the terms of the trust.
(14)Represents (a) 12,082,244 shares of Class B common stock held by Joseph Edmonds; (b) 16,000 shares of Class B common stock held by David Smith; (c) 12,800 shares of Class B common stock held by Sun Nam Smith; (d) 16,000 shares of Class B common stock held by Baird Edmonds; (e) 12,800 shares of Class B common stock held by Betheda Edmonds; (f) 12,800 shares of Class B common stock held by Lynn Edmonds; (g) 12,800 shares of Class B common stock held by Kate Owen, as custodian for Alejandra Owen; (h) 16,000 shares of Class B common stock held by Nancy Edmonds; (i) 16,000 shares of Class B common stock held by Stacey Martin, as custodian for Wyatt Martin; (j) 12,800 shares of Class B common stock held by Julie
Smith; (k) 16,000 shares of Class B common stock held by Linda Smith; and (l) 12,800 shares of Class B common stock held by Mon Agranat. Joseph Edmonds has sole voting power with respect to the shares held by David Smith, Sun Nam Smith, Baird Edmonds, Betheda Edmonds, Lynn Edmonds, Kate Owen, as custodian for Alejandra Owen, Nancy Edmonds, Stacey Martin, as custodian for Wyatt Martin, Julie Smith, Linda Smith and Mon Agranat.
DESCRIPTION OF CAPITAL STOCK
The following description summarizes the most important terms of our capital stock, as they will be in effect shortly following the effectiveness of the registration statement of which this prospectus forms a part. We have adopted a restated certificate of incorporation and restated bylaws that will become effective upon the effectiveness of the registration statement of which this prospectus forms a part, and this description summarizes provisions included in these documents. Because it is only a summary, it does not contain all the information that may be important to you. For a complete description, you should refer to our restated certificate of incorporation and restated bylaws, which are included as exhibits to the registration statement of which this prospectus forms a part, and to the applicable provisions of Delaware law.
Upon the effectiveness of the registration statement of which this prospectus forms a part, our authorized capital stock will consist of 700,000,000 shares of Class A common stock, $0.00001 par value per share, 700,000,000 shares of Class B common stock, $0.00001 par value per share, and 50,000,000 shares of undesignated preferred stock, $0.00001 par value per share.
Assuming the conversion of 2,271,437 shares of our Series A convertible preferred stock and 6,030,706 shares of our Series B convertible preferred stock outstanding as of December 31, 2020 into 24,202,202 shares of our Class B common stock, which will occur upon the effectiveness of the registration statement of which this prospectus forms a part, as well as the conversion of the Convertible Notes into 3,055,007 shares of our Class B common stock, assuming a conversion price of $8.2909 per share (which is the maximum price per share at which the convertible promissory notes are convertible by their terms, as further described within the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Convertible Notes with Related Parties”), which will occur immediately following the first day of trading of our Class A common stock on the New York Stock Exchange, each as of December 31, 2020, there will be outstanding:
•no shares of our Class A common stock;
•105,345,284 shares of our Class B common stock outstanding, held by approximately 235 stockholders of record;
•19,587,667 shares of our Class B common stock issuable upon the exercise of outstanding stock options, with a weighted-average exercise price of $2.107 per share; and
•5,450,663 shares of our Class B common stock issuable upon settlement of outstanding RSUs, including 1,225,890 shares of Class B common stock related to the RSUs for which the service-based vesting condition was satisfied as of December 31, 2020 and for which our board of directors waived the liquidity event-based vesting condition effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022.
Class A Common Stock and Class B Common Stock
Dividend Rights
Subject to preferences that may apply to any shares of our convertible preferred stock outstanding at the time, the holders of our Class A common stock and Class B common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and then only at the times and in the amounts that our board of directors may determine. Shares of Class A common stock and Class B common stock will be treated equally, identically and ratably, on a per share basis, with respect to dividends that may be declared by our board of directors.
Voting Rights
Holders of our Class A common stock are entitled to one vote per share, and holders of our Class B common stock are entitled to twenty votes per share, on all matters submitted to a vote of stockholders. Following the effectiveness of the registration statement of which this prospectus forms a part, the holders of our outstanding Class B common stock will hold 100% of the voting power of our outstanding capital stock, with our directors, executive officers, and 5% stockholders and their respective affiliates holding 86.7% of the voting power in the aggregate. The holders of our Class A common stock, Class B common stock will generally vote together as a single class on all matters (including the election of directors) submitted to a vote of our stockholders, unless otherwise required by Delaware law or our restated certificate of incorporation. Delaware law could require either holders of our Class A common stock or Class B common stock to vote separately as a single class in the following circumstances:
•if we were to seek to amend our restated certificate of incorporation to increase or decrease the par value of a class of our capital stock, then that class would be required to vote separately to approve the proposed amendment; and
•if we were to seek to amend our restated certificate of incorporation in a manner that alters or changes the powers, preferences, or special rights of a class of our capital stock in a manner that affected its holders adversely, then that class would be required to vote separately to approve the proposed amendment.
Our restated certificate of incorporation will not provide for cumulative voting for the election of directors. As a result, the holders of a majority of our voting shares can elect all of the directors then standing for election. Our restated certificate of incorporation establishes a classified board of directors, to be divided in three classes with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder for their respective three-year terms.
Conversion
Each outstanding share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon any transfer, whether or not for value, which occurs after the effectiveness of the registration statement of which this prospectus forms a part, except for certain permitted transfers, including certain transfers to family members, trusts solely for the benefit of the stockholder or their family members, affiliates under common control with the stockholder, and partnerships, corporations, and other entities exclusively owned by the stockholder or their family members, in each case as fully described in our restated certificate of incorporation. Once converted into Class A common stock, the Class B common stock will not be reissued.
All the outstanding shares of our Class B common stock will convert automatically into shares of our Class A common stock upon the date that is the earlier of (1) the first business day falling on or after 180 days after the date on which Ian Siegel beneficially owns less than 4,000,000 shares of Class B common stock, (2) the date which is (a) 90 days after the date of death or disability of Mr. Siegel or (b) such later date, not to exceed a total period of 180 days after the date of death or disability of Mr. Siegel, as may be approved prior to the date that is 90 days after the date of death or disability of Mr. Siegel by a majority of our independent directors then in office, and (3) the first business day falling on or after the date on which Mr. Siegel elects to convert all then-outstanding shares of Class B common stock into shares of Class A common stock. Following such conversion, each share of Class A common stock will have one vote per share and the rights of the holders of all outstanding common stock will be identical. Once converted into Class A common stock, the Class B common stock may not be reissued.
No Preemptive or Similar Rights
Our Class A common stock and Class B common stock are not entitled to preemptive rights and are not subject to conversion (except as noted above), redemption, or sinking fund provisions.
Right to Receive Liquidation Distributions
If we become subject to a liquidation, dissolution, or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our Class A common stock and Class B common stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock.
Fully Paid and Non-Assessable
All of the outstanding shares of our Class A common stock and Class B common stock are fully paid and non-assessable.
Form
Shares of Class A common stock and Class B common stock will be uncertificated.
Preferred Stock
Each currently outstanding share of our Series A convertible preferred stock will automatically be converted into eight shares of Class B common stock and each share of our currently outstanding Series B convertible preferred stock will automatically be converted into one share of Class B common stock, in each case, upon the effectiveness of the registration statement of which this prospectus forms a part. Following such date, no shares of convertible preferred stock will be outstanding.
Shortly following the effectiveness of the registration statement of which this prospectus forms a part, our board of directors will be authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences, and rights of the shares of each series and any of its qualifications, limitations, or restrictions, in each case without further vote or action by our stockholders. Our board of directors can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring, or preventing a change in control of our company and might adversely affect the price of our Class A common stock and the voting and other rights of the holders of our Class A common stock and Class B common stock. We have no current plan to issue any shares of preferred stock.
Stock Options
As of December 31, 2020, we had outstanding options to purchase an aggregate of 19,587,667 shares of our Class B common stock, with a weighted-average exercise price of $2.107 per share, 16,881,143 of which were granted pursuant to our 2014 Plan, of which 2,491,524 were granted pursuant to our 2012 Plan, and 215,000 of which were not granted under a plan, but were granted pursuant to a performance award under the consultant’s option agreement. Since December 31, 2020 through April 23, 2021, we have granted options to purchase an aggregate of 113,745 shares of our Class B common stock, with a weighted-average exercise price of $2.00, pursuant to our 2014 Plan.
Restricted Stock Units
As of December 31, 2020, we had outstanding RSUs settleable for an aggregate of 5,450,663 shares of our Class B common stock, all of which were granted pursuant to our 2014 Plan. Since December 31, 2020 through April 23, 2021, we have granted RSUs settleable for an aggregate of 3,009,500 shares of our Class B common stock, pursuant to our 2014 Plan.
Registration Rights
Our Investors’ Rights Agreement, or IRA, provides that certain holders of our Class A common stock and Class B common stock will be entitled to rights with respect to the registration of their shares under the Securities Act, as set forth below. The registration of shares of our Class A common stock or Class B common stock by the exercise of registration rights described below would enable the holders to sell these shares without restriction under the Securities Act when the applicable registration statement was declared effective. We will pay the registration expenses (other than underwriting discounts and selling commissions) of the holders of the shares registered pursuant to the demand, piggyback, and Form S-3, registrations described below, including the reasonable fees of one counsel for the selling holders, not to exceed $25,000. In an underwritten offering, the underwriters have the right, subject to specified conditions, to limit the number of shares such holders may include.
The registration rights set forth in the IRA will expire five years following the effectiveness of the registration statement of which this prospectus forms a part, or, with respect to any particular stockholder, when such stockholder is able to sell all of its shares without registration pursuant to Rule 144 of the Securities Act during any three-month period.
Demand Registration Rights
After the effectiveness of the registration statement of which this prospectus forms a part, the holders of approximately 27,257,209 shares of our Class A common stock and Class B common stock will be entitled to certain demand registration rights. At any time beginning 180 days after the effectiveness of the registration statement of which this prospectus forms a part, the holders of at least 30% of these shares then outstanding can request that we register the offer and sale of their shares. We are obligated to effect only two such registrations. If we determine that it would be materially detrimental to us and our stockholders to effect such a demand registration, we have the right to defer such registration, not more than once in any 12-month period, for a period of up to 30 days. Additionally, we will not be required to effect a demand registration during the period beginning 60 days prior to our good faith estimate of the date of the filing of and ending on a date 180 days following the effectiveness of a registration statement relating to our common stock.
Piggyback Registration Rights
After the effectiveness of the registration statement of which this prospectus forms a part, if we propose to register the offer and sale of our common stock under the Securities Act, in connection with the public offering of such common stock, the holders of up to approximately 27,257,209 shares of our Class A common stock and Class B common stock will be entitled to certain “piggyback” registration rights allowing the holders to include their shares in such registration, subject to certain marketing and other limitations. As a result, whenever we propose to file a registration statement under the Securities Act, other than with respect to (1) a registration related solely to a company equity plan, (2) a registration relating to a corporate reorganization or transaction under Rule 145 of the Securities Act, (3) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the public offering of our common stock, or (4) a registration in which the only common stock being registered is common stock issuable upon the conversion of debt securities that are also being registered, the holders of these shares are entitled to notice of the registration and have the right, subject to certain limitations, to include their shares in the registration.
S-3 Registration Rights
After the effectiveness of the registration statement of which this prospectus forms a part, the holders of up to approximately 27,257,209 shares of our Class A common stock and Class B common stock will be entitled to certain Form S-3 registration rights. The holders of at least 15% of these shares then outstanding may make a written request that we register the offer and sale of their shares on a registration statement on Form S-3 if we are eligible to file a registration statement on Form S-3 so long as the request covers at least that number of shares with an anticipated offering price, net of underwriting discounts and commissions, of at least $2.0 million. These stockholders may make an unlimited number of requests for registration on Form S-3; however, we will not be required to effect a registration on Form S-3 if we have effected two such registrations within the 12-month period preceding the date of the request. If we determine that it would be seriously detrimental to us and our stockholders to effect such a registration, we have the right to defer such registration, not more than twice in any 12-month period, for a period of up to 90 days. Additionally, we will not be required to effect a registration on Form S-3 during the period beginning 30 days prior to our good faith estimate of the date of the filing of and ending on a date 90 days following the effectiveness of a registration statement relating to our common stock.
Anti-Takeover Provisions
The provisions of Delaware law, our restated certificate of incorporation, and our restated bylaws, as we expect they will be in effect shortly following the effectiveness of the registration statement of which this prospectus forms a part, which are summarized below, may have the effect of delaying, deferring, or discouraging another person from acquiring control of our company. They are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.
Delaware Law
We are subject to the provisions of Section 203 of the DGCL, regulating corporate takeovers. In general, DGCL Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the date on which the person became an interested stockholder unless:
•prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
•the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, (1) shares owned by persons who are directors and also officers and (2) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
•at or subsequent to the date of the transaction, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.
Generally, a “business combination” includes a merger, asset or stock sale, or other transaction or series of transactions together resulting in a financial benefit to the interested stockholder. An “interested stockholder” is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporation’s outstanding voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to
transactions our board of directors does not approve in advance. We also anticipate that DGCL Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.
Restated Certificate of Incorporation and Restated Bylaw Provisions
Our restated certificate of incorporation and our restated bylaws will include a number of provisions that could deter hostile takeovers or delay or prevent changes in control of our board of directors or management team, including the following:
•Multi-Class Stock Structure. As described above in the subsection titled “—Class A Common Stock and Class B Common Stock—Voting Rights,” our restated certificate of incorporation will provide for a multi-class common stock structure pursuant to which holders of our Class B common stock, including our current investors, executives, and employees, will have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the shares of our outstanding Class A common stock and Class B common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets.
•Board of Directors Vacancies. Our restated certificate of incorporation and restated bylaws will authorize only our board of directors to fill vacant directorships, including newly created seats. In addition, the number of directors constituting our board of directors will be permitted to be set only by a resolution adopted by a majority vote of our entire board of directors. These provisions would prevent a stockholder from increasing the size of our board of directors and then gaining control of our board of directors by filling the resulting vacancies with its own nominees. This will make it more difficult to change the composition of our board of directors and promote continuity of management.
•Classified Board. Our restated certificate of incorporation and restated bylaws will provide that our board of directors is classified into three classes of directors. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is more difficult and time consuming for stockholders to replace a majority of the directors on a classified board of directors. See the section titled “Management—Board of Directors.”
•Supermajority Requirements for Amendments of Our Restated Certificate of Incorporation and Restated Bylaws. Our restated certificate of incorporation will further provide that the affirmative vote of holders of at least two-thirds (2/3) of the voting power of all of the then outstanding shares of voting stock will be required to amend certain provisions of our restated certificate of incorporation, including provisions relating to the classified board, the size of the board, removal of directors, special meetings, actions by written consent, and designation of our preferred stock. In addition, the affirmative vote of holders of 75% of the voting power of each of our Class A common stock and Class B common stock, voting separately by class, will be required to amend the provisions of our restated certificate of incorporation relating to the terms of our Class B common stock. The affirmative vote of holders of at least two-thirds (2/3) of the voting power of all of the then outstanding shares of voting stock will be required to amend or repeal our restated bylaws, although our restated bylaws may be amended by a simple majority vote of our board of directors.
•Stockholder Action; Special Meeting of Stockholders. Our restated certificate of incorporation will provide that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders. As a result, holders of our capital stock would not be able to amend our restated bylaws or remove directors without holding a meeting of our stockholders called in accordance with our restated bylaws. Our restated bylaws will further provide that special meetings of our stockholders may be called only by a majority of our board of directors or our Chief Executive Officer, thus prohibiting a stockholder from calling a special
meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders controlling a majority of our capital stock to take any action, including the removal of directors.
•Advance Notice Requirements for Stockholder Proposals and Director Nominations. Our restated bylaws will provide advance notice procedures for 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. Our restated bylaws will also specify certain requirements regarding the form and content of a stockholder’s notice. These provisions might preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders if the proper procedures are not followed. We expect that these provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company.
•No Cumulative Voting. The DGCL provides that stockholders are not entitled to cumulate votes in the election of directors unless a corporation’s certificate of incorporation provides otherwise. Our restated certificate of incorporation will not provide for cumulative voting.
•Directors Removed Only for Cause. Our restated certificate of incorporation will provide that stockholders may remove directors only for cause.
•Issuance of Undesignated Preferred Stock. Our restated certificate of incorporation will provide that our board of directors has the authority, without further action by the stockholders, to issue up to 50,000,000 shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock would enable our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest, or other means.
•Exclusive Forum. Our restated certificate of incorporation will provide that, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the DGCL, our restated certificate of incorporation or our restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. Our restated bylaws will also provide that the federal district courts of the United States will, to the fullest extent permitted by law, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or the Federal Forum Provision. While there can be no assurance that federal or state courts will follow the holding of the Delaware Supreme Court which recently found that such provisions are facially valid under Delaware law or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court. Neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder also must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder. Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum of
their choosing for disputes with us or our directors, officers, or other employees, which may discourage lawsuits against us and our directors, officers, and other employees.
Listing
We intend to apply to list our Class A common stock on the New York Stock Exchange under the symbol “ZIP.”
Transfer Agent and Registrar
Upon the effectiveness of the registration statement of which this prospectus forms a part, the transfer agent and registrar for our Class A common stock and Class B common stock will be American Stock Transfer & Trust Company, LLC. The address of the transfer agent and registrar is 6201 15th Avenue, Brooklyn, NY 11219, and its telephone number is (718) 921-8257.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the listing of our Class A common stock on the New York Stock Exchange, there has been no public market for our shares of Class A common stock, and we cannot predict the effect, if any, that sales of shares of our Class A common stock or the availability of shares of our Class A common stock for sale will have on the price of our Class A common stock prevailing from time to time. Sales or distributions of substantial amounts of our Class A common stock, or the perception that such sales could occur, could adversely affect the public price of our Class A common stock and may make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate. We will have no input if and when any registered stockholder may, or may not, elect to sell its shares of Class A common stock or the prices at which any such sales may occur. Future sales of our Class A common stock, including shares issued upon the exercise of outstanding stock options, or the availability of such shares for sale, could adversely affect market prices prevailing from time to time.
Upon the effectiveness of the registration statement of which this prospectus forms a part, based on the number of shares of our capital stock outstanding as of December 31, 2020, we had no shares of our Class A common stock and 105,345,284 shares of our Class B common stock, assuming (1) the conversion of 2,271,437 shares of our Series A convertible preferred stock and 6,030,706 shares of our Series B convertible preferred stock outstanding as of December 31, 2020 into 24,202,202 shares of our Class B common stock and (2) the conversion of the Convertible Notes into 3,055,007 shares of our Class B common stock at a conversion price of $8.2909 per share (which is the maximum price per share at which the convertible promissory notes are convertible by their terms, as further described within the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Convertible Notes with Related Parties”), which conversion shall occur immediately following the first day of trading of our Class A common stock on the New York Stock Exchange. This excludes 1,225,890 shares of Class B common stock related to the RSUs for which the service-based vesting condition was satisfied as of December 31, 2020 for which our board of directors has waived the liquidity event-based vesting condition effective as of the earlier of the first day of trading of our Class A common stock on the New York Stock Exchange and March 15, 2022.
Shares of our Class A common stock and Class B common stock will be deemed “restricted securities” (as defined in Rule 144 under the Securities Act). Restricted securities may be sold in the public market only if they are registered or if they qualify for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which rules are summarized below. Following the effectiveness of the registration statement of which this prospectus forms a part, shares of our Class A common stock may be sold either by the registered stockholders pursuant to this prospectus or by our other existing stockholders in accordance with Rule 144 of the Securities Act.
As further described below, until we have been a reporting company for at least 90 days, only non-affiliates who have beneficially owned their shares of Class A common stock for a period of at least one year will be able to sell their shares of Class A common stock under Rule 144, which is expected to include approximately shares of Class A common stock immediately after our registration.
Rule 144
In general, under Rule 144, as currently in effect, once we have been subject to the public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell those shares without complying with the manner of sale, volume limitation, or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then that person would be entitled to sell those shares without complying with any of the requirements of Rule 144.
In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell, within any three-month period a number of shares of Class A common stock that does not exceed the greater of:
•1% of the number of shares of our Class A common stock then outstanding; or
•the average weekly trading volume of our Class A common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to that sale.
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.
Rule 701
Rule 701 generally allows a stockholder who purchased shares of our capital stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation, or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required by that rule to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701.
Registration Rights
Pursuant to the IRA, we have granted demand, Form S-3, and piggyback registration rights to certain of our stockholders to sell our Class A common stock or Class B common stock. Registration of the sale of these shares under the Securities Act would result in these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. See the section titled “Description of Capital Stock—Registration Rights” for additional information.
Registration Statements on Form S-8
In connection with the effectiveness of the registration statement of which this prospectus forms a part, we intend to file one or more registration statements on Form S-8 under the Securities Act covering all of the shares of our Class A common stock and Class B common stock subject to outstanding stock options and RSU awards, and the shares of our Class A common stock reserved for issuance under our equity incentive plans. We expect to file these registration statements as soon as permitted under the Securities Act. However, the shares registered on Form S-8 may be subject to the volume limitations and the manner of sale, notice, and public information requirements of Rule 144.
SALE PRICE HISTORY OF OUR CAPITAL STOCK
We intend to apply to list our Class A common stock on the New York Stock Exchange. Prior to the initial listing, no public market existed for our Class A common stock. However, our Class B common stock has a history of trading in private transactions. The table below shows the high and low sales prices for our Class B common stock in private transactions by our stockholders, for the indicated periods, as well as the volume weighted average price per share, based on information available to us. We have calculated the number of shares outstanding at each period end assuming (1) the conversion of 2,271,437 shares of our Series A convertible preferred stock and 6,030,706 shares of our Series B convertible preferred stock into 24,202,202 shares of our Class B common stock and (2) the conversion of the Convertible Notes into 3,055,007 shares of our Class B common stock at a conversion price of $8.2909 per share (which is the maximum price per share at which the convertible promissory notes are convertible by their terms, as further described within the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Convertible Notes with Related Parties”), which conversion shall occur immediately following the first day of trading of our Class A common stock on the New York Stock Exchange, as if such conversions had occurred as of December 31, 2020. This information may have little or no relation to broader market demand for our Class A common stock and thus the opening public price and subsequent public price of our Class A common stock on the New York Stock Exchange. As a result, you should not place undue reliance on these historical private sales prices as they may differ materially from the opening public price and subsequent public price of our Class A common stock on the New York Stock Exchange. See the section titled “Risk Factors—Risks Related to Ownership of Our Class A Common Stock—The trading price of our Class A common stock, upon listing on the New York Stock Exchange, may have little or no relationship to the historical sales prices of our capital stock in private transactions, and such private transactions have been limited.”
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Per Share Sale Price
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Number of
Shares Sold in the
Period
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Volume
Weighted
Average Price
(VWAP)
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Number of
Shares Outstanding
(Period End)
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High
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Low
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Annual
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Year Ended December 31, 2020
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$
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6.36
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$
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6.36
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2,987,420
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$
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6.36
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105,345,284
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Quarterly
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Year Ended December 31, 2020
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First Quarter
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—
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—
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—
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Second Quarter
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—
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—
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—
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Third Quarter
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—
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—
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—
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Fourth Quarter
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6.36
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6.36
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2,987,420
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6.36
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105,345,284
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Monthly
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Year Ended December 31, 2020
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June
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—
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—
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—
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July
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—
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—
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—
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August
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—
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—
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—
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September
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—
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—
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—
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October
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—
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—
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—
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November
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6.36
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6.36
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2,987,420
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6.36
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104,697,813
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December
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—
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—
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—
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR CLASS A COMMON STOCK
The following summary describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition by Non-U.S. Holders (as defined below) of our Class A common stock. This discussion does not describe all of the tax considerations that may be relevant to a particular holder's acquisition, ownership or disposition of our Class A common stock. In addition, this discussion does not discuss the potential application of the alternative minimum tax or the Medicare Contribution tax and does not deal with state or local taxes, U.S. federal gift, and estate tax laws, except to the limited extent provided below, or any non-U.S. tax consequences that may be relevant to holders of our Class A common stock in light of their particular circumstances.
Special rules different from those described below may apply to certain holders that are subject to special treatment under the Code, such as:
•insurance companies, banks, and other financial institutions;
•tax-exempt organizations (including private foundations) and tax-qualified retirement plans;
•foreign governments and international organizations;
•broker-dealers and traders in securities;
•U.S. expatriates and certain former citizens or long-term residents of the United States;
•persons required for U.S. federal income tax purposes to conform the timing of income accruals to their financial statements under Section 451(b) of the Code;
•persons that own, or are deemed to own, more than five percent of our capital stock;
•“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;
•persons that hold our Class A common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security,” or integrated investment or other risk reduction strategy;
•persons who do not hold our Class A common stock as a capital asset within the meaning of Section 1221 of the Code (generally, for investment purposes);
•persons who hold or receive our Class A common stock pursuant to the exercise of any employee stock option or otherwise as compensation;
•“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds; and
•partnerships and other pass-through entities, and investors in such pass-through entities (regardless of their places of organization or formation).
Such Non-U.S. Holders are urged to consult their own tax advisors to determine the U.S. federal, state, local, and other tax consequences that may be relevant to them.
If an entity treated as partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership, and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
Furthermore, the discussion below is based upon the provisions of the Code, and Treasury regulations, rulings, and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked, or modified, possibly with retroactive effect, and are subject to differing interpretations which could result in U.S. federal income tax consequences different from those discussed below. We have not requested a ruling from the Internal Revenue Service, or IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS will agree with such statements and conclusions or will not take a contrary position regarding the tax consequences described herein, or that any such contrary position would not be sustained by a court.
PERSONS CONSIDERING THE PURCHASE OF OUR CLASS A COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF ACQUIRING, OWNING, AND DISPOSING OF OUR CLASS A COMMON STOCK IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION, INCLUDING ANY STATE, LOCAL, OR NON-U.S. TAX CONSEQUENCES OR ANY U.S. FEDERAL NON-INCOME TAX CONSEQUENCES, AND THE POSSIBLE APPLICATION OF TAX TREATIES.
For purposes of this discussion, a “Non-U.S. Holder” is a beneficial owner of our Class A common stock that is not a U.S. Holder or a partnership for U.S. federal income tax purposes. A “U.S. Holder” means a beneficial owner of our Class A common stock that is, for U.S. federal income tax purposes:
•an individual who is a citizen or resident of the United States;
•a corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; or
•an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.
An individual non-U.S. citizen may, in some cases, be deemed to be a resident alien (as opposed to a nonresident alien) by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. Generally, for this purpose, all the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year, are counted.
Resident aliens are generally subject to U.S. federal income tax as if they were U.S. citizens. Individuals who are uncertain of their status as resident or nonresident aliens for U.S. federal income tax purposes are urged to consult their own tax advisors regarding the U.S. federal income tax consequences of the ownership or disposition of our Class A common stock.
Distributions on Our Class A Common Stock
As described in the section entitled “Dividend Policy,” we have never declared or paid cash dividends on our capital stock, and we do not anticipate paying any dividends on our capital stock in the foreseeable future. If we do make distributions on our Class A common stock, however, such distributions made to a Non-U.S. Holder of our Class A common stock will constitute dividends for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital that is applied against and reduces, but not below zero, a Non-U.S. Holder’s adjusted tax basis in our Class A common stock. Any remaining excess will be treated as gain realized on the sale or exchange of our Class A common stock as described below under “—Gain on Disposition of Our Class A Common Stock.”
Any distribution on our Class A common stock that is treated as a dividend paid to a Non-U.S. Holder that is not effectively connected with the holder’s conduct of a trade or business in the United States will
generally be subject to withholding tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and the Non-U.S. Holder’s country of residence. To obtain a reduced rate of withholding under a treaty, a Non-U.S. Holder will be required to provide the applicable withholding agent with a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, certifying the Non-U.S. Holder’s entitlement to the lower rate under that treaty. Such form must be provided prior to the payment of the applicable dividend and must be updated periodically. If a Non-U.S. Holder holds stock through a financial institution or other agent acting on the holder’s behalf, the holder will be required to provide appropriate documentation to such agent. The holder’s agent will then be required to provide certification to the applicable withholding agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. withholding tax under an income tax treaty, you should consult with your own tax advisor to determine if you are able to obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.
We (or an applicable withholding agent) are not required to withhold tax on dividends paid to a Non-U.S. Holder that are effectively connected with the holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment that the holder maintains in the United States) if a properly executed IRS Form W-8ECI, stating that the dividends are so connected, is furnished to us (or to the applicable withholding agent). In general, such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular rates applicable to United States persons. A corporate Non-U.S. Holder receiving effectively connected dividends may also be subject to an additional “branch profits tax,” which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by an applicable treaty) on the corporate Non-U.S. Holder’s effectively connected earnings and profits, subject to certain adjustments.
See also the section below titled “—Foreign Accounts” for additional withholding rules that may apply to dividends paid to certain foreign financial institutions or non-financial foreign entities.
Gain on Disposition of Our Class A Common Stock
Subject to the discussions below under the sections titled “—Backup Withholding and Information Reporting,” a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax with respect to gain realized on a sale or other disposition of our Class A common stock unless (1) the gain is effectively connected with a trade or business of the holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment that the holder maintains in the United States), (2) the Non-U.S. Holder is a nonresident alien individual and is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, or (3) we are or have been a “United States real property holding corporation” within the meaning of Code Section 897(c)(2) at any time within the shorter of the five-year period preceding such disposition or the holder’s holding period in our Class A common stock.
Non-U.S. Holders recognizing gain described in (1) above will be required to pay tax on the net gain derived from the sale at the regular U.S. federal income tax rates applicable to U.S. persons. Corporate Non-U.S. Holders described in (1) above may also be subject to the additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. An individual Non-U.S. Holder described in (2) above will be required to pay a flat 30% tax on the gain derived from the sale, which gain may be offset by certain U.S. source capital losses (even though such holder is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses. With respect to (3) above, in general, we would be a United States real property holding corporation if United States real property interests (as defined in the Code and the Treasury Regulations) comprised (by fair market value) at least half of our real property interests and assets used in a trade or business. We believe that we are not, and do not anticipate becoming, a United States real property holding corporation. However, there can be no assurance that we will not become a United States real property holding corporation in the future. Even if we are treated as a United States real property holding corporation, gain realized by a Non-U.S. Holder
on a disposition of our Class A common stock will not be subject to U.S. federal income tax so long as (1) the Non-U.S. Holder owned, directly, indirectly, and constructively, no more than five percent of our Class A common stock at all times within the shorter of (a) the five-year period preceding the disposition or (b) the holder’s holding period and (2) our Class A common stock is regularly traded on an established securities market for purposes of the relevant tax rules. There can be no assurance that our Class A common stock will qualify as regularly traded on an established securities market.
U.S. Federal Estate Tax
The estates of nonresident alien individuals generally are subject to U.S. federal estate tax on property with a U.S. situs. Because we are a U.S. corporation, our Class A common stock will be U.S. situs property and, therefore, will be included in the taxable estate of a nonresident alien decedent, unless an applicable estate tax treaty between the United States and the decedent’s country of residence provides otherwise. The terms “resident” and “nonresident” are defined differently for U.S. federal estate tax purposes than for U.S. federal income tax purposes. Investors are urged to consult their own tax advisors regarding the U.S. federal estate tax consequences of the acquisition, ownership or disposition of our Class A common stock.
Backup Withholding and Information Reporting
Generally, we or certain financial middlemen must report information to the IRS with respect to any distributions we pay on our Class A common stock, including the amount of any such distributions, the name and address of the recipient, and the amount, if any, of tax withheld, regardless of whether such distributions constitute dividends or whether any tax was actually withheld. A similar report is sent to the holder to whom any such distributions are paid. Pursuant to tax treaties or certain other agreements, the IRS may make its reports available to tax authorities in the recipient’s country of residence.
Dividends paid by us (or our paying agents) to a Non-U.S. Holder may also be subject to U.S. backup withholding. U.S. backup withholding generally will not apply to a Non-U.S. Holder who provides a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or otherwise establishes an exemption, provided that the applicable withholding agent does not have actual knowledge or reason to know the holder is a United States person.
Under current U.S. federal income tax law, U.S. information reporting and backup withholding requirements generally will apply to the proceeds of a sale or other taxable disposition of our Class A common stock effected by or through a U.S. office of any broker, U.S. or non-U.S., unless the Non-U.S. Holder provides a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable, or otherwise meets documentary evidence requirements for establishing non-United States person status or otherwise establishes an exemption. Generally, U.S. information reporting and backup withholding requirements will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. Information reporting and backup withholding requirements may, however, apply to a payment of disposition proceeds if the broker has actual knowledge, or reason to know, that the holder is, in fact, a United States person. For information reporting purposes only, certain U.S. related brokers may be treated in a manner similar to U.S. brokers.
Backup withholding is not an additional tax. If backup withholding is applied to you, you should consult with your own tax advisor to determine whether you have overpaid your U.S. federal income tax, and whether you are able to obtain a tax refund or credit of the overpaid amount.
Foreign Accounts
In addition, U.S. federal withholding taxes may apply under the Foreign Account Tax Compliance Act, or FATCA, on certain types of payments, including dividends on our Class A common stock, made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends with respect to our Class A common stock paid to a “foreign financial institution” or
a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution agrees to undertake certain diligence and reporting obligations, (2) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States-owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Under proposed U.S. Treasury Regulations, this withholding tax will not apply to the gross proceeds from any sale or disposition of our common stock. Withholding agents may, but are not required to, rely on the proposed Treasury Regulations until final Treasury Regulations are issued. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States concerning FATCA may be subject to different rules.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our Class A common stock.
EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF ACQUIRING, HOLDING, AND DISPOSING OF OUR CLASS A COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAW, AS WELL AS TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR U.S. FEDERAL NON-INCOME TAX LAWS SUCH AS ESTATE AND GIFT TAX.
PLAN OF DISTRIBUTION
The registered stockholders may sell their shares of Class A common stock covered hereby pursuant to brokerage transactions on the New York Stock Exchange, or other public exchanges or registered alternative trading venues, at prevailing market prices at any time after the shares of Class A common stock are listed for trading.
We are not party to any arrangement with any registered stockholder or any broker-dealer with respect to sales of shares of Class A common stock by the registered stockholders, except we have engaged financial advisors with respect to certain other matters relating to the registration and listing of our Class A common stock, as further described below. As such, we will have no input if and when any registered stockholder may, or may not, elect to sell their shares of Class A common stock or the prices at which any such sales may occur, and there can be no assurance that any registered stockholders will sell any or all of the shares of Class A common stock covered by this prospectus.
We will not receive any proceeds from the sale of shares of Class A common stock by the registered stockholders. We expect to recognize certain non-recurring costs as part of our transition to a publicly traded company, consisting of professional fees and other expenses. As part of our direct listing, these fees will be expensed in the period incurred and not deducted from net proceeds to the issuer as they would be in an initial public offering.
We have engaged Goldman Sachs & Co. LLC, or Goldman Sachs, and J.P. Morgan Securities LLC, or J.P. Morgan, as our financial advisors to advise and assist us with respect to certain matters relating to the registration and listing of our Class A common stock, including defining our objectives with respect to the filing of the registration statement of which this prospectus forms a part and the listing of our Class A common stock on the New York Stock Exchange, the preparation of the registration statement of which this prospectus forms a part, and the preparation of investor communications and presentations in connection with investor education, and to be available to consult with the designated market maker, or DMM, who will be setting the opening public price of our Class A common stock on the New York Stock Exchange. We also engaged Barclays Capital Inc., Evercore Group L.L.C., William Blair & Company, L.L.C., and Raymond James & Associates, Inc. as additional financial advisors to advise and assist us with respect to certain matters relating to our listing, including the preparation of the registration statement of which this prospectus forms a part and the preparation of investor communications and presentations in connection with investor education. However, our financial advisors have not been engaged to participate in investor meetings or to otherwise facilitate or coordinate price discovery activities or sales of our Class A common stock in consultation with us or on the behalf of others, except as described herein on our behalf with respect to consultation with the DMM on the opening public price in accordance with the New York Stock Exchange rules.
The DMM, acting pursuant to its obligations under the rules of the New York Stock Exchange, is responsible for facilitating an orderly opening for our Class A common stock. Based on information provided to the New York Stock Exchange, the opening public price of our Class A common stock on the New York Stock Exchange will be determined by buy and sell orders collected by the DMM from various broker-dealers and will be set based on the DMM’s determination of where buy orders can be matched with sell orders at a single price. On the New York Stock Exchange, buy orders priced equal to or higher than the opening public price and sell orders priced lower than or equal to the opening public price will participate in that opening trade. In accordance with the New York Stock Exchange direct listing rules, including Rule 104(a), because there has not been a recent sustained history of trading in our Class A common stock in a private placement market prior to listing, the New York Stock Exchange will consult with Goldman Sachs and J.P. Morgan, in order for the DMM to effect a fair and orderly opening of our Class A common stock on the New York Stock Exchange, without coordination with us, consistent with the federal securities laws in connection with our direct listing. Instead, the input that the financial advisors provide to the DMM will be based on information they become aware of from potential investors and holders of our Class A common stock (which may include certain of the registered holders) in connection with investor education regarding the process and mechanics of the direct listing, the receipt of buy and
sell orders, and other customary brokerage activities undertaken without coordination with us. Goldman Sachs and J.P. Morgan in their capacity as financial advisors to the Company, and who are available to consult with the DMM in accordance with New York Stock Exchange rules, are expected, but not obligated, to provide the DMM with our fair value per share, as determined by our most recently completed independent common stock valuation report, dated as of March 31, 2021, which was $22.85 per share of Class A common stock and Class B common stock. The common stock valuation report was prepared by an independent third party on behalf of the Company, and no financial advisor participated in the preparation of such report. The DMM, in consultation with Goldman Sachs and J.P. Morgan, is also expected to consider the information in the section titled “Sale Price History of our Capital Stock.”
Similar to how a security being offered in an underwritten initial public offering would open on the first day of trading, before the opening public price of our Class A common stock is determined, the DMM may publish one or more pre-opening indications, which provides the market with a price range of where the DMM anticipates the opening public price will be, based on the buy and sell orders entered on the New York Stock Exchange. The pre-opening indications will be available on the consolidated tape and New York Stock Exchange market data feeds. As part of this opening process, the DMM will continue to update the pre-opening indication until the buy and sell orders reach equilibrium and can be priced by offsetting one another to determine the opening public price of our Class A common stock.
In connection with the process described above, a DMM in a direct listing may have less information available to it to determine the opening public price of our Class A common stock than a DMM would in an underwritten initial public offering. For example, because we are pursuing an initial public offering via a Direct Listing, which does not involve an underwritten initial public offering, our financial advisors will not have engaged in a book building process, and as a result, they will not be able to provide input to the DMM that is based on or informed by that process. Moreover, prior to the opening trade, there will not be a price at which underwriters initially sold shares of our Class A common stock to the public as there would be in an underwritten initial public offering. This lack of an initial public offering price could impact the range of buy and sell orders collected by the New York Stock Exchange from various broker-dealers. Consequently, the public price of our Class A common stock may be more volatile than in an underwritten initial public offering and could, upon listing on the New York Stock Exchange, decline significantly and rapidly. See the section titled “Risk Factors—Risks Related to the Ownership of Our Class A Common Stock—The registration and listing of our Class A common stock differs significantly from an underwritten initial public offering” and “Risk Factors—Risks Related to Ownership of Our Class A Common Stock—The trading price of our Class A common stock, upon listing on the New York Stock Exchange, may have little or no relationship to the historical sales prices of our capital stock in private transactions, and such private transactions have been limited.”
In addition to sales made pursuant to this prospectus, the shares of Class A common stock covered by this prospectus may be sold by the registered stockholders in individually negotiated transactions exempt from the registration requirements of the Securities Act.
If any of the registered stockholders utilize a broker-dealer in the sale of the shares of Class A common stock being offered by this prospectus, such broker-dealer may receive commissions in the form of discounts, concessions, or commissions from such registered stockholder or commissions from purchasers of the shares of Class A common stock for whom they may act as agent or to whom they may sell as principal.
LEGAL MATTERS
Fenwick & West LLP, Santa Monica, California, which has acted as our counsel in connection with this listing, will pass upon the validity of the shares of our Class A common stock registered by this prospectus. Latham & Watkins LLP, Menlo Park, California, is legal advisor to the financial advisors.
EXPERTS
The financial statements as of December 31, 2019 and 2020 and for the years then ended included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our Class A common stock covered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and our Class A common stock, we refer you to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance, we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. The SEC maintains a website that contains reports, proxy statements, and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.
Immediately upon the effectiveness of the registration statement of which this prospectus forms a part, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will file periodic reports, proxy statements, and other information with the SEC. These periodic reports, proxy statements, and other information will be available for inspection and copying at the website of the SEC referred to above. We also maintain a website at www.ziprecruiter.com. Upon the effectiveness of the registration statement of which this prospectus forms a part, you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The inclusion of our website address in this prospectus is an inactive textual reference only. The information contained in or accessible through our website is not part of this prospectus or the registration statement of which this prospectus forms a part, and investors should not rely on such information in making a decision to purchase shares of our Class A common stock.
ZIPRECRUITER, INC.
INDEX TO FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of ZipRecruiter, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of ZipRecruiter, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of changes in redeemable convertible preferred stock and stockholders’ deficit, and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
March 9, 2021
We have served as the Company's auditor since 2015.
ZipRecruiter, Inc.
Consolidated Balance Sheets
(in thousands, except par value)
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December 31,
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Pro Forma as of December 31,
2020
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2019
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2020
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(unaudited)
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Assets
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Current assets
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Cash
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$
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35,529
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|
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$
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114,539
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Accounts receivable, net of allowances of $5,128 and $3,933 at December 31, 2019 and 2020, respectively
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25,575
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|
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21,036
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|
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Prepaid expenses and other assets
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7,107
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|
|
5,462
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|
|
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Deferred commissions, current portion
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2,431
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|
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3,727
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|
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Total current assets
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70,642
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|
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144,764
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Property and equipment, net
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6,090
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5,043
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Operating lease right-of-use assets
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22,275
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|
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22,500
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Internal use software, net
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12,874
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11,191
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Deferred commissions, net of current portion
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3,328
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3,712
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Intangible assets, net
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328
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—
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Goodwill
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1,724
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1,724
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|
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Deferred tax assets, net
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172
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|
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23,083
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Other assets
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291
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|
|
112
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Total assets
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$
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117,724
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$
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212,129
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Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Deficit
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Current liabilities
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Accounts payable
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$
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8,477
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$
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13,509
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Accrued expenses
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42,876
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38,842
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Deferred revenue
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18,458
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15,112
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Deferred payroll tax liability, current portion
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—
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|
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1,677
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|
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Operating lease liabilities, current portion
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5,823
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|
|
1,669
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Other liabilities
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248
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|
|
646
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|
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Long-term borrowing, current portion
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278
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|
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—
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Total current liabilities
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76,160
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|
|
71,455
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|
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Long-term borrowing, net of current portion
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9,722
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—
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Operating lease liabilities, net of current portion
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21,119
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|
|
25,130
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|
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Convertible notes and accrued interest with related parties
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—
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|
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25,371
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|
|
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Deferred payroll tax liability, net of current portion
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—
|
|
|
1,818
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|
|
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Other liabilities
|
61
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|
|
1,795
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|
|
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Total liabilities
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107,062
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|
|
125,569
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Commitments and contingencies (Note 11)
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Redeemable convertible preferred stock
|
|
|
|
|
|
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Series A, $0.00001 par value; 2,271 shares authorized, issued, and outstanding; liquidation preference of $94,500 as of December 31, 2019 and 2020; no shares issued and outstanding as of December 31, 2020, pro forma (unaudited)
|
83,375
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|
|
87,118
|
|
|
|
|
Series B, $0.00001 par value; 6,151 shares authorized, 6,031 shares issued and outstanding; liquidation preference of $50,000 as of December 31, 2019 and 2020; no shares issued and outstanding as of December 31, 2020, pro forma (unaudited)
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49,598
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|
|
49,738
|
|
|
|
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Total redeemable convertible preferred stock
|
132,973
|
|
|
136,856
|
|
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Stockholders' deficit
|
|
|
|
|
|
|
Common stock, $0.00001 par value; 137,800 shares authorized, 79,583, 78,283, and 106,767 shares issued, and 79,388, 78,088, and 106,571 shares outstanding as of December 31, 2019, 2020, and 2020 pro forma (unaudited), respectively
|
—
|
|
|
—
|
|
|
|
|
Treasury stock, 195 shares outstanding as of December 31, 2019 and 2020
|
(644)
|
|
|
(644)
|
|
|
|
|
Additional paid-in capital
|
35,339
|
|
|
21,732
|
|
|
|
|
Accumulated deficit
|
(157,006)
|
|
|
(71,384)
|
|
|
|
|
Total stockholders' (deficit) equity
|
(122,311)
|
|
|
(50,296)
|
|
|
|
|
Total liabilities, redeemable convertible preferred stock, and stockholders' (deficit) equity
|
$
|
117,724
|
|
|
$
|
212,129
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-3
ZipRecruiter, Inc.
Consolidated Statements of Operations
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Revenue
|
$
|
429,559
|
|
|
$
|
418,142
|
|
|
Cost of revenue
|
54,778
|
|
|
54,163
|
|
|
Gross profit
|
374,781
|
|
|
363,979
|
|
|
Operating expenses:
|
|
|
|
|
Sales and marketing
|
276,197
|
|
|
191,141
|
|
|
Research and development
|
65,410
|
|
|
69,408
|
|
|
General and administrative
|
39,492
|
|
|
38,998
|
|
|
Total operating expenses
|
381,099
|
|
|
299,547
|
|
|
Income (loss) from operations
|
(6,318)
|
|
|
64,432
|
|
|
Other income (expense)
|
|
|
|
|
Interest expense
|
(575)
|
|
|
(1,037)
|
|
|
Sublease income
|
1,170
|
|
|
1,051
|
|
|
Other expense, net
|
(38)
|
|
|
(109)
|
|
|
Total other income (expense), net
|
557
|
|
|
(95)
|
|
|
Income (loss) before income taxes
|
(5,761)
|
|
|
64,337
|
|
|
Income tax expense (benefit)
|
588
|
|
|
(21,711)
|
|
|
Net income (loss)
|
(6,349)
|
|
|
86,048
|
|
|
Less: Accretion of redeemable convertible preferred stock
|
(3,722)
|
|
|
(3,883)
|
|
|
Less: Undistributed earnings attributable to participating securities
|
—
|
|
|
(19,148)
|
|
|
Net income (loss) attributable to common stockholders
|
$
|
(10,071)
|
|
|
$
|
63,017
|
|
|
Net income (loss) per share:
|
|
|
|
|
Basic
|
$
|
(0.13)
|
|
|
$
|
0.79
|
|
|
Diluted
|
$
|
(0.13)
|
|
|
$
|
0.70
|
|
|
Weighted-average shares used in computing net income (loss) per share:
|
|
|
|
|
Basic
|
79,337
|
|
|
79,651
|
|
|
Diluted
|
79,337
|
|
|
94,156
|
|
|
Pro forma net income per share (unaudited):
|
|
|
|
|
Basic
|
|
|
|
|
Diluted
|
|
|
|
|
Weighted-average shares used in computing pro forma net income per share (unaudited):
|
|
|
|
|
Basic
|
|
|
106,085
|
|
|
Diluted
|
|
|
118,591
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ZipRecruiter, Inc.
Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Convertible Preferred Stock
|
|
|
|
|
|
|
|
|
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Total
Stockholders'
Deficit
|
|
|
Series A
|
|
Series B
|
|
|
Common Stock
|
|
Treasury Stock
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
|
|
Balance as of
January 1, 2019
|
2,271
|
|
|
$
|
79,793
|
|
|
6,031
|
|
|
$
|
49,458
|
|
|
|
79,650
|
|
|
$
|
—
|
|
|
(195)
|
|
|
$
|
(644)
|
|
|
$
|
31,060
|
|
|
$
|
(150,657)
|
|
|
$
|
(120,241)
|
|
|
Issuance of common stock upon exercise of options
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
784
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
945
|
|
|
—
|
|
|
945
|
|
|
Vesting of early exercised restricted stock
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66
|
|
|
—
|
|
|
66
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,990
|
|
|
—
|
|
|
6,990
|
|
|
Capital contribution
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(851)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Accretion of redeemable convertible preferred stock
|
—
|
|
|
3,582
|
|
|
—
|
|
|
140
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,722)
|
|
|
—
|
|
|
(3,722)
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,349)
|
|
|
(6,349)
|
|
|
Balance as of December 31, 2019
|
2,271
|
|
|
$
|
83,375
|
|
|
6,031
|
|
|
$
|
49,598
|
|
|
|
79,583
|
|
|
$
|
—
|
|
|
(195)
|
|
|
$
|
(644)
|
|
|
$
|
35,339
|
|
|
$
|
(157,006)
|
|
|
$
|
(122,311)
|
|
|
Cumulative-effect of accounting change adopted as of January 1, 2020
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
426
|
|
(426)
|
|
—
|
|
Issuance of common stock upon exercise of options
|
—
|
|
—
|
|
—
|
|
—
|
|
|
2,184
|
|
—
|
|
—
|
|
—
|
|
2,943
|
|
—
|
|
2,943
|
|
Repurchase and retirement of common stock
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(2,987)
|
|
—
|
|
—
|
|
—
|
|
(19,000)
|
|
—
|
|
(19,000)
|
|
Stock-based compensation
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,907
|
|
—
|
|
5,907
|
|
Capital contribution
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(497)
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
Accretion of redeemable convertible preferred stock
|
—
|
|
3,743
|
|
—
|
|
140
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(3,883)
|
|
—
|
|
(3,883)
|
|
Net income
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
86,048
|
|
86,048
|
|
Balance as of December 31, 2020
|
2,271
|
|
$
|
87,118
|
|
6,031
|
|
$
|
49,738
|
|
|
78,283
|
|
$
|
—
|
|
(195)
|
|
$
|
(644)
|
|
$
|
21,732
|
|
$
|
(71,384)
|
|
$
|
(50,296)
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ZipRecruiter, Inc.
Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Cash flows from operating activities
|
|
|
|
|
Net income (loss)
|
$
|
(6,349)
|
|
|
$
|
86,048
|
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
Stock-based compensation expense
|
6,740
|
|
|
5,752
|
|
|
Depreciation and amortization
|
8,944
|
|
|
9,949
|
|
|
Provision for bad debts
|
1,264
|
|
|
3,218
|
|
|
|
|
|
|
|
Deferred income taxes
|
(55)
|
|
|
(22,911)
|
|
|
Noncash lease expense
|
5,656
|
|
|
5,562
|
|
|
Loss on disposal of property and equipment
|
15
|
|
|
341
|
|
|
Change in operating assets and liabilities:
|
|
|
|
|
Accounts receivable
|
(9,851)
|
|
|
1,321
|
|
Prepaid expenses and other current assets
|
(783)
|
|
|
2,218
|
|
Deferred commissions, net
|
(3,908)
|
|
|
(1,680)
|
|
Other assets
|
74
|
|
|
179
|
|
Accounts payable
|
747
|
|
|
5,115
|
|
Accrued expenses and other liabilities
|
3,136
|
|
|
(1,318)
|
|
Deferred revenue
|
(1,608)
|
|
|
(3,346)
|
|
Deferred payroll taxes
|
—
|
|
|
3,495
|
|
Operating lease liabilities
|
(6,157)
|
|
|
(5,930)
|
|
Net cash provided by (used in) operating activities
|
(2,135)
|
|
|
88,013
|
|
|
Cash flows from investing activities
|
|
|
|
|
Purchases of property and equipment
|
(2,519)
|
|
|
(1,355)
|
|
Capitalized internal use software costs
|
(7,845)
|
|
|
(6,018)
|
|
Net cash used in investing activities
|
(10,364)
|
|
|
(7,373)
|
|
Cash flows from financing activities
|
|
|
|
|
Proceeds from term loan
|
—
|
|
|
10,000
|
|
|
Repayment of term loan
|
—
|
|
|
(20,000)
|
|
|
Proceeds from revolving line
|
—
|
|
|
16,500
|
|
|
Repayment of revolving line
|
—
|
|
|
(16,500)
|
|
|
Proceeds from convertible notes with related parties
|
—
|
|
|
25,000
|
|
|
Repurchase of common stock
|
—
|
|
|
(19,000)
|
|
|
Proceeds from exercise of stock options
|
945
|
|
|
2,370
|
|
|
Net cash provided by (used in) financing activities
|
945
|
|
|
(1,630)
|
|
|
Net increase (decrease) in cash
|
(11,554)
|
|
|
79,010
|
|
|
Cash
|
|
|
|
|
Beginning of year
|
47,083
|
|
|
35,529
|
|
End of year
|
$
|
35,529
|
|
|
$
|
114,539
|
|
Supplemental disclosure
|
|
|
|
|
Cash paid for taxes
|
$
|
877
|
|
|
$
|
1,003
|
|
|
Cash paid for interest
|
577
|
|
|
703
|
|
|
Supplemental disclosure of non-cash activities
|
|
|
|
|
Capitalized assets included in accounts payable and accrued expenses
|
$
|
1,405
|
|
|
$
|
1,109
|
|
|
Stock-based compensation capitalized for software development
|
250
|
|
|
155
|
|
|
In-transit proceeds from stock option exercise
|
—
|
|
|
573
|
|
|
|
|
|
|
|
Operating lease right-of-use assets obtained in exchange for new operating lease
|
—
|
|
|
5,787
|
|
|
Decrease in operating lease right-of-use asset and operating lease liability from lease modification
|
2,825
|
|
|
—
|
|
|
|
|
|
|
|
Accretion of redeemable convertible preferred stock
|
3,722
|
|
|
3,883
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
1.Description of Business
ZipRecruiter, Inc. was incorporated in the state of Delaware on June 29, 2010. Hereinafter, ZipRecruiter, Inc. and its wholly owned subsidiaries ZipRecruiter Israel Ltd., ZipRecruiter UK Ltd., and ZipRecruiter Canada Ltd. are collectively referred to as “ZipRecruiter” or the “Company.” The Company is a two-sided marketplace that enables employers and job seekers to connect with one another online to fill job opportunities.
2.Basis of Presentation, Principles of Consolidation and Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.
Foreign Currency Remeasurement
The Company’s foreign subsidiaries operate in their local currency and their functional currency is the U.S. dollar. Monetary assets and liabilities of each subsidiary, denominated in local or other foreign currency, are remeasured at the end of each reporting period using the exchange rates at that date. Non-monetary assets and liabilities and equity are remeasured at the historical exchange rates, while results of operations in the local currency or other foreign currencies are translated into U.S. dollars at the exchange rates in effect at the date of the transaction. Net foreign transaction losses for the years ended December 31, 2019 and 2020 were not material.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP 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 consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates include revenue recognition, estimates relating to the measurement of operating lease right-of-use (“ROU”) assets and operating lease liabilities, determination of the fair value of stock-based awards, valuation of common stock, collectability of accounts receivable, impairment of long-lived assets including goodwill, the carrying value and useful lives of property and equipment and internal-use software, the amortization period for deferred commission costs, and income taxes. By their nature, estimates are subject to an inherent degree of uncertainty and actual results could differ from those estimates.
The Company is subject to additional risks and uncertainties caused by the global outbreak of a novel strain of coronavirus (“COVID-19”). In March 2020, the World Health Organization declared COVID-19 a pandemic. In response to the pandemic, governments and organizations have taken preventative or protective actions, such as temporary closures of non-essential businesses and “shelter-at-home” guidelines for individuals to stop the spread of the virus, which has led to a decline in global economic activity. Consequently, there has been a reduction in hiring levels, which resulted in a decline in the Company’s revenue beginning in the second half of March 2020 from fewer contract renewals and a lower daily volume of transactions.
The extent of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. The estimated impact of the COVID-19 pandemic on the Company’s business and related events have been considered in determining the Company's estimates and
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
judgments, and the related carrying value of the Company's assets and liabilities. As of the date these consolidated financial statements are available for issuance, the Company is not aware of any specific event or circumstances that would require an update to the Company’s estimates or judgments, or a change to the carrying value of the Company’s assets or liabilities. However, these estimates and judgments may change and could result in a meaningful impact on the financial statements in future periods. Actual results could differ from those estimates and any such differences may have a material impact on the financial statements.
Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Accounting standards describe a fair value hierarchy based on the following three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value:
- Level 1 — Quoted prices in active markets for identical assets, liabilities, or funds.
- Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
- Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The carrying amounts of the Company’s financial instruments, including accounts receivable, accounts payable, and accrued expenses approximate fair value because of their short-term maturities. Using level 2 inputs, the carrying amount of long-term debt outstanding at December 31, 2019 was determined to approximate fair value due to the relationship between the interest rate on long-term debt and the borrowing rates available to the Company. The fair value of the Company’s convertible notes with related parties as of December 31, 2020 was estimated to be approximately $36.9 million and was based on the value of shares into which the notes convert. The value of the shares represents a level 3 input in the fair value hierarchy.
Certain assets, including goodwill and intangible assets are also subject to measurement at fair value on a non-recurring basis using Level 3 inputs, but only when they are deemed to be impaired. For the years ended December 31, 2019 and 2020, no impairments were identified on those assets required to be measured at fair value on a non-recurring basis.
Segments and Geographic Information
The Company operates as a single operating segment. The Company’s Chief Operating Decision Maker (“CODM”), the Chief Executive Officer (“CEO”), regularly reviews financial information presented on a consolidated basis for purposes of assessing financial performance and allocating resources. During the years ended December 31, 2019 and 2020, revenue from countries outside of the United States was not material. In addition, as of December 31, 2019 and 2020, property and equipment and operating lease ROU assets outside of the United States were not material.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
Unaudited pro forma consolidated balance sheet information and pro forma net income per share
Unaudited pro forma consolidated balance sheet
The unaudited pro forma consolidated balance sheet information as of December 31, 2020 reflects the conversion of all shares of redeemable convertible preferred stock outstanding as of December 31, 2020 into 24,202,202 shares of common stock in connection with becoming a public company. Each share of outstanding Series A and Series B redeemable convertible preferred stock converts into 8 shares and 1 share of common stock, respectively. The unaudited pro forma consolidated balance sheet also gives effect to the automatic conversion of the principal amount of the convertible notes with related parties and accrued interest outstanding as of December 31, 2020 into an aggregate of 3,055,007 shares of common stock at a conversion price of $8.2909 per share. To the extent that the volume-weighted average price of the Company’s common stock on the first day of trading following a Direct Listing is less than $11.05 per share, then the convertible notes and contractual accrued interest will convert at 75.0% of the volume weighted-average price, which would result in the issuance of additional shares of common stock upon conversion.
As described in Note 14 of the consolidated financial statements, the Company has granted restricted stock units (“RSUs”) which contain both service and liquidity event-based performance vesting conditions. The liquidity event-based performance condition is satisfied upon the earliest to occur of a qualifying event, defined as a change of control transaction, or after a set period of time following the effective date of the Company’s IPO pursuant to an effective registration statement under the Securities Act for the offer and sale of shares by the Company. A direct listing in which the Company does not sell its equity securities does not satisfy the liquidity event performance condition. On April 19, 2021, the Company’s board of directors waived the liquidity event-based performance condition such that the performance condition is satisfied on the earlier of the first day of trading of the Company’s stock on the New York Stock Exchange or March 15, 2022. Accordingly, in connection with the direct listing of the Company’s stock, RSUs that had satisfied the service condition will vest. The unaudited pro forma balance sheet information gives effect to stock-based compensation expense of $30.7 million associated with RSUs, assuming the board of directors waived the liquidity event-based performance condition and such RSUs settled as of December 31, 2020. The pro forma adjustment is reflected as an increase to additional paid-in-capital and accumulated deficit. Stock-based compensation expense is based on the estimated fair value of the RSUs as of April 19, 2021, which management has estimated to be $25.04 per share. If the liquidity event-based performance condition was waived on December 31, 2020, 1,225,890 RSUs would have vested based on satisfying the service vesting condition and these RSUs have been included in the pro forma number of common shares outstanding in the pro forma balance sheet as of December 31, 2020. Payroll tax expenses and other withholding obligations have not been included in the pro forma adjustments. The RSU holders will generally incur taxable income based upon the value of the shares on the date they are settled. The Company is required to withhold taxes on such value at applicable minimum statutory rates. The Company is unable to quantify these obligations as the withholding obligations will be based on the value of the shares on the settlement date.
The unaudited pro forma balance sheet also gives effect to the payment of a $10.0 million special bonus that will be earned by the Company’s CEO upon the first day of trading following a direct listing of the Company’s common stock. The special bonus is reflected as a decrease in cash and an increase in accumulated deficit.
The unaudited pro forma balance sheet also gives effect to approximately $ in transaction expenses related to the listing of the Company’s common stock on the New York Stock Exchange, which is reflected as a reduction in cash and an increase in accumulated deficit.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
Unaudited pro forma net income per share
The unaudited pro forma net income per share is computed to give effect to the conversion of all outstanding shares of the redeemable convertible preferred stock and the convertible notes and accrued interest into shares of common stock, using the if-converted method, as of January 1, 2020 or the date of issuance, if later. The unaudited pro forma net income per share also gives effect to stock-based compensation expense of $30.2 million, net of the blended federal and statutory tax rate of 26.0%, for RSUs that contain both service and liquidity event-based performance vesting conditions assuming the liquidity event-based performance condition was satisfied as of January 1, 2020 or the date of grant of the RSUs, if later. Stock-based compensation expense is based on the estimated fair value of the RSUs as of April 19, 2021, which management has estimated to be $25.04 per share. The unaudited pro forma net income per share also gives effect to 632,874 weighted-average shares related to RSUs which contain both service and performance vesting conditions for which the service-based condition was satisfied as of December 31, 2020 as if such issuance had occurred as of January 1, 2020, or the date of issuance, if later. Additionally, the unaudited pro forma net income per share gives effect to the $10.0 million special bonus that will be earned by the Company’s chief executive officer upon the first trading day following a direct listing and approximately $ in transaction expenses related to the listing of the Company’s common stock on the New York Stock Exchange.
Business Combinations
The results of businesses acquired in a business combination are included in the Company’s consolidated financial statements from the date of acquisition. Assets and liabilities acquired in a business combination are recorded at their estimated fair values on acquisition date. The excess of the purchase price over the fair values of identifiable assets and liabilities is recorded as goodwill.
Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates and selection of comparable companies. The Company’s estimates of fair value are based on assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
Transaction costs associated with business combinations are expensed as incurred.
Revenue Recognition
The Company recognizes revenue when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. The Company determines revenue recognition through the following five steps:
(1)Identification of the contract, or contracts, with a customer
(2)Identification of all performance obligations in the contract
(3)Determination of the transaction price
(4)Allocation of the transaction price to the performance obligations in the contract
(5)Recognition of revenue when, or as, the performance obligation or obligations are satisfied
The Company identifies enforceable revenue contracts when the terms are agreed to by the customer. Some of the Company’s contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The Company determines the standalone selling prices based on its overall pricing
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
objectives, taking into consideration market conditions and other factors, including the value of its contracts, the products sold, and the number and types of users within the Company’s contracts.
Revenue is recognized as performance obligations are satisfied and is presented net of the sales allowance.
The Company derives its revenues from the following sources:
Subscription Revenue
Subscription revenue consists of time-based job posting plans, upsells which complement or expand visibility and prominence to job posting plans, and resume database plans. Plans are priced at a flat rate based on plan size and whether the plan is for a daily, monthly, or annual term. Customer contracts are typically subject to renewal at the end of the subscription term. Contracts are only cancelable at the end of the term and are nonrefundable.
Time-based job posting plans: Job posting plans provide customers access to cloud-based software services, where they may create job postings that are posted to the Company’s marketplace in addition to numerous other job sites or partner networks with job seeker communities. Customers may also access the Company’s software to review job applications and manage job postings. The Company recognizes revenue from job posting plans ratably over the term of the agreement beginning on the date the subscription service is made available to the customer. Once a customer requests a cancellation of their subscription, the open job postings are closed at the end of the term; however, the customer may still access the software to review past job postings or prior applications received under a separate upsell subscription. Job posting plans are billed in advance of the subscription period, which typically ranges from one to twelve months, except for daily subscription plans, which are billed in arrears based on how many days the customer uses the services.
Upsell services: Additional features to complement or expand visibility to job posting plans may be purchased as an upsell service. For these services, the Company bills the customers in advance and recognizes revenue ratably over the term of the agreement beginning on the date the upsell services are made available to the customer, which typically ranges from one to twelve months.
Upsell services also include job posting enhancements which are applied to individual job postings, and provide customers with a temporary boost in the prominence of the job postings. Individual job posting enhancements may be purchased by a customer when needed, or in recurring monthly prepaid bundles to complement their job posting subscription plan, and are billed in advance of use. Typically these prepaid bundles can be used over a period ranging from one to twelve months. Revenue from job posting enhancements is recognized as the customer uses the enhancement on their job postings. Unused prepaid job enhancements are not refundable, and the Company recognizes revenue for the estimated portion of prepaid job enhancements that are expected to expire unused (“breakage”) based on estimates considering historical breakage levels for similarly sized customers and upsell plans. Breakage is recognized as revenue in proportion to the pattern of actual usage by customers.
Resume database plans: Access to the Company’s resume database is purchased on a subscription basis and allows a customer to search for and view resumes. Resume database plans are priced based on how many resumes the customer would like to view in a month and may be purchased independent of, or in addition to, a job posting plan. Resume database plans are billed in advance of the subscription period, which typically ranges from one to twelve months. Revenue is recognized ratably over the subscription period.
Performance-based Revenue
Performance-based revenue consists of customers who pay on a per click by job applicant or per job application basis for the job postings they wish to distribute through the Company’s software. Customers pay an amount per click or per application that is usually capped at a contractual maximum per
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
recruitment campaign, with campaigns typically lasting from one to three months. Customers on this pricing model do not have access to the Company’s software for subscription customers though they may purchase resume database subscription plans separately. Customers that use performance-based plans are typically companies with consistent hiring needs and sophisticated recruitment campaigns where they manage incoming applications and job postings on their own applicant tracking systems.
The Company may distribute jobs to candidates from sources who have job seeker or candidate databases. When a job seeker from a candidate source clicks on or applies to a job posting, the Company pays the candidate source a percentage of the revenue the Company earns from its customer for the click or application according to the terms of the revenue share agreement. In these arrangements, the Company has responsibility for advertising the customer’s job postings, discretion in how and where it chooses to advertise the customer’s job postings and discretion in establishing the price paid by the customer. The Company recognizes the fees it receives from its customers as revenue and the revenue share due is recorded in cost of revenue in the Consolidated Statements of Operations.
Performance-based revenue is typically billed monthly, in arrears, and revenue is recognized as job applicants click or apply to the distributed job postings, up to the contractual maximum per recruitment campaign.
Sales Allowance
The Company establishes a sales allowance to estimate refunds and credits that it may grant to customers in the future for cancellations of subscriptions and concessions to customers who are not satisfied with services received. While subscriptions are noncancelable once the contract term has commenced, the Company may at times allow customers who miss their cancellation window prior to an autorenewal to cancel their contract, and the Company may issue refunds or credits to maintain overall customer satisfaction. The sales allowance is estimated by considering historical results and trends, and is accounted for as a reduction to revenue or deferred revenue for contracts where payments are received upfront and revenue is recognized over time.
The following table summarizes the changes in the sales allowance (in thousands):
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Year Ended
December 31,
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2019
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2020
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Sales allowance, at beginning of year
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$
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3,597
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$
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8,781
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Recorded as a reduction to revenue
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31,179
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15,548
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Recorded as a reduction to deferred revenue
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10,594
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6,086
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Utilization of allowance for refunds and credits
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(36,589)
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(26,053)
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Sales allowance, at end of year
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$
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8,781
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$
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4,362
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Of the total sales allowance balance of $8.8 million and $4.4 million at December 31, 2019 and 2020, respectively, $4.4 million and $1.9 million, respectively, was presented net of accounts receivable and $4.4 million and $2.4 million, respectively, was presented within accrued expenses on the Consolidated Balance Sheets. The amount netted against accounts receivable represents estimated future credits expected to be granted to customers who had not yet paid for services as of December 31, 2019 and 2020, and the amount included in accrued expenses represents estimated refunds expected to be granted to customers who had already paid.
Cost of Revenue
Cost of revenue consists of web hosting, credit card processing fees, personnel related costs (including salaries, bonuses, benefits and stock-based compensation) for customer support employees, partner revenue share amounts, job distribution costs from performance-based revenue, and amortization of capitalized software costs associated with the Company’s marketplace technology to provide services
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
to its customers. In addition, the Company allocates a portion of overhead costs, such as rent, IT costs, supplies and depreciation and amortization to cost of revenue based on headcount.
Sales and Marketing
Sales and marketing expense consists of personnel related costs (including salaries, sales commissions, bonuses, benefits, and stock-based compensation) for the Company’s sales and marketing employees and marketing activities. Marketing activities include advertising, online lead generation, customer and industry events and candidate acquisition. The Company allocates a portion of overhead costs, such as rent, IT costs, supplies and depreciation and amortization to sales and marketing expense based on headcount. Sales and marketing costs are expensed as incurred.
Advertising costs principally represent online advertising costs, direct mailing, television, podcast and radio advertisements. Advertising expense was $150.9 million and $98.3 million for the years ended December 31, 2019 and 2020, respectively.
At times, the Company may prepay certain advertising expenses, which are deferred and subsequently recognized as expense when the advertisement is released. The Company had $2.2 million and $0.5 million of prepaid advertising costs included in prepaid expenses in the Consolidated Balance Sheets as of December 31, 2019 and 2020, respectively.
Research and Development
Research and development expense consists of personnel related costs (including salaries, bonuses, benefits and stock-based compensation) for the Company’s research and development employees, amortization of capitalized software costs associated with the development of databases that support the Company’s marketplace technology and the cost of certain third-party service providers. The Company allocates a portion of overhead costs, such as rent, IT costs, supplies and depreciation and amortization to research and development expense based on headcount. Research and development costs, other than software development costs qualifying for capitalization, are expensed as incurred.
General and Administrative
General and administrative expense consists of personnel related costs (including salaries, bonuses, benefits and stock-based compensation) for employees in the Company’s executive, finance, human resource and administrative departments and fees for third party professional services, including consulting, legal and accounting services. In addition, the Company allocates a portion of overhead costs, such as rent, IT costs, supplies and depreciation and amortization to general and administrative expense based on headcount.
Stock-Based Compensation
The Company estimates the fair value of employee stock-based compensation awards on the grant-date and recognizes the resulting fair value over the requisite service period as stock-based compensation expense. The Company recognizes forfeitures as they occur. The Company estimates the fair value of restricted stock units based on the fair value of its common stock. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The Company has elected to treat stock-based compensation awards with graded vesting schedules and time-based service conditions as a single award and recognizes stock-based compensation on a straight-line basis over the requisite service period.
For awards that contain both performance and service vesting conditions, the grant date fair value is recognized as stock-based compensation expense using a graded vesting attribution model. No expense is recognized for awards with performance conditions until the performance condition is probable of being met.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
The Black-Scholes option pricing model requires the Company to make certain assumptions including the fair value of the underlying common stock, the expected term, the expected volatility, the risk-free interest rate and the dividend yield.
Because there has been no public market for the Company’s common stock, the board of directors has determined the fair value of the common stock at the time of the grant of options by considering a number of objective and subjective factors including valuation of comparable companies, operating and financial performance and general and industry-specific economic outlook, amongst other factors. The fair value of the underlying common stock will be determined by the board of directors until such time as, and if, the Company’s common stock is listed on an established stock exchange or national market system. The fair value was determined in accordance with applicable elements of the practice aid issued by the American Institute of Certified Public Accountants titled, Valuation of Privately Held Company Equity Securities Issued as Compensation.
Given that the Company does not have sufficient exercise history to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior, the Company determines the expected term for its plain vanilla stock options using the simplified method, which is calculated as the midpoint of the stock option vesting term and the expiration date of the stock option.
Because the Company’s common stock has no publicly traded history, the Company estimates the expected volatility of the awards from the historical volatility of selected public companies that represent similar but alternative investment opportunities to an investment in the Company. Characteristics considered in identifying guideline public companies include similarity in size, lines of business, market capitalization, revenue and financial leverage. The Company determines the expected volatility assumption using the frequency of daily historical prices of comparable public company common stock for a period equal to the expected term of the option. The Company periodically assesses the comparable companies and other relevant factors used to measure expected volatility for stock option grants.
The risk-free interest rate assumption is based upon observed interest rates on the United States government securities appropriate for the expected term of the Company’s employee stock options.
The dividend yield assumption is based on the Company’s history and expectation of dividend payouts. The Company has never declared nor paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.
The determination of stock-based compensation is inherently uncertain and subjective and involves the application of valuation models and assumptions requiring the use of judgment. If the Company had made different assumptions, its stock-based compensation expense, and its results of operations for the years ended December 31, 2019 and 2020 may have been significantly different.
Income Taxes
The Company accounts for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, Income Taxes. Current tax liabilities and assets are recognized for the estimated taxes payable or refundable, respectively, on the tax returns for the current year. Deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company must also make judgments in evaluating whether deferred tax assets will be recovered from future taxable income. To the extent that it believes that recovery is not likely, the Company establishes a valuation allowance. A valuation allowance is established for deferred tax assets which the Company does not believe meet the “more likely than not” criteria. The Company’s judgments regarding future taxable income may change over time due to market conditions, tax laws, tax planning strategies or other factors. If the Company’s assumptions and estimates change in the future, the
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
valuation allowance may materially increase or decrease, resulting in an increase or decrease in income tax expense and the related impact on the Company’s reported net loss.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized. The Company recognizes interest and penalties accrued with respect to uncertain tax positions, if any, in the provision for income taxes in the Consolidated Statements of Operations.
Comprehensive Income (Loss)
For the years ended December 31, 2019 and 2020, the Company had no other comprehensive income (loss) items; therefore, comprehensive income (loss) equaled net income (loss). Accordingly, the Company has not included separate consolidated statements of comprehensive income (loss) as part of these consolidated financial statements.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and accounts receivable. The Company maintains its cash accounts with large financial institutions and at times, the cash accounts may exceed Federal Deposit Insurance Corporation (“FDIC”) limits. The Company has not experienced any losses in such accounts.
There were no customers that individually accounted for 10% or more of the Company’s outstanding accounts receivable as of December 31, 2019 and 2020. No customers represented 10% or more of revenue for the years ended December 31, 2019 and 2020.
The Company uses third parties to collect its credit card receivables and believes risk related to its credit card processors is minimal.
Accounts Receivable and Allowance for Doubtful Accounts
The Company receives payments via credit card, electronic payment or check. The Company’s accounts receivable consists of receivables from the Company’s credit card processing merchants and customers. Credit card payment is required unless the plan qualifies for credit terms which the Company may grant in the normal course of business. The Company does not normally require collateral or other security to support credit sales. Accounts receivable from customers do not bear interest, are typically due within 30 days and are recorded at the invoiced amount. The Company reduces accounts receivable by its allowance for doubtful accounts.
The Company regularly monitors collections and payments from customers and maintains an allowance for doubtful accounts for estimated losses resulting from the inability of customers to make required payments. Management estimates its allowance for doubtful accounts by considering a number of factors, including historical experience, the length of time accounts receivables are past due, customer payment histories and any specific customer collection issues identified. The Company writes off accounts receivables that have become uncollectible.
The Company’s allowance for doubtful accounts was $0.7 million and $2.0 million as of December 31, 2019 and 2020, respectively, which was recorded net within accounts receivable on the Consolidated Balance Sheets.
Property and Equipment
Property and equipment is initially recorded at cost, and depreciated using the straight-line method over the estimated useful lives of the assets, which is generally three years for computer hardware and software and five years for furniture and equipment. Leasehold improvements are amortized using the
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
straight-line method over the shorter of the lease term or estimated useful life. Costs of maintenance and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. Upon retirement or sale, the cost and related accumulated depreciation are removed from the Consolidated Balance Sheets and the resulting gain or loss is reflected in loss from operations in the Consolidated Statements of Operations.
Leases
Effective January 1, 2019, the Company adopted ASC 842, Leases, utilizing the modified retrospective transition method applied at the effective date of the standard. On the effective date, the Company recorded a cumulative adjustment to recognize operating lease liabilities of $35.9 million and corresponding operating lease ROU assets of $30.8 million on the Consolidated Balance Sheet. The operating lease ROU assets were recorded net of a $5.2 million reclassification of previously deferred or prepaid rent and lease incentives.
The Company determines at contract inception whether the arrangement is a lease based on its ability to control a physically distinct asset and determines the classification of the lease as either operating or finance. For all leases, the Company combines all components of the lease including related non-lease components as a single component. Operating leases are reflected as operating lease ROU assets and operating lease liabilities in the Consolidated Balance Sheets. The Company has also elected to utilize the short-term lease recognition exemption and, for those leases that qualify, the Company has not recognized operating lease ROU assets or operating lease liabilities. The Company does not have any finance leases.
Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term, and operating lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate in determining the present value of lease payments. The Company estimates the incremental borrowing rate to reflect the profile of collateralized borrowing over the expected term of the leases based on the information available at the later of the initial date of adoption, or the lease commencement date.
The operating lease ROU asset also includes any lease payments made prior to lease commencement date and excludes lease incentives. Lease terms may include options to extend or terminate the lease when the Company is reasonably certain that it will exercise the option. Lease expense is recognized on a straight-line basis over the lease term in the Consolidated Statements of Operations. Lease incentives are recognized as a reduction to the lease expense on a straight-line basis over the underlying lease term. Certain lease agreements may contain variable costs such as utilities and common area maintenance. Variable lease costs are expensed when the cost is incurred.
Internal-Use Software
The Company capitalizes eligible costs associated with the development of its internal-use software in accordance with ASC 350-40, Internal-Use Software. Accordingly, the Company capitalizes costs incurred during the development phase including: (1) external direct costs of materials and services consumed in developing or obtaining the software, and (2) payroll and payroll-related costs for employees who are directly associated with the project. The Company expenses all costs as incurred that relate to the planning and post implementation phases of its software development cycle and costs associated with minor enhancements and maintenance. Capitalized costs are amortized using the straight-line method over three years. Amortization of internal-use software costs associated with the Company’s marketplace technology to provide services to its customers is recorded in cost of revenue. Amortization of internal-use software costs associated with internal databases, candidate insights, and reporting are recorded in research and development and general and administrative expenses in the Consolidated
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
Statements of Operations. Amortization of these costs are allocated in the Consolidated Statements of Operations based on the nature of the underlying project.
Intangible Assets
Intangible assets are amortized over their estimated useful life using the straight-line method which approximates the pattern in which the economic benefits are consumed.
Impairment of Long-Lived Assets
The Company periodically evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance of long-lived assets may not be recoverable in accordance with ASC 360, Property, Plant and Equipment, Accounting for the Impairment or Disposal of Long-Lived Assets. In determining whether an asset is impaired, assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets. When factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted future cash flows over the remaining life of the long-lived assets in measuring whether they are recoverable. If the estimated undiscounted future cash flows are less than the carrying value of the asset, a loss is recorded as the excess of the asset’s carrying value over its fair value. There were no impairment charges related to long-lived assets during the years ended December 31, 2019 and 2020, respectively.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of net assets acquired and liabilities assumed in a business combination. The Company tests for impairment at least annually, in the fourth quarter, or whenever events or changes in circumstances indicate that goodwill might be impaired. The Company has one reporting unit for impairment purposes.
In testing for goodwill impairment, the Company has an option to first make an assessment of qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, it is determined that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then additional impairment testing is not required. However, if concluded otherwise, the quantitative impairment test is performed.
The quantitative test compares the estimated fair value of a reporting unit to its carrying amount, including goodwill. If the estimated fair value exceeds its carrying amount, goodwill is considered not to be impaired. However, if the carrying amount exceeds the fair value of the reporting unit, then an impairment charge is recorded in an amount equal to the excess but limited to the total amount of goodwill. There were no impairment charges in the periods presented.
Recent Accounting Pronouncements
Accounting Pronouncements Not Yet Adopted
As an “emerging growth company”, the Jumpstart Our Business Startups Act, allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use the adoption dates applicable to private companies. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies.
In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the existing model for measuring the allowance for credit losses for financial assets measured at
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
amortized cost (including accounts receivable) to a model that is based on the expected losses rather than incurred losses. Under the new credit loss model, lifetime expected credit losses on such financial assets are measured and recognized at each reporting date based on historical, current, and forecast information. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, and in April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. These ASUs provide supplemental guidance and clarification to ASU 2016-13 and must be adopted concurrently with the adoption of ASU 2016-13, cumulatively referred to as “Topic 326.” For public business entities that are Securities and Exchange Commission (“SEC”) filers excluding smaller reporting companies, this guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. For all other entities, this guidance is effective for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects of the adoption of this update on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, which aligns the accounting for implementation costs incurred in a hosting arrangement that is a service contract with the accounting for implementation costs incurred to develop or obtain internal-use software under ASC 350-40, in order to determine which costs to capitalize and recognize as an asset and which costs to expense. For public business entities, this guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. For all other entities, this guidance is effective for annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021. Early adoption of the guidance is permitted, including adoption in any interim period for all entities, and can be applied either prospectively to implementation costs incurred after the date of adoption or retrospectively to all arrangements. The Company is currently evaluating the impact of the adoption of this update on its consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which enhances and simplifies various aspects of income tax accounting guidance. For public business entities, this guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. For all other entities, this guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted, including adoption in an interim period. An entity that elects to early adopt ASU 2019-12 in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. The Company is currently evaluating the effects of the adoption of this update on its consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for certain convertible instruments, amends the guidance on derivative scope exceptions for contracts in an entity’s own equity, and modifies the guidance on diluted earnings per share calculations as a result of these changes. For public business entities that are SEC filers excluding smaller reporting companies, this guidance is effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years. For all other entities, this guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects of the adoption of this update on its consolidated financial statements.
Recently Adopted Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350), which allows companies an alternative accounting treatment for subsequently measuring goodwill. Under ASU 2017-04, the goodwill impairment test is simplified such that the impairment loss to goodwill is measured as the difference between the carrying amount of the reporting unit over its fair value, thereby
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
eliminating Step 2 from the current impairment test, which required comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of the goodwill. The Company early adopted ASU 2017-04 on January 1, 2020 and applied the changes prospectively. The adoption did not have a material impact on the Company’s financial statements.
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under ASU 2018-07, most of the guidance on such payments to nonemployees is aligned with requirements for share-based payments granted to employees. The Company adopted ASU 2018-07 on January 1, 2020. The adoption did not have a material impact on the Company’s consolidated financial statements.
3.Net Income (Loss) Per Share
Basic and diluted net income (loss) per share is presented in conformity with the two-class method required for participating securities. The two-class method requires net income after deducting the accretion of redeemable convertible preferred stock be allocated between common stock and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. In periods of net income, net income after deducting the accretion of redeemable convertible preferred stock is attributed to common stockholders and participating securities based on their participation rights. Net losses after deducting the accretion of redeemable convertible preferred stock are not allocated to the participating securities as the participating securities do not have a contractual obligation to share in any losses. The Company’s redeemable convertible preferred stock are participating securities as the holders of the redeemable convertible preferred stock are entitled to participate in dividends with the common stockholders. Basic net income (loss) per share is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period.
The following table presents the Company’s basic net income (loss) per share (in thousands, except for per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Net income (loss) per share, basic:
|
|
|
|
|
Net income (loss)
|
$
|
(6,349)
|
|
|
$
|
86,048
|
|
|
Less: Accretion of redeemable convertible preferred stock
|
(3,722)
|
|
|
(3,883)
|
|
|
Less: Undistributed earnings attributable to participating securities
|
—
|
|
|
(19,148)
|
|
|
Net income (loss) attributable to common stockholders
|
(10,071)
|
|
|
63,017
|
|
|
Weighted-average shares
|
79,337
|
|
|
79,651
|
|
|
Net income (loss) per share - basic
|
$
|
(0.13)
|
|
|
$
|
0.79
|
|
The Company computes diluted net income per share under the two-class method where income is reallocated between common stock, potential common stock and participating securities. Potential common stock includes stock options and restricted stock units computed using the treasury stock method and the conversion of the convertible notes and accrued interest using the if converted method.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
The following table presents the Company’s diluted net income (loss) per share (in thousands, except for per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31
|
|
|
2019
|
|
2020
|
|
Net income (loss) per share, diluted:
|
|
|
|
|
Numerator:
|
|
|
|
|
Net income (loss) attributable to common stockholders
|
$
|
(10,071)
|
|
|
$
|
63,017
|
|
|
Add:
|
|
|
|
|
Reallocation of net income attributable to participating securities
|
—
|
|
|
2,346
|
|
|
Interest on convertible notes with related parties, net of tax
|
—
|
|
|
275
|
|
|
Net income (loss) attributable to common stockholders, diluted
|
$
|
(10,071)
|
|
|
$
|
65,638
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
Weighted-average shares, basic
|
79,337
|
|
|
79,651
|
|
|
Effect of dilutive securities:
|
|
|
|
|
Options to purchase common stock
|
—
|
|
|
12,506
|
|
|
Convertible notes with related parties
|
—
|
|
|
1,999
|
|
|
Weighted-average shares, diluted
|
79,337
|
|
|
94,156
|
|
|
Net income (loss) per share - diluted
|
$
|
(0.13)
|
|
|
$
|
0.70
|
|
The following table presents the weighted-average number of potentially dilutive common stock equivalents excluded from the computation of diluted net income (loss) per share for the years ended December 31, 2019 and 2020 because their inclusion would have been antidilutive (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Options to purchase common stock
|
22,667
|
|
3,747
|
|
Unvested restricted stock units
|
1,453
|
|
4,148
|
|
Redeemable convertible preferred stock, if converted basis
|
24,202
|
|
—
|
|
Total shares excluded from diluted net income (loss) per share
|
48,322
|
|
7,895
|
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
Unaudited pro forma net income per share
The following table sets forth the computation of unaudited pro forma basic and diluted net income per share for the year ended December 31, 2020 (in thousands, except for per share data):
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Pro forma net income per share:
|
2020
|
|
Numerator:
|
|
|
Net income
|
$
|
86,048
|
|
|
Add: Interest on convertible notes with related parties, net of tax
|
275
|
|
|
Deduct: Stock-based compensation related to assumed vesting of RSUs, net of tax
|
(30,187)
|
|
|
Deduct: Special bonus
|
(10,000)
|
|
|
Deduct: Transaction costs related to the listing of the Company’s common stock
|
|
|
Pro forma net income, basic and diluted
|
|
|
|
|
|
Denominator:
|
|
|
Weighted-average shares, basic
|
79,651
|
|
Adjustment for assumed conversion of redeemable convertible preferred stock to common stock
|
24,202
|
|
Adjustment for assumed vesting of the RSUs
|
633
|
|
Adjustment for assumed conversion of convertible notes to common stock
|
1,599
|
|
Weighted-average shares used in computing pro forma net income per share, basic
|
106,085
|
|
Effects of dilutive securities:
|
|
|
Options to purchase common stock
|
12,506
|
|
Weighted-average shares used in computing pro forma net income per share, diluted
|
118,591
|
|
|
Pro forma net income per share, basic
|
|
|
Pro forma net income per share, diluted
|
|
4.Revenue Information
Contract Balances
Contract liabilities are recorded as deferred revenue when customer payments are received in advance of the Company meeting all the revenue recognition criteria under ASC 606. Deferred revenue includes prepaid subscription and performance-based revenue. Generally, the remaining performance obligations will be satisfied within one to twelve months after prepayment. The Company recognized $20.0 million and $18.5 million of revenue during the years ended December 31, 2019 and 2020, respectively, that were included in the deferred revenue balance as of December 31, 2018 and 2019, respectively.
As of December 31, 2019 and 2020, the Company had no contract assets.
Remaining Performance Obligations
The Company has omitted the disclosure of information about the transaction price allocated to remaining performance obligations and when revenue will be recognized as the vast majority of the Company’s contracts have a duration of one year or less. As of December 31, 2019 and 2020, the Company’s contracts with customers that have terms of more than one year are not material.
The Company did not recognize revenue for the years ended December 31, 2019 and 2020 from performance obligations satisfied in previous periods.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
Deferred Commissions
ASC 606 requires the deferral of the recognition of incremental costs to obtain a contract, which the Company has identified as certain of its sales commissions paid to internal sales representatives for the sale of the Company’s services. The Company amortizes deferred commissions over the expected period of benefit unless the amortization period is less than one year, in which case, the Company has elected to apply the practical expedient to expense those costs as incurred. The estimated period of benefit includes anticipated customer renewals. If the Company pays commissions on contract renewals that are commensurate with the initial commission, the amortization period is the initial contract term. If the renewal commission is not commensurate with the initial commission, commissions are deferred and subsequently amortized on a straight-line basis over the expected customer life, which has been estimated to be three years based on an analysis of historical data and other qualitative factors, such as new product offerings, the seasonality of certain customer relationships and estimated useful life of the Company’s marketplace technology. Amortization expense is included within sales and marketing expense in the Consolidated Statements of Operations.
For the years ended December 31, 2019 and 2020, amortization expense for deferred sales commissions was $1.3 million and $3.1 million, respectively. There was no impairment to capitalized deferred commissions in the periods presented.
Disaggregation of Revenue
The Company disaggregates revenue into two streams: subscription revenue and performance-based revenue. The following table presents the Company’s revenue streams for 2019 and 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Subscription
|
$
|
373,863
|
|
|
$
|
346,781
|
|
|
Performance-based
|
55,696
|
|
|
71,361
|
|
|
Total revenue
|
$
|
429,559
|
|
|
$
|
418,142
|
|
5.Property and Equipment, net
Property and equipment consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2019
|
|
2020
|
|
Computer, equipment and software
|
$
|
5,461
|
|
|
$
|
5,533
|
|
|
Furniture and fixtures
|
1,894
|
|
|
1,901
|
|
|
Leasehold improvements
|
4,765
|
|
|
4,495
|
|
|
Construction in progress
|
—
|
|
|
743
|
|
|
|
12,120
|
|
|
12,672
|
|
|
Less: Accumulated depreciation
|
(6,030)
|
|
|
(7,629)
|
|
|
Total property and equipment, net
|
$
|
6,090
|
|
|
$
|
5,043
|
|
Depreciation expense for the years ended December 31, 2019 and 2020 was $2.4 million and $2.2 million, respectively.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
6.Internal-Use Software, net
Internal-use software consists of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2019
|
|
2020
|
|
Internal-use software
|
$
|
22,914
|
|
|
$
|
25,437
|
|
|
Less: Accumulated amortization
|
(10,040)
|
|
|
(14,246)
|
|
|
Total internal-use software, net
|
$
|
12,874
|
|
|
$
|
11,191
|
|
Amortization expense for internal-use software for the years ended December 31, 2019 and 2020 was $5.9 million and $7.4 million, respectively.
Future amortization expense of the Company’s internal-use software as of December 31, 2020 is as follows for the years ending December 31 (in thousands):
|
|
|
|
|
|
|
|
2021
|
$
|
5,917
|
|
|
2022
|
3,736
|
|
|
2023
|
1,358
|
|
|
2024
|
180
|
|
|
Total future amortization expense
|
$
|
11,191
|
|
7.Intangible Assets
The Company has finite-lived intangible assets, which are amortized over their estimated useful lives on a straight-line basis. The following table presents the gross carrying amount and the accumulated amortization of finite-lived intangible assets (in thousands, except for useful life):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Useful Life
(in years)
|
|
December 31,
|
|
|
|
2019
|
|
2020
|
|
Acquired developed technology
|
3
|
|
$
|
1,876
|
|
|
$
|
1,876
|
|
|
Brand assets
|
3
|
|
70
|
|
|
70
|
|
|
|
|
|
1,946
|
|
|
1,946
|
|
|
Less: Accumulated amortization
|
|
|
(1,618)
|
|
|
(1,946)
|
|
|
Total intangibles, net
|
|
|
$
|
328
|
|
|
$
|
—
|
|
Amortization expense for finite-lived intangible assets was $0.6 million and $0.3 million for the years ended December 31, 2019 and 2020, respectively.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
8.Accrued Expenses
Accrued expenses consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2019
|
|
2020
|
|
Accrued marketing
|
$
|
8,222
|
|
|
$
|
6,006
|
|
|
Accrued bonuses
|
9,325
|
|
|
11,202
|
|
|
Other accrued expenses
|
7,389
|
|
|
7,311
|
|
|
Accrued partner expenses
|
5,675
|
|
|
5,554
|
|
|
Accrued 401(k) contributions
|
3,370
|
|
|
2,414
|
|
|
Accrued commissions
|
3,884
|
|
|
3,332
|
|
|
Accrued indirect taxes
|
653
|
|
|
600
|
|
|
Accrued refunds and customer liabilities
|
4,358
|
|
|
2,423
|
|
|
Total accrued expenses
|
$
|
42,876
|
|
|
$
|
38,842
|
|
9.Term Loan and Revolving Credit Facility
On March 21, 2017, the Company entered into a loan and security agreement (“Agreement”). The Agreement provided the Company with a credit facility (“Revolving Line”) providing for borrowings up to $12.5 million and allowed the Company term loan advances (“Term Loan”) up to $10.0 million. On November 30, 2018, the Company entered an amendment (the “Third Amendment to the Loan and Security Agreement”) to the Agreement whereby the Revolving Line limit was increased from $12.5 million to $20.0 million and the maturity date was extended to November 28, 2021. The Third Amendment to the Loan and Security Agreement also extended the Term Loan maturity date to November 1, 2022 and required the Company to draw down the full Term Loan limit of $10.0 million on November 30, 2018. Under the Third Amendment to the Loan and Security Agreement, the Revolving Line bore interest at a floating per annum rate of 0.4% above the bank’s Prime Rate and interest on the Term Loan was adjusted to a per annum rate equal to 0.4% above the bank’s Prime Rate as of the funding date.
On November 21, 2019, the Company entered a subsequent amendment (the “Amended and Restated Loan and Security Agreement”) to the Agreement whereby the Revolving Line limit was increased from $20.0 million to $25.0 million and the maturity date was extended to November 21, 2022. The Amended and Restated Loan and Security Agreement also increased the amount available under the Term Loan to $20.0 million and extended the maturity date to November 1, 2023. Additionally, the Company was subject to interest equal to 0.5% per annum of the average unused portion of the Term Loan. Both the Revolving Line and the Term Loan are collateralized by the security interests in substantially all of the Company’s assets.
In June 2020, the Company paid off and extinguished its Term Loan of $20.0 million.
On September 2, 2020 the Company executed an amendment to the Amended and Restated Loan and Security Agreement (the “Second Amended and Restated Loan and Security Agreement”), which increased the amount available under the Revolving Line from $25.0 million to $35.0 million, changed the maturity date of the Revolving Line to September 2, 2022 and modified the interest rate on the Revolving Line to be the floating per annum rate equal to the greater of (i) 0.25% above the bank’s Prime Rate, and (ii) 4.5%.
The amount available under the Revolving Line as of December 31, 2019 and 2020 was $20.1 million and $27.9 million, respectively. The amount available under the Revolving Line is reduced by letters of credit outstanding, which relates to various leased office spaces, which was $4.5 million and $6.9 million as of December 31, 2019 and 2020, respectively. The amount available under the Revolving Line is also reduced by business credit card balances outstanding, which was $0.4 million and $0.2 million as of
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2020, respectively. Pursuant to the Second Amended and Restated Loan and Security Agreement, if there are any letters of credit outstanding on the maturity date of the Revolving Line, the Company is required to provide cash collateral in the amount equal to at least 105.0% of the letters of credit.
The Second Amended and Restated Loan and Security Agreement provides for certain events of default such as nonpayment of principal and interest when due, breaches of representations and warranties, noncompliance with covenants, insolvency, and default on certain agreements related to indebtedness. Upon the occurrence of an event of default and at the option of the lender, all the amounts outstanding under the Second Amended and Restated Loan and Security Agreement may be declared to be immediately due and payable.
The Second Amended and Restated Loan and Security Agreement contains financial covenants and other customary affirmative and negative covenants, including, among other terms and conditions, delivering financial statements and other financial information by certain due dates, achieving certain EBITDA targets, maintaining a minimum remaining months of liquidity requirement, restrictions on changes in business, management, control of business locations, indebtedness, dispositions of certain business or property, mergers or acquisitions, subordinated debt, maintenance of collateral accounts and payment of dividends or distributions. The Company was in compliance with the financial covenants as of December 31, 2019 and 2020.
As of December 31, 2019 and 2020, the Company had no outstanding borrowings under the Revolving Line. As of December 31, 2019 and 2020, the Company had $10.0 million and no amounts outstanding under the Term Loan, respectively. The average interest rate for the years ended December 31, 2019 and 2020 was 5.7% and 5.1%, respectively. Total interest expense was $0.6 million for the years ended December 31, 2019 and 2020 and was recorded in interest expense in the Consolidated Statements of Operations.
10.Convertible Notes with Related Parties
On June 22, 2020, the Company issued subordinated secured convertible promissory notes ("Convertible Notes") to related parties who are holders of the Company’s Redeemable Convertible Preferred Stock. The Convertible Notes totaled $25.0 million and have a maturity date of June 22, 2023. Principal and interest under the Convertible Notes are due and payable in full on or after the maturity date, unless earlier converted to shares of the Company’s capital stock as described below. The interest on the Convertible Notes is equal to the lower of (i) 2.5% per annum until June 2022, 3.0% per annum until December 2022, and 3.5% per annum until maturity; and (ii) the maximum non-usurious rate of interest in effect from time to time under applicable laws. The Convertible Notes are classified as non-current liabilities in the Consolidated Balance Sheets as of December 31, 2020.
Principal and accrued interest under the Convertible Notes is automatically convertible into shares of a new series of preferred stock upon a Qualified Financing event (as defined as raising gross proceeds of at least $40.0 million). The new series of preferred stock will have the same rights and preferences as the new shares issued in the Qualified Financing event, except per share liquidation preference and dividend rights will be based on the conversion price. The Convertible Notes are automatically convertible into common stock upon a Liquidity Event (as defined as a change in control, qualified initial public offering (“IPO”) (yielding gross proceeds of at least $50.0 million), or Direct Listing to register existing shares of capital stock of the Company for resale on a major U.S. based stock exchange not pursuant to an underwritten public offering).
The conversion price triggered upon these events, with the exception of the Direct Listing event, is the lower of (i) 75.0% of the price per share paid by the purchasers for the event and (ii) $8.2909 (subject to appropriate adjustments). If a Direct Listing occurs, the conversion price is equal to the lower of (i) 75.0% of the volume-weighted average price of the common stock on the first trading day following such listing and (ii) $8.2909 (subject to appropriate adjustments).
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
Principal and accrued interest under the Convertible Notes may be converted into shares of a new series of preferred stock, at the option of the holder upon a Nonqualified Financing event. A Nonqualified Financing is defined as the Company’s sale of shares of preferred stock for the primary purposes of raising working capital that does not constitute a Qualified Financing. The new series of preferred stock will have the same rights and preferences as the new shares issued in the Nonqualified Financing event, except per share liquidation preference and dividend rights will be based on the conversion price. The conversion price arising from a Nonqualified Financing is the lower of (i) 75.0% of the price per share paid by purchasers in the Nonqualified Financing and (ii) $8.2909 (subject to appropriate adjustments).
The Company cannot repay the Convertible Notes prior to maturity without prior written consent from the majority noteholders, as defined as holding at least 61.0% of the aggregate principal balance. After the maturity date, at the option of the holders, principal and accrued interest under the Convertible Notes is convertible into a new series of preferred stock at a conversion price of $6.6327 per share (subject to standard anti-dilution adjustments). The new series of preferred stock will have the same rights and preferences as the Series B convertible preferred stock, except per share liquidation preference and dividend rights will be based on the conversion price. Upon maturity, if the holders do not convert the notes into the new series of preferred stock, the holders can call the outstanding principal and accrued interest balances.
The Convertible Notes provide for certain events of default such as nonpayment of principal and interest when due, insolvency, or if there is a liquidation, dissolution or winding up of the Company. Upon an event of default, all unpaid principal and accrued interest becomes immediately due and payable.
For the year ended December 31, 2020, the Company accrued interest expense of $0.4 million.
Certain embedded features are accounted for separately as a derivative liability and recorded at fair value each period. As of the date of issuance of the Convertible Notes and as of December 31, 2020, the fair value of the embedded features were immaterial.
11.Commitments and Contingencies
Purchase Commitments
As of December 31, 2020, the Company had various noncancelable purchase commitments relating to software service agreements. Future minimum commitments are $6.7 million for 2021, $10.8 million for 2022, $10.0 million for 2023, $10.0 million for 2024, and $8.3 million for 2025.
Legal Matters
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. If the Company determines that it is probable that a loss has been incurred and the amount is reasonably estimable, the Company will record a liability. However, if the Company determines that a contingent loss is reasonably possible and the loss or range of loss can be estimated, the Company will disclose the possible loss in the consolidated financial statements. Legal costs relating to loss contingencies are expensed as incurred.
In April 2019, the Company was named as a defendant in a putative class action lawsuit filed by a former employee in the Los Angeles Superior Court alleging that the Company violated the Fair Credit Reporting Act as well as owed certain compensation to employees. In January 2020, the former employee filed a related representative action in the Los Angeles Superior Court under the Private Attorney General Act alleging similar claims regarding compensation owed to employees. In January 2021, the Company filed a motion for summary judgment or, in the alternative, summary adjudication, which was granted in part and denied in part. At the date these consolidated financial statements were available for issuance, it is reasonably possible that a loss may be incurred; however, a loss or range of losses is not currently estimable.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
Indemnification
In the ordinary course of business, the Company may provide indemnification of varying scopes and terms to customers, investors, directors and officers with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach of such agreements, services to be provided by the Company, or from certain claims made by third parties. These indemnification provisions may survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make under these indemnification provisions may not be subject to maximum loss clauses. The maximum potential amount of future payments the Company could be required to make under these indemnification provisions is indeterminable. The Company has never paid a material claim, nor has the Company been sued in connection with these indemnification arrangements. As of December 31, 2019 and 2020, the Company had not accrued a liability for these indemnification arrangements because the likelihood of incurring a payment obligation, if any, in connection with these indemnification arrangements is neither probable nor reasonably estimable.
Restructuring
On March 31, 2020, the Company announced and committed to a restructuring plan to contain costs and further strengthen its liquidity profile in response to the impact of the COVID-19 pandemic. This plan resulted in a reduction in the Company’s workforce of approximately 40%. The Company recorded restructuring costs of $5.7 million in the first quarter of 2020 primarily related to employee severance and continuation of health benefits. Included in the $5.7 million restructuring costs is a non-cash charge of $0.8 million pertaining mainly to the modification of stock option awards for terminated employees. These awards were modified to extend the post-termination exercise period of vested options. Restructuring costs are presented as $3.7 million in sales and marketing, $1.0 million in research and development, and $1.0 million in general and administrative expenses within the Consolidated Statement of Operations. Of the restructuring costs liability outstanding as of December 31, 2020, the Company expects the remaining costs to be paid by early 2021.
The following table presents the roll forward of the restructuring costs liability for the year ended December 31, 2020 (in thousands), which is included in accrued expenses in the Company’s Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2020
|
|
Accrual, at beginning of year
|
$
|
—
|
|
|
Expense
|
4,947
|
|
|
Cash payments
|
(4,281)
|
|
|
Non-cash adjustments
|
(433)
|
|
|
Accrual, at end of year
|
$
|
233
|
|
12.Leases
The Company has various noncancelable operating leases for its offices. These existing leases have remaining lease terms ranging from one to eleven years. Certain lease agreements contain renewal options, termination rights, rent abatement and/or escalation clauses with renewal terms that can extend the lease term from one to ten years.
The Company signed an operating lease on March 2, 2020 with a term of 128 months commencing on August 29, 2020. The execution of the lease resulted in an operating lease ROU asset obtained in exchange for new operating lease liabilities of $5.8 million. The Company has the option to terminate a portion of the leased building (“Partial Premises”) on the last day of the 12th month of the lease term for a fee. The Company is reasonably certain it will exercise the Partial Premises termination option.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
The Company cannot determine with reasonable certainty that any other options will be exercised and therefore only the Partial Premises termination option is considered when recording the Company’s operating lease ROU assets, operating lease liabilities or lease expense.
The components of lease cost related to the Company’s operating leases is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Operating lease cost
|
$
|
7,434
|
|
|
$
|
7,572
|
|
|
Short-term lease cost
|
380
|
|
|
237
|
|
|
Variable lease cost
|
1,456
|
|
|
1,399
|
|
|
Sublease income
|
(1,170)
|
|
|
(1,051)
|
|
|
Net lease cost
|
$
|
8,100
|
|
|
$
|
8,157
|
|
The Company made cash payments for amounts included in the measurement of operating lease liabilities of $8.0 million and $7.3 million for the years ended December 31, 2019 and 2020, respectively.
During the year ended December 31, 2019, the Company modified the terms of one of its leases to terminate three years earlier than the original expiration date. The impact of this modification was a reduction to the operating lease ROU asset and operating lease liability of $2.8 million.
Supplemental information related to the Company’s operating leases is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2019
|
|
2020
|
|
Weighted-average remaining lease term
|
4.5 years
|
|
5.5 years
|
|
Weighted-average incremental borrowing rate
|
5.3
|
%
|
|
5.2
|
%
|
Future undiscounted lease payments for the Company’s operating lease liabilities and a reconciliation of these payments to its operating lease liabilities as of December 31, 2020 are as follows (in thousands):
|
|
|
|
|
|
|
|
2021
|
$
|
3,063
|
|
|
2022
|
7,419
|
|
|
2023
|
6,197
|
|
|
2024
|
4,910
|
|
|
2025
|
2,829
|
|
|
Thereafter
|
7,383
|
|
|
Total lease payments
|
31,801
|
|
|
Less: imputed interest
|
(5,002)
|
|
|
Present value of operating lease liabilities
|
$
|
26,799
|
|
In April 2016, the Company entered into a noncancelable sublease agreement for one of its office facilities through March 2021. The sublease rent is subject to increases over the term of the lease. The total minimum future contractual rental payments as of December 31, 2020 is $0.2 million in 2021. The Company computes rental income on a straight-line basis over the lease term. The difference between rental income and rental payments over the lease term is recorded as an unbilled rent receivable.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
13.Common Stock and Redeemable Convertible Preferred Stock
Common Stock
In October 2016, each of the Company’s founders entered into capital contribution agreements where they agreed to contribute back to the Company up to an aggregate of 3.4 million shares of common stock on a ratable basis over a four year period through July 2020. The contributed shares were retired and canceled immediately. The contributed shares were accounted for within equity. As of December 31, 2019 and 2020, an aggregate of 2.9 million and 3.4 million shares of common stock were contributed back to the Company.
In November 2020, the Company repurchased a total of 3.0 million shares of common stock from three of the Company’s founders. The shares of common stock were repurchased at a price of $6.36 per share for an aggregate amount of $19.0 million. The repurchased shares of common stock were retired and recorded as a reduction of common stock and additional paid-in capital.
Redeemable Convertible Preferred Stock
On August 12, 2014, the Company raised gross proceeds of $25.0 million from the sale of 0.9 million shares of Series A Redeemable Convertible Preferred Stock (“Series A preferred stock”) at $27.7358 per share. In addition, the Company exchanged 11.0 million shares of common stock purchased by the Series A preferred stock investors for 1.4 million shares of Series A preferred stock. Issuance costs of $0.2 million were incurred and recorded as a reduction to the carrying value of the Series A preferred stock.
On November 7, 2017 the Company raised gross proceeds of $50.0 million from the sale of 6.0 million shares of Series B Redeemable Convertible Preferred Stock (“Series B preferred stock” and, together with the Series A preferred stock, the “preferred stock”) at $8.2909 per share. Issuance costs of $0.7 million were incurred and recorded as a reduction to the carrying value of the Series B preferred stock.
The rights and preferences of the Series A and Series B preferred stock are summarized below.
Conversion
Each share of preferred stock is convertible, at the option of the holder, at any time and from time to time, into a number of shares of common stock as determined by dividing such share’s original issue price by the conversion price. The conversion price was initially the original issuance price which is then subject to change for stock splits, dividends, recapitalizations, and dilutive issuances. The current applicable conversion price is $3.4670 for the Series A preferred stock and $8.2909 for the Series B preferred stock. As of December 31, 2020, each share of outstanding Series A and Series B preferred stock converts into 8 shares and 1 share of common stock, respectively.
The preferred stock automatically shall convert into common stock, at the then effective conversion rate, upon (1) the closing of the sale of shares of common stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended resulting in gross proceeds of at least $100.0 million or (2) the date and time, or occurrence of an event specified by vote or written consent of the holders of at least a majority of the then outstanding shares of Series A preferred stock and the holders of at least a majority of the then outstanding shares of Series B preferred stock, each voting separately as a class. The conversion rate shall be computed in the same manner as in an optional conversion, except that in the case of a mandatory conversion triggered by clause (1) above, the conversion shall be adjusted if the price per share in the offering is less than $6.9340 for the Series A preferred stock or $2.0727 for the Series B preferred stock, subject to adjustment for stock dividends, stock splits, combinations or other similar recapitalization events.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
As of December 31, 2020, the Company had 24.2 million authorized, but unissued shares of common stock available for conversion of the preferred stock.
Liquidation
A Deemed Liquidation Event includes (1) a merger or consolidation or (2) the sale, lease transfer, exclusive license or disposition, in a single transaction or series of related transactions, by the Company of all or substantially all the assets of the Company. In the event of any voluntary or involuntary liquidation or dissolution, or winding up of the Company or a Deemed Liquidation Event, the holders of preferred stock then outstanding will be entitled to be paid out of the assets of the Company available for distribution to stockholders before any payment is made to the holders of common shares.
The amount paid per share for Series A preferred stock would be the greater of (1) one-and-a-half times the Series A preferred stock original issue price, plus any dividends declared but unpaid, or (2) such amount per share as would have been payable had all shares of Series A preferred stock been converted in common stock immediately prior to such liquidation, dissolution, or winding up or Deemed Liquidation Event.
The amount paid per share for Series B preferred stock would be the greater of (1) one times the Series B preferred stock original issue price, plus any dividends declared but unpaid, or (2) such amount per share as would have been payable had all shares of Series B preferred stock been converted in common stock immediately prior to such liquidation, dissolution, or winding up or Deemed Liquidation Event.
If amounts available to be distributed are insufficient to pay the liquidation preference in full, then the holders of preferred stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by the preferred stock holders upon such distribution if all amounts payable on or with respect to such shares were paid in full.
Any remaining assets after payment of the liquidation preferences to the holders of the preferred stock would be distributed amongst the holders of common stock, pro rata based on the number of shares held by each holder.
Redemption
At any time on or after November 7, 2022, at the election of the holders of a majority of the then outstanding shares of preferred stock voting as a single class, and so long as the Company has sufficient funds without the need to obtain financing, shares of preferred stock will be redeemed by the Company at a price equal to (1) one-and-a-half times the Series A preferred stock original issue price of $27.7358 for shares of Series A preferred stock and (2) the Series B preferred stock original issue price of $8.2909 for shares of Series B preferred stock.
The liquidation preference and redemption provisions of the preferred stock are considered contingent redemption provisions as there are certain elements that are not solely within the control of the Company. These elements primarily relate to the redemption rights described above and the Deemed Liquidation Events such as a change in control or an involuntary winding-up or dissolution of the Company. Accordingly, the Company has presented the preferred stock within the mezzanine section of the Consolidated Balance Sheets.
The Company accretes the carrying value of the Series A and B preferred stock to the redemption values over the period to the earliest redemption date, November 7, 2022, using the effective interest rate method. Accretion is recorded as a charge against retained earnings, or in the absence of retained earnings, by charges against additional paid-in capital until fully depleted, then finally against accumulated deficit.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
Voting
Each holder of preferred stock is entitled to one vote per whole share of common stock into which such holder’s shares of preferred stock are convertible as of the record date for such vote. The holders of preferred stock, voting as a separate class, are entitled to elect two directors of the Company. The holders of common stock, voting as a separate class, are entitled to elect four directors of the Company.
Dividends
The holders of preferred stock are entitled to receive non-cumulative dividends when and as declared by the board of directors with dividends declared or paid to common stock or any other series of stock on an as converted to common stock basis. No dividends were declared or paid by the Company during the years ended December 31, 2019 and 2020.
14.Stock-Based Compensation
2012 and 2014 Plans
The Company has granted awards under the 2012 Equity Incentive Plan (“2012 Plan”) or 2014 Equity Incentive Plan (“2014 Plan”), collectively the “Plans”. All awards currently are granted from the 2014 Plan. However, the 2012 Plan continues to govern the terms and conditions of the outstanding awards previously granted under the 2012 Plan. As of December 31, 2020, there were 36.8 million shares authorized and 2.9 million shares of common stock available for grant under the 2014 Plan.
The Plans permit the grant of incentive stock options to employees and the grant of nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to the Company’s employees, directors and consultants at the sole discretion of the board of directors. The Plans also allow for the administrator of the plan to include terms in an award agreement that the option holder may exercise in whole or part of the option prior to the full vesting of those options.
Stock Options
Under the 2014 Plan, options must be granted with exercise prices not less than the fair value of the underlying common stock on the date of grant. Options granted generally vest over periods of up to four years and expire ten years from the grant date. In 2019, the Company amended the terms and conditions of the Israeli Sub-Plan of the 2014 Plan. The Israeli Sub-Plan amendment allows the Company to grant options to Israeli employees or Israeli non-employees with exercise prices less than the fair market value of the underlying common stock on the date of grant.
If a 2014 Plan option expires, such as upon termination of employment, becomes unexercisable without having been exercised in full, or is surrendered pursuant to an option exchange program, the unpurchased shares will become available for future grant or sale under the 2014 Plan. If the employee does not exercise vested 2014 Plan options within 90 days of termination, these options will expire and revert back to the 2014 Plan’s option pool. The Company’s policy is to issue new shares of common stock upon the exercise of stock options.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
A summary of the Company’s stock option activity under the Plans for the year ended December 31, 2020 is as follows (in thousands, except weighted-average information):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Options Outstanding
|
|
Weighted Average Exercise Price Per Share
|
|
Weighted Average Remaining Contractual Term (in years)
|
|
Aggregate Intrinsic Value
|
|
Outstanding at December 31, 2019
|
22,299
|
|
|
$
|
2.09
|
|
|
6.4
|
|
$
|
90,924
|
|
|
Granted
|
516
|
|
|
2.33
|
|
|
|
|
|
|
Exercised
|
(2,098)
|
|
|
1.25
|
|
|
|
|
|
|
Forfeited/Canceled
|
(1,344)
|
|
|
3.54
|
|
|
|
|
|
|
Outstanding at December 31, 2020
|
19,373
|
|
|
$
|
2.09
|
|
|
5.1
|
|
$
|
193,551
|
|
|
Exercisable at December 31, 2020
|
17,059
|
|
|
$
|
1.77
|
|
|
4.7
|
|
$
|
175,812
|
|
The weighted-average grant-date fair value per share of options granted for the years ended December 31, 2019 and 2020 was $3.08 and $4.05, respectively. The total fair value of options vested for the years ended December 31, 2019 and 2020 was $7.2 million and $12.7 million, respectively. The total intrinsic value of options exercised in 2019 and 2020 was $3.7 million and $8.5 million, respectively. This intrinsic value represents the difference between the fair market value of the Company’s common stock on the date of exercise and the exercise price of each option.
The weighted average assumptions that were used to calculate the grant date fair value of the Company’s stock option grants for the years ended December 31, 2019 and 2020 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2020
|
|
Expected dividend yield
|
—
|
%
|
|
—
|
%
|
|
Expected stock price volatility
|
54.5
|
%
|
|
59.4
|
%
|
|
Risk-free interest rate
|
2.0
|
%
|
|
0.6
|
%
|
|
Expected term (in years)
|
5.9
|
|
|
6.0
|
|
|
Fair value of common stock
|
$
|
5.82
|
|
|
$
|
5.52
|
|
During the years ended December 31, 2019 and 2020, the Company recorded stock-based compensation expense for stock option awards of $6.5 million and $5.7 million, respectively under the 2012 and 2014 Plans. As of December 31, 2020, total remaining stock-based compensation expense for unvested stock options is $6.2 million, which is expected to be recognized over a weighted average period of 1.0 year.
On April 12, 2018, the board of directors approved the issuance of performance and service-based options outside of the Plans to a consultant of the Company. The number of shares of the Company’s common stock issuable upon the vesting of this award is based upon (1) satisfaction of performance milestones and (2) continued service as a service provider over a four year period. The performance milestones are satisfied upon achievement of specified levels of job seeker activity each month through December 1, 2021. Achievement of the minimum performance level would result in the issuance of options to purchase 50,000 shares and achievement at the maximum performance level would result in the issuance of options to purchase 300,000 shares. As of December 31, 2020, a total of 150,000 options had vested of which 85,000 options were exercised, and 150,000 options were subject to future vesting pending achievement of additional performance milestones. For the years ended December 31, 2019 and 2020, stock-based compensation expense for this award was not material.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
Stock-based Compensation
Total stock-based compensation expense for stock options is recorded in the Consolidated Statements of Operations as follows for the years ended December 31, 2019 and 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Cost of revenue
|
$
|
119
|
|
|
$
|
73
|
|
|
Sales and marketing
|
1,031
|
|
|
704
|
|
|
Research and development
|
3,159
|
|
|
3,050
|
|
|
General and administrative
|
2,431
|
|
|
1,925
|
|
|
Total stock-based compensation
|
$
|
6,740
|
|
|
$
|
5,752
|
|
During the years ended December 31, 2019 and 2020, the Company capitalized $0.3 million and $0.2 million in stock-based compensation cost associated with the development of internal-use software, respectively.
Restricted Stock Units
The Company has granted restricted stock units (“RSUs”) to certain employees and directors of the Company. The granted RSUs vest upon the satisfaction of both a time-based service condition and a liquidity event performance condition. The time-based service condition for these awards is generally satisfied over four years. The liquidity event performance condition is satisfied upon the earliest to occur of a qualifying event, defined as a change of control transaction, or after a set period of time following the effective date of the Company’s IPO pursuant to an effective registration statement under the Securities Act for the offer and sale of shares by the Company. A direct listing in which the Company does not sell its equity securities does not satisfy the liquidity event performance condition.
A summary of the Company’s RSU activity for year ended December 31, 2020 is as follows (in thousands, except weighted-average information):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted Average Grant Date Fair Value Per Share
|
|
Unvested at December 31, 2019
|
2,503
|
|
|
$
|
5.89
|
|
|
Granted
|
3,836
|
|
|
5.72
|
|
|
Vested
|
—
|
|
|
—
|
|
|
Forfeited/Canceled
|
(888)
|
|
|
6.02
|
|
|
Unvested at December 31, 2020
|
5,451
|
|
|
$
|
5.75
|
|
As of December 31, 2020, the Company concluded that the liquidity event performance condition described above for the RSUs was not probable of being satisfied. As a result, the Company did not recognize any compensation cost during the years ended December 31, 2019 and 2020 for any RSUs granted. In the quarter in which the performance condition is achieved, the Company will begin recording stock-based compensation expense using the graded vesting method based on the grant date fair value of the RSUs. As of December 31, 2020, there was $31.2 million of unrecognized stock-based compensation expense related to unvested RSUs. Of this amount, $17.6 million relates to RSUs for which the service-based vesting condition had been satisfied as of December 31, 2020.
15.401(k) Plan
The Company participates in a retirement plan qualified as a defined contribution plan under Section 401(k) of the Internal Revenue Code by making contributions to employee retirement accounts. The Company’s management may elect to make contributions to the 401(k) plan based on a percentage of
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
the employee’s earnings and contributions. The Company incurred and accrued for $3.4 million and $2.4 million of contributions to employee retirement accounts as of December 31, 2019 and 2020, respectively.
16.Income Taxes
The following are domestic and foreign components of the Company’s income (loss) before income taxes (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Domestic
|
$
|
(7,024)
|
|
|
$
|
63,075
|
|
|
Foreign
|
1,263
|
|
|
1,262
|
|
|
Income (loss) before income taxes
|
$
|
(5,761)
|
|
|
$
|
64,337
|
|
The components of the Company's income tax expense (benefit) are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Current:
|
|
|
|
|
Federal
|
$
|
—
|
|
|
$
|
—
|
|
|
State and local
|
144
|
|
|
572
|
|
|
Foreign
|
499
|
|
|
633
|
|
|
Total current income tax expense
|
643
|
|
|
1,205
|
|
|
Deferred:
|
|
|
|
|
Federal
|
7
|
|
|
(14,189)
|
|
|
State and local
|
3
|
|
|
(8,582)
|
|
|
Foreign
|
(65)
|
|
|
(145)
|
|
|
Total deferred income tax benefit
|
(55)
|
|
|
(22,916)
|
|
|
Total income tax expense (benefit)
|
$
|
588
|
|
|
$
|
(21,711)
|
|
A reconciliation of the income taxes computed at the U.S. federal statutory tax rate of 21% to the income tax expense (benefit) for the years ended December 31, 2019 and 2020 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
U.S. federal statutory income tax rate
|
$
|
(1,210)
|
|
|
$
|
13,511
|
|
|
State and local income taxes, net of federal benefit
|
223
|
|
|
3,596
|
|
|
Foreign income inclusion
|
348
|
|
|
24
|
|
|
Stock-based compensation expense
|
776
|
|
|
349
|
|
|
Other permanent items
|
898
|
|
|
359
|
|
|
Tax credits
|
(6,286)
|
|
|
(1,444)
|
|
|
Other
|
(14)
|
|
|
(18)
|
|
|
Change in valuation allowance
|
6,392
|
|
|
(37,706)
|
|
|
Return to provision
|
(539)
|
|
|
(382)
|
|
|
Income tax expense (benefit)
|
$
|
588
|
|
|
$
|
(21,711)
|
|
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
The components of deferred tax assets and liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Deferred income tax assets:
|
|
|
|
|
Net operating loss carryforwards
|
$
|
25,244
|
|
|
$
|
9,405
|
|
|
Stock-based compensation
|
1,213
|
|
|
2,138
|
|
|
Accrued expenses
|
1,550
|
|
|
1,491
|
|
|
Tax credit carryforwards
|
13,431
|
|
|
13,513
|
|
|
Non-deductible interest carryforwards
|
25
|
|
|
—
|
|
|
Operating lease liabilities
|
6,858
|
|
|
6,904
|
|
|
Gross deferred tax assets
|
48,321
|
|
|
33,451
|
|
|
Less valuation allowance
|
(37,706)
|
|
|
—
|
|
|
Net deferred tax assets
|
10,615
|
|
|
33,451
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Property and equipment
|
(297)
|
|
|
(84)
|
|
|
Operating lease right-of-use assets
|
(5,670)
|
|
|
(5,797)
|
|
|
Intangible assets and goodwill
|
(3,010)
|
|
|
(2,570)
|
|
|
Deferred commissions
|
(1,466)
|
|
|
(1,917)
|
|
|
Total deferred tax liabilities
|
(10,443)
|
|
|
(10,368)
|
|
|
Total net deferred tax assets
|
$
|
172
|
|
|
$
|
23,083
|
|
The Company regularly assesses the need for a valuation allowance against its deferred tax assets as prescribed by ASC 740, Income Taxes. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, which includes historical operating performance and ability to generate sufficient taxable income in the future, whether it is more likely than not that some or all the deferred tax assets will not be realized. As a result of the Company’s profitability in 2020 and estimates of future taxable income, the Company determined that it was more likely than not the deferred tax assets will be realized, and accordingly, released the valuation allowance of $37.7 million against the deferred tax assets during 2020.
The change in the valuation allowance was comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Valuation allowance, at beginning of year
|
$
|
31,314
|
|
|
$
|
37,706
|
|
|
Increase in valuation allowance recorded through earnings
|
6,392
|
|
|
—
|
|
|
Release of valuation allowance recorded through earnings
|
—
|
|
|
(37,706)
|
|
|
Valuation allowance, at end of year
|
$
|
37,706
|
|
|
$
|
—
|
|
As of December 31, 2019 and 2020, the Company had gross U.S. federal operating loss carryforwards of $100.2 million and $33.7 million, respectively, and gross state operating loss carryforwards of $69.5 million and $34.6 million, respectively. Of the gross federal and state operating loss carryforwards as of December 31, 2020, $33.7 million and $1.8 million, respectively, carryforward indefinitely. The remaining gross state operating loss carryforwards as of December 31, 2020 will expire at various dates beginning in the year ending December 31, 2025, if not utilized. Additionally, as of December 31, 2019 and 2020, the Company had U.S. federal credit carryforwards of $11.7 million and $12.2 million, respectively, and state credit carryforwards of $7.7 million and $7.6 million, respectively.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
The federal credit carryforwards will begin to expire at various dates beginning in 2033 while the majority of gross state credit carryforwards are not subject to expiration.
Utilization of net operating loss and credit carryforwards may be subject to a substantial annual limitation provided for in the Internal Revenue Code and similar state codes. Such annual limitation could result in the expiration of net operating loss and credit carryforwards before utilization. The Company does not believe that such limitation rules will have a material impact on the consolidated financial statements.
The U.S. Internal Revenue Code of 1986, as amended, imposes an annual limitation on a corporation’s ability to utilize net operating loss carryforwards if it experiences an ownership change as defined in Section 382. If certain substantial changes in the entity’s ownership occur, there would be an annual limitation on the amount of the carryforward(s) that can be utilized.
The following is a reconciliation of the total amounts of unrecognized tax benefits (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
2019
|
|
2020
|
|
Unrecognized tax benefit, beginning of year:
|
$
|
71
|
|
|
$
|
4,728
|
|
|
Gross increases - tax positions in prior year
|
3,281
|
|
|
—
|
|
|
Gross increases - tax positions in current year
|
1,402
|
|
|
752
|
|
|
Gross decreases - tax positions in prior year
|
(26)
|
|
|
(359)
|
|
|
Gross decreases - tax positions in current year
|
—
|
|
|
—
|
|
|
Unrecognized tax benefit, end of year
|
$
|
4,728
|
|
|
$
|
5,121
|
|
In the normal course of business, the Company is regularly audited by federal, state, and foreign tax authorities. The Company has not accrued interest nor penalties related to unrecognized tax benefits reflected in the consolidated financial statements during the years ended December 31, 2019 and 2020. The Company believes that any change to the unrecognized tax benefits in the next twelve months will not be material to the consolidated financial statements.
The Company is subject to taxation in the United States, as well as various state and foreign jurisdictions. As of December 31, 2020, the Company is not under audit by the IRS, any state authority, or foreign jurisdiction for income taxes for any open years. Due to the Company’s net operating loss carryforwards, the Company’s income tax returns are open to examination by the Internal Revenue Service beginning with tax year 2012 and by state taxing authorities beginning with tax year 2011.
The Company determined certain foreign earnings to be indefinitely reinvested outside the United States. The Company regularly evaluates its reinvestment policy on a quarterly basis and will adjust its estimate of its income tax provision accordingly to the extent there is a change and an adjustment is required. As of December 31, 2020, the amount of undistributed earnings was approximately $2.7 million. The Company did not provide for U.S. income taxes on the undistributed earnings and other outside temporary differences of foreign subsidiaries as they are considered indefinitely reinvested outside the United States. As of December 31, 2020, the amount of temporary differences related to undistributed earnings and other outside temporary differences upon which U.S. income taxes have not been provided is immaterial to the consolidated financial statements.
Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)
On March 27, 2020, the CARES Act was enacted in the United States to provide economic relief to individuals and businesses facing economic hardship as a result of the COVID-19 public health emergency. The CARES Act includes, among other things, provisions relating to payroll tax credits and deferrals, net operating loss carryback periods, alternative minimum tax credits refunds, modifications to
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.
As allowed by the CARES Act, the Company deferred the payment of certain federal payroll taxes. This relief program is applicable for wages paid through December 31, 2020 and requires 50% of the amounts deferred to be paid by December 31, 2021 with the remaining amount paid by December 31, 2022. As of December 31, 2020, the deferred payroll tax liability was $3.5 million of which $1.7 million was presented in current liabilities and $1.8 million was presented in non-current liabilities in the Consolidated Balance Sheets. The Company completed its evaluation of the impact of the CARES Act, and with the exception of the impact of the deferred payroll tax liability, it did not have a significant impact on the effective tax rate, deferred tax assets and liabilities, or income tax payable of the Company.
17.Subsequent Events
The Company has evaluated subsequent events through March 9, 2021 which is the date these consolidated financial statements were available for issuance.
Common Stock Repurchase
On January 22, 2021, the Company repurchased 50,000 shares of common stock from a former employee for an aggregate price of $0.5 million. The repurchased shares of common stock were retired and recorded as a reduction of common stock and additional paid-in capital.
18.Events Subsequent to Issuance of the Consolidated Financial Statements (Unaudited)
Equity Award Grants
On March 24, 2021, the Company granted stock options to purchase 113,745 shares of common stock at an exercise price of $2.00 per share with an aggregate grant date fair value $2.4 million that the Company expects to recognize as stock-based compensation expense over a four-year period. In addition, the Company granted 1,579,000 RSUs with an aggregate grant date fair value of $36.1 million. The RSUs vest upon the satisfaction of both a time-based service condition and a liquidity event performance condition as described in Note 14.
Restricted Stock Units Modification
On April 19, 2021, the Company’s board of directors waived the liquidity event-based performance condition such that the RSUs that had satisfied the service condition vest upon the earlier of the first day of trading of the Company’s common stock on the New York Stock Exchange or March 15, 2022. As the satisfaction of the performance condition was not probable for accounting purposes prior to the waiver, the waiver of the liquidity event-based performance condition resulted in the incremental fair value on the date of the waiver being equal to the fair value of the modified RSUs, which management estimated to be $25.04 per share. As of April 19, 2021, the fair value of the then outstanding modified RSUs is approximately $172.6 million, which the Company expects to record $41.7 million as stock-based compensation expense on the date of the modification and $130.9 million over a weighted average remaining service period of the RSUs of 1.5 years.
Nonemployee Option Award Amendment
In April 2021, the Company approved the amendment of its nonemployee performance and service-based option award. The amendment resulted in the vesting of an additional 50,000 options. The nonemployee’s remaining 100,000 unvested options were cancelled and a new grant for 32,500 RSUs was concurrently issued by the Company.
ZipRecruiter, Inc.
Notes to Consolidated Financial Statements
Executive Compensation Agreements
In April 2021, the Company entered into a new agreement with the CEO, which provides that, upon the earlier to occur of (a) (i) the first trading day following the Company’s initial public offering or direct listing pursuant to an effective registration statement under the Securities Act covering the offer and sale of the Company’s equity securities (whether by the Company or by any holders of the Company’s equity securities), as a result of or following which the shares are publicly held, or (ii) the consummation of a merger, acquisition or other business combination involving the Company and a publicly traded special purpose acquisition company, that results in the Company or its business becoming a publicly traded company (each a “Listing Condition”) or (b) a Change of Control, as defined in the 2014 Plan, the CEO will be entitled to special bonus in an amount equal to $10.0 million provided that the CEO is an active employee at the time of either event.
In April 2021, the Company also granted the CEO an RSU award, which provides for a grant of 1,398,000 RSUs (“CEO Grant”). The CEO Grant vests based on achieving stock price targets ranging from $67.61 per share to $157.75 per share following the first day the Company becomes a publicly traded company as well as satisfying certain minimum service requirements ranging from one to five years. The Company is in process of completing the valuation of the CEO Grant using a Monte Carlo simulation valuation model given the market-based vesting conditions.
Dual Class Structure
In April 2021, the Company amended and restated its certificate of incorporation resulting in the creation the Class A common stock and the Class B common stock. All existing shares of common stock issued and outstanding or held as treasury stock automatically converted into shares of Class B common stock.
The Class A common stock is entitled to one vote per share and the Class B common stock is entitled to twenty votes per share. The Class A and Class B common stock have the same dividend and liquidation rights. The Class B common stock converts to Class A at any time at the option of the holder. Additionally, each share of Class B common stock will convert automatically into one share of Class A common stock upon any transfer, except for certain transfers described in the restated certificate of incorporation.
All outstanding options to purchase common stock became options to purchase an equivalent number of shares of Class B common stock and all RSUs became RSUs for an equivalent number of Class B common stock.
Amendment to Redeemable Convertible Preferred Stock Conversion
In April 2021, the Company amended and restated its certificate of incorporation such that the redeemable convertible preferred stock automatically converts into shares of Class B common stock upon a direct listing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses to be paid by the registrant in connection with the registration and listing of its Class A common stock. All amounts shown are estimates except for the Securities and Exchange Commission, or SEC, registration fee and the New York Stock Exchange. or NYSE, listing fee.
|
|
|
|
|
|
|
|
|
|
|
|
Amount Paid or to be Paid
|
|
SEC registration fee
|
$
|
*
|
|
NYSE listing fee
|
|
*
|
|
Printing fees and expenses
|
|
*
|
|
Legal fees and expenses
|
|
*
|
|
Accounting fees and expenses
|
|
*
|
|
Transfer agent and registrar fees and expenses
|
|
*
|
|
Other advisors’ fees
|
|
*
|
|
Miscellaneous expenses
|
|
*
|
|
Total
|
$
|
*
|
________________
*To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law, or DGCL, authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers under certain circumstances and subject to certain limitations. The terms of Section 145 of the DGCL are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Securities Act of 1933, as amended, or the Securities Act.
As permitted by the DGCL, the registrant’s restated certificate of incorporation that will be in effect following the effectiveness of this registration statement contains provisions that eliminate the personal liability of its directors for monetary damages for any breach of fiduciary duties as a director, except liability for the following:
•any breach of the director’s duty of loyalty to the registrant or its stockholders;
•acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
•under Section 174 of the DGCL (regarding unlawful dividends and stock purchases); or
•any transaction from which the director derived an improper personal benefit.
As permitted by the DGCL, the registrant’s restated bylaws that will be in effect following the effectiveness of this registration statement provide that:
•the registrant is required to indemnify its directors and executive officers to the fullest extent permitted by the DGCL, subject to very limited exceptions;
•the registrant may indemnify its other employees and agents as set forth in the DGCL;
•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 DGCL, subject to very limited exceptions; and
•the rights conferred in the restated bylaws are not exclusive.
In addition, the registrant has entered into indemnification agreements with each of its current directors and executive officers to provide these directors and executive officers additional contractual assurances regarding the scope of the indemnification set forth in the registrant’s restated certificate of incorporation and restated bylaws and to provide additional procedural protections. From time to time the registrant has indemnified and may in the future indemnify its directors and officers pursuant to these indemnification agreements in connection legal or regulatory proceedings. The indemnification provisions in the registrant’s restated certificate of incorporation and restated bylaws and the indemnification agreements entered into or to be 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.
The registrant has directors’ and officers’ liability insurance for its directors and officers.
Certain of the registrant’s directors are also indemnified by their employers with regard to their service on the registrant’s board of directors.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following sets forth information regarding all unregistered securities sold since January 1, 2018.
Option, RSU, and Common Stock Issuances
Since January 1, 2018 and through April 23, 2021, the registrant granted to its directors, officers, employees, consultants, and other service providers options to purchase an aggregate of 5,359,245 shares of Class B common stock under its 2014 Equity Incentive Plan, or 2014 Plan, at exercise prices ranging from $2.00 to $6.36 per share.
Since January 1, 2018 and through April 23, 2021, the registrant granted to its directors, officers, employees, consultants, and other service providers an aggregate of 9,452,160 RSUs to be settled in shares of our Class B common stock under our 2014 Stock Plan and an additional 32,500 RSUs to be settled in shares of our Class B common stock outside of its 2014 Plan.
Since January 1, 2018 and through April 23, 2021, the registrant granted options to purchase an aggregate of 300,000 shares of Class B common stock to a consultant, outside of its 2014 Plan, at an exercise price of $3.70 for obtaining certain performance milestones set forth in such consultant’s consulting and stock option agreements.
Note Issuance
In June 2020, the registrant issued unsecured, convertible promissory notes, or Convertible Notes, to four accredited investors in the aggregate principal amount of $25,000,000, at an interest rate of 2.5% per year, compounded annually; provided, however, the interest rate shall increase by 0.5% to 3.0% per annum on the two-year anniversary of the initial closing of the note financing and shall further increase by an additional 0.5% on each six month anniversary thereafter. The maturity date of the notes is the earliest to occur of: (1) June 22, 2023, or (2) an event of default under the Convertible Notes.
The Convertible Notes will automatically convert into shares of a new series of preferred stock upon a Qualified Financing Event, defined as raising gross proceeds of at least $40.0 million, or upon a Liquidity Event, defined as a change in control, a qualified initial public offering yielding gross proceeds of at least $50.0 million, or a direct listing to register existing shares of capital stock of the registrant for resale on a
major U.S. based stock exchange not pursuant to an underwritten public offering. The Convertible Notes may convert into shares of a new series of preferred stock upon a Nonqualified Financing Event, defined as a sale of shares of preferred stock that does not constitute a Qualified Financing Event, or after the maturity date at the option of the note holders. The Convertible Notes will convert into shares of our Class B common stock upon the effectiveness of the registration statement of which this prospectus forms a part.
Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.
None of the foregoing transactions involved any underwriters, underwriting discounts or commissions or any public offering, and the registrant believes each transaction was exempt from the registration requirements of the Securities Act as stated above. All recipients of the foregoing transactions either received adequate information about the registrant or had access, through their relationships with the registrant, to such information. Furthermore, the registrant affixed appropriate legends to the share certificates and instruments issued in each foregoing transaction setting forth that the securities had not been registered and the applicable restrictions on transfer.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
|
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Exhibit
Number
|
|
Description of Document
|
|
3.1
|
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|
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|
3.2
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3.3
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|
3.4
|
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4.1
|
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|
4.2
|
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|
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4.3
|
|
|
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|
5.1*
|
|
Opinion of Fenwick & West LLP.
|
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|
|
|
10.1
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10.2
|
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10.3
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|
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|
|
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10.4
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|
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10.5
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|
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|
|
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10.6
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10.7
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|
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|
|
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10.8
|
|
|
|
|
|
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10.9
|
|
|
|
|
|
|
|
10.10*
|
|
Office Lease, dated May 16, 2014, by and between Douglas Emmett 1995, LLC and ZipRecruiter, Inc.
|
|
|
|
|
|
10.11*
|
|
Consent to Sublease Agreement, dated November 14, 2014, by and among Douglas Emmett 1995, LLC, IBISWORLD, and ZipRecruiter, Inc.
|
|
|
|
|
|
10.12
|
|
|
|
|
|
|
|
10.13*
|
|
First Amendment to Office Lease, dated May 23, 2017, by and between Douglas Emmett 1995, LLC and ZipRecruiter, Inc.
|
|
|
|
|
|
10.14
|
|
|
|
|
|
|
|
10.15*
|
|
Lease Agreement, dated September 30, 2017, between Hudson 604 Arizona, LLC and ZipRecruiter, Inc.
|
|
|
|
|
|
10.16*
|
|
First Amendment to Lease Agreement, dated December 15, 2017, by and between Hudson 604 Arizona, LLC and ZipRecruiter, Inc.
|
|
|
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|
10.17
|
|
|
|
|
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10.18*
|
|
Second Amendment to Office Lease, dated May 3, 2018, by and between Douglas Emmett 1995, LLC, and ZipRecruiter, Inc.
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10.19
|
|
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10.20
|
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10.21
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10.22
|
|
|
|
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|
|
23.1*
|
|
Consent of Fenwick & West LLP (included in Exhibit 5.1).
|
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23.2
|
|
|
|
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24.1
|
|
|
________________
* To be provided by amendment
(b) Financial Statement Schedules.
All financial statement schedules are omitted because they are not applicable or the information is included in the registrant’s consolidated financial statements or related notes.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1)To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
•To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended, or Securities Act.
•To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the registration statement.
•To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
(2)That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3)To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to provisions described in Item 14 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1)For purposes of determining any liability under the Securities Act, 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 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, 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.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Santa Monica, California, on April 23, 2021.
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ZIPRECRUITER, INC.
|
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|
By:
|
/s/ Ian Siegel
|
|
|
Ian Siegel
|
|
|
Chief Executive Officer
|
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Ryan Sakamoto and David Travers, as his or her true and lawful attorneys-in-fact, proxies, and agents, each with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments or any abbreviated registration statement and any amendments thereto filed pursuant to Rule 462(b) increasing the number of securities for which registration is sought), and to file the same, with all exhibits thereto and other documents in connection therewith, with the SEC, granting unto said attorneys-in-fact, proxies, and agents 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 for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact, proxies, and agents, or their or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the date indicated.
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Signature
|
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Title
|
|
Date
|
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|
/s/ Ian Siegel
|
|
Chief Executive Officer and Director
(Principal Executive Officer)
|
|
April 23, 2021
|
|
Ian Siegel
|
|
|
|
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|
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|
|
|
/s/ David Travers
|
|
Chief Financial Officer
(Principal Financial Officer)
|
|
April 23, 2021
|
|
David Travers
|
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|
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|
|
/s/ Amy Garefis
|
|
Senior Vice President, Accounting
(Principal Accounting Officer)
|
|
April 23, 2021
|
|
Amy Garefis
|
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|
/s/ Emilie Choi
|
|
Director
|
|
April 23, 2021
|
|
Emilie Choi
|
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/s/ Cipora Herman
|
|
Director
|
|
April 23, 2021
|
|
Cipora Herman
|
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|
/s/ Blake Irving
|
|
Director
|
|
April 23, 2021
|
|
Blake Irving
|
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/s/ Brian Lee
|
|
Director
|
|
April 23, 2021
|
|
Brian Lee
|
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|
|
/s/ Eric Liaw
|
|
Director
|
|
April 23, 2021
|
|
Eric Liaw
|
|
|
FIFTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ZIPRECRUITER, INC.
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
ZipRecruiter, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”),
DOES HEREBY CERTIFY:
1. That the name of this corporation is ZipRecruiter, Inc., and that this corporation was originally incorporated pursuant to the General Corporation Law on June 29, 2010 under the name ZipRecruiter, Inc.
2. That the Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolution setting forth the proposed amendment and restatement is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as follows:
FIRST: The name of this corporation is ZipRecruiter, Inc. (the “Corporation”).
SECOND: The address of the registered office of the Corporation in the State of Delaware is 251 Little Falls Drive, in the City of Wilmington, County of New Castle 19808. The name of its registered agent at such address is Corporation Service Company.
THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.
FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 139,971,256 shares of Class A Common Stock, par value $0.00001 per share (“Class A Common Stock”), (ii) 139,971,256 shares of Class B Common Stock, par value $0.00001 per share (“Class B Common Stock” and, together with the Class A Common Stock, the “Common Stock”) and (iii) 27,288,394 shares of Preferred Stock, par value $0.00001 per share (“Preferred Stock”).
Immediately upon the date upon which this Fifth Amended and Restated Certificate of Incorporation is accepted for filing by the Secretary of State of the State of Delaware (the “Filing Date”), each share of the Corporation’s Common Stock issued and outstanding or held as treasury stock immediately prior to the Filing Date (the “Prior Common Stock”) shall,
automatically and without further action by any stockholder, be reclassified as, and shall become, one share of Class B Common Stock (the “Reclassification”).
All of the shares of Class B Common Stock issued in the Reclassification shall, pursuant to a resolution adopted by the Board of Directors, be uncertificated shares, and the person registered on the Corporation’s books as the owner of any share or shares of Prior Common Stock shall be registered on the Corporation’s books as the owner of any share or shares of Class B Common Stock issued upon the Reclassification. Each stock certificate that immediately prior to the Filing Date represented shares of Prior Common Stock shall, from and after the Filing Date, be deemed to be cancelled, shall be null and void, and shall no longer represent any interest in the Corporation’s capital stock. The Corporation shall not be obligated to issue any certificate or certificates representing shares of Class B Common Stock issued pursuant to the Reclassification.
The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK
1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.
2. Voting. Each holder of shares of Class A Common Stock shall be entitled to one vote for each share thereof held. Each holder of shares of Class B Common Stock shall be entitled to twenty (20) votes for each share thereof held. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of the Certificate of Incorporation) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law.
3. Conversion of Class B Common Stock.
3.1 Rights to Convert. Each share of Class B Common Stock shall be convertible into one (1) fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the Corporation. Before any holder of Class B Common Stock shall be entitled to convert any of such holder’s shares of such Class B Common Stock into shares of Class A Common Stock, such holder shall deliver an instruction, duly signed and authenticated in accordance with any procedures set forth in the Bylaws or any policies of the Corporation then in effect, at the principal corporate office of the Corporation or of any transfer agent for the Class B Common Stock, and shall give written notice to the Corporation at its principal corporate office of such holder’s election to convert the same and shall state therein the name or names in which the shares of Class A Common Stock issuable on conversion thereof are to be registered on the books of the Corporation. The Corporation
shall, as soon as practicable thereafter, register on the Corporation’s books ownership of the number of shares of Class A Common Stock to which such record holder of Class B Common Stock, or to which the nominee or nominees of such record holder, shall be entitled as aforesaid. Such conversion shall be deemed to have occurred immediately prior to the close of business on the date such notice of the election to convert is received by the Corporation, and the person or persons entitled to receive the shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock as of such date. Notwithstanding anything to the contrary in this Section 3.1, at no time shall any member of the Board of Directors or any executive officer (as such term is defined in the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”)) of the Corporation, any trust Beneficially Owned or controlled, directly or indirectly, by any member of the Board of Directors or any executive officer, or any general partnership or limited partnership Beneficially Owned or controlled, directly or indirectly, by a member of the Board of Directors, be permitted to optionally convert shares of Class B Common Stock into shares of Class A Common Stock pursuant to this Section 3.1.
3.2 Automatic Conversion. Each share of Class B Common Stock shall automatically, without further action by the Corporation or the holder thereof, be converted into one (1) fully paid and nonassessable share of Class A Common Stock immediately prior to the close of business on the earliest of (a) 5:00 p.m. New York time on the first Business Day falling on or after the date which is 180 days after the date on which the Founder Beneficially Owns less than 4,000,000 shares of Class B Common Stock (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like); (b) 5:00 p.m. New York time on the Business Day which is (i) ninety (90) days after the date of death or Disability of the Founder or (ii) such later date, not to exceed a total period of one hundred eighty (180) days after the date of death or Disability of the Founder, as may be approved prior to the date that is ninety (90) days after the date of death or Disability of the Founder by a majority of the Independent Directors then in office (which such later date, if any, shall be maintained by the secretary of the Corporation in writing as part of the books and records of the Corporation, a copy of which shall be furnished, without cost, to any stockholder who makes a request therefor); and (c) 5:00 p.m. New York time on the first Business Day falling on or after the date on which the Founder elects to convert all then-outstanding shares of Class B Common Stock into shares of Class A Common Stock (each of the events referred to in (a), (b), and (c) are referred to herein as an “Automatic Conversion”). The Corporation shall provide notice of the Automatic Conversion of shares of Class B Common Stock pursuant to this Article Fourth to record holders of such shares of Class B Common Stock as soon as practicable following the Automatic Conversion. Such notice shall be provided by any means then permitted by the General Corporation Law; provided, however, that no failure to give such notice nor any defect therein shall affect the validity of the Automatic Conversion. Upon and after the Automatic Conversion, the person registered on the Corporation’s books as the record holder of the shares of Class B Common Stock so converted immediately prior to the Automatic Conversion shall be registered on the Corporation’s books as the record holder of the shares of Class A Common Stock issued upon Automatic Conversion of such shares of Class B Common Stock, without further action on the part of the record holder thereof. Immediately upon the effectiveness of the Automatic Conversion, the rights of the
holders of shares of Class B Common Stock as such shall cease, and the holders shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock into which such shares of Class B Common Stock were converted.
3.3 Conversion on Transfer. On or after the closing of the IPO or the Direct Listing (the “Public Listing Date”), each share of Class B Common Stock shall automatically, without further action by the Corporation or the holder thereof, be converted into one fully paid, nonassessable share of Class A Common Stock, upon the occurrence of a Transfer (as defined below), other than a Permitted Transfer (as defined below), of such share of Class B Common Stock.
3.4 Policies and Procedures. The Corporation may, from time to time, establish such policies and procedures, not in violation of applicable law or this Restated Certificate of Incorporation or the Bylaws, relating to the conversion of shares of the Class B Common Stock into shares of Class A Common Stock as it may deem necessary or advisable. If the Corporation has reason to believe that a Transfer that is not a Permitted Transfer has occurred, the Corporation may request that the purported transferor furnish affidavits or other evidence to the Corporation as it reasonably deems necessary to determine whether a Transfer that is not a Permitted Transfer has occurred, and if such transferor does not within ten (10) days after the date of such request furnish sufficient (as determined by the Board of Directors) evidence to the Corporation (in the manner provided in the request) to enable the Corporation to determine that no such Transfer has occurred, any such shares of Class B Common Stock, to the extent not previously converted, shall be automatically converted into shares of Class A Common Stock and such conversion shall thereupon be registered on the books and records of the Corporation. In connection with any action of stockholders taken at a meeting, the stock ledger of the Corporation shall be presumptive evidence as to who are the stockholders entitled to vote in person or by proxy at any meeting of stockholders and the classes of shares held by each such stockholder and the number of shares of each class held by such stockholder.
3.5 Definitions.
3.5.1 “Beneficially Owned” has such meaning as is set forth in Rule 13d-3 of the U.S. Securities Exchange Act of 1934, as amended. “Beneficial Ownership,” “Beneficially Own” and “Beneficial Owner” shall have correlative meanings.
3.5.2 “Business Day” shall mean a day, other than Saturday, Sunday or other day on which commercial banks in New York City, New York are authorized or required by applicable law to close.
3.5.3 “Convertible Security” shall mean any evidences of indebtedness, shares of Preferred Stock or other securities (other than shares of Class B Common Stock) convertible into or exchangeable for Class A Common Stock or Class B Common Stock, either directly or indirectly.
3.5.4 “Disability” shall mean the Founder is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous
period of not less than twelve (12) months as determined by a licensed medical practitioner. In the event of a dispute whether the Founder has suffered a Disability, no Disability of the Founder shall be deemed to have occurred unless and until an affirmative ruling regarding such Disability has been made by a court of competent jurisdiction, and such ruling has become final and non-appealable.
3.5.5 “Family Member” shall mean with respect to any natural person who is a Qualified Stockholder, the spouse, domestic partner, parents, grandparents, lineal descendants, siblings and lineal descendants of siblings of such Qualified Stockholder. Lineal descendants shall include adopted persons, but only so long as they are adopted while a minor.
3.5.6 “Founder” means Ian Siegel.
3.5.7 “Independent Directors” means members of the Board of Directors that are not officers or otherwise employees of the Corporation or its subsidiaries (provided that a director shall not be considered an officer or employee of the Corporation solely due to such director’s position as a member of the Board of Directors or the board of directors or similar governing body of one or more subsidiaries of the Corporation).
3.5.8 “Option” shall mean rights, options, restricted stock units or warrants to subscribe for, purchase or otherwise acquire Class A Common Stock, Class B Common Stock or Convertible Securities (as defined above).
3.5.9 “Parent” of an entity shall mean any entity that directly or indirectly owns or controls a majority of the voting power of the voting securities of such entity.
3.5.10 “Permitted Entity” shall mean with respect to a Qualified Stockholder: (a) a Permitted Trust solely for the benefit of any combination of the following: (i) such Qualified Stockholder, (ii) one or more Family Members of such Qualified Stockholder, and/or (iii) any other Permitted Entity of such Qualified Stockholder; and/or (b) any general partnership, limited partnership, limited liability company, corporation or other entity exclusively owned by any combination of the following: (i) such Qualified Stockholder, (ii) one or more Family Members of such Qualified Stockholder, and/or (iii) any other Permitted Entity of such Qualified Stockholder.
3.5.11 “Permitted Transfer” shall mean, and be restricted to, any Transfer of a share of Class B Common Stock:
(a) by a Qualified Stockholder to (A) one or more Family Members of such Qualified Stockholder, (B) any Permitted Entity of such Qualified Stockholder, or (C) to such Qualified Stockholder’s revocable living trust, which revocable living trust is itself both a Permitted Trust and a Qualified Stockholder;
(b) by a Permitted Entity of a Qualified Stockholder to (A) such Qualified Stockholder or one or more Family Members of such Qualified Stockholder, or (B) any other Permitted Entity of such Qualified Stockholder; or
(c) by a general partnership or limited partnership that was the record holder of a share of Class B Common Stock as of the Public Listing Date to a member of the Board of Directors who is the Beneficial Owner of such shares of Class B Common Stock within the meaning of the Exchange Act; provided, however, that in the event that such a member of the Board of Directors who has received such a Permitted Transfer from a general partnership or limited partnership subsequently is no longer a member the Board of Directors, then holders of a majority of the then outstanding shares of Class B Common Stock, voting as a separate class, may cause the shares of such former director to convert automatically into an equal number of shares of Class A Common Stock upon a date specified in writing by such remaining majority of the then outstanding shares of Class B Common Stock.
3.5.12 “Permitted Transferee” shall mean a transferee of shares of Class B Common Stock received in a Permitted Transfer.
3.5.13 “Permitted Trust” shall mean a bona fide trust where each trustee is (i) a Qualified Stockholder, (ii) a Family Member, or (iii) a professional in the business of providing trustee services, including private professional fiduciaries, trust companies and bank trust departments.
3.5.14 “Qualified Stockholder” shall mean: (a) the record holder of a share of Class B Common Stock as of the Public Listing Date; (b) the initial registered holder of any shares of Class B Common Stock that are originally issued by the Corporation after the Public Listing Date pursuant to the exercise or conversion of any Option or Convertible Security that, in each case, was outstanding as of the Public Listing Date; (c) each natural person who, prior to the Public Listing Date, Transferred shares of capital stock of the Corporation to a Permitted Entity that is or becomes a Qualified Stockholder; (d) each natural person who Transferred shares of, or equity awards for, Class B Common Stock (including any Option exercisable or Convertible Security exchangeable for or convertible into shares of Class B Common Stock) to a Permitted Entity that is or becomes a Qualified Stockholder; and (e) a Permitted Transferee.
3.5.15 “Transfer” of a share of Class B Common Stock shall mean any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether voluntary or involuntary or by operation of law, including, without limitation, a transfer of a share of Class B Common Stock to a broker or other nominee (regardless of whether there is a corresponding change in Beneficial Ownership), or the transfer of, or entering into a binding agreement with respect to, Voting Control over such share by proxy or otherwise; provided, however, that the following shall not be considered a “Transfer” within the meaning of this Section 3 of this Article Fourth:
(a) the granting of a revocable proxy to officers or directors of the Corporation at the request of the Board of Directors in connection with actions to be taken at an annual or special meeting of stockholders;
(b) entering into a voting trust, agreement or arrangement (with or without granting a proxy) solely with stockholders who are holders of
Class B Common Stock that (i) is disclosed either in a Schedule 13D filed with the Securities and Exchange Commission or in writing to the Secretary of the Corporation, (ii) either has a term not exceeding one (1) year or is terminable by the holder of the shares subject thereto at any time and (iii) does not involve any payment of cash, securities, property or other consideration to the holder of the shares subject thereto other than the mutual promise to vote shares in a designated manner;
(c) entering into a voting trust, agreement or arrangement (with or without granting a proxy) pursuant to a written agreement to which the Corporation is a party;
(d) the pledge of shares of Class B Common Stock by a stockholder that creates a mere security interest in such shares pursuant to a bona fide loan or indebtedness transaction for so long as such stockholder continues to exercise Voting Control over such pledged shares; provided, however, that a foreclosure on such shares or other similar action by the pledgee shall constitute a Transfer unless such foreclosure or similar action qualifies as a Permitted Transfer;
(e) the fact that, as of the Public Listing Date or at any time after the Public Listing Date, the spouse of any holder of Class B Common Stock possesses or obtains an interest in such holder’s shares of Class B Common Stock arising solely by reason of the application of the community property laws of any jurisdiction, so long as no other event or circumstance shall exist or have occurred that constitutes a Transfer of such shares of Class B Common Stock; provided that any transfer of shares by any holder of shares of Class B Common Stock to such holder’s spouse, including a transfer in connection with a divorce proceeding, domestic relations order or similar legal requirement, shall constitute a “Transfer” of such shares of Class B Common Stock unless otherwise exempt from the definition of Transfer;
(f) entering into a trading plan pursuant to Rule 10b5-1 under the Exchange Act, with a broker or other nominee; provided, however, that a sale of such shares of Class B Common Stock pursuant to such plan shall constitute a “Transfer” at the time of such sale; or
(g) in connection with a merger or consolidation of the Corporation with or into any other entity, or in the case of any other transaction having an effect on stockholders substantially similar to that resulting from a merger or consolidation, that has been approved by the Board of Directors, the entering into a support, voting, tender or similar agreement or arrangement (in each case, with or without the grant of a proxy) that has also been approved by the Board of Directors.
A Transfer shall also be deemed to have occurred with respect to a share of Class B Common Stock beneficially held by (i) an entity that is a Permitted Entity, if there occurs any act or circumstance that causes such entity to no longer be a Permitted Entity or (ii) an entity that is a Qualified Stockholder, if, in either case, there occurs a Transfer on a cumulative basis, from and after the Public Listing Date, of a majority of the voting power of the voting securities of such entity or any direct or indirect Parent of such entity, other than a Transfer to parties that are, as of the Public Listing Date, holders of voting securities of any such entity or Parent of such entity.
3.5.16 “Voting Control” shall mean, with respect to a share of Class B Common Stock, the power (whether exclusive or shared) to vote or direct the voting of such share by proxy, voting agreement or otherwise.
3.6 Status of Converted Stock. In the event any shares of Class B Common Stock are converted into shares of Class A Common Stock pursuant to this Section 6, the shares of Class B Common Stock so converted shall be retired and shall not be reissued by the Corporation.
3.7 Reservation. The Corporation shall at all times reserve and keep available, out of its authorized and unissued shares of Class A Common Stock, solely for the purpose of effecting conversions of shares of Class B Common Stock into Class A Common Stock, such number of duly authorized shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all then outstanding shares of Class B Common Stock. If at any time the number of authorized and unissued shares of Class A Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Class B Common Stock, the Corporation shall promptly take such corporate action as may be necessary to increase its authorized but unissued shares of Class A Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, obtaining the requisite stockholder approval of any necessary amendment to this Fifth Amended and Restated Certificate of Incorporation. All shares of Class A Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable shares. The Corporation shall take all such action as may be necessary to ensure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or regulation.
B. PREFERRED STOCK
2,271,437 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. 9,116,898 shares of the authorized Preferred Stock of the Corporation are hereby designated “Series B Preferred Stock” with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to “sections” or “subsections” in this Part B of this Article Fourth refer to sections and subsections of Part B of this Article Fourth.
1. Dividends.
The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a
share of Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the applicable Original Issue Price (as defined below); provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one (1) class or series of capital stock of the Corporation, the dividend payable to the holders of Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Preferred Stock dividend. The “Series A Original Issue Price” shall mean $27.7358 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock. The “Series B Original Issue Price” shall mean $8.2909 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Preferred Stock. The “Original Issue Price” shall mean the Series A Original Issue Price with respect to the Series A Preferred Stock, and the Series B Original Issue Price with respect to the Series B Preferred Stock.
2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.
2.1 Preferential Payments to Holders of Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the holders of shares of Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders before any payment shall be made to the holders of Common Stock by reason of their ownership thereof,(i) with respect to the Series A Preferred Stock, an amount per share equal to the greater of (A) one-and-a-half (1.5) times the Series A Original Issue Price, plus any dividends declared but unpaid thereon, or (B) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter referred to as the “Series A Liquidation Amount”), and (ii) with respect to the Series B Preferred Stock, an amount per share equal to the greater of (A) one (1.0) times the Series B Original Issue Price, plus any dividends declared but unpaid thereon, or (B) such amount per share as would have been payable had all shares of Series B Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter referred to as the “Series B Liquidation Amount” and together with the Series A Liquidation Amount, the “Liquidation Amounts”). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Preferred Stock the full amount
to which they shall be entitled under this Section 2.1, the holders of shares of Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.
2.2 Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of shares of Preferred Stock, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares held by each such holder.
2.3 Deemed Liquidation Events.
2.3.1 Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless (i) the holders of at least a majority of the outstanding shares of Preferred Stock, voting together as a single class on an as-converted basis and (ii) the holders of at least a majority of the outstanding shares of Series B Preferred Stock, voting as a single class, elect otherwise:
(a) a merger or consolidation in which
(i) the Corporation is a constituent party or
(ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such merger or consolidation,
except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or
(b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.
2.3.2 Effecting a Deemed Liquidation Event.
(a) The Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Section 2.3.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the “Merger Agreement”) provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2 hereof.
(b) In the event of a Deemed Liquidation Event referred to in Section 2.3.1(a)(ii) or 2.3.1(b), if the Corporation does not effect a dissolution of the Corporation under the General Corporation Law within ninety (90) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Preferred Stock no later than the ninetieth (90th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause; (ii) to require the redemption of such shares of Preferred Stock, and (iii) if the holders of at least a majority of the then outstanding shares of Preferred Stock so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation), together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “Available Proceeds”), on the one hundred fiftieth (150th) day after such Deemed Liquidation Event, to redeem all outstanding shares of Preferred Stock at a price per share equal to the Liquidation Amounts. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Preferred Stock, the Corporation shall ratably redeem each holder’s shares of Preferred Stock to the fullest extent of such Available Proceeds, and shall redeem the remaining shares as soon as it may lawfully do so under Delaware law governing distributions to stockholders. The provisions of Section 6 shall apply, with such necessary changes in the details thereof as are necessitated by the context, to the redemption of the Preferred Stock pursuant to this Section 2.3.2(b). Prior to the distribution or redemption provided for in this Section 2.3.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business.
2.3.3 Amount Deemed Paid or Distributed. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation.
2.3.4 Allocation of Escrow and Contingent Consideration. In the event of a Deemed Liquidation Event pursuant to Section 2.3.1(a)(i), if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of
contingencies (the “Additional Consideration”), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Sections 2.1 and 2.2 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Section 2.3.4, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.
3. Voting.
3.1 General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Class B Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of the Certificate of Incorporation, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class.
3.2 Election of Directors. The holders of record of the shares of Preferred Stock, exclusively and as a separate class, shall be entitled to elect two (2) directors of the Corporation (the “Preferred Directors”) and the holders of record of the shares of Common Stock, exclusively and as a separate class, shall be entitled to elect four (4) directors of the Corporation (the “Common Directors”). Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. If the holders of shares of Preferred Stock or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class, pursuant to the first sentence of this Section 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Preferred Stock or Common Stock, as the case may be, elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class. The holders of record of the shares of Common Stock and of any other class or series of voting stock (including the Preferred Stock), exclusively and voting together as a single class, shall be entitled to elect the balance of the total number of directors of the Corporation. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director. Except as otherwise provided
in this Section 3.2, a vacancy in any directorship filled by the holders of any class or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or series or by any remaining director or directors elected by the holders of such class or series pursuant to this Section 3.2.
3.3 Preferred Stock Protective Provisions. At any time when shares of Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
3.3.1 amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation in a manner that adversely affects the powers, preferences or rights of the Preferred Stock;
3.3.2 create, or authorize the creation of, any additional class or series of capital stock;
3.3.3 (i) reclassify, alter or amend any existing security of the Corporation that is pari passu with the Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Preferred Stock in respect of any such right, preference, or privilege or (ii) reclassify, alter or amend any existing security of the Corporation that is junior to the Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Corporation, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Preferred Stock in respect of any such right, preference or privilege;
3.3.4 purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than (i) redemptions of or dividends or distributions on the Preferred Stock as expressly authorized herein, (ii) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock and (iii) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection with the cessation of such employment or service at the original purchase price;
3.3.5 create, or authorize the creation of, or issue, or authorize the issuance of any debt security, or permit any subsidiary to take any such action with respect to any debt security, if the aggregate indebtedness of the Corporation and its subsidiaries for borrowed money following such action would exceed five million dollars ($5,000,000); or
3.3.6 create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Corporation, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Corporation, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary;
3.3.7 agree to consummate (A) any acquisition by this Corporation of another entity by means of any reorganization, merger or consolidation (but excluding any reorganization, merger or consolidation effected exclusively for the purpose of a consolidation with a wholly-owned subsidiary of the Corporation or the change in domicile of the Corporation); (B) the acquisition by this Corporation of all or substantially all of the assets of another entity; or (C) the acquisition of securities representing more than fifty percent (50%) of the outstanding voting power of another entity (but excluding the securities of a wholly-owned subsidiary formed by or on behalf of the Corporation), in each case so long as the aggregate amount payable, distributable or otherwise deliverable to the stockholders of the acquired entity (including the value of this Corporation’s securities deliverable to the stockholders of the acquired entity determined in accordance with Section 2.3 above) or to the entity (or its stockholders) from whom the assets were acquired, plus the amount of any earn-out consideration, or retention amounts payable to employees of the targeted entity, is in excess of ten million dollars ($10,000,000);
3.3.8 increase or decrease the authorized number of directors constituting the Board of Directors.
3.4 Series A Preferred Stock Protective Provisions. At any time when shares of Series A Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Series A Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
3.4.1 liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any merger or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing, unless, in each case, the holders of the Series A Preferred Stock would be paid an aggregate liquidation price per share of Series A Preferred Stock immediately following such transaction equal to or greater than one-and-a-half (1.5) times the Series A Original Issue Price.
3.5 Series B Preferred Stock Protective Provisions. At any time when shares of Series B Preferred Stock are outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or the Certificate of Incorporation) the written consent or affirmative vote of the holders of at least a majority of the then outstanding shares of Series B Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may
be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect:
3.5.1 liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any merger or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing, unless, in each case, the holders of the Series B Preferred Stock would be paid an aggregate liquidation price per share of Series B Preferred Stock immediately following such transaction equal to or greater than one (1.0) times the Series B Original Issue Price.
4. Optional Conversion.
The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):
4.1 Right to Convert.
4.1.1 Conversion Ratio. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Class B Common Stock as is determined by dividing the applicable Original Issue Price by the applicable Conversion Price (as defined below) for such series in effect at the time of conversion. The “Conversion Price” shall initially be equal to $3.466975 in the case of the Series A Preferred Stock and the Series B Original Issue Price in the case of the Series B Preferred Stock. Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Class B Common Stock, shall be subject to adjustment as provided below.
4.1.2 Termination of Conversion Rights. In the event of a notice of redemption of any shares of Preferred Stock pursuant to Section 6, the Conversion Rights of the shares designated for redemption shall terminate at the close of business on the last full day preceding the date fixed for redemption, unless the redemption price is not fully paid on such redemption date, in which case the Conversion Rights for such shares shall continue until such price is paid in full. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock.
4.2 Fractional Shares. No fractional shares of Class B Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Class B Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Class B Common Stock and the aggregate number of shares of Class B Common Stock issuable upon such conversion.
4.3 Mechanics of Conversion.
4.3.1 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Class B Common Stock, such holder shall (a) provide written notice to the Corporation’s transfer agent at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holder’s shares of Preferred Stock and, if applicable, any event on which such conversion is contingent and (b), if such holder’s shares are certificated, surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent). Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the shares of Class B Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the “Conversion Time”), and the shares of Class B Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Class B Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Class B Common Stock, (ii) pay in cash such amount as provided in Section 4.2 in lieu of any fraction of a share of Class B Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.
4.3.2 Reservation of Shares. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; 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 the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation. Before taking any action which would cause an adjustment reducing the Conversion Price for a series of Preferred Stock below the then par
value of the shares of Common Stock issuable upon conversion of the Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price for such series of Preferred Stock.
4.3.3 Effect of Conversion. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Class B Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 4.2 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.
4.3.4 No Further Adjustment. Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Class B Common Stock delivered upon conversion.
4.3.5 Taxes. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Class B Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Class B Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.
4.4 Adjustments to Conversion Price for Diluting Issues.
4.4.1 Special Definitions. For purposes of this Article Fourth, the following definitions shall apply:
(a) Solely for purposes of this Section 4.4 of Article Fourth, “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Class B Common Stock or Convertible Securities.
(b) “IVP Director” has the meaning given to it in that certain Amended and Restated Voting Agreement, dated November 7, 2017, by and among the Corporation, the Investors (as defined therein) and other stockholders of the Corporation, as may be amended from time to time.
(c) “Series B Original Issue Date” shall mean the date on which the first share of Series B Preferred Stock was issued.
(d) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Class B Common Stock, but excluding Options.
(e) “Additional Shares of Common Stock” shall mean all shares of Class B Common Stock issued (or, pursuant to Section 4.4.3 below, deemed to be issued) by the Corporation after the Series B Original Issue Date, other than (1) the following shares of Class B Common Stock and (2) shares of Class B Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (1) and (2), collectively, “Exempted Securities”):
(i) shares of Class B Common Stock, Options or Convertible Securities issued as a dividend or distribution on Preferred Stock;
(ii) shares of Class B Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Section 4.5, 4.6, 4.7 or 4.8;
(iii) shares of Class B Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to the Corporation’s 2014 Equity Incentive Plan (the “2014 Plan”) (including any increase authorized under the 2014 Plan prior to the date hereof);
(iv) shares of Class B Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Corporation or any of its subsidiaries pursuant to future increases authorized under the 2014 Plan, any plan other than the 2014 Plan (including any increase to such other plan), agreement or arrangement approved by the Board of Directors of the Corporation (including the IVP Director);
(v) shares of Class B Common Stock or Convertible Securities actually issued upon the exercise of Options or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided such
issuance is pursuant to the terms of such Option or Convertible Security;
(vi) shares of Class B Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction approved by the Board of Directors of the Corporation (including the IVP Director, as that term is defined in the Corporation’s Amended and Restated Voting Agreement, dated as of the Series B Original Issue Date);
(vii) shares of Class B Common Stock, Options or Convertible Securities issued pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, provided that such issuances are approved by the Board of Directors of the Corporation (including the IVP Director); or
(viii) shares of Class B Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board of Directors of the Corporation (including the IVP Director).
4.4.2 No Adjustment of Conversion Price. No adjustment in the Conversion Price for a series of Preferred Stock shall be made as the result of the issuance or deemed issuance of Additional Shares of Common Stock if the Corporation receives written notice from the holders of at least a majority of the then outstanding shares of such series of Preferred Stock agreeing that no such adjustment shall be made as the result of the issuance or deemed issuance of such Additional Shares of Common Stock.
4.4.3 Deemed Issue of Additional Shares of Common Stock.
(a) If the Corporation at any time or from time to time after the Series B Original Issue Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall
fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Class B Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.
(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of any series of Preferred Stock pursuant to the terms of Section 4.4.4, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Class B Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the applicable Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this clause (b) shall have the effect of increasing the Conversion Price for any series of Preferred Stock to an amount which exceeds the lower of (i) the Conversion Price for such series of Preferred Stock in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Conversion Price for such series of Preferred Stock that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.
(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price for a series of Preferred Stock pursuant to the terms of Section 4.4.4 (either because the consideration per share (determined pursuant to Section 4.4.5) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price for such series of Preferred Stock then in effect, or because such Option or Convertible Security was issued before the Series B Original Issue Date), are revised after the Series B Original Issue Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase in the number of shares of Class B Common Stock issuable upon the exercise, conversion or exchange
of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 4.4.3(a) shall be deemed to have been issued effective upon such increase or decrease becoming effective.
(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price for a series of Preferred Stock pursuant to the terms of Section 4.4.4, the Conversion Price for such series of Preferred Stock shall be readjusted to such Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
(e) If the number of shares of Class B Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price for a series of Preferred Stock provided for in this Section 4.4.3 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (b) and (c) of this Section 4.4.3). If the number of shares of Class B Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price for a series of Preferred Stock that would result under the terms of this Section 4.4.3 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Conversion Price for such series of Preferred Stock that such issuance or amendment took place at the time such calculation can first be made.
4.4.4 Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the Series B Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 4.4.3), without consideration or for a consideration per share less than the Conversion Price for a series of Preferred Stock in effect immediately prior to such issue, then the Conversion Price for such series of Preferred Stock shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-hundredth of a cent) determined in accordance with the following formula:
CP2 = CP1* (A + B) ÷ (A + C).
For purposes of the foregoing formula, the following definitions shall apply:
(a) “CP2” shall mean the Conversion Price for such series of Preferred Stock in effect immediately after such issue of Additional Shares of Common Stock
(b) “CP1” shall mean the Conversion Price for such series of Preferred Stock in effect immediately prior to such issue of Additional Shares of Common Stock;
(c) “A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Class B Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);
(d) “B” shall mean the number of shares of Class B Common Stock that would have been issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and
(e) “C” shall mean the number of such Additional Shares of Common Stock issued in such transaction.
4.4.5 Determination of Consideration. For purposes of this Section 4.4, the consideration received by the Corporation for the issue of any Additional Shares of Common Stock shall be computed as follows:
(a) Cash and Property: Such consideration shall:
(i) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;
(ii) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors of the Corporation; and
(iii) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in
clauses (i) and (ii) above, as determined in good faith by the Board of Directors of the Corporation.
(b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 4.4.3, relating to Options and Convertible Securities, shall be determined by dividing:
(i) The total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by
(ii) the maximum number of shares of Class B Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.
4.4.6 Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price for a series of Preferred Stock pursuant to the terms of Section 4.4.4, and such issuance dates occur within a period of no more than ninety (90) days from the first such issuance to the final such issuance, then, upon the final such issuance, the Conversion Price for such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they
occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).
4.5 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time following the date hereof effect a subdivision of the outstanding Class B Common Stock, the Conversion Price for a series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Class B Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Class B Common Stock outstanding. If the Corporation shall at any time or from time to time following the date hereof combine the outstanding shares of Class B Common Stock, the Conversion Price for a series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Class B Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Class B Common Stock outstanding. Any adjustment under this Section 4.5 shall become effective at the close of business on the date the subdivision or combination becomes effective.
4.6 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series B Original Issue Date shall make or issue, or fix a record date for the determination of holders of Class B Common Stock entitled to receive, a dividend or other distribution payable on the Class B Common Stock in additional shares of Class B Common Stock, then and in each such event the Conversion Price for a series of Preferred Stock in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price for such series of Preferred Stock then in effect by a fraction:
(1) the numerator of which shall be the total number of shares of Class B Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and
(2) the denominator of which shall be the total number of shares of Class B Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Class B Common Stock issuable in payment of such dividend or distribution.
Notwithstanding the foregoing (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for such series of Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for such series of Preferred Stock shall be adjusted pursuant to this Section 4.6 as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of such series of Preferred Stock simultaneously receive a dividend or other distribution of shares of Class B Common Stock in a number equal to the number of shares of Class B Common Stock as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Class B Common Stock on the date of such event.
4.7 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Series B Original Issue Date shall make or issue, or fix a record date for the determination of holders of Class B Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Class B Common Stock in respect of outstanding shares of Class B Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of Preferred Stock shall receive, simultaneously with the distribution to the holders of Class B Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Preferred Stock had been converted into Class B Common Stock on the date of such event.
4.8 Adjustment for Merger or Reorganization, etc. Subject to the provisions of Section 2.3, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Class B Common Stock (but not one or more series of Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Sections 4.4, 4.6 or 4.7), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Preferred Stock shall thereafter be convertible in lieu of the Class B Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Class B Common Stock of the Corporation issuable upon conversion of one share of such series of Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the such series of Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price of such series of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of such series of Preferred Stock.
4.9 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of any series of Preferred Stock pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of such series of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the such series of Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of any series of Preferred Stock (but in any event not later than ten (10) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the Conversion Price for such series of Preferred Stock then in effect, and (ii) the number of shares
of Class B Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of such series of Preferred Stock.
4.10 Notice of Record Date. In the event:
(a) the Corporation shall take a record of the holders of its Class B Common Stock (or other capital stock or securities at the time issuable upon conversion of Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or
(b) of any capital reorganization of the Corporation, any reclassification of the Class B Common Stock of the Corporation, or any Deemed Liquidation Event; or
(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation, then, and in each such case, the Corporation will send or cause to be sent to the holders of Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Class B Common Stock (or such other capital stock or securities at the time issuable upon the conversion of Preferred Stock) shall be entitled to exchange their shares of Class B Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least ten (10) days prior to the record date or effective date for the event specified in such notice; provided that, in either case, such notice may be shortened and/or notice may be waived upon the Corporation’s receipt of written consent of the holders of at least a majority of the then outstanding shares of Preferred Stock.
5. Mandatory Conversion.
5.1 Trigger Events. Upon either (a) the closing of the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the “Securities Act”), resulting in gross proceeds to the Corporation (before underwriting discounts, commissions or fees) of at least $100,000,000 (an “IPO”), (b) the effectiveness of a registration statement on Form S-1 under the Securities Act by the Corporation for the offer and sale of securities held by existing Corporation stockholders, whereby the Corporation’s Class A Common Stock is listed on a major U.S. based stock exchange such as The New York Stock Exchange or The Nasdaq Stock Market LLC and not done in connection with an underwritten public offering (a “Direct Listing”); or (c) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least a majority of the then outstanding shares of the Series A Preferred Stock (voting separately as a class) and the holders of at least a majority of the then outstanding shares of the Series B Preferred Stock (voting separately as a
class) (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), then (i) all outstanding shares of Preferred Stock shall automatically be converted into shares of Class B Common Stock, at the then effective conversion rate as calculated pursuant to Section 4.1.1; provided that, under clauses (a) or (b) above, (A) with respect to the Series A Preferred Stock, if the price per share in such offering is less than $6.93395 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock following the date hereof) (the “Minimum Series A Preferred Price”), all outstanding shares of Series A Preferred Stock shall automatically be converted into (1) a number of shares of Class B Common Stock, at the then effective conversion rate as calculated pursuant to Section 4.1.1, multiplied by (2) a fraction, the numerator of which is the Minimum Series A Preferred Price, and the denominator of which is the per share price in such offering, and (B) with respect to the Series B Preferred Stock, if the price per share in such offering is less than $2.072725 (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Common Stock following the date hereof) (the “Minimum Series B Preferred Price”), all outstanding shares of Series B Preferred Stock shall automatically be converted into (1) a number of shares of Class B Common Stock, at the then effective conversion rate as calculated pursuant to Section 4.1.1, multiplied by (2) a fraction, the numerator of which is the Minimum Series B Preferred Price, and the denominator of which is the per share price in such offering, and (ii) such shares may not be reissued by the Corporation.
5.2 Procedural Requirements. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock in certificated form shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Section 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender any certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of any certificate or certificates of such holders (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Section 5.2. As soon as practicable after the Mandatory Conversion Time and, if applicable, the surrender of any certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Class B
Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in Section 4.2 in lieu of any fraction of a share of Class B Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.
6. Redemption.
6.1 General. Unless prohibited by Delaware law governing distributions to stockholders and so long as the Corporation has sufficient funds without the need to obtain financing therefor, shares of Series A Preferred Stock shall be redeemed by the Corporation at a price equal to one-and-a-half (1.5) times the Series A Original Issue Price (the “Series A Redemption Price”) and the shares of Series B Preferred Stock shall be redeemed by the Corporation at the Series B Original Issue Price (the “Series B Redemption Price”, and together with the Series A Redemption Price, each a “Redemption Price”), on the fifth (5th) anniversary of the Series B Original Issue Date (the “Redemption Date”), following receipt by the Corporation at least sixty (60) days prior to the Redemption Date, from the holders of at least a majority of the then outstanding shares of such series of Preferred Stock, of written notice requesting redemption of all shares of such series of Preferred Stock (the “Redemption Request”). Upon receipt of a Redemption Request, the Corporation shall apply all of its assets to any such redemption, and to no other corporate purpose, except to the extent prohibited by Delaware law governing distributions to stockholders. If, on any Redemption Date, Delaware law governing distributions to stockholders prevents the Corporation from redeeming all shares of Preferred Stock to be redeemed, the Corporation shall ratably redeem the maximum number of shares that it may redeem consistent with such law, and shall redeem the remaining shares as soon as it may lawfully do so under such law.
6.2 Redemption Notice. The Corporation shall send written notice of redemption (the “Redemption Notice”) to each holder of record of a series of Preferred Stock not less than forty (40) days prior to each Redemption Date. Each Redemption Notice shall state:
(a) the number and series of shares of Preferred Stock held by the holder that the Corporation shall redeem on the Redemption Date;
(b) the Redemption Date and the applicable Redemption Price;
(c) the date upon which the holder’s right to convert such shares terminates (as determined in accordance with Section 4.1); and
(d) for holders of shares in certificated form, that the holder is to surrender to the Corporation, in the manner and at the place designated, his, her or its certificate or certificates representing the shares of Preferred Stock to be redeemed.
If the Corporation receives, on or prior to the twentieth (20th) day after the date of delivery of the Redemption Notice to a holder of Preferred Stock, written notice from such holder that such
holder elects to be excluded from the redemption provided in this Section 6, then the shares of Preferred Stock registered on the books of the Corporation in the name of such holder at the time of the Corporation’s receipt of such notice shall thereafter be “Excluded Shares.” Excluded Shares shall not be redeemed or redeemable pursuant to this Section 6, whether on such Redemption Date or thereafter.
6.3 Surrender of Certificates; Payment. On or before the Redemption Date, each holder of shares of Preferred Stock to be redeemed, unless such holder has exercised his, her or its right to convert such shares as provided in Section 4, shall, if a holder of shares in certificated form, surrender the certificate or certificates representing such shares (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation, in the manner and at the place designated in the Redemption Notice, and thereupon the Redemption Price for such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof. In the event less than all of the shares of Preferred Stock represented by a certificate are redeemed, a new certificate, instrument, or book entry representing the unredeemed shares of Preferred Stock shall promptly be issued to such holder.
6.4 Rights Subsequent to Redemption. If the Redemption Notice shall have been duly given, and if on the Redemption Date the Redemption Price payable upon redemption of the shares of Preferred Stock to be redeemed on the Redemption Date is paid or tendered for payment or deposited with an independent payment agent so as to be available therefor in a timely manner, then notwithstanding that any certificates evidencing any of the shares of Preferred Stock so called for redemption shall not have been surrendered, dividends with respect to such shares of Preferred Stock shall cease to accrue after such Redemption Date and all rights with respect to such shares shall forthwith after the Redemption Date terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of any such certificate or certificates therefor.
7. Redeemed or Otherwise Acquired Shares. Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption.
8. Waiver. Any of the rights, powers, preferences and other terms of a series of Preferred Stock set forth herein may be waived on behalf of all holders of such series of Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of such series of Preferred Stock then outstanding. Any of the rights, powers, preferences and other terms of the Preferred Stock set forth herein may be waived on behalf of all holders of the Preferred Stock by the affirmative written consent or vote of the holders of at least a majority of the shares of the Preferred Stock then outstanding.
9. Notices. Any notice required or permitted by the provisions of this Article Fourth to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to
the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission.
FIFTH: Subject to any additional vote required by the Certificate of Incorporation or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.
SIXTH: Subject to any additional vote required by the Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.
SEVENTH: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.
EIGHTH: Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.
NINTH: To the fullest extent permitted by law, 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. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Ninth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law 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, 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.
TENTH: To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the 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 General Corporation Law.
Any amendment, repeal or modification of the foregoing provisions of this Article Tenth shall not adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification.
ELEVENTH: The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation.
TWELFTH: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for any stockholder (including a Beneficial Owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or the Corporation’s certificate of incorporation or bylaws or (iv) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten (10) days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. If any provision or provisions of this Article Twelfth shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article Twelfth (including, without limitation, each portion of any sentence of this Article Twelfth containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.
THIRTEENTH: For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Common Stock permitted under this Fifth Amended and Restated Certificate of Incorporation from employees, officers, directors or consultants of the Corporation in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board of Directors (in addition to any other consent required under this Fifth Amended and Restated Certificate of Incorporation), such repurchase may be made without regard to any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined in Section 500 of the California Corporations Code). Accordingly, for purposes of making any calculation
under California Corporations Code Section 500 in connection with such repurchase, the amount of any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined therein) shall be deemed to be zero (0).
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3. That the foregoing amendment and restatement was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.
4. That this Fifth Amended and Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this Corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, this Fifth Amended and Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 22nd day of April, 2021.
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By:
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/s/ Ian Siegel
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Name:
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Ian Siegel
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Title:
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Chief Executive Officer
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ZIPRECRUITER, INC.
SIXTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
ZipRecruiter, Inc., a Delaware corporation, hereby certifies as follows:
1. The name of this corporation is ZipRecruiter, Inc. The date of the filing of its original Certificate of Incorporation with the Secretary of State was July 29, 2010.
2. The Restated Certificate of Incorporation of this corporation attached hereto as Exhibit A, which is incorporated herein by this reference, and which restates, integrates and further amends the provisions of the Certificate of Incorporation of this corporation, as previously amended and/or restated, has been duly adopted by this corporation’s Board of Directors and by the stockholders in accordance with Sections 242 and 245 of the General Corporation Law of the State of Delaware, with the approval of this corporation’s stockholders having been given by written consent without a meeting in accordance with Section 228 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this corporation has caused this Restated Certificate of Incorporation to be signed by its duly authorized officer and the foregoing facts stated herein are true and correct.
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Dated:
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[l], 2021
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ZipRecruiter, Inc.
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By:
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Name:
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Ian Siegel
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Title:
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Chief Executive Officer
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EXHIBIT A
ZIPRECRUITER, INC.
SIXTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
ARTICLE I: NAME
The name of this corporation is ZipRecruiter, Inc. (the “Corporation”).
ARTICLE II: AGENT FOR SERVICE OF PROCESS
The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle, Zip Code 19808, and the name of the registered agent of the Corporation in the State of Delaware at such address is Corporation Service Company.
ARTICLE III: PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (the “General Corporation Law”).
ARTICLE IV: AUTHORIZED STOCK
1. Total Authorized.
1.1. The total number of shares of all classes of stock that the Corporation has authority to issue is 1,400,000,000 shares, consisting of three classes: 700,000,000 shares of Class A Common Stock, $0.00001 par value per share (“Class A Common Stock”); 700,000,000 shares of Class B Common Stock, $0.00001 par value per share (“Class B Common Stock” and together with the Class A Common Stock, the “Common Stock”); and 50,000,000 shares of Preferred Stock, $0.00001 par value per share (the “Preferred Stock”).
1.2. The number of authorized shares of Class A Common Stock or Class B Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, and no vote of the holders of the Class A Common Stock or Class B Common Stock voting separately as a class shall be required therefor.
2. Preferred Stock.
2.1. The Corporation’s Board of Directors (“Board of Directors”) is authorized, subject to any limitations prescribed by the law of the State of Delaware, by resolution or resolutions adopted from time to time, to provide for the issuance of shares of Preferred Stock in one or more series, and, by filing a certificate of designation pursuant to the applicable law of the State of Delaware (“Certificate of Designation”), to establish from time to time the number of shares to be included in each
such series, to fix the designation, powers (including voting powers), preferences and relative, participating, optional or other special rights (and the qualifications, limitations or restrictions thereof) of the shares of each such series and, except where otherwise provided in the applicable Certificate of Designation, to increase (but not above the total number of authorized shares of the Preferred Stock) or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, without a separate vote of the holders of the Preferred Stock, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law, unless a separate vote of the holders of one or more series is required pursuant to the terms of any Certificate of Designation.
2.2. Except as otherwise expressly provided in any Certificate of Designation designating any series of Preferred Stock pursuant to the foregoing provisions of this Article IV, (i) any new series of Preferred Stock may be designated, fixed and determined as provided herein by the Board of Directors without approval of the holders of Common Stock or the holders of Preferred Stock, or any series thereof, and (ii) any such new series may have powers, preferences and rights, including, without limitation, voting powers, dividend rights, liquidation rights, redemption rights and conversion rights, senior to, junior to or pari passu with the rights of the Common Stock, any series of the Preferred Stock, or any future class or series of capital stock of the Corporation.
3. Rights of Class A Common Stock and Class B Common Stock.
3.1. Equal Status. Except as otherwise provided in this Restated Certificate of Incorporation or required by applicable law, shares of Class A Common Stock and Class B Common Stock shall have the same rights and powers, rank equally (including as to dividends and distributions, and upon any liquidation, dissolution or winding up of the Corporation), share ratably and be identical in all respects and as to all matters.
3.2. Voting Rights. Except as otherwise expressly provided by this Restated Certificate of Incorporation or as required by law, the holders of shares of Class A Common Stock and Class B Common Stock shall (a) at all times vote together as a single class on all matters (including the election of directors) submitted to a vote of the stockholders of the Corporation, (b) be entitled to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation (as the same may be amended and/or restated from time to time, the “Bylaws”) and (c) be entitled to vote upon such matters and in such manner as may be provided by applicable law; provided, however, that, except as otherwise required by law, holders of shares of Class A Common Stock and Class B Common Stock shall not be entitled to vote on any amendment to this Restated Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Restated Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock). Except as otherwise expressly provided herein or required by applicable law, each holder of Class A Common Stock shall have the right to one (1) vote per share of Class A Common Stock held of record by such holder and each holder of Class B Common Stock shall have the right to twenty (20) votes per share of Class B Common Stock held of record by such holder.
3.3. Dividends and Distribution Rights. Shares of Class A Common Stock and Class B Common Stock shall be treated equally, identically and ratably, on a per share basis, with respect
to any dividends or distributions as may be declared and paid from time to time by the Board of Directors out of any assets of the Corporation legally available therefor; provided, however, that in the event a dividend is paid in the form of shares of Class A Common Stock or Class B Common Stock (or rights to acquire such shares), then holders of Class A Common Stock shall receive shares of Class A Common Stock (or rights to acquire such shares, as the case may be) and holders of Class B Common Stock shall receive shares of Class B Common Stock (or rights to acquire such shares, as the case may be), with holders of shares of Class A Common Stock and Class B Common Stock receiving, on a per share basis, an identical number of shares of Class A Common Stock or Class B Common Stock, as applicable. Notwithstanding the foregoing, the Board of Directors may pay or make a disparate dividend or distribution per share of Class A Common Stock or Class B Common Stock (whether in the amount of such dividend or distribution payable per share, the form in which such dividend or distribution is payable, the timing of the payment, or otherwise) if such disparate dividend or distribution is approved in advance by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of Class A Common Stock and Class B Common Stock, each voting separately as a class.
3.4. Subdivisions, Combinations or Reclassifications. Shares of Class A Common Stock or Class B Common Stock may not be subdivided, combined or reclassified unless the shares of the other class are concurrently therewith proportionately subdivided, combined or reclassified in a manner that maintains the same proportionate equity ownership between the holders of the outstanding Class A Common Stock and Class B Common Stock on the record date for such subdivision, combination or reclassification; provided, however, that shares of one such class may be subdivided, combined or reclassified in a different or disproportionate manner if such subdivision, combination or reclassification is approved in advance by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of Class A Common Stock and Class B Common Stock, each voting separately as a class.
3.5. Liquidation, Dissolution or Winding Up. Subject to the preferential or other rights of any holders of Preferred Stock then outstanding, upon the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, holders of Class A Common Stock and Class B Common Stock will be entitled to receive ratably, on a per share basis, all assets of the Corporation available for distribution to its stockholders unless disparate or different treatment of the shares of each such class with respect to distributions upon any such liquidation, dissolution or winding up is approved in advance by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of Class A Common Stock and Class B Common Stock, each voting separately as a class.
3.6. Merger or Consolidation. In the case of any distribution or payment made or other consideration paid in respect, or upon conversion or exchange, of the shares of Class A Common Stock or Class B Common Stock upon the merger or consolidation of the Corporation with or into any other entity, or in the case of any other transaction having an effect on stockholders substantially similar to that resulting from a merger or consolidation, such distribution or payment shall be made, or other consideration shall be paid, ratably on a per share basis among the holders of the Class A Common Stock and Class B Common Stock as a single class; provided, however, that shares of one such class may receive different or disproportionate distributions, payments, or other consideration in connection with such merger, consolidation or other transaction if (i) the only difference in the per share distribution, payment, or other consideration to the holders of the Class A Common Stock and Class B Common Stock is that any securities that a holder of a share of Class B Common Stock receives as part of such merger, consolidation or other transaction upon conversion or in exchange for such holder’s Class B Common
Stock shall have twenty (20) times the voting power of any securities that a holder of a share of Class A Common Stock receives as part of such merger, consolidation or other transaction upon conversion or in exchange for such holder’s Class A Common Stock, or (ii) such merger, consolidation or other transaction is approved by the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of Class A Common Stock and Class B Common Stock, each voting separately as a class.
ARTICLE V: CLASS B COMMON STOCK CONVERSION
1. Optional Conversion. Each share of Class B Common Stock shall be convertible into one (1) fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof at any time upon written notice to the Corporation. Before any holder of Class B Common Stock shall be entitled to convert any of such holder’s shares of such Class B Common Stock into shares of Class A Common Stock, such holder shall deliver an instruction, duly signed and authenticated in accordance with any procedures set forth in the Bylaws or any policies of the Corporation then in effect, at the principal corporate office of the Corporation or of any transfer agent for the Class B Common Stock, and shall give written notice to the Corporation at its principal corporate office of such holder’s election to convert the same and shall state therein the name or names in which the shares of Class A Common Stock issuable on conversion thereof are to be registered on the books of the Corporation. The Corporation shall, as soon as practicable thereafter, register on the Corporation’s books ownership of the number of shares of Class A Common Stock to which such record holder of Class B Common Stock, or to which the nominee or nominees of such record holder, shall be entitled as aforesaid. Such conversion shall be deemed to have occurred immediately prior to the close of business on the date such notice of the election to convert is received by the Corporation, and the person or persons entitled to receive the shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock as of such date.
2. Automatic Conversion. Each share of Class B Common Stock shall automatically, without further action by the Corporation or the holder thereof, be converted into one (1) fully paid and nonassessable share of Class A Common Stock immediately prior to the close of business on the earliest of (a) 5:00 p.m. New York time on the first Business Day falling on or after the date which is 180 days after the date on which the Founder Beneficially Owns less than 4,000,000 shares of Class B Common Stock (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations or the like); (b) 5:00 p.m. New York time on the Business Day which is (i) ninety (90) days after the date of death or Disability of the Founder or (ii) such later date, not to exceed a total period of one hundred eighty (180) days after the date of death or Disability of the Founder, as may be approved prior to the date that is ninety (90) days after the date of death or Disability of the Founder by a majority of the Independent Directors then in office (which such later date, if any, shall be maintained by the secretary of the Corporation in writing as part of the books and records of the Corporation, a copy of which shall be furnished, without cost, to any stockholder who makes a request therefor); and (c) 5:00 p.m. New York time on the first Business Day falling on or after the date on which the Founder elects to convert all then-outstanding shares of Class B Common Stock into shares of Class A Common Stock (each of the events referred to in (a), (b), and (c) are referred to herein as an “Automatic Conversion”). The Corporation shall provide notice of the Automatic Conversion of shares of Class B Common Stock pursuant to this Article Fourth to record holders of such shares of Class B Common Stock as soon as practicable following the Automatic Conversion. Such notice shall be provided by any means then permitted by the General Corporation Law; provided, however, that no failure to give such notice nor any defect therein shall affect the validity of the Automatic Conversion. Upon and after the Automatic Conversion, the person registered on the Corporation’s books as the record holder of the shares of Class B Common Stock
so converted immediately prior to the Automatic Conversion shall be registered on the Corporation’s books as the record holder of the shares of Class A Common Stock issued upon Automatic Conversion of such shares of Class B Common Stock, without further action on the part of the record holder thereof. Immediately upon the effectiveness of the Automatic Conversion, the rights of the holders of shares of Class B Common Stock as such shall cease, and the holders shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock into which such shares of Class B Common Stock were converted.
3. Conversion on Transfer. Each share of Class B Common Stock shall automatically, without further action by the Corporation or the holder thereof, be converted into one (1) fully paid and nonassessable share of Class A Common Stock, upon the occurrence of a Transfer (as defined below), other than a Permitted Transfer (as defined below), of such share of Class B Common Stock.
4. Policies and Procedures. The Corporation may, from time to time, establish such policies and procedures, not in violation of applicable law or this Restated Certificate of Incorporation or the Bylaws, relating to the conversion of shares of the Class B Common Stock into shares of Class A Common Stock as it may deem necessary or advisable. If the Corporation has reason to believe that a Transfer that is not a Permitted Transfer has occurred, the Corporation may request that the purported transferor furnish affidavits or other evidence to the Corporation as it reasonably deems necessary to determine whether a Transfer that is not a Permitted Transfer has occurred, and if such transferor does not within ten (10) days after the date of such request furnish sufficient (as determined by the Board of Directors or a committee thereof) evidence to the Corporation (in the manner provided in the request) to enable the Corporation to determine that no such Transfer has occurred, any such shares of Class B Common Stock, to the extent not previously converted, shall be automatically converted into shares of Class A Common Stock on a one-to-one basis, and such conversion shall thereupon be registered on the books and records of the Corporation. In connection with any action of stockholders taken at a meeting, the stock ledger of the Corporation shall be presumptive evidence as to who are the stockholders entitled to vote in person or by proxy at any meeting of stockholders and the classes of shares held by each such stockholder and the number of shares of each class held by such stockholder.
5. Definitions.
(a) “Beneficially Owned” has such meaning as is set forth in Rule 13d-3 of the U.S. Securities Exchange Act of 1934, as amended. “Beneficial Ownership,” “Beneficially Own” and “Beneficial Owner” shall have correlative meanings.
(b) “Business Day” shall mean a day, other than Saturday, Sunday or other day on which commercial banks in New York City, New York are authorized or required by applicable law to close.
(c) “Convertible Security” shall mean any evidences of indebtedness, shares of Preferred Stock or other securities (other than shares of Class B Common Stock) convertible into or exchangeable for Class A Common Stock or Class B Common Stock, either directly or indirectly.
(d) “Disability” shall mean the Founder is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months as determined by a licensed medical practitioner. In the event of a dispute whether the Founder has suffered a Disability, no Disability of the Founder shall be deemed to have occurred unless and until
an affirmative ruling regarding such Disability has been made by a court of competent jurisdiction, and such ruling has become final and non-appealable.
(e) “Effective Date” shall mean the date on which the Securities and Exchange Commission (the “Commission”) declares effective the Corporation’s registration statement on Form S-1 (No. 333-[●]).
(f) “Family Member” shall mean with respect to any natural person who is a Qualified Stockholder, the spouse, domestic partner, parents, grandparents, lineal descendants, siblings and lineal descendants of siblings of such Qualified Stockholder. Lineal descendants shall include adopted persons, but only so long as they are adopted while a minor.
(g) “Founder” means Ian Siegel.
(h) “Independent Directors” means members of the Board of Directors that are not officers or otherwise employees of the Corporation or its subsidiaries (provided that a director shall not be considered an officer or employee of the Corporation solely due to such director’s position as a member of the Board of Directors or the board of directors or similar governing body of one or more subsidiaries of the Corporation).
(i) “Option” shall mean rights, options, restricted stock units or warrants to subscribe for, purchase or otherwise acquire Class A Common Stock, Class B Common Stock or Convertible Securities (as defined above).
(j) “Parent” of an entity shall mean any entity that directly or indirectly owns or controls a majority of the voting power of the voting securities of such entity.
(k) “Permitted Entity” shall mean with respect to a Qualified Stockholder: (a) a Permitted Trust solely for the benefit of any combination of the following: (i) such Qualified Stockholder, (ii) one or more Family Members of such Qualified Stockholder, and/or (iii) any other Permitted Entity of such Qualified Stockholder; and/or (b) any general partnership, limited partnership, limited liability company, corporation or other entity exclusively owned by any combination of the following: (i) such Qualified Stockholder, (ii) one or more Family Members of such Qualified Stockholder, and/or (iii) any other Permitted Entity of such Qualified Stockholder.
(l) “Permitted Transfer” shall mean, and be restricted to, any Transfer of a share of Class B Common Stock:
(i) by a Qualified Stockholder to (A) one or more Family Members of such Qualified Stockholder, (B) any Permitted Entity of such Qualified Stockholder, or (C) to such Qualified Stockholder’s revocable living trust, which revocable living trust is itself both a Permitted Trust and a Qualified Stockholder;
(ii) by a Permitted Entity of a Qualified Stockholder to (A) such Qualified Stockholder or one or more Family Members of such Qualified Stockholder, or (B) any other Permitted Entity of such Qualified Stockholder; or
(iii) by a general partnership or limited partnership that was the record holder of a share of Class B Common Stock as of the Effective Date to a member of the Board of Directors who is the “Beneficial Owner” of such shares of Class B Common Stock within the meaning of
the Exchange Act; provided, however, that in the event that such a member of the Board of Directors who has received such a Permitted Transfer from a general partnership or limited partnership subsequently is no longer a member the Board of Directors, then holders of a majority of the then outstanding shares of Class B Common Stock, voting as a separate class, may cause the shares of such former director to convert automatically into an equal number of shares of Class A Common Stock upon a date specified in writing by such remaining majority of the then outstanding shares of Class B Common Stock.
(m) “Permitted Transferee” shall mean a transferee of shares of Class B Common Stock received in a Permitted Transfer.
(n) “Permitted Trust” shall mean a bona fide trust where each trustee is (i) a Qualified Stockholder, (ii) a Family Member, or (iii) a professional in the business of providing trustee services, including private professional fiduciaries, trust companies and bank trust departments.
(o) “Qualified Stockholder” shall mean: (a) the record holder of a share of Class B Common Stock as of the Effective Date; (b) the initial registered holder of any shares of Class B Common Stock that are originally issued by the Corporation after the Effective Date pursuant to the exercise or conversion of any Option or Convertible Security that, in each case, was outstanding as of the Effective Date; (c) each natural person who, prior to the Effective Date, Transferred shares of capital stock of the Corporation to a Permitted Entity that is or becomes a Qualified Stockholder; (d) each natural person who Transferred shares of, or equity awards for, Class B Common Stock (including any Option exercisable or Convertible Security exchangeable for or convertible into shares of Class B Common Stock) to a Permitted Entity that is or becomes a Qualified Stockholder; and (e) a Permitted Transferee.
(p) “Transfer” of a share of Class B Common Stock shall mean any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether voluntary or involuntary or by operation of law, including, without limitation, a transfer of a share of Class B Common Stock to a broker or other nominee (regardless of whether there is a corresponding change in Beneficial Ownership), or the transfer of, or entering into a binding agreement with respect to, Voting Control over such share by proxy or otherwise; provided, however, that the following shall not be considered a “Transfer” within the meaning of this Section 3 of this Article Fourth:
(i) the granting of a revocable proxy to officers or directors of the Corporation at the request of the Board of Directors in connection with actions to be taken at an annual or special meeting of stockholders;
(ii) entering into a voting trust, agreement or arrangement (with or without granting a proxy) solely with stockholders who are holders of Class B Common Stock that (i) is disclosed either in a Schedule 13D filed with the Securities and Exchange Commission or in writing to the Secretary of the Corporation, (ii) either has a term not exceeding one (1) year or is terminable by the holder of the shares subject thereto at any time and (iii) does not involve any payment of cash, securities, property or other consideration to the holder of the shares subject thereto other than the mutual promise to vote shares in a designated manner;
(iii) entering into a voting trust, agreement or arrangement (with or without granting a proxy) pursuant to a written agreement to which the Corporation is a party;
(iv) the pledge of shares of Class B Common Stock by a stockholder that creates a mere security interest in such shares pursuant to a bona fide loan or indebtedness transaction
for so long as such stockholder continues to exercise Voting Control over such pledged shares; provided, however, that a foreclosure on such shares or other similar action by the pledgee shall constitute a Transfer unless such foreclosure or similar action qualifies as a Permitted Transfer;
(v) the fact that, as of the Effective Date or at any time after the Effective Date, the spouse of any holder of Class B Common Stock possesses or obtains an interest in such holder’s shares of Class B Common Stock arising solely by reason of the application of the community property laws of any jurisdiction, so long as no other event or circumstance shall exist or have occurred that constitutes a Transfer of such shares of Class B Common Stock; provided that any transfer of shares by any holder of shares of Class B Common Stock to such holder’s spouse, including a transfer in connection with a divorce proceeding, domestic relations order or similar legal requirement, shall constitute a “Transfer” of such shares of Class B Common Stock unless otherwise exempt from the definition of Transfer;
(vi) entering into a trading plan pursuant to Rule 10b5-1 under the Exchange Act, with a broker or other nominee; provided, however, that a sale of such shares of Class B Common Stock pursuant to such plan shall constitute a “Transfer” at the time of such sale; or
(vii) in connection with a merger or consolidation of the Corporation with or into any other entity, or in the case of any other transaction having an effect on stockholders substantially similar to that resulting from a merger or consolidation, that has been approved by the Board of Directors, the entering into a support, voting, tender or similar agreement or arrangement (in each case, with or without the grant of a proxy) that has also been approved by the Board of Directors.
A Transfer shall also be deemed to have occurred with respect to a share of Class B Common Stock beneficially held by (i) an entity that is a Permitted Entity, if there occurs any act or circumstance that causes such entity to no longer be a Permitted Entity or (ii) an entity that is a Qualified Stockholder, if, in either case, there occurs a Transfer on a cumulative basis, from and after the Effective Date, of a majority of the voting power of the voting securities of such entity or any direct or indirect Parent of such entity, other than a Transfer to parties that are, as of the Effective Date, holders of voting securities of any such entity or Parent of such entity.
(q) “Voting Control” shall mean, with respect to a share of Class B Common Stock, the power (whether exclusive or shared) to vote or direct the voting of such share by proxy, voting agreement or otherwise.
6. Status of Converted Stock. In the event any shares of Class B Common Stock are converted into shares of Class A Common Stock pursuant to this Article V, the shares of Class B Common Stock so converted shall be retired and shall not be reissued by the Corporation.
7. Effect of Conversion on Payment of Dividends. Notwithstanding anything to the contrary in Sections 1, 2 or 3 of this Article V, if the date on which any share of Class B Common Stock is converted into Class A Common Stock pursuant to the provisions of Sections 1, 2 or 3 of this Article V occurs after the record date for the determination of the holders of Class B Common Stock entitled to receive any dividend or distribution to be paid on the shares of Class B Common Stock, the holder of such shares of Class B Common Stock as of such record date will be entitled to receive such dividend or distribution on such payment date; provided, that, notwithstanding any other provision of this Restated Certificate of Incorporation, to the extent that any such dividend or distribution is payable in shares of Class B Common Stock, such dividend or distribution shall be deemed to have been declared, and shall be
payable in, shares of Class A Common Stock and no shares of Class B Common Stock shall be issued in payment thereof.
8. Reservation. The Corporation shall at all times reserve and keep available, out of its authorized and unissued shares of Class A Common Stock, solely for the purpose of effecting conversions of shares of Class B Common Stock into Class A Common Stock, such number of duly authorized shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all then-outstanding shares of Class B Common Stock. If at any time the number of authorized and unissued shares of Class A Common Stock shall not be sufficient to effect the conversion of all then-outstanding shares of Class B Common Stock, the Corporation shall promptly take such corporate action as may be necessary to increase its authorized but unissued shares of Class A Common Stock to such number of shares as shall be sufficient for such purpose, including, without limitation, obtaining the requisite stockholder approval of any necessary amendment to this Restated Certificate of Incorporation. All shares of Class A Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and non-assessable shares. The Corporation shall take all such action as may be necessary to ensure that all such shares of Class A Common Stock may be so issued without violation of any applicable law or regulation.
ARTICLE VI: AMENDMENT OF BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal the Bylaws. Any adoption, amendment or repeal of the Bylaws by the Board of Directors shall require the approval of a majority of the Whole Board. For purposes of this Restated Certificate of Incorporation, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. The stockholders shall also have power to adopt, amend or repeal the Bylaws; provided, however, that, notwithstanding any other provision of this Restated Certificate of Incorporation or any provision of law that might otherwise permit a lesser or no vote, but in addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Restated Certificate of Incorporation, the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required for the stockholders to adopt, amend or repeal any provision of the Bylaws, provided, further, that, in the case of any proposed adoption, amendment or repeal of any provisions of the Bylaws that is approved by at least two-thirds (2/3) of the Whole Board and submitted to the stockholders for adoption thereby, then only the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required to adopt, amend or repeal any such provision of the Bylaws.
ARTICLE VII: MATTERS RELATING TO THE BOARD OF DIRECTORS
1. Director Powers. Except as otherwise provided by the General Corporation Law or this Restated Certificate of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
2. Number of Directors. Subject to the special rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the total number of directors constituting the Whole Board shall be fixed from time to time exclusively by resolution adopted by a majority of the Whole Board.
3. Classified Board. Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, the directors shall be divided, with respect to the time for which they severally hold office, into three classes designated as Class I, Class II and Class III, respectively (the “Classified Board”). The Board of Directors is authorized to assign members of the Board of Directors already in office to such classes of the Classified Board. The number of directors in each class shall be divided as nearly equal as is practicable. The initial term of office of the Class I directors shall expire at the Corporation’s first annual meeting of stockholders following the Effective Date, the initial term of office of the Class II directors shall expire at the Corporation’s second annual meeting of stockholders following the Effective Date, and the initial term of office of the Class III directors shall expire at the Corporation’s third annual meeting of stockholders following the Effective Date. At each annual meeting of stockholders following the Effective Date, directors elected to succeed those directors of the class whose terms then expire shall be elected for a term of office expiring at the third succeeding annual meeting of stockholders after their election.
4. Term and Removal. Each director shall hold office until the annual meeting at which such director’s term expires and until such director’s successor is duly elected and qualified, or until such director’s earlier death, resignation, disqualification or removal. Any director may resign at any time upon notice to the Corporation given in writing or by any electronic transmission. Subject to the special rights of the holders of any series of Preferred Stock, no director may be removed from the Board of Directors except for cause and only by the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of the then-outstanding shares of capital stock of the Corporation entitled to vote thereon, voting together as a single class. In the event of any increase or decrease in the authorized number of directors, (a) each director then serving as such shall nevertheless continue as a director of the class of which he or she is a member and (b) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board among the classes of directors so as to make all classes as nearly equal in number as is practicable, provided that no decrease in the number of directors constituting the Board shall shorten the term of any director.
5. Vacancies and Newly Created Directorships. Subject to the special rights of the holders of any series of Preferred Stock to elect directors, any vacancy occurring in the Board of Directors for any cause, and any newly created directorship resulting from any increase in the authorized number of directors, shall be filled only by the affirmative vote of a majority of the directors then in office, even if less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. Any director elected in accordance with the preceding sentence shall hold office for a term expiring at the annual meeting of stockholders at which the term of office of the class to which the director has been assigned expires and until such director’s successor shall have been duly elected and qualified, or until such director’s earlier death, resignation, disqualification or removal.
6. Vote by Ballot. Election of directors need not be by written ballot unless the Bylaws shall so provide.
ARTICLE VIII: DIRECTOR LIABILITY
1. Limitation of Liability. To the fullest extent permitted by law, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Without limiting the effect of the preceding sentence, if the General Corporation Law 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, as so amended.
2. Change in Rights. Neither any amendment nor repeal of this Article VIII, nor the adoption of any provision of this Restated Certificate of Incorporation inconsistent with this Article VIII, shall eliminate, reduce or otherwise adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such amendment, repeal or adoption of such an inconsistent provision.
ARTICLE IX: MATTERS RELATING TO STOCKHOLDERS
1. No Action by Written Consent of Stockholders. Subject to the rights of any series of Preferred Stock then outstanding, no action shall be taken by the stockholders of the Corporation except at a duly called annual or special meeting of stockholders and no action shall be taken by the stockholders of the Corporation by written consent in lieu of a meeting.
2. Special Meeting of Stockholders. Special meetings of the stockholders of the Corporation may be called only by the Chairperson of the Board, the Chief Executive Officer. the Lead Independent Director (as defined in the Bylaws) or the Board of Directors acting pursuant to a resolution adopted by a majority of the Whole Board, and may not be called by the stockholders or any other person or persons.
3. Advance Notice of Stockholder Nominations and Business Transacted at Special Meetings. Advance notice of stockholder nominations for the election of directors of the Corporation and of business to be brought by stockholders before any meeting of stockholders of the Corporation shall be given in the manner provided in the Bylaws. Business transacted at special meetings of stockholders shall be limited to the purpose or purposes stated in the notice of meeting.
ARTICLE X: SEVERABILITY
If any provision of this Restated Certificate of Incorporation shall be held to be invalid, illegal, or unenforceable, then such provision shall nonetheless be enforced to the maximum extent possible consistent with such holding and the remaining provisions of this Restated Certificate of Incorporation (including without limitation, all portions of any section of this Restated Certificate of Incorporation containing any such provision held to be invalid, illegal, or unenforceable, which is not invalid, illegal, or unenforceable) shall remain in full force and effect.
ARTICLE XI: AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION
1. General. The Corporation reserves the right to amend or repeal any provision contained in this Restated Certificate of Incorporation in the manner prescribed by the laws of the State of Delaware and all rights conferred upon stockholders are granted subject to this reservation; provided, however, that, notwithstanding any provision of this Restated Certificate of Incorporation (including any Certificate of Designation) or any provision of law that might otherwise permit a lesser vote or no vote (but subject to Section 2 of Article IV hereof), but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Restated Certificate of Incorporation (including any Certificate of Designation), and subject to Sections 1 and 2.1 of Article IV, the affirmative vote of the holders of at least two-thirds (2/3) of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required to amend or repeal, or adopt any provision inconsistent with, this Section 1 of this Article XI, Sections 1.2 and 2 of Article IV, or Article V, Article VI, Article VII, Article VIII, Article IX, Article X or Article XII (the “Specified Provisions”); provided, further, that if two-thirds (2/3) of the Whole Board has approved such amendment or repeal of, or any provision inconsistent with, the Specified Provisions, then only the
affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote thereon, voting together as a single class (in addition to any other vote of the holders of any class or series of stock of the Corporation required by law or by this Restated Certificate of Incorporation, including any Certificate of Designation), shall be required to amend or repeal, or adopt any provision inconsistent with, the Specified Provisions.
2. Changes to or Inconsistent with Section 3 of Article IV. Notwithstanding any other provision of this Restated Certificate of Incorporation (including any Certificate of Designation) or any provision of law that might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of the Corporation required by law or by this Restated Certificate of Incorporation (including any Certificate of Designation), the affirmative vote of the holders of Class A Common Stock representing at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of Class A Common Stock, voting separately as a single class, and the affirmative vote of the holders of Class B Common Stock representing at least seventy-five percent (75%) of the voting power of all of the then-outstanding shares of Class B Common Stock, voting separately as a single class, shall be required to amend or repeal, or to adopt any provision inconsistent with, Section 3 of Article IV or this Section 2 of this Article XI.
ARTICLE XII: CHOICE OF FORUM; EXCLUSIVE FORUM
Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (a) any derivative action or proceeding brought on behalf of the Corporation; (b) any action asserting a claim that is based upon a breach of a fiduciary duty owed by, or other wrongdoing by, any current or former director, officer, stockholder, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders; (c) any action asserting a claim against the Corporation or any current or former director, officer, stockholder, employee or agent of the Corporation arising pursuant to any provision of the General Corporation Law, this Restated Certificate of Incorporation or the Bylaws or as to which the General Corporation Law confers jurisdiction on the Court of Chancery of the State of Delaware; (d) any action to interpret, apply, enforce or determine the validity of this Restated Certificate of Incorporation or the Bylaws; (e) any action asserting a claim against the Corporation governed by the internal affairs doctrine; or (f) any action asserting an “internal corporate claim” as that term is defined in Section 115 of the General Corporation Law. Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended, or any successor thereto or, to the fullest extent permitted by law, under the Exchange Act, or any successor thereto. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article XII. Failure to enforce the foregoing provisions of this Article XII would cause the Corporation irreparable harm, and the Corporation shall be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
AMENDED AND RESTATED
BYLAWS
OF
ZIPRECRUITER, INC.
TABLE OF CONTENTS
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Page
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ARTICLE I CORPORATE OFFICES
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3
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1.1
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Registered Office
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3
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1.2
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Other Offices
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3
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ARTICLE II MEETINGS OF STOCKHOLDERS
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3
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2.1
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Place Of Meetings
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3
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2.2
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Annual Meeting
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3
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2.3
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Special Meeting
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3
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2.4
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Notice Of Stockholders' Meetings
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4
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2.5
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Manner Of Giving Notice; Affidavit Of Notice
|
4
|
|
2.6
|
Quorum
|
4
|
|
2.7
|
Adjourned Meeting; Notice
|
4
|
|
2.8
|
Organization; Conduct of Business
|
5
|
|
2.9
|
Voting
|
5
|
|
2.10
|
Waiver Of Notice
|
5
|
|
2.11
|
Stockholder Action By Written Consent Without A Meeting
|
6
|
|
2.12
|
Record Date For Stockholder Notice; Voting; Giving Consents
|
6
|
|
2.13
|
Proxies
|
7
|
|
|
|
|
|
ARTICLE III DIRECTORS
|
7
|
|
|
|
|
|
3.1
|
Powers
|
7
|
|
3.2
|
Number Of Directors
|
8
|
|
3.3
|
Election, Qualification And Term Of Office Of Directors
|
8
|
|
3.4
|
Resignation And Vacancies
|
8
|
|
3.5
|
Place Of Meetings; Meetings By Telephone
|
9
|
|
3.6
|
Regular Meetings
|
9
|
|
3.7
|
Special Meetings; Notice
|
9
|
|
3.8
|
Quorum
|
10
|
|
3.9
|
Waiver Of Notice
|
10
|
|
3.10
|
Board Action By Written Consent Without A
|
10
|
|
3.11
|
Fees And Compensation Of Directors
|
10
|
|
3.12
|
Approval Of Loans To Officers
|
11
|
|
3.13
|
Removal Of Directors
|
11
|
|
3.14
|
Chairman Of The Board Of Directors
|
11
|
|
|
|
|
|
ARTICLE IV COMMITTEES
|
11
|
|
|
|
|
|
4.1
|
Committees Of Directors
|
11
|
|
|
|
|
|
|
|
|
|
|
|
4.2
|
Committee Minutes
|
12
|
|
4.3
|
Meetings And Action Of Committees
|
12
|
|
|
|
|
|
ARTICLE V OFFICERS
|
12
|
|
|
|
|
|
5.1
|
Officers
|
12
|
|
5.2
|
Appointment Of Officers
|
12
|
|
5.3
|
Subordinate Officers
|
12
|
|
5.4
|
Removal And Resignation Of Officers
|
13
|
|
5.5
|
Vacancies In Offices
|
13
|
|
5.6
|
Chief Executive Officer
|
13
|
|
5.7
|
President
|
13
|
|
5.8
|
Vice Presidents
|
13
|
|
5.9
|
Secretary
|
14
|
|
5.10
|
Chief Financial Officer
|
14
|
|
5.11
|
Representation Of Shares Of Other Corporations
|
14
|
|
5.12
|
Authority And Duties Of Officers
|
15
|
|
|
|
|
|
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS.
|
15
|
|
|
|
|
|
6.1
|
Indemnification Of Directors And Officers
|
15
|
|
6.2
|
Indemnification Of Others
|
15
|
|
6.3
|
Payment Of Expenses In Advance
|
15
|
|
6.4
|
Indemnity Not Exclusive
|
16
|
|
6.5
|
Insurance
|
16
|
|
6.6
|
Conflicts
|
16
|
|
|
|
|
|
ARTICLE VII RECORDS AND REPORTS
|
16
|
|
|
|
|
|
7.1
|
Maintenance And Inspection Of Records.
|
16
|
|
7.2
|
Inspection By Directors
|
17
|
|
|
|
|
|
ARTICLE VIII GENERAL MATTERS
|
17
|
|
|
|
|
|
8.1
|
Checks
|
17
|
|
8.2
|
Execution Of Corporate Contracts And Instruments
|
17
|
|
8.3
|
Stock Certificates; Partly Paid Shares
|
18
|
|
8.4
|
Special Designation On Certificates
|
18
|
|
8.5
|
Lost Certificates
|
18
|
|
8.6
|
Construction; Definitions
|
19
|
|
8.7
|
Dividends
|
19
|
|
8.8
|
Fiscal Year
|
19
|
|
8.9
|
Seal
|
19
|
|
|
|
|
|
|
|
|
|
|
|
8.10
|
Right of First Refusal
|
19
|
|
8.11
|
Transfer Restrictions.
|
22
|
|
8.12
|
Transfer Of Stock
|
26
|
|
8.13
|
Stock Transfer Agreements
|
26
|
|
8.14
|
Registered Stockholders
|
26
|
|
8.15
|
Facsimile Signature
|
26
|
|
|
|
|
|
ARTICLE IX AMENDMENTS
|
26
|
AMENDED AND RESTATED
BYLAWS
OF
ZIPRECRUITER, INC.
ARTICLE I
CORPORATE OFFICES
1.1 Registered Office.
The registered office of the corporation shall be in the City of Dover, County of Kent, State of Delaware. The name of the registered agent of the corporation at such location is National Registered Agents, Inc.
1.2 Other Offices.
The Board of Directors may at any time establish other offices at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 Place Of Meetings.
Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board of Directors. In the absence of any such designation, stockholders' meetings shall be held at the registered office of the corporation.
2.2 Annual Meeting.
The annual meeting of stockholders shall be held on such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the Board of Directors each year. At the meeting, directors shall be elected and any other proper business may be transacted.
2.3 Special Meeting.
A special meeting of the stockholders may be called at any time by the Board of Directors, the chairman of the board, the chief executive officer, the president or by one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent of the votes at that meeting.
If a special meeting is called by any person or persons other than the Board of Directors, the chief executive officer, the president or the chairman of the board, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by
telegraphic or other facsimile transmission to the chairman of the board, the chief executive officer, the president, any vice president, or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after the receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.
2.4 Notice Of Stockholders' Meetings.
All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws 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. The notice shall specify the place (if any), date and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called.
2.5 Manner Of Giving Notice; Affidavit Of Notice.
Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by electronic mail or other electronic transmission, in the manner provided in Section 232 of the Delaware General Corporation Law. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
2.6 Quorum.
The holders of a majority of the shares of stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (a) the chairman of the meeting or (b) holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, shall have power to adjourn the meeting to another place (if any), date or time.
2.7 Adjourned Meeting; Notice.
When a meeting is adjourned to another place (if any), date or time, unless these Bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place (if any), thereof and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the place (if any), date and time of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
2.8 Organization; Conduct of Business.
(a) 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 or her 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 of the meeting appoints.
(b) The Chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including the manner of voting and the conduct of business. The date and time of opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.
2.9 Voting.
The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 of these Bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law, all other matters shall be determined by a majority of the votes cast affirmatively or negatively.
2.10 Waiver Of Notice.
Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these Bylaws, a written waiver thereof signed by the person entitled to notice, or waiver by electronic mail or other electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of 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. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice, or any waiver of notice by electronic transmission, unless so required by the certificate of incorporation or these Bylaws.
2.11 Stockholder Action By Written Consent Without A Meeting.
Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is (i) signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and (ii) delivered to the Corporation in accordance with Section 228(a) of the Delaware General Corporation Law.
Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the date the earliest dated consent is delivered to the Corporation, a written consent or consents signed by a sufficient number of holders to take action are delivered to the Corporation in the manner prescribed in this Section. A telegram, cablegram, electronic mail or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for purposes of this Section to the extent permitted by law. Any such consent shall be delivered in accordance with Section 228(d)(l) of the Delaware General Corporation Law.
Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.
Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing (including by electronic mail or other electronic transmission as permitted by law). If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware.
2.12 Record Date For Stockholder Notice; Voting; Giving Consents.
In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, 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 60 nor less than l 0 days before the date of such meeting, nor more than 60 days prior to any other action.
If the Board of Directors does not so fix a record date:
(a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent (including consent by electronic mail or other electronic transmission as permitted by law) is delivered to the corporation.
(c) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, if such adjournment is for thirty (30) days or less; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
2.13 Proxies.
Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by an instrument in writing or by an electronic transmission permitted by law filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, facsimile, electronic or telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware.
ARTICLE III
DIRECTORS
3.1 Powers.
Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these Bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors.
3.2 Number Of Directors.
Upon the adoption of these bylaws, the number of directors constituting the entire Board of Directors shall be seven (7). Thereafter, this number may be changed by a resolution of the Board of Directors or of the stockholders, subject to Section 3.4 of these Bylaws. No reduction of the authorized number of directors shall have the effect of removing any director before such director's term of office expires.
3.3 Election, Qualification And Term Of Office Of Directors.
Except as provided in Section 3.4 of these Bylaws, and unless otherwise provided in the certificate of incorporation, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these Bylaws, wherein other qualifications tor directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal.
Unless otherwise specified in the certificate of incorporation, elections of directors need not be by written ballot.
3.4 Resignation And Vacancies.
Any director may resign at any time upon written notice to the attention of the Secretary of the corporation. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to till such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these Bylaws:
(a) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
(b) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these
Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.
(c) at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least l 0% 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 newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable.
3.5 Place Of Meetings; Meetings By Telephone.
The Board of Directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation 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 other 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.
3.6 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.
3.7 Special Meetings; Notice.
Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairman of the board, the chief executive officer, the president, any vice president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail, facsimile, electronic transmission, or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. If the notice is delivered personally or by facsimile, electronic transmission, telephone or telegram, it shall be delivered at least 48 hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting. The notice need not specify the place of the meeting, if the meeting is to be held at the principal executive office of the corporation. Unless otherwise indicated in the notice thereof any and all business may be transacted at a special meeting.
3.8 Quorum.
At all meetings of the Board of Directors, a majority of the total number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
3.9 Waiver Of Notice.
Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, or waiver by electronic mail or other electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of 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. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these Bylaws.
3.10 Board Action By Written Consent Without A Meeting.
Unless otherwise restricted by the certificate of incorporation 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 or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.
3.11 Fees And Compensation Of Directors.
Unless otherwise restricted by the certificate of incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors. No such
compensation shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.
3.12 Approval Of 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 subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benetl.t the corporation. The loan, guaranty 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 section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.
3.13 Removal Of Directors.
Unless otherwise restricted by statute, by the certificate of incorporation or by these Bylaws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided, however, that if the stockholders of the corporation are entitled to cumulative voting, if less than the entire Board of Directors is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors.
No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office.
3.14 Chairman Of The Board Of Directors.
The corporation may also have, at the discretion of the Board of Directors, a chairman of the Board of Directors who shall not be considered an officer of the corporation.
ARTICLE IV
COMMITTEES
4.1 Committees Of Directors.
The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate 1 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 or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members 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, or in these Bylaws, 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 the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the General Corporate Law of Delaware to be submitted to stockholders for approval or (ii) adopting, amending or repealing any Bylaw of the corporation.
4.2 Committee Minutes.
Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
4.3 Meetings And Action Of Committees.
Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting) of these Bylaws, with such changes in the context of such provisions as are necessary to substitute the committee and its members for the Board of Directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the Board of Directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws.
ARTICLE V
OFFICERS
5.1 Officers.
The officers of the corporation shall be a chief executive officer, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the Board of Directors, a president, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these Bylaws. Any number of offices may be held by the same person.
5.2 Appointment Of Officers.
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these Bylaws, shall be appointed by the Board of Directors, subject to the rights, if any, of an officer under any contract of employment.
5.3 Subordinate Officers.
The Board of Directors may appoint, or empower the chief executive officer or the president to appoint, such other officers and agents as the business of the corporation may
require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these Bylaws or as the Board of Directors may from time to time determine.
5.4 Removal And Resignation Of Officers.
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board of Directors at any regular or special meeting of the board or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom the power of removal is conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
5.5 Vacancies In Offices.
Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.
5.6 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 any, 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. He or she shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the Board of Directors 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 these Bylaws.
5.7 President.
Subject to such supervisory powers, if any, as may be given by the Board of Directors to the chairman of the board (if any) or the chief executive officer, the president (if such an officer is appointed) shall have general supervision, direction, and control of the business and other officers of the corporation. He or she shall have the general powers and duties of management usually vested in the office of president of a corporation and such other powers and duties as may be prescribed by the Board of Directors or these Bylaws.
5.8 Vice Presidents.
In the absence or disability of the chief executive officer and president, the vice presidents, if any, in order of their rank as fixed by the Board of Directors or, if not ranked, a vice president designated by the Board of Directors, shall perform all the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon, the
president. 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, these Bylaws, the president or the chairman of the board.
5.9 Secretary.
The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the Board of Directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors required to be given by law or by these Bylaws. He or she shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws.
5.10 Chief Financial Officer.
The chief financial officer shall be the treasurer and shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys 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 the funds of the corporation as may be ordered by the Board of Directors, shall render to the president, the chief executive officer, or the directors, upon request, an account of all his or her transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the Board of Directors or the bylaws.
5.11 Representation Of Shares Of Other Corporations.
The chairman of the board, the chief executive officer, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the Board of Directors or the chief executive officer or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by the person having such authority.
5.12 Authority And Duties Of Officers.
In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 Indemnification Of Directors And Officers.
The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys' fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.1, a "director" or "officer" of the corporation includes any person (a) who is or was a director or officer of the corporation, (b) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (c) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.2 Indemnification Of Others.
The corporation shall have the power, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys' fees), judgments, tines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.2, an "employee" or "agent" of the corporation (other than a director or officer) includes any person (a) who is or was an employee or agent of the corporation, (b) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (c) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.3 Payment Of Expenses In Advance.
Expenses incurred in defending any action or proceeding for which indemnification is required pursuant to Section 6.1 or for which indemnification is permitted
pursuant to Section 6.2 following authorization thereof by the Board of Directors shall be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that the indemnified party is not entitled to be indemnified as authorized in this Article VI.
6.4 Indemnity Not Exclusive.
The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the certificate of incorporation.
6.5 Insurance.
The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of the General Corporation Law of Delaware.
6.6 Conflicts.
No indemnification or advance shall be made under this Article VI, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:
(a) That it would be inconsistent with a provision of the certificate of incorporation, these Bylaws, a resolution of the stockholders or an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
7.1 Maintenance And Inspection Of Records.
The corporation shall, either at its principal executive offices or at such place or places as designated by the Board of Directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Bylaws as amended to date, accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.
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 each such stockholder and the number of shares registered in each such stockholder's name, shall be open to the examination of any such stockholder for a period of at least ten (10) days prior to the meeting in the manner provided by law. The stock list shall also be open to the examination of any stockholder during the whole time of the meeting as provided by law. 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.
7.2 Inspection By Directors.
Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.
ARTICLE VIII
GENERAL MATTERS
8.1 Checks.
From time to time, the Board of Directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
8.2 Execution Of Corporate Contracts And Instruments.
The Board of Directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board of Directors or
within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or tor any amount.
8.3 Stock Certificates; Partly Paid Shares.
The shares of a corporation shall be represented by certificates, provided that the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has 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 or she were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
8.4 Special Designation On Certificates.
If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the 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 that the corporation shall issue to represent such class or series of stock; provided, however, 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 that 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, the designations, the preferences, and the 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.
8.5 Lost Certificates.
Except as provided in this Section 8.5, no new certificates tor shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
8.6 Construction; Definitions.
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these 'Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person.
8.7 Dividends.
The directors of the corporation, subject to any restrictions contained in (a) the General Corporation Law of Delaware or (b) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.
8.8 Fiscal Year.
The fiscal year of the corporation shall be fixed by resolution of the Board of Directors and may be changed by the Board of Directors.
8.9 Seal.
The corporation may adopt a corporate seal, which may be altered at pleasure, and may use the same by causing it or a facsimile thereof, to be impressed or affixed or in any other manner reproduced.
8.10 Right of First Refusal.
8.10.1 In addition to any other limitation on transfer created by applicable securities laws, these Bylaws or contract, before any security of the corporation (“Security”) may be transferred, the corporation and/or its assignee(s) will have a right of first refusal to purchase the Securities to be sold or transferred (the “Offered Securities”) on the terms and conditions set forth in this Section 8.10 (the “Right of First Refusal”).
(a) Exercise of Right of First Refusal. At any time within fifteen (15) days after the date of the written notice (the “Notice”) to the corporation from the holder of any Security (“Security Holder”) of the corporation of its intention to sell or transfer any Security to a proposed transferee (the “Proposed Transferee”) at the purchase price set forth in the Notice (the “Offered Price”), which Notice must be given to the corporation at least thirty (30) days
prior to the consummation of such proposed transfer, the corporation and/or its assignee(s) may, by giving written notice to the Security Holder, elect to purchase all (or, with the consent of the Security Holder, less than all) of the Securities proposed to be transferred to any one or more of the Proposed Transferees named in the Notice, at the purchase price determined in accordance with subsection (d) below.
(b) Secondary Right of First Refusal. Each holder of the corporation’s Series A Preferred Stock, par value $0.00001 per share (“Series A Preferred Stock”) shall have a secondary refusal right, but not the obligation, to purchase up to its pro rata portion (based upon the total number of shares of the corporation’s capital stock then held by all of the corporation’s investors) of any or all of the Offered Securities not purchased by the corporation pursuant to the Right of First Refusal, on the terms and conditions specified in the Notice (the “Secondary Refusal Right”). If the corporation does not intend to exercise its Right of First Refusal with respect to the Offered Securities, the corporation must deliver a secondary notice (the “Secondary Notice”) to the selling Security Holder and to each holder of Series A Preferred Stock to that effect no later than fifteen (15) days after the corporation’s receipt of the Notice. To exercise its Secondary Refusal Right, a holder of Series A Preferred Stock must deliver written notice to the selling Security Holder and the corporation within ten (10) days after the corporation’s deadline for its delivery of the Secondary Notice (the “Notice Period”), as provided in this subsection (b).
(c) Undersubscription. If the corporation and the holders of Series A Preferred Stock elect to purchase some but not all of the Offered Securities by the end of the Notice Period, then the corporation shall immediately after the expiration of the Notice Period send written notice (the “Undersubscription Notice”) to the holders of Series A Preferred Stock who fully exercised their Secondary Refusal Right within the Notice Period (the “Exercising Holders”). Each Exercising Holder shall, subject to the provisions of this Section 8.10, have an additional option to purchase all or any part of the balance of any such remaining unsubscribed shares of the Offered Securities on the terms and conditions set forth in the Notice. To exercise such option, an Exercising Holder must deliver an Undersubscription Notice to the selling Security Holder and the corporation within ten (10) days after the expiration of the Notice Period. In the event there are two or more such Exercising Holders that timely exercise the last- mentioned option for a total number of remaining shares in excess of the number available, the remaining shares available for purchase under this subsection (c) shall be allocated to such Exercising Holders pro rata based on the number of shares of Offered Securities such Exercising Holders have elected to purchase pursuant to the Secondary Refusal Right (without giving effect to any shares of the Offered Securities that any such Exercising Holder has elected to purchase pursuant to the Undersubscription Notice). If the options to purchase the remaining shares are exercised in full by the Exercising Holders, the corporation shall immediately notify all of the Exercising Holders and the selling Security Holder of that fact.
(d) Purchase Price. The purchase price for the Securities purchased under this Section 8.10 will be the Offered Price, provided that if the Offered Price consists of no legal consideration (as, for example, in the case of a transfer by gift), the purchase price will be the fair market value of the Securities as determined in good faith by the Board. If the Offered Price includes consideration other than cash, then the value of the non-cash consideration, as
determined in good faith by the Board, will conclusively be deemed to be the cash equivalent value of such non-cash consideration.
(e) Payment. Payment of the purchase price for the Securities will be payable, at the option of the corporation and/or its assignee(s) or the holders of Series A Preferred Stock (as applicable), by check or by cancellation of all or a portion of any outstanding indebtedness owed by the Security Holder to the corporation (or to such assignee or holder of Series A Preferred Stock, in the case of a purchase of Offered Securities by such assignee or holder of Series A Preferred Stock) or by any combination thereof. The purchase price will be paid without interest within sixty (60) days after the corporation’s receipt of the Notice, or, at the option of the corporation and/or its assignee(s) or holder of Series A Preferred Stock, in the manner and at the time(s) set forth in the notice.
(f) Holder’s Right to Transfer. If the Securities proposed in the Notice to be transferred to a given Proposed Transferee are not purchased by the corporation and/or its assignee(s) or by the holders of Series A Preferred Stock as provided in this Section 8.10, then the Security Holder may transfer such Offered Securities to each Proposed Transferee at the Offered Price or at a higher price, provided that (i) such transfer is consummated within ninety (90) days after the date of the Notice, (ii) any such transfer is effected in compliance with all applicable securities laws, and (iii) each Proposed Transferee agrees in writing that the provisions of this Section 8.10 will continue to apply to the Securities in the hands of such Proposed Transferee. If the Securities described in the Notice are not transferred to each Proposed Transferee within such ninety (90) day period, then a new Notice must be given to the corporation, pursuant to which the corporation will again be offered the Right of First Refusal before any Securities held by the Security Holder may be sold or otherwise transferred.
(g) Exempt Transfers. Notwithstanding anything to the contrary in this Section 8.10, the restrictions contained in this Section 8.10 shall not apply to the following transactions set forth below, provided, however, that each transferee, assignee, or other recipient of any interest in the Security shall, as a condition to the transfer, agree to be bound by all of the restrictions set forth in these Bylaws:
(i) the transfer of any or all of the Securities (or any interest therein) during Security Holder’s lifetime or on Security Holder’s death by gift, will or intestacy to Security Holder’s Immediate Family or a trust for the benefit of Security Holder or Security Holder’s Immediate Family. “Immediate Family” as used herein shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister or the spouse of any child or grandchild of Security Holder or the Security Holder’s spouse, whether or not adopted;
(ii) a transfer for no consideration to an organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code; provided, however, that no more than one such transfer under this Section 39(b)(2) shall be effected during any twelve month period;
(iii) a distribution without consideration by a Security Holder that is a trust to a trustee of such trust and/or to members of the Immediate Family of a trustee of such trust;
(iv) a transfer (A) without consideration by a Security Holder to a subsidiary, parent, partner, limited partner, retired partner, member, retired member or holder of capital stock of such Security Holder, or to an affiliated fund or entity of such Security Holder (including, without limitation, a fund or entity managed by the same manager or managing member or general partner or management company or advisory company or by an entity controlling, controlled by, or under common control with such manager or managing member or general partner or management company or advisory company) or (B) with consideration by a Security Holder to a fund or entity managed by the same manager or managing member or general partner or management company or advisory company of such Security Holder.
8.10.2 The Right of First Refusal will terminate as to all securities of the corporation immediately prior to the closing of any registered initial public offering of the corporation.
8.10.3 In the event of a conflict between this Section 8.10 and any similar provision set forth in that certain Right of First Refusal and Co-Sale Agreement, dated August 12, 2014, by and among the corporation and certain investors listed therein (the “ROFR/Co-Sale Agreement”), with respect to any Securities covered by the ROFR/Co-Sale Agreement, then the ROFR/Co-Sale Agreement shall control.
8.11 Transfer Restrictions.
8.11.1 Any stockholder holding Restricted Shares (as defined below) (any such stockholder, a “Restricted Stockholder”) shall not directly or indirectly (whether by sale, gift, merger, consolidation, operation of law or otherwise) transfer, assign, pledge, lend, grant any option, right or warrant to purchase or otherwise dispose of or encumber such Restricted Shares or any economic or voting rights or other interests therein to any person or entity, or enter into any agreement, arrangement or understanding to do any of the foregoing (collectively, “Transfer”), without the consent of the Board of Directors prior to such Transfer, which consent may be granted or withheld in the Board of Director’s sole and absolute discretion. “Restricted Shares” are shares of common stock of the corporation that were issued or disposed and became outstanding after August 16, 2018, the date of the adoption of the amendment and restatement of these Bylaws adding this Section 8.11 (the “Approval Date”); provided, however, that shares of common stock of the corporation issued subsequent to the Approval Date as a result of the conversion of shares of Preferred Stock outstanding prior to the Approval Date shall not be considered “Restricted Shares” for purposes of this Section 8.11. The restrictions on Transfer and ownership of shares set forth in this Section 8.11.1 shall be in addition to, and not limited by, the Certificate of Incorporation, the other provisions of these Bylaws, or the provision(s) of any agreement(s) currently in effect by and between the corporation and any stockholder, or any applicable law.
8.11.2 Any Restricted Stockholder seeking the Board’s approval of a Transfer of some or all of such Restricted Stockholder’s Restricted Shares (a “Transferring Stockholder”) shall give prior written notice thereof (the “Transferring Stockholder Notice”) to the Secretary of the corporation, which notice shall include: (1) the name of the Transferring Stockholder; (2) the name of the proposed transferee(s); (3) the number of shares of Restricted Stock proposed to be Transferred; and (4) the purchase price, if any, of the Restricted Shares proposed for Transfer. The corporation may require the Transferring Stockholder to supplement its notice with such additional information as the corporation may reasonably request.
8.11.3 If the Board approves such Transfer of Restricted Shares, said Transferring Stockholder may, subject to any other restrictions on Transfer in respect thereof, including, without limitation, the right of first refusal and co-sale rights set forth in that certain Amended and Restated Right of First Refusal and Co-sale Agreement, dated as of November 7, 2017, by and among the corporation and certain of its stockholders party thereto, as such agreement may be amended from time to time (as amended, the “Co-Sale Agreement”) and the right of first refusal set forth in any equity award agreement entered into by such Transferring Stockholder and the corporation pursuant to the corporation’s 2014 Equity Incentive Plan, as amended from time to time, Transfer to the proposed transferee or transferees named in the Transferring Stockholder Notice the Restricted Shares specified in said Transferring Stockholder Notice that were not acquired by the corporation or its assigns, provided that said Transfer shall not be on terms or conditions more favorable to any such proposed transferee than those contained in the Transferring Stockholder Notice. All Restricted Shares so Transferred by said Transferring Stockholder shall continue to be subject to the provisions of this Section 8.11 in the same manner as before said Transfer and, for the avoidance of doubt, any transferee of such Restricted Shares, by his, her or its acceptance of Transfer thereof, shall be bound by such provisions (along with any other restrictions on transfer or ownership in respect of his, her or its shares of capital stock of the corporation under the Certificate of Incorporation, these Bylaws, any agreement between such transferee and the corporation and applicable law).
8.11.4 Notwithstanding the foregoing provisions of this Section 8.11, the following transactions shall be exempt from the other provisions of this Section 8.11 (each an “Exempt Transfer”):
(a) With respect to a Restricted Stockholder that is a natural person, such Restricted Stockholder’s transfer without consideration of any or all Restricted Shares held by such Restricted Stockholder made for bona fide estate planning purposes, either during his or her lifetime or on death by will or intestacy to his or her spouse, child (natural or adopted), or any other direct lineal descendant of such stockholder (or his or her spouse) (all of the foregoing collectively referred to as “family members”), or any other relative or person approved by the Board of Directors, or any custodian or trustee of any trust, partnership or limited liability company for the benefit of, or the ownership interests of which are owned wholly by, such stockholder or any such family members. Notwithstanding the foregoing exception, a Restricted Stockholder may not Transfer any Restricted Shares prior to consulting with the corporation to determine whether such Transfer would result in the corporation having a class of security held of record by (i) two thousand (or such other number as may be applicable under the Exchange Act) or more persons, as described in Section 12(g) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) and Rule 12g5-1 promulgated under the Exchange Act (or any successor provisions thereto), or (ii) such number of persons that would require the corporation under the applicable laws of any non-US jurisdiction to take any action with respect to the registration of any shares of the corporation’s capital stock and/or the providing of any public disclosures with respect to the corporation (the number of persons described in clauses (i) and (ii) of this clause (a) referred to as the “Threshold Record Holder Amount”), and no such Transfer shall be effected if such Transfer would result in the corporation having a class of security held of record by that number of persons representing the Threshold Record Holder Amount.
(b) With respect to a Restricted Stockholder that is an entity, such Restricted Stockholder’s or such Restricted Stockholder’s principal’s Transfer of Restricted Shares without consideration to any other entity that, directly or indirectly, controls, is controlled by, or is under common control with such Restricted Stockholder or such Restricted Stockholder’s principal, including without limitation any general partner, managing partner, managing member, officer or director of such Restricted Stockholder or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Restricted Stockholder or such Restricted Stockholder’s principal. For purposes of this definition, the terms “controlling,” “controlled by,” or “under common control with” shall mean the possession, directly or indirectly, of (i) the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract, or otherwise, or (ii) the power to elect or appoint at least 50% of the directors, managers, general partners, or persons exercising similar authority with respect to such entity. Notwithstanding the foregoing exception, a Restricted Stockholder may not Transfer any Restricted Shares prior to consulting with the corporation to determine whether such Transfer would result in the corporation having a class of security held of record by that number of persons representing the Threshold Record Holder Amount, and no such Transfer shall be effected if such Transfer would result in the corporation having a class of security held of record by that number of persons representing the Threshold Record Holder Amount.
(c) With respect to a Restricted Stockholder that is a party to the Co- Sale Agreement, the Transfer of any Restricted Shares to the corporation or another party to the Co-Sale Agreement pursuant to the terms of the Co-Sale Agreement. Notwithstanding the foregoing exception, a Restricted Stockholder may not Transfer any Restricted Shares prior to consulting with the corporation to determine whether such Transfer would result in the corporation having a class of security held of record by that number of persons representing the Threshold Record Holder Amount, and no such Transfer shall be effected if such Transfer would result in the corporation having a class of security held of record by that number of persons representing the Threshold Record Holder Amount.
(d) Any Transfer of shares of capital stock to the corporation.
Prior to effecting any Exempt Transfer (other than an Exempt Transfer in which the corporation is the transferee), a Restricted Stockholder shall furnish to the corporation all information regarding the proposed Exempt Transfer as may be reasonably requested by the corporation, if any, to determine whether such Exempt Transfer constitutes an Exempt Transfer pursuant to this
Section 8.11.4, and the corporation shall not be required to register any proposed Exempt Transfer, or recognize any right, title or interest of any proposed transferee of such Exempt Transfer, in any Restricted Shares unless and until the corporation has received all such information it may request and has determined that such proposed Exempt Transfer constitutes an Exempt Transfer pursuant to this Section 8.11.4. All Restricted Shares so Transferred pursuant to an Exempt Transfer shall continue to be subject to the provisions of this Section 8.11 in the same manner as before said Exempt Transfer and, for the avoidance of doubt, any transferee of such Restricted Shares pursuant to an Exempt Transfer, by his, her or its acceptance of Transfer thereof, shall be bound by such provisions (along with any other restrictions on transfer or ownership in respect of his, her or its shares of capital stock of the corporation under the Certificate of Incorporation, these Bylaws, any agreement between such transferee and the corporation and applicable law).
8.11.5 Certificates representing shares of the corporation’s capital stock issued on or after the Approval Date (but prior to the termination of the transfer restrictions provided for herein) shall have impressed on, printed on, written on or otherwise affixed to them the following legend:
THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO TRANSFER RESTRICTIONS REQUIRING APPROVAL OF THE BOARD OF DIRECTORS PURSUANT TO AND IN ACCORDANCE WITH THE AMENDED AND RESTATED BYLAWS OF THE CORPORATION, AS AMENDED FROM TIME TO TIME (THE “BYLAWS”), INCLUDING SECTION 8.11 THEREOF (AND ANY SUCCESSOR PROVISION THERETO), A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS. THE CORPORATION SHALL NOT REGISTER OR OTHERWISE RECOGNIZE OR GIVE EFFECT TO ANY PURPORTED SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE THAT DOES NOT COMPLY WITH THE BYLAWS, INCLUDING SECTION 8.11 (OR ANY SUCCESSOR PROVISION THERETO) OF THE BYLAWS.
In the case Restricted Shares that are uncertificated, notice of such legend shall be sent in accordance with applicable law.
8.11.6 Any Transfer, or purported Transfer, of Restricted Shares shall be null and void ab initio, and the corporation shall not be obligated to recognize any right, title or interest of any person or entity, in Restricted Shares Transferred in violation of this Section 8.11 unless the terms, conditions, and provisions of this Section 8.11 are strictly observed and followed.
8.11.7 The foregoing Transfer restrictions shall terminate on any of the following dates, whichever shall first occur:
(a) October 5, 2020;
(b) Upon the date of a Deemed Liquidation Event (as defined in the corporation’s certificate of incorporation, as such may be amended from time to time); or
(c) Upon the date securities of the corporation are first offered to the public pursuant to a registration statement filed with, and declared effective by, the United States Securities and Exchange Commission under the Securities Act of 1933, as amended.
8.12 Transfer Of Stock.
Subject to the provisions of 8.10 and 8.11 hereof, 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 in its books.
8.13 Stock Transfer Agreements.
Subject to the provisions of 8.10 and 8.11 hereof, the corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.
8.14 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, shall be entitled to hold liable for calls and assessments the 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 another person, whether or not it shall have express or other notice thereof except as otherwise provided by the laws of Delaware.
8.15 Facsimile Signature.
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.
ARTICLE IX
AMENDMENTS
The Bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal Bylaws upon the directors. The fact that such power
has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal Bylaws.
ZIPRECRUITER, INC.
(a Delaware corporation)
RESTATED BYLAWS
As Adopted [l], 2021 and
As Effective [l], 2021
ZIPRECRUITER, INC.
(a Delaware corporation)
RESTATED BYLAWS
TABLE OF CONTENTS
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Page
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ARTICLE I: STOCKHOLDERS
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1
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Section 1.1:
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Annual Meetings
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1
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Section 1.2:
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Special Meetings
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1
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Section 1.3:
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Notice of Meetings
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1
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Section 1.4:
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Adjournments
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1
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Section 1.5:
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Quorum
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2
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Section 1.6:
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Organization
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2
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Section 1.7:
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Voting; Proxies
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3
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Section 1.8:
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Fixing Date for Determination of Stockholders of Record
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3
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Section 1.9:
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List of Stockholders Entitled to Vote
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4
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Section 1.10:
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Inspectors of Elections
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4
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1.10.1
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Applicability
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4
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1.10.2
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Appointment
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4
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1.10.3
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Inspector’s Oath
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4
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1.10.4
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Duties of Inspectors
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5
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1.10.5
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Opening and Closing of Polls
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5
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1.10.6
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Determinations
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5
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Section 1.11:
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Conduct of Meetings
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5
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Section 1.12:
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Notice of Stockholder Business; Nominations
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6
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1.12.1
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Annual Meeting of Stockholders
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6
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1.12.2
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Submission of Questionnaire, Representation and Agreement
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11
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1.12.3
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Special Meetings of Stockholders
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11
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1.12.4
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General
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12
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ARTICLE II: BOARD OF DIRECTORS
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14
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Section 2.1:
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Number; Qualifications
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14
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Section 2.2:
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Election; Resignation; Removal; Vacancies
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14
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Section 2.3:
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Regular Meetings
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15
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Section 2.4:
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Special Meetings
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15
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Section 2.5:
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Remote Meetings Permitted
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15
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Section 2.6:
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Quorum; Vote Required for Action
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15
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Section 2.7:
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Organization
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15
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Section 2.8:
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Unanimous Action by Directors in Lieu of a Meeting
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15
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Section 2.9:
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Powers
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16
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Section 2.10:
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Compensation of Directors
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16
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Section 2.11:
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Confidentiality
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16
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ARTICLE III: COMMITTEES
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16
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Section 3.1:
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Committees
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16
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Section 3.2:
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Committee Rules
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16
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ARTICLE IV: OFFICERS; CHAIRPERSON; LEAD INDEPENDENT DIRECTOR
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17
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Section 4.1:
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Generally
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17
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Section 4.2:
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Chief Executive Officer
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17
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Section 4.3:
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Chairperson of the Board
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18
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Section 4.4:
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Lead Independent Director
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18
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Section 4.5:
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President
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18
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Section 4.6:
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Chief Financial Officer
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18
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Section 4.7:
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Treasurer
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18
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Section 4.8:
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Vice President
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18
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Section 4.9:
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Secretary
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19
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Section 4.10:
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Delegation of Authority
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19
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Section 4.11:
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Removal
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19
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ARTICLE V: STOCK
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19
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Section 5.1:
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Certificates; Uncertificated Shares
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19
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Section 5.2:
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Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares
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19
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Section 5.3:
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Other Regulations
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20
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ARTICLE VI: INDEMNIFICATION
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20
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Section 6.1:
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Indemnification of Officers and Directors
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20
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Section 6.2:
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Advance of Expenses
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20
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Section 6.3:
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Non-Exclusivity of Rights
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20
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Section 6.4:
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Indemnification Contracts
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21
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Section 6.5:
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Right of Indemnitee to Bring Suit
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21
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6.5.1
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Right to Bring Suit
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21
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6.5.2
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Effect of Determination
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21
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6.5.3
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Burden of Proof
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21
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Section 6.6:
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Nature of Rights
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21
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Section 6.7:
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Insurance
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22
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ARTICLE VII: NOTICES
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22
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Section 7.1:
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Notice
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22
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7.1.1
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Form and Delivery
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22
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7.1.2
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Electronic Transmission
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22
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7.1.3
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Affidavit of Giving Notice
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23
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Section 7.2:
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Waiver of Notice
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23
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ARTICLE VIII: INTERESTED DIRECTORS
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23
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Section 8.1:
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Interested Directors
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23
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Section 8.2:
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Quorum
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23
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ARTICLE IX: MISCELLANEOUS
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24
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Section 9.1:
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Fiscal Year
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24
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Section 9.2:
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Sealb
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24
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Section 9.3:
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Form of Records
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24
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Section 9.4:
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Reliance Upon Books and Records
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24
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Section 9.5:
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Certificate of Incorporation Governs
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24
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Section 9.6:
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Severability
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24
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Section 9.7:
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Time Periods
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24
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ARTICLE X: FORUM SELECTION
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24
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ARTICLE XI: AMENDMENT
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25
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ZIPRECRUITER, INC.
(a Delaware corporation)
RESTATED BYLAWS
As Adopted [l], 2021 and
As Effective [l], 2021
ARTICLE I: STOCKHOLDERS
Section 1.1: Annual Meetings. If required by applicable law, an annual meeting of stockholders shall be held for the election of directors at such date and time as the Board of Directors (the “Board”) of ZipRecruiter, Inc. (the “Corporation”) shall each year fix. The meeting may be held either at a place, within or without the State of Delaware as permitted by the Delaware General Corporation Law (the “DGCL”), or by means of remote communications as the Board in its sole discretion may determine. Any proper business may be transacted at the annual meeting. The Board may postpone, reschedule or cancel any previously schedule annual meeting of stockholders.
Section 1.2: Special Meetings. Special meetings of stockholders for any purpose or purposes shall be called in the manner set forth in the Restated Certificate of Incorporation of the Corporation (as the same may be amended and/or restated from time to time, the “Certificate of Incorporation”). The special meeting may be held either at a place, within or without the State of Delaware, or by means of remote communications as the Board in its sole discretion may determine. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of the meeting.
Section 1.3: Notice of Meetings. Notice of all meetings of stockholders shall be given in writing or by electronic transmission in the manner provided by applicable law (including, without limitation, as set forth in Section 7.1.1 of these Bylaws) stating the date, time and place, if any, of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and the record date for determining the stockholders entitled to vote at the meeting. In the case of a special meeting, such notice shall also set forth the purpose or purposes for which the meeting is called. Unless otherwise required by applicable law or the Certificate of Incorporation, notice of any meeting of stockholders shall be given not less than ten (10), nor more than sixty (60), days before the date of the meeting to each stockholder of record entitled to vote at such meeting.
Section 1.4: Adjournments. Notwithstanding Section 1.5 of these Bylaws, the chairperson of the meeting shall have the power to adjourn the meeting to another time, date and place (if any) regardless of whether a quorum is present, at any time and for any reason. Any meeting of stockholders, annual or special, may be adjourned from time to time, and notice need not be given of any such adjourned meeting if the time, date and place (if any) thereof and the means of remote communications (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken; provided, however, that 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,
then a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting. If a quorum is present at the original meeting, it shall also be deemed present at the adjourned meeting. To the fullest extent permitted by law, the Board may postpone, reschedule or cancel at any time and for any reason any previously scheduled special or annual meeting of stockholders before it (or any adjournment) is to be held, regardless of whether any notice or public disclosure with respect to any such meeting (or any adjournment) has been sent or made pursuant to Section 1.3 hereof or otherwise, in which case notice shall be provided to the stockholders of the new date, time and place, if any, of the meeting as provided in Section 1.3 above.
Section 1.5: Quorum. Except as otherwise provided by applicable law, the Certificate of Incorporation or these Bylaws, at each meeting of stockholders the holders of a majority of the voting power of the shares of stock issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business; provided, however, that where a separate vote by a class or classes or series of stock is required by applicable law or the Certificate of Incorporation, the holders of a majority of the voting power of the shares of such class or classes or series of the stock issued and outstanding and entitled to vote on such matter, present in person or represented by proxy at the meeting, shall constitute a quorum entitled to take action with respect to the vote on such matter. If a quorum shall fail to attend any meeting, the chairperson of the meeting or, if directed to be voted on by the chairperson of the meeting, the holders of a majority of the voting power of the shares entitled to vote who are present in person or represented by proxy at the meeting may adjourn the meeting. Shares of the Corporation’s stock belonging to the Corporation (or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation are held, directly or indirectly, by the Corporation), shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of the Corporation or any other corporation to vote any shares of the Corporation’s stock held by it in a fiduciary capacity and to count such shares for purposes of determining a quorum. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum, including at any adjournment thereof (unless a new record date is fixed for the adjourned meeting).
Section 1.6: Organization. Meetings of stockholders shall be presided over by (a) such person as the Board may designate, or (b) in the absence of such a person, the Chairperson of the Board, or (c) in the absence of such person, the Lead Independent Director, or, (d) in the absence of such person, the Chief Executive Officer of the Corporation, or (e) in the absence of such person, the President of the Corporation, or (f) in the absence of such person, by the Secretary of the Corporation, or (g) in the absence of such person, the most senior officer of the Corporation present, or (h) in the absence of such person, such person as may be chosen by the holders of a majority of the voting power of the shares entitled to vote who are present, in person or by proxy, at the meeting. Such person shall be chairperson of the meeting, and subject to Section 1.10 hereof, 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 seems to him or her to be in order. The Secretary of the Corporation shall act as secretary of the meeting, but in such person’s
absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section1.7: Voting; Proxies. Each stockholder of record entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy. Such a proxy may be prepared, transmitted and delivered in any manner permitted by applicable law. Except as may be required in the Certificate of Incorporation, directors shall be elected by a plurality of the votes cast by the holders of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. At all meetings of stockholders at which a quorum is present, unless a different or minimum vote is required by applicable law, rule or regulation applicable to the Corporation or its securities, the rules or regulations of any stock exchange applicable to the Corporation, the Certificate of Incorporation or these Bylaws, in which case such different or minimum vote shall be the applicable vote on the matter, every matter other than the election of directors shall be decided by the affirmative vote of the holders of a majority of the voting power of the shares of stock entitled to vote on such matter that are present in person or represented by proxy at the meeting and are voted for or against the matter (or if there are two or more classes or series of stock entitled to vote as separate classes, then in the case of each class or series, the holders of a majority of the voting power of the shares of stock of that class or series present in person or represented by proxy at the meeting voting for or against such matter).
Section1.8: Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at 5:00 p.m. Pacific Time on the day next preceding the day on which notice is given, or, if notice is waived, at 5:00 p.m. Pacific Time on the day next preceding the day on which the meeting is held. 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 may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
In order that the Corporation may determine the stockholders 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 may fix, in advance, a record date, which shall not precede the date upon which the resolution fixing the record date is adopted by the Board and which shall not be more than sixty (60) days prior to such action. If no such record date is fixed by the Board, then the record date for determining stockholders for any such purpose shall be at 5:00 p.m. Pacific Time on the day on which the Board adopts the resolution relating thereto.
Section1.9: List of Stockholders Entitled to Vote. The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date), 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, for a period of at least ten (10) days prior to the meeting, (a) on a reasonably accessible electronic network as permitted by applicable law (provided that the information required to gain access to the list is provided with the notice of the meeting), or (b) during ordinary business hours, at the principal place of business of the Corporation. If the meeting is held at a location where stockholders may attend in person, a list of stockholders entitled to vote at the meeting 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 at the meeting. If the meeting is held solely by means of remote communications, then the list shall be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 1.9 or to vote in person or by proxy at any meeting of stockholders.
Section1.10: Inspectors of Elections.
1.10.1 Applicability. Unless otherwise required by the Certificate of Incorporation or by applicable law, the following provisions of this Section 1.10 shall apply only if and when the Corporation has a class of voting stock that is: (a) listed on a national securities exchange; (b) authorized for quotation on an interdealer quotation system of a registered national securities association; or (c) held of record by more than two thousand (2,000) stockholders. In all other cases, observance of the provisions of this Section 1.10 shall be optional, and at the discretion of the Board.
1.10.2 Appointment. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors of election to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting.
1.10.3 Inspector’s Oath. Each inspector of election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such inspector’s ability.
1.10.4 Duties of Inspectors. At a meeting of stockholders, the inspectors of election shall (a) ascertain the number of shares outstanding and the voting power of each share, (b) determine the shares represented at a meeting and the validity of proxies and ballots, (c) count all votes and ballots, (d) determine and retain for a reasonable period of time a record of the disposition of any
challenges made to any determination by the inspectors, and (e) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.
1.10.5 Opening and Closing of Polls. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced by the chairperson of the meeting at the meeting. No ballot, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the Court of Chancery upon application by a stockholder shall determine otherwise.
1.10.6 Determinations. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in connection with proxies pursuant to Section 211(a)(2)b.(i) of the DGCL, or in accordance with Sections 211(e) or 212(c)(2) of the DGCL, ballots and the regular books and records of the Corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification of their determinations pursuant to this Section 1.10 shall specify the precise information considered by them, including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained and the basis for the inspectors’ belief that such information is accurate and reliable.
Section 1.11: Conduct of Meetings. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the presiding person of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; (v) limitations on the time allotted to questions or comments by participants; (vi) restricting the use of audio/video recording devices and cell phones; and (vii) complying with any state and local laws and regulations concerning safety and security. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so
declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
Section 1.12: Notice of Stockholder Business; Nominations.
1.12.1 Annual Meeting of Stockholders.
(a) Nominations of persons for election to the Board and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only: (i) pursuant to the Corporation’s notice of such meeting (or any supplement thereto), (ii) by or at the direction of the Board or any committee thereof or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Section 1.12 (the “Record Stockholder”), who is entitled to vote at such meeting and who complies with the notice and other procedures set forth in this Section 1.12 in all applicable respects. For the avoidance of doubt, the foregoing clause (iii) shall be the exclusive means for a stockholder to make nominations or propose business (other than business included in the Corporation’s proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the “Exchange Act”)), at an annual meeting of stockholders, and such stockholder must fully comply with the notice and other procedures set forth in this Section 1.12 to make such nominations or propose business before an annual meeting.
(b) For nominations or other business to be properly brought before an annual meeting by a Record Stockholder pursuant to Section 1.12.1(a) of these Bylaws:
(i) the Record Stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and provide any updates or supplements to such notice at the times and in the forms required by this Section 1.12;
(ii) such other business (other than the nomination of persons for election to the Board) must otherwise be a proper matter for stockholder action;
(iii) if the Proposing Person (as defined below) has provided the Corporation with a Solicitation Notice (as defined below), such Proposing Person must, in the case of a proposal other than the nomination of persons for election to the Board, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation’s voting shares reasonably believed by such Proposing Person to be sufficient to elect the nominee or nominees proposed to be nominated by such Record Stockholder, and must, in either case, have included in such materials the Solicitation Notice; and
(iv) if no Solicitation Notice relating thereto has been timely provided pursuant to this Section 1.12, the Proposing Person proposing such business or nomination must
not have solicited a number of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 1.12.
To be timely, a Record Stockholder’s notice must be delivered to the Secretary at the principal executive offices of the Corporation not later than 5:00 p.m. Pacific Time on the ninetieth (90th) day nor earlier than 5:00 p.m. Pacific Time on the one hundred and twentieth (120th) day prior to the first anniversary of the preceding year’s annual meeting (except in the case of the Corporation’s first annual meeting following its initial public offering, for which such notice shall be timely if delivered in the same time period as if such meeting were a special meeting governed by Section 1.12.3 of these Bylaws); provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the Record Stockholder to be timely must be so delivered (A) no earlier than 5:00 p.m. Pacific Time on the one hundred and twentieth (120th) day prior to such annual meeting and (B) no later than 5:00 p.m. Pacific Time on the later of the ninetieth (90th) day prior to such annual meeting or 5:00 p.m. Pacific Time on the tenth (10th) day following the day on which Public Announcement (as defined below) of the date of such meeting is first made by the Corporation. In no event shall an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for providing the Record Stockholder’s notice.
(c) As to each person whom the Record Stockholder proposes to nominate for election or reelection as a director, in addition to the matters set forth in paragraph (e) below, such Record Stockholder’s notice shall set forth:
(i) the name, age, business address and residence address of such person;
(ii) the principal occupation or employment of such nominee;
(iii) the class, series and number of any shares of stock of the Corporation that are beneficially owned or owned of record by such person or any Associated Person (as defined in Section 1.12.4(c));
(iv) the date or dates such shares were acquired and the investment intent of such acquisition;
(v) all other information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors in an election contest (even if an election contest is not involved), or would be otherwise required, in each case pursuant to and in accordance with Section 14(a) (or any successor provision) under the Exchange Act and the rules and regulations thereunder;
(vi) such person’s written consent to being named in the Corporation’s proxy statement as a nominee, to the public disclosure of information regarding or related to such person provided to the Corporation by such person or otherwise pursuant to this Section 1.12 and to serving as a director if elected;
(vii) whether such person meets the independence requirements of the stock exchange upon which the Corporation’s Class A Common Stock is primarily traded;
(viii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among such Proposing Person or any of its respective affiliates and associates, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the Proposing Person or any of its respective affiliates and associates were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and
(ix) a completed and signed questionnaire, representation and agreement required by Section 1.12.2 of these Bylaws.
(d) As to any business other than the nomination of a director or directors that the Record Stockholder proposes to bring before the meeting, in addition to the matters set forth in paragraph (e) below, such Record Stockholder’s notice shall set forth:
(i) a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend the Bylaws, the text of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such Proposing Person, including any anticipated benefit to any Proposing Person therefrom; and
(ii) a description of all agreements, arrangements and understandings between or among any such Proposing Person and any of its respective affiliates or associates, on the one hand, and any other person or persons, on the other hand, (including their names) in connection with the proposal of such business by such Proposing Person;
(e) As to each Proposing Person giving the notice, such Record Stockholder’s notice shall set forth:
(i) the current name and address of such Proposing Person, including, if applicable, their name and address as they appear on the Corporation’s stock ledger, if different;
(ii) the class or series and number of shares of stock of the Corporation that are directly or indirectly owned of record or beneficially owned by such Proposing Person, including any shares of any class or series of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future;
(iii) whether and the extent to which any derivative interest in the Corporation’s equity securities (including without limitation any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying class or series of shares of the
Corporation or otherwise, and any cash-settled equity swap, total return swap, synthetic equity position or similar derivative arrangement (any of the foregoing, a “Derivative Instrument”), as well as any rights to dividends on the shares of any class or series of shares of the Corporation that are separated or separable from the underlying shares of the Corporation) or any short interest in any security of the Corporation (for purposes of this Bylaw a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any increase or decrease in the value of the subject security, including through performance-related fees) is held directly or indirectly by or for the benefit of such Proposing Person, including without limitation whether and the extent to which any ongoing hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including without limitation any short position or any borrowing or lending of shares) has been made, the effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of, such Proposing Person with respect to any share of stock of the Corporation (any of the foregoing, a “Short Interest”);
(iv) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such Proposing Person or any of its respective affiliates or associates is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership;
(v) any direct or indirect material interest in any material contract or agreement with the Corporation, any affiliate of the Corporation or any Competitor (as defined below) (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement);
(vi) any significant equity interests or any Derivative Instruments or Short Interests in any Competitor held by such Proposing Person and/or any of its respective affiliates or associates;
(vii) any other material relationship between such Proposing Person, on the one hand, and the Corporation, any affiliate of the Corporation or any Competitor, on the other hand;
(viii) all information that would be required to be set forth in a Schedule 13D filed pursuant to Rule 13d-1(a) or an amendment pursuant to Rule 13d-2(a) if such a statement were required to be filed under the Exchange Act and the rules and regulations promulgated thereunder by such Proposing Person and/or any of its respective affiliates or associates;
(ix) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) (or
any successor provision) under the Exchange Act and the rules and regulations thereunder;
(x) such Proposing Person’s written consent to the public disclosure of information provided to the Corporation pursuant to this Section 1.12;
(xi) a complete written description of any agreement, arrangement or understanding (whether oral or in writing) (including any knowledge that another person or entity is Acting in Concert (as defined in Section 1.12.4(c)) with such Proposing Person) between or among such Proposing Person, any of its respective affiliates or associates and any other person Acting in Concert with any of the foregoing persons;
(xii) a representation that the Record Stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination;
(xiii) a representation whether such Proposing Person intends (or is part of a group that intends) to deliver a proxy statement or form of proxy to holders of, in the case of a proposal, at least the percentage of the Corporation’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent being a “Solicitation Notice”); and
(xiv) any proxy, contract, arrangement, or relationship pursuant to which the Proposing Person has a right to vote, directly or indirectly, any shares of any security of the Corporation.
The disclosures to be made pursuant to the foregoing clauses (ii), (iii), (iv) and (vi) shall not include any information with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these Bylaws on behalf of a beneficial owner.
(f) A stockholder providing written notice required by this Section 1.12 shall update such notice in writing, if necessary, so that the information provided or required to be provided in such notice is true and correct in all material respects as of (i) the record date for determining the stockholders entitled to notice of the meeting and (ii) 5:00 p.m. Pacific Time on the tenth (10th) business day prior to the meeting or any adjournment or postponement thereof. In the case of an update pursuant to clause (i) of the foregoing sentence, such update shall be received by the Secretary of the Corporation at the principal executive office of the Corporation not later than five (5) business days after the record date for determining the stockholders entitled to notice of the meeting, and in the case of an update and supplement pursuant to clause (ii) of the foregoing sentence, such update and supplement shall be received by the Secretary of the Corporation at the principal executive office of the Corporation not later than eight (8) business days prior to the date for the meeting, and, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed). For the avoidance of doubt, the obligation to update as set forth in this paragraph
shall not limit the Corporation’s rights with respect to any deficiencies in any notice provided by a stockholder, extend any applicable deadlines hereunder or enable or be deemed to permit a stockholder who has previously submitted notice hereunder to amend or update any proposal or nomination or to submit any new proposal, including by changing or adding nominees, matters, business and/or resolutions proposed to be brought before a meeting of the stockholders.
(g) Notwithstanding anything in Section 1.12 or any other provision of the Bylaws to the contrary, any person who has been determined by a majority of the Whole Board to have violated Section 2.11 of these Bylaws or a Board Confidentiality Policy (as defined below) while serving as a director of the Corporation in the preceding five (5) years shall be ineligible to be nominated or be qualified to serve as a member of the Board, absent a prior waiver for such nomination or qualification approved by two-thirds of the Whole Board.
1.12.2 Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee of any stockholder for election or reelection as a director of the Corporation, the person proposed to be nominated must deliver (in accordance with the time periods prescribed for delivery of notice under Section 1.12 of these Bylaws) to the Secretary at the principal executive offices of the Corporation a completed and signed questionnaire in the form required by the Corporation (which form the stockholder shall request in writing from the Secretary of the Corporation and which the Secretary shall provide to such stockholder within ten days of receiving such request) with respect to the background and qualification of such person to serve as a director of the Corporation and the background of any other person or entity on whose behalf, directly or indirectly, the nomination is being made and a signed representation and agreement (in the form available from the Secretary upon written request) that such person: (a) is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (ii) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (b) is not and will not become a party to any Compensation Arrangement (as defined below) that has not been disclosed therein, (c) if elected as a director of the Corporation, will comply with all informational and similar requirements of applicable insurance policies and laws and regulations in connection with service or action as a director of the Corporation, (d) if elected as a director of the Corporation, will comply with all corporate governance, conflict of interest, stock ownership requirements, confidentiality and trading policies and guidelines of the Corporation publicly disclosed from time to time, (e) if elected as a director of the Corporation, will act in the best interests of the Corporation and its stockholders and not in the interests of individual constituencies, (f) consents to being named as a nominee in the Corporation’s proxy statement pursuant to Rule 14a-4(d) under the Exchange Act and any associated proxy card of the Corporation and agrees to serve if elected as a director and (g) intends to serve as a director for the full term for which such individual is to stand for election.
1.12.3 Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of such meeting. Nominations of persons for election to the Board may be
made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of such meeting (a) by or at the direction of the Board or any committee thereof or (b) provided that the Board has determined that directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice of the special meeting, who shall be entitled to vote at the meeting and who complies with the notice and other procedures set forth in this Section 1.12 in all applicable respects. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by Section 1.12.1(b) of these Bylaws shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation (i) no earlier than the one hundred and twentieth (120th) day prior to such special meeting and (ii) no later than 5:00 p.m. Pacific Time on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for providing such notice.
1.12.4 General.
(a) Except as otherwise expressly provided in any applicable rule or regulation promulgated under the Exchange Act, only such persons who are nominated in accordance with the procedures set forth in this Section 1.12 shall be eligible to be elected at a meeting of stockholders and serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 1.12. Except as otherwise provided by law or these Bylaws, the chairperson of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 1.12 and, if any proposed nomination or business is not in compliance herewith, to declare that such defective proposal or nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 1.12, unless otherwise required by law, if the stockholder (or a Qualified Representative of the stockholder (as defined below)) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.
(b) Notwithstanding the foregoing provisions of this Section 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 1.12 shall be deemed to affect any rights of (a) stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) the holders of any series of Preferred Stock to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.
(c) For purposes of these Bylaws the following definitions shall apply:
(A) a person shall be deemed to be “Acting in Concert” with another person if such person knowingly acts (whether or not pursuant to an express agreement, arrangement or understanding) in concert with, or toward a common goal relating to the management, governance or control of the Corporation in substantial parallel with, such other person where (1) each person is conscious of the other person’s conduct or intent and this awareness is an element in their decision-making processes and (2) at least one additional factor suggests that such persons intend to act in concert or in substantial parallel, which such additional factors may include, without limitation, exchanging information (whether publicly or privately), attending meetings, conducting discussions or making or soliciting invitations to act in concert or in substantial parallel; provided that a person shall not be deemed to be Acting in Concert with any other person solely as a result of the solicitation or receipt of revocable proxies or consents from such other person in response to a solicitation made pursuant to, and in accordance with, Section 14(a) (or any successor provision) of the Exchange Act by way of a proxy or consent solicitation statement filed on Schedule 14A. A person Acting in Concert with another person shall be deemed to be Acting in Concert with any third party who is also Acting in Concert with such other person;
(B) “affiliate” and “associate” shall have the meanings ascribed thereto in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”); provided, however, that the term “partner” as used in the definition of “associate” shall not include any limited partner that is not involved in the management of the relevant partnership;
(C) “Associated Person” shall mean with respect to any subject stockholder or other person (including any proposed nominee) (1) any person directly or indirectly controlling, controlled by or under common control with such stockholder or other person, (2) any beneficial owner of shares of stock of the Corporation owned of record or beneficially by such stockholder or other person, (3) any associate of such stockholder or other person, and (4) any person directly or indirectly controlling, controlled by or under common control or Acting in Concert with any such Associated Person;
(D) “Compensation Arrangement” shall mean any direct or indirect compensatory payment or other financial agreement, arrangement or understanding with any person or entity other than the Corporation, including any agreement, arrangement or understanding with respect to any direct or indirect compensation, reimbursement or indemnification in connection with candidacy, nomination, service or action as a nominee or as a director of the Corporation;
(E) “Competitor” shall mean any entity that provides products or services that compete with or are alternatives to the principal products produced or services provided by the Corporation or its affiliates;
(F) “Proposing Person” shall mean (1) the Record Stockholder providing the notice of business proposed to be brought before an annual meeting or nomination of persons for election to the Board at a stockholder meeting, (2) the beneficial owner or beneficial owners, if different, on whose behalf the notice of business proposed to be brought before the annual meeting or nomination of persons for election to the Board at a stockholder meeting is made, and (3) any Associated Person on whose behalf the notice of business proposed to be brought before the annual meeting or nomination of persons for election to the Board at a stockholder meeting is made;
(G) “Public Announcement” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act; and
(H) to be considered a “Qualified Representative” of a stockholder, a person must be a duly authorized officer, manager, trustee or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as a proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction thereof, at the meeting. The Secretary of the Corporation, or any other person who shall be appointed to serve as secretary of the meeting, may require, on behalf of the Corporation, reasonable and appropriate documentation to verify the status of a person purporting to be a “Qualified Representative” for purposes hereof.
ARTICLE II: BOARD OF DIRECTORS
Section 2.1: Number; Qualifications The total number of directors constituting the Whole Board shall be fixed from time to time in the manner set forth in the Certificate of Incorporation and the term “Whole Board” shall have the meaning specified in the Certificate of Incorporation. No decrease in the authorized number of directors constituting the Whole Board shall shorten the term of any incumbent director. Directors need not be stockholders of the Corporation.
Section 2.2: Election; Resignation; Removal; Vacancies. Election of directors need not be by written ballot. Unless otherwise provided by the Certificate of Incorporation and subject to the special rights of holders of any series of Preferred Stock to elect directors, the Board shall be divided into three classes, designated as Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the Whole Board. Each director shall hold office until such director’s successor is elected and qualified or until such director’s earlier death, resignation, disqualification or removal. Any director may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer, or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at a later time or upon the happening of an event. Subject to the special rights of holders of any series of Preferred Stock to elect directors, directors may be removed only as provided by the Certificate of Incorporation
and applicable law. The Board shall initially consist of the person or persons then in office as director(s) at the time these Restated Bylaws become effective. All vacancies occurring in the Board and any newly created directorships resulting from any increase in the authorized number of directors shall be filled in the manner set forth in the Certificate of Incorporation.
Section 2.3: Regular Meetings. Regular meetings of the Board may be held at such places, within or without the State of Delaware, and at such times as the Board may from time to time determine. Notice of regular meetings need not be given if the date, times and places thereof are fixed by resolution of the Board.
Section 2.4: Special Meetings. Special meetings of the Board may be called by the Chairperson of the Board, the Chief Executive Officer, the Lead Independent Director or a majority of the members of the Board then in office and may be held at any time, date or place, within or without the State of Delaware, as the person or persons calling the meeting shall fix. Notice of the time, date and place of such meeting shall be given, orally, in writing or by electronic transmission (including electronic mail), by the person or persons calling the meeting to all directors at least four (4) days before the meeting if the notice is mailed, or at least twenty-four (24) hours before the meeting if such notice is given by telephone, hand delivery, telegram, telex, mailgram, facsimile, electronic mail or other means of electronic transmission; provided, however, that if, under the circumstances, the Chairperson of the Board, the Lead Independent Director or the Chief Executive Officer calling a special meeting deems that more immediate action is necessary or appropriate, notice may be delivered on the day of such special meeting. Unless otherwise indicated in the notice, any and all business may be transacted at a special meeting.
Section 2.5: Remote Meetings Permitted. Members of the Board, or any committee of the Board, may participate in a meeting of the Board or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to conference telephone or other communications equipment shall constitute presence in person at such meeting.
Section 2.6: Quorum; Vote Required for Action. Subject to the Certificate of Incorporation regarding the ability of members of the Board to fill a vacancy occurring in the Board, at all meetings of the Board, a majority of the Whole Board shall constitute a quorum for the transaction of business. If a quorum shall fail to attend any meeting, a majority of those present may adjourn the meeting to another place, date or time without further notice thereof. Except as otherwise provided herein or in the Certificate of Incorporation, or required by law, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board.
Section 2.7: Organization. Meetings of the Board shall be presided over by (a) the Chairperson of the Board, or (b) in the absence of such person, the Lead Independent Director, or (c) in such person’s absence, by the Chief Executive Officer, or (d) in such person’s absence, by a chairperson chosen by the Board at the meeting. The Secretary shall act as secretary of the meeting, but in such person’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.
Section 2.8: Unanimous Action by Directors in Lieu of a Meeting. Any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee, respectively, in the minute books of the Corporation. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 2.9: Powers. Except as otherwise provided by the Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board.
Section 2.10: Compensation of Directors. Members of the Board, as such, may receive, pursuant to a resolution of the Board, fees and other compensation for their services as directors, including without limitation their services as members of committees of the Board.
Section 2.11: Confidentiality. Each director shall maintain the confidentiality of, and shall not share with any third party person or entity (including third parties that originally sponsored, nominated or designated such director (the “Sponsoring Party”)), any non-public information learned in their capacities as directors, including communications among Board members in their capacities as directors. The Board may adopt a board confidentiality policy further implementing and interpreting this bylaw (a “Board Confidentiality Policy”). All directors are required to comply with this bylaw and any such Board Confidentiality Policy unless such director or the Sponsoring Party for such director has entered into a specific written agreement with the Corporation, in either case as approved by the Board, providing otherwise with respect to such confidential information.
ARTICLE III:COMMITTEES
Section 3.1: Committees. The Board may 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 or disqualification of a member of the committee, the member or members thereof present at any meeting of such committee who are not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in a resolution of the Board, shall have and may exercise all the powers and authority of the Board 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 that may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving, adopting, or recommending to the stockholders any action or matter (other than the election or removal of members of the Board) expressly required by the DGCL to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the Corporation.
Section 3.2: Committee Rules. Each committee shall keep records of its proceedings and make such reports as the Board may from time to time request. Unless the Board otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules, each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article II of these Bylaws. Except as otherwise provided in the Certificate of Incorporation, these Bylaws or the resolution of the Board designating the committee, any committee may create one or more subcommittees, each subcommittee to consist of one or more members of the committee, and may delegate to any such subcommittee any or all of the powers and authority of the committee.
ARTICLE IV: OFFICERS; CHAIRPERSON; LEAD INDEPENDENT DIRECTOR
Section 4.1: Generally. The officers of the Corporation shall consist of a Chief Executive Officer (who may be the Chairperson of the Board or the President), a President, a Secretary and a Treasurer and may consist of such other officers, including, without limitation, a Chief Financial Officer, and one or more Vice Presidents, as may from time to time be appointed by the Board. All officers shall be elected by the Board; provided, however, that the Board may empower the Chief Executive Officer of the Corporation to appoint any officer other than the Chief Executive Officer, the President, the Chief Financial Officer or the Treasurer. Except as otherwise provided by law, by the Certificate of Incorporation or these Bylaws, each officer shall hold office until such officer’s successor is duly elected and qualified or until such officer’s earlier resignation, death, disqualification or removal. Any number of offices may be held by the same person. Any officer may resign by delivering a resignation in writing or by electronic transmission to the Corporation at its principal office or to the Chairperson of the Board, the Chief Executive Officer, or the Secretary. Such resignation shall be effective upon delivery unless it is specified to be effective at some later time or upon the happening of some later event. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled by the Board and the Board may, in its discretion, leave unfilled, for such period as it may determine, any offices. Each such successor shall hold office for the unexpired term of such officer’s predecessor and until a successor is duly elected and qualified or until such officer’s earlier resignation, death, disqualification or removal.
Section 4.2: Chief Executive Officer. Subject to the control of the Board and such supervisory powers, if any, as may be given by the Board, the powers and duties of the Chief Executive Officer of the Corporation are:
(a) to act as the general manager and, subject to the control of the Board, to have general supervision, direction and control of the business and affairs of the Corporation;
(b) subject to Section 1.6 of these Bylaws, to preside at all meetings of the stockholders;
(c) subject to Section 1.2 of these Bylaws, to call special meetings of the stockholders to be held at such times and, subject to the limitations prescribed by law or by these Bylaws, at such places as he or she shall deem proper; and
(d) to affix the signature of the Corporation to all deeds, conveyances, mortgages, guarantees, leases, obligations, bonds, certificates and other papers and instruments in writing which have been authorized by the Board or which, in the judgment of the Chief Executive Officer, should be executed on behalf of the Corporation; to sign certificates for shares of stock of the Corporation (if any); and, subject to the direction of the Board, to have general charge of the property of the Corporation and to supervise and control all officers, agents and employees of the Corporation.
The person holding the office of President shall be the Chief Executive Officer of the Corporation unless the Board shall designate another officer to be the Chief Executive Officer.
Section 4.3: Chairperson of the Board. Subject to the provisions of Section 2.7 of these Bylaws, the Chairperson of the Board shall have the power to preside at all meetings of the Board and shall have such other powers and duties as provided in these Bylaws and as the Board may from time to time prescribe. The Chairperson of the Board may or may not be an officer of the Corporation.
Section 4.4: Lead Independent Director. The Board may, in its discretion, elect a lead independent director from among its members that are Independent Directors (as defined below) (such director, the “Lead Independent Director”). The Lead Independent Director shall preside at all meetings at which the Chairperson of the Board is not present and shall exercise such other powers and duties as may from time to time be assigned to him or her by the Board or as prescribed by these Bylaws. For purposes of these Bylaws, “Independent Director” has the meaning ascribed to such term under the rules of the exchange upon which the Corporation’s Class A Common Stock is primarily traded.
Section 4.5: President. The person holding the office of Chief Executive Officer shall be the President of the Corporation unless the Board shall have designated one individual as the President and a different individual as the Chief Executive Officer of the Corporation. Subject to the provisions of these Bylaws and to the direction of the Board, and subject to the supervisory powers of the Chief Executive Officer (if the Chief Executive Officer is an officer other than the President), and subject to such supervisory powers and authority as may be given by the Board to the Chairperson of the Board, and/or to any other officer, the President shall have the responsibility for the general management and control of the business and affairs of the Corporation and the general supervision and direction of all of the officers, employees and agents of the Corporation (other than the Chief Executive Officer, if the Chief Executive Officer is an officer other than the President) and shall perform all duties and have all powers that are commonly incident to the office of President or that are delegated to the President by the Board.
Section 4.6: Chief Financial Officer. The person holding the office of Chief Financial Officer shall be the Treasurer of the Corporation unless the Board shall have designated another officer as the Treasurer of the Corporation. Subject to the direction of the Board and the Chief Executive Officer, the Chief Financial Officer shall perform all duties and have all powers that are commonly incident to the office of Chief Financial Officer, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.7: Treasurer. The person holding the office of Treasurer shall have custody of all monies and securities of the Corporation. The Treasurer shall make such disbursements of the funds of the Corporation as are authorized and shall render from time to time an account of all such transactions. The Treasurer shall also perform such other duties and have such other powers as are commonly incident to the office of Treasurer, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.8: Vice President. Each Vice President shall have all such powers and duties as are commonly incident to the office of Vice President or that are delegated to him or her by the Board or the Chief Executive Officer. A Vice President may be designated by the Board to perform the duties and exercise the powers of the Chief Executive Officer or President in the event of the Chief Executive Officer’s or President’s absence or disability.
Section 4.9: Secretary. The Secretary shall issue or cause to be issued all authorized notices for, and shall keep, or cause to be kept, minutes of all meetings of the stockholders and the Board. The Secretary shall have charge of the corporate minute books and similar records and shall perform such other duties and have such other powers as are commonly incident to the office of Secretary, or as the Board or the Chief Executive Officer may from time to time prescribe.
Section 4.10: Delegation of Authority. The Board may from time to time delegate the powers or duties of any officer of the Corporation to any other officers or agents of the Corporation, notwithstanding any provision hereof.
Section 4.11: Removal. Any officer of the Corporation shall serve at the pleasure of the Board and may be removed at any time, with or without cause, by the Board; provided that if the Board has empowered the Chief Executive Officer to appoint any officer of the Corporation, then such officer may also be removed by the Chief Executive Officer. Such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation.
ARTICLE V: STOCK
Section 5.1: Certificates; Uncertificated Shares. The shares of capital stock of the Corporation shall be uncertificated shares; provided, however, that the resolution of the Board that the shares of capital stock of the Corporation shall be uncertificated shares shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation (or the transfer agent or registrar, as the case may be). Notwithstanding the foregoing, the Board may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be certificated shares. Every holder of stock represented by certificates shall be entitled to have a certificate signed by, or in the name of the Corporation, by any two authorized officers of the Corporation (it being understood that each of the Chairperson of the Board, the Vice-Chairperson of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary, and any Assistant Secretary shall be an authorized officer for such purpose), representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.
Section 5.2: Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates or Uncertificated Shares. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate previously issued by it, 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, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to agree to indemnify the Corporation and/or to give the Corporation a bond sufficient to indemnify it, against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
Section 5.3: Other Regulations. Subject to applicable law, the Certificate of Incorporation and these Bylaws, the issue, transfer, conversion and registration of shares represented by certificates and of uncertificated shares shall be governed by such other regulations and procedures as the Board may establish.
ARTICLE VI: INDEMNIFICATION
Section 6.1: Indemnification of Officers and Directors. Each person who was or is made a party to, or is threatened to be made a party to, or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, legislative, investigative or any other type whatsoever, preliminary, informal or formal, including any arbitration or other alternative dispute resolution and including any appeal of any of the foregoing (a “Proceeding”), by reason of the fact that such person (or a person of whom such person is the legal representative), is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation, or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (for purposes of this Article VI, an “Indemnitee”), shall be indemnified and held harmless by the Corporation to the fullest extent permitted by the DGCL 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 such law permitted the Corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes and penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith, provided such Indemnitee acted in good faith and in a manner that the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or Proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful. Such indemnification shall continue as to an Indemnitee who has ceased to be a director or officer of the Corporation and shall inure to the benefit of such Indemnitees’ heirs, executors and administrators. Notwithstanding the foregoing, subject to Section 6.5 of Article VI, the Corporation shall indemnify any such Indemnitee seeking indemnity in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if
such Proceeding (or part thereof) was authorized by the Board or such indemnification is authorized by an agreement approved by the Board.
Section 6.2: Advance of Expenses. Except as otherwise provided in a written indemnification agreement between the Corporation and an Indemnitee, the Corporation shall pay all expenses (including attorneys’ fees) as they are incurred by an Indemnitee in defending any Proceeding in advance of its final disposition; provided, however, that if the DGCL then so requires, the advancement of such expenses shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay such amounts if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified under this Article VI or otherwise.
Section 6.3: Non-Exclusivity of Rights. The rights conferred on any person in this Article VI shall not be exclusive of any other right that such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote or consent of stockholders or disinterested directors, or otherwise. Additionally, nothing in this Article VI shall limit the ability of the Corporation, in its discretion, to indemnify or advance expenses to persons whom the Corporation is not obligated to indemnify or advance expenses pursuant to this Article VI.
Section 6.4: Indemnification Contracts. The Board is authorized to cause the Corporation to enter into indemnification contracts 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, agent or trustee of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, providing indemnification or advancement rights to such person. Such rights may be greater than those provided in this Article VI.
Section 6.5: Right of Indemnitee to Bring Suit. The following shall apply to the extent not in conflict with any indemnification contract provided for in Section 6.4 above.
6.5.1 Right to Bring Suit. If a claim under Section 6.1 or 6.2 of this Article VI is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for an advancement of expenses, in which case the applicable period shall be twenty (20) days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If the Indemnitee is successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Indemnitee shall be entitled to be paid, to the fullest extent permitted by law, the expense of prosecuting or defending such suit. In (a) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses) it shall be a defense that, and (b) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that, the Indemnitee has not met any applicable standard for indemnification set forth in applicable law.
6.5.2 Effect of Determination. Neither the absence of a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances
because the Indemnitee has met the applicable standard of conduct set forth in applicable law, nor an actual determination that the Indemnitee has not met such applicable standard of conduct, shall not create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit.
6.5.3 Burden of Proof. In any suit brought by the Indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VI, or otherwise, shall be on the Corporation.
Section 6.6: Nature of Rights. The rights conferred upon Indemnitees in this Article VI shall be contract rights and such rights shall continue as to an Indemnitee who has ceased to be a director, officer or trustee and shall inure to the benefit of the Indemnitee’s heirs, executors and administrators. Any amendment, repeal or modification of any provision of this Article VI that adversely affects any right of an Indemnitee or an Indemnitee’s successors shall be prospective only, and shall not adversely affect any right or protection conferred on a person pursuant to this Article VI with respect to any Proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment, repeal or modification.
Section 6.7: Insurance. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.
ARTICLE VII: NOTICES
Section 7.1: Notice
7.1.1 Form and Delivery. Except as otherwise specifically required in these Bylaws (including, without limitation, Section 7.1.2 of these Bylaws) or by applicable law, all notices required to be given pursuant to these Bylaws may (a) in every instance in connection with any delivery to a member of the Board, be effectively given by hand delivery (including use of a delivery service), by depositing such notice in the mail, postage prepaid, or by sending such notice by overnight express courier, facsimile, electronic mail or other form of electronic transmission and (b) be effectively delivered to a stockholder when given by hand delivery, by depositing such notice in the mail, postage prepaid or, if specifically consented to by the stockholder as described in Section 7.1.2 of these Bylaws, by sending such notice by facsimile, electronic mail or other form of electronic transmission. Any such notice shall be addressed to the person to whom notice is to be given at such person’s address as it appears on the records of the Corporation. The notice shall be deemed given (a) in the case of hand delivery, when received by the person to whom notice is to be given or by any person accepting such notice on behalf of such person, (b) in the case of delivery by mail, upon deposit in the mail, (c) in the case of delivery by overnight express courier, when dispatched, and (d) in the case of delivery via
facsimile, electronic mail or other form of electronic transmission, at the time provided in Section 7.1.2 of these Bylaws.
7.1.2 Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation, or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given in accordance with Section 232 of the DGCL. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (a) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (b) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given pursuant to this Section 7.1.2 shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of such posting and the giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the stockholder.
7.1.3 Affidavit of Giving Notice. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given in writing or by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
Section 7.2: Waiver of Notice. Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these Bylaws, a written waiver of notice, signed by the person entitled to notice, or waiver by electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of 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. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any waiver of notice.
ARTICLE VIII:INTERESTED DIRECTORS
Section 8.1: Interested Directors. No contract or transaction between the Corporation and one or more of its members of the Board or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are members of the board of directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof that authorizes the contract or transaction, or solely because his, her or their votes are counted for such purpose, if: (a) the
material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; (b) the material facts as to his, her or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board, a committee thereof, or the stockholders.
Section 8.2: Quorum. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.
ARTICLE IX:MISCELLANEOUS
Section 9.1: Fiscal Year. The fiscal year of the Corporation shall be determined by resolution of the Board.
Section 9.2: Sealb. The Board may provide for a corporate seal, which may have the name of the Corporation inscribed thereon and shall otherwise be in such form as may be approved from time to time by the Board.
Section 9.3: Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on or by means of, or be in the form of any other information storage device, method or one or more electronic networks or databases (including one or more distributed electronic networks or databases), electronic or otherwise, provided that the records so kept can be converted into clearly legible paper form within a reasonable time and otherwise comply with the DGCL. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records pursuant to any provision of the DGCL.
Section 9.4: Reliance Upon Books and Records. A member of the Board, or a member of any committee designated by the Board shall, in the performance of such person’s duties, be fully protected in relying in good faith upon the books and records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board, or by any other person as to matters the member reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
Section 9.5: Certificate of Incorporation Governs. In the event of any conflict between the provisions of the Certificate of Incorporation and Bylaws, the provisions of the Certificate of Incorporation shall govern.
Section 9.6: Severability. If any provision of these Bylaws shall be held to be invalid, illegal, unenforceable or in conflict with the provisions of the Certificate of Incorporation, then such provision shall nonetheless be enforced to the maximum extent possible consistent with
such holding and the remaining provisions of these Bylaws (including without limitation, all portions of any section of these Bylaws containing any such provision held to be invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation, that are not themselves invalid, illegal, unenforceable or in conflict with the Certificate of Incorporation) shall remain in full force and effect.
Section 9.7: Time Periods. In applying any provision of these Bylaws which requires that an act be done or not be 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 X:FORUM SELECTION
Unless the Corporation consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the United States Securities Act of 1933, as amended, and the rules and regulations promulgated by the Securities and Exchange Commission thereunder. Any person or entity purchasing or otherwise acquiring or holding any interest in any security of the Corporation shall be deemed to have notice of and consented to the provisions of this Article X.
ARTICLE XI:AMENDMENT
Notwithstanding any other provision of these Bylaws, any alteration, amendment or repeal of these Bylaws, and any adoption of new Bylaws, shall require the approval of the Board or the stockholders of the Corporation as expressly provided in the Certificate of Incorporation.
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CERTIFICATION OF RESTATED BYLAWS
OF
ZIPRECRUITER, INC.
(a Delaware corporation)
I, Ryan Sakamoto, certify that I am Secretary of ZipRecruiter, Inc., a Delaware corporation (the “Corporation”), that I am duly authorized to make and deliver this certification, that the attached Bylaws are a true and complete copy of the Restated Bylaws of the Corporation in effect as of the date of this certificate.
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Dated: [l], 2021
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General Counsel and Secretary
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AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT is made as of April 22, 2021 by and among ZipRecruiter, Inc., a Delaware corporation (the “Company”), and each of the investors listed on SCHEDULE A hereto, each of which is referred to in this Agreement as an “Investor.”
RECITALS
A. Certain of the Investors (the “Prior Investors”) hold shares of the Company’s Series A Preferred Stock, Series B Preferred Stock and/or shares of Common Stock and possess registration rights, information rights, rights of first offer and other rights pursuant to an Investors’ Rights Agreement, dated November 7, 2017 between the Company and the Prior Investors (the “Prior Agreement”).
B. The Prior Investors are holders of at least a majority of the Registrable Securities (as defined in the Prior Agreement), and desire to amend and restate the Prior Agreement in its entirety and to accept the rights created pursuant to this Agreement in lieu of the rights granted to them under the Prior Agreement.
NOW, THEREFORE, the Company, and the Investors (including the Prior Investors) each hereby agree to amend and restate the Prior Agreement in its entirety as set forth herein, and the parties hereto further hereby agree as follows:
1. Definitions. For purposes of this Agreement:
1.1 “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.
1.2 “Common Stock” means shares of the Company’s Class A common stock, par value $0.00001 per share (“Class A Common Stock”) and the Company’s Class B common stock, par value $0.00001 per share (“Class B Common Stock”).
1.3 “Damages” means any loss, damage, claim or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, claim or liability (or any action in respect thereof) arises out of or is based upon (a) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (b) an 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 (c) any violation or alleged violation by the indemnifying party (or any of its agents or Affiliates) of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act, or any state securities law.
1.4 “Derivative Securities” means any securities or rights convertible into, or exercisable or exchangeable for (in each case, directly or indirectly), Common Stock, including options and warrants.
1.5 “Direct Listing” means the Company’s initial listing of its Common Stock on a national securities exchange by means of a registration statement on Form S-1 filed by the Company with
the Securities and Exchange Commission that registers shares of existing capital stock of the Company for resale. For the avoidance of doubt, the Direct Listing shall not be deemed to be an underwritten offering and shall not involve any underwriting services. Any and all mentions of an underwritten offering or underwriters contained herein shall not apply to the Direct Listing.
1.6 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
1.7 “Excluded Registration” means (a) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (b) a registration relating to an SEC Rule 145 transaction; (c) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; (d) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered or (e) with respect to a Holder, a registration relating to the Direct Listing that includes all Registrable Securities then held by such Holder.
1.8 “Form S-1” means such form under the Securities Act as in effect on the date hereof or any successor registration form under the Securities Act subsequently adopted by the SEC.
1.9 “Form S-3” means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits incorporation of substantial information by reference to other documents filed by the Company with the SEC.
1.10 “GAAP” means generally accepted accounting principles in the United States.
1.11 “Holder” means any Investor owning Registrable Securities.
1.12 “Immediate Family Member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, of a natural person referred to herein.
1.13 “Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.
1.14 “IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.
1.15 “Key Employee” has the meaning set forth in the Purchase Agreement, as amended.
1.16 “Major Investor” means any Investor that, individually or together with such Investor’s Affiliates, holds at least 2,000,603 shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, or other recapitalization or reclassification effected after the date hereof).
1.17 “New Securities” means, collectively, equity securities of the Company, whether or not currently authorized, as well as rights, options, or warrants to purchase such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.
1.18 “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.
1.19 “Preferred Director” means any director of the Company that the holders of record of the Preferred Stock are entitled to elect pursuant to the Company’s Certificate of Incorporation.
1.20 “Preferred Stock” means shares of the Company’s Series A Preferred Stock, par value $0.00001 per share and shares of the Company’s Series B Preferred Stock, par value $0.00001 per share.
1.21 “Purchase Agreement” means that certain Series B Preferred Stock Purchase Agreement dated November 7, 2017 by and between the Company and certain of the Investors.
1.22 “Registrable Securities” means (a) the Common Stock issuable or issued upon conversion of the Preferred Stock; (b) any Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company, acquired by the Investors after the date hereof; (c) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in clauses (a) and (b) above; excluding in all cases, however, any Registrable Securities sold by a Person in a transaction in which the applicable rights under this Agreement are not assigned pursuant to Section 6.1, and excluding for purposes of Section 2 any shares for which registration rights have terminated pursuant to Section 2.14 of this Agreement.
1.23 “Registrable Securities then outstanding” means the number of shares determined by adding the number of shares of outstanding Common Stock that are Registrable Securities and the number of shares of Common Stock issuable (directly or indirectly) pursuant to then exercisable and/or convertible securities that are Registrable Securities.
1.24 “Restricted Securities” means the securities of the Company required to bear the legend set forth in Section 2.12 hereof.
1.25 “SEC” means the Securities and Exchange Commission.
1.26 “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.
1.27 “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.
1.28 “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.29 “Selling Expenses” means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder, except for the fees and disbursements of the Selling Holder Counsel borne and paid by the Company as provided in Section 2.6.
2. Registration Rights. The Company covenants and agrees as follows:
2.1 Demand Registration.
(a) Form S-1 Demand. If at any time after the earlier of (i) 7 years after the date of this Agreement or (ii) one hundred eighty (180) days after the effective date of the registration statement for the IPO or the Direct Listing (whichever occurs first), the Company receives a request from Holders of at least a majority of the shares of Common Stock issued or issuable upon conversion of the Preferred Stock that the Company file a Form S-1 registration statement with respect to at least thirty percent (30%) of the Registrable Securities then outstanding (or a lesser percent if the anticipated aggregate offering price, net of Selling Expenses, would exceed $10 million), then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 1.1(c) and Section 2.2.
(b) Form S-3 Demand. If at any time when it is eligible to use a Form S-3 registration statement, the Company receives from any Holder or Holders of at least fifteen percent (15%) of the Registrable Securities a request that the Company file a Form S-3 registration statement with respect to outstanding Registrable Securities of such Holder or Holders having an anticipated aggregate offering price, net of Selling Expenses, of at least $2 million, then the Company shall (i) within ten (10) days after the date such request is given, give a Demand Notice to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within forty-five (45) days after the date such request is given by the Initiating Holders, file a Form S-3 registration statement under the Securities Act covering all Registrable Securities requested to be included in such registration by any other Holders, as specified by notice given by each such Holder to the Company within twenty (20) days of the date the Demand Notice is given, and in each case, subject to the limitations of Section 1.1(c) and Section 2.2.
(c) Notwithstanding the foregoing obligations, if the Company furnishes to Holders requesting a registration pursuant to this Section 2.1 a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Company’s Board of Directors (the “Board”) it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective , then the Company shall have the right to defer taking action with respect to such filing, and any time periods with respect to filing or effectiveness thereof shall be tolled correspondingly, for a period of not more than ninety (90) days after the request of the Initiating Holders is given for any registration pursuant to Section 1.1(a) or 1.1(b); provided, however, that the Company may not invoke this right more than twice in any twelve (12) month period; and provided further that the Company shall not register any securities for its own account or that of any other stockholder during such ninety-day period, other than an Excluded Registration.
(d) The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 1.1(a): (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement
to become effective; (ii) after the Company has effected two (2) registrations pursuant to Section 1.1(a); or (iii) if the Initiating Holders propose to dispose of shares of Registrable Securities that may be immediately registered on Form S-3 pursuant to a request made pursuant to Section 1.1(b). The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 1.1(b): A. during the period that is thirty (30) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is ninety (90) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; or B. if the Company has effected two (2) registrations pursuant to Section 1.1(b) within the twelve (12) month period immediately preceding the date of such request. A registration shall not be counted as “effected” for purposes of this Section 1.1(d) until such time as the applicable registration statement has been declared effective by the SEC, unless the Initiating Holders withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 2.6, in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 1.1(d).
2.2 Company Registration. If the Company proposes to register (including, for this purpose, a registration effected by the Company for stockholders other than the Holders) any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than in an Excluded Registration or for the Direct Listing), the Company shall, at such time, promptly give each Holder notice of such registration. Upon the request of each Holder given within twenty (20) days after such notice is given by the Company, the Company shall, subject to the provisions of Section 2.2, cause to be registered all of the Registrable Securities that each such Holder has requested to be included in such registration. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2.2 before the effective date of such registration, whether or not any Holder has elected to include Registrable Securities in such registration. The expenses (other than Selling Expenses) of such withdrawn registration shall be borne by the Company in accordance with Section 2.6
2.3 Underwriting Requirements.
(a) If, pursuant to Section 2.1, the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 2.1, and the Company shall include such information in the Demand Notice. The underwriter(s) will be selected by the Company and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include such Holder’s Registrable Securities in such registration 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 as provided in Section 2.4(e)) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting. Notwithstanding any other provision of this Section 2.2, if the underwriter(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company
or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares.
(b) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to Section 2.2, the Company shall not be required to include any of the Holders’ Registrable Securities in such underwriting unless the Holders accept the terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their sole discretion determine will not jeopardize the success of the offering by the Company. If the total number of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the number of securities to be sold (other than by the Company) that the underwriters in their reasonable discretion determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters and the Company in their sole discretion determine will not jeopardize the success of the offering. If the underwriters determine that less than all of the Registrable Securities requested to be registered can be included in such offering, then the Registrable Securities that are included in such offering shall be allocated among the selling Holders in proportion (as nearly as practicable to) the number of Registrable Securities owned by each selling Holder or in such other proportions as shall mutually be agreed to by all such selling Holders. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest one hundred (100) shares. Notwithstanding the foregoing, in no event shall (i) the number of Registrable Securities included in the offering be reduced unless all other securities (other than securities to be sold by the Company) are first entirely excluded from the offering, or (ii) the number of Registrable Securities included in the offering be reduced below twenty-five percent (25%) of the total number of securities included in such offering, unless such offering is the IPO or the Direct Listing (whichever occurs first), in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering. For purposes of the provision in this Section 2.3(b) concerning apportionment, for any selling Holder that is a partnership, limited liability company, or corporation, the partners, members, retired partners, retired members, stockholders, and Affiliates of such Holder, or the estates and Immediate Family Members of any such partners, retired partners, members, and retired members and any trusts for the benefit of any of the foregoing Persons, shall be deemed to be a single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be based upon the aggregate number of Registrable Securities owned by all Persons included in such “selling Holder,” as defined in this sentence.
(c) For purposes of Section 2.1, a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 2.3(a), fewer than fifty percent (50%) of the total number of Registrable Securities that Holders have requested to be included in such registration statement are actually included.
2.4 Obligations of the Company. Whenever required under this Section 2 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible:
(a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its commercially reasonable 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 for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that (i) such one hundred twenty (120) day period shall be extended for a period of time equal to the period the Holder refrains, at the request of an underwriter of
Common Stock (or other securities) of the Company, from selling any securities included in such registration;
(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 Securities Act in order to enable the disposition of all securities covered by such registration statement;
(c) furnish to the selling Holders such numbers of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities;
(d) use its commercially reasonable 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 selling Holders; provided that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act;
(e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering;
(f) use its commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and each securities exchange and trading system (if any) on which similar securities issued by the Company are then listed;
(g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration;
(h) promptly make available for inspection by the selling Holders, any underwriter(s) participating in any disposition pursuant to such registration statement, and any attorney or accountant or other agent retained by any such underwriter or selected by the selling Holders, all financial and other records, pertinent corporate documents, and properties of the Company, and cause the Company’s officers, directors, employees, and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant, or agent, in each case, as necessary or advisable to verify the accuracy of the information in such registration statement and to conduct appropriate due diligence in connection therewith;
(i) notify each selling Holder, promptly after the Company receives notice thereof, of the time when such registration statement has been declared effective or a supplement to any prospectus forming a part of such registration statement has been filed; and
(j) after such registration statement becomes effective, notify each selling Holder of any request by the SEC that the Company amend or supplement such registration statement or prospectus.
In addition, the Company shall ensure that, at all times after any registration statement covering a public offering of securities of the Company under the Securities Act shall have become
effective, its insider trading policy shall provide that the Company’s directors may implement a trading program under Rule 10b5-1 of the Exchange Act.
2.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 2 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.
2.6 Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 2, including all registration, filing, and qualification fees; printers’ and accounting fees; fees and disbursements of counsel for the Company; and the reasonable fees and disbursements, not to exceed $35,000 per registration, of one counsel for the selling Holders (“Selling Holder Counsel”), shall be borne and paid by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 2.1 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all selling Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included in the withdrawn registration), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration pursuant to Section 1.1(a) or Section 1.1(b), as the case may be; provided further that if, at the time of such withdrawal, the Holders shall have learned of a material adverse change in the financial condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such information, then the Holders shall not be required to pay any of such expenses and shall not forfeit their right to one registration pursuant to Section 1.1(a) or Section 1.1(b). All Selling Expenses relating to Registrable Securities registered pursuant to this Section 2 shall be borne and paid by the Holders pro rata on the basis of the number of Registrable Securities registered on their behalf.
2.7 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.
2.8 Indemnification. If any Registrable Securities are included in a registration statement (i) under this Section 2 or (ii) in connection with the Direct Listing:
(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(a) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such Holder, underwriter, controlling Person, or other aforementioned Person expressly for use in connection with such registration.
(b) To the extent permitted by law, each selling Holder, severally and not jointly, will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any), who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter (as defined in the Securities Act), any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to the Company and each other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 2.8(b) shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Sections 2.8(b) and 2.8(d) exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of fraud or willful misconduct by such Holder.
(c) Promptly after receipt by an indemnified party under this Section 2.8 of notice of the commencement of any action (including any governmental action) for which a party may be entitled to indemnification hereunder, such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 2.8, give the indemnifying party notice of the commencement thereof. The indemnifying party shall have the right to participate in such action and, to the extent the indemnifying party so desires, participate jointly with any other indemnifying party to which notice has been given, and to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that 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 action. The failure to give notice to the indemnifying party within a reasonable time of the commencement of any such action shall relieve such indemnifying party of any liability to the indemnified party under this Section 2.8, to the extent that such failure materially prejudices the indemnifying party’s ability to defend such action.
(d) Notwithstanding anything else herein to the contrary, the foregoing indemnity agreements of the Company and the selling Holders are subject to the condition that, insofar as they relate to any Damages arising from any untrue statement or alleged untrue statement of a material fact contained in, or omission or alleged omission of a material fact from, a preliminary prospectus (or necessary to make the statements therein not misleading) that has been corrected in the form of prospectus included in the registration statement at the time it becomes effective, or any amendment or supplement thereto filed with the SEC pursuant to Rule 424(b) under the Securities Act (the “Final Prospectus”), such indemnity agreement shall not inure to the benefit of any Person if a copy of the Final Prospectus was furnished to the indemnified party and such indemnified party failed to deliver, at or before the confirmation of the sale of the shares registered in such offering, a copy of the Final Prospectus to the Person asserting the loss, liability, claim, or damage in any case in which such delivery was required by the Securities Act.
(e) To provide for just and equitable contribution to joint liability under the Securities Act in any case in which either (i) any party otherwise entitled to indemnification hereunder
makes a claim for indemnification pursuant to this Section 2.8 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case, notwithstanding the fact that this Section 2.8 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of any party hereto for which indemnification is provided under this Section 2.8, then, and in each such case, such parties will contribute to the aggregate losses, claims, damages, liabilities, or expenses to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of each of the indemnifying party and the indemnified party in connection with the statements, omissions, or other actions that resulted in such loss, claim, damage, liability, or expense, as well as to reflect any other relevant equitable considerations. 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 allegedly untrue statement of a material fact, or the omission or alleged omission of 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; provided, however, that, in any such case, (1) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Securities offered and sold by such Holder pursuant to such registration statement, and (2) no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation; and provided further that in no event shall a Holder’s liability pursuant to this Section 2.8(e), when combined with the amounts paid or payable by such Holder pursuant to Section 2.8(b), exceed the proceeds from the offering received by such Holder (net of any Selling Expenses paid by such Holder), except in the case of willful misconduct or fraud by such Holder.
(f) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shall control.
(g) Unless otherwise superseded by an underwriting agreement entered into in connection with the underwritten public offering, the obligations of the Company and Holders under this Section 2.8 shall survive the completion of any offering of Registrable Securities in a registration under this Section 2, and otherwise shall survive the termination of this Agreement.
2.9 Reports Under Exchange Act. With a view to making available to the Holders the benefits of SEC Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall:
(a) make and keep available adequate current public information, as those terms are understood and defined in SEC Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO or the Direct Listing (whichever occurs first);
(b) use commercially reasonable efforts to 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 the Company has become subject to such reporting requirements); and
(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO or the Direct Listing
(whichever occurs first)), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company; and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration (at any time after the Company has become subject to the reporting requirements under the Exchange Act) or pursuant to Form S-3 (at any time after the Company so qualifies to use such form).
2.10 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that (a) would allow such holder or prospective holder to include such securities in any registration unless, under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of such securities will not reduce the number of the Registrable Securities of the Holders that are included or (b) allow such holder or prospective holder to initiate a demand for registration of any securities held by such holder or prospective holder; provided that this limitation shall not apply to any additional Investor who becomes a party to this Agreement in accordance with Section 6.9.
2.11 “Market Stand off” Agreement. Each Holder hereby agrees that it will not, without the prior written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the registration by the Company of shares of its Common Stock or any other equity securities under the Securities Act on a registration statement on Form S-1 or Form S-3, and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days in the case of the IPO, which period may be extended upon the request of the managing underwriter, to the extent required by any FINRA or stock exchange rules, for an additional period of up to fifteen (15) days if the Company issues or proposes to issue an earnings or other public release within fifteen (15) days of the expiration of the 180-day lockup period): (a) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the registration statement for such offering or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction described in clause (a) or (b) above is to be settled by delivery of Common Stock or other securities, in cash, or otherwise. The foregoing provisions of this Section 2.11 shall apply only to the IPO, shall not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall be applicable to the Holders only if all officers and directors are subject to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to the conversion into Common Stock of all outstanding Preferred Stock). The underwriters in connection with such registration are intended third-party beneficiaries of this Section 2.11 and shall have the right, power and authority to enforce the provisions hereof as though they were a party hereto. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriters in connection with such registration that are consistent with this Section 2.11 or that are necessary to give further effect thereto. The foregoing provisions of this Section 2.11 shall not apply to the Direct Listing and shall only be applicable to the Company’s initial offering of equity securities if the Company has not already completed the Direct Listing.
2.12 Restrictions on Transfer.
(a) The Preferred Stock and the Registrable Securities shall not be sold, pledged, or otherwise transferred, and the Company shall not recognize and shall issue stop-transfer instructions to its transfer agent with respect to any such sale, pledge, or transfer, except upon the conditions specified in this Agreement, which conditions are intended to ensure compliance with the provisions of the Securities Act. A transferring Holder will cause any proposed purchaser, pledgee, or transferee of the Preferred Stock and the Registrable Securities held by such Holder to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Agreement.
(b) Each certificate, instrument or book entry representing (i) the Preferred Stock, (ii) the Registrable Securities, and (iii) any other securities issued in respect of the securities referenced in clauses (i) and (ii), upon any stock split, stock dividend, recapitalization, merger, consolidation, or similar event, shall (unless otherwise permitted by the provisions of Section 2.12(c)) be notated with a legend substantially in the following form:
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD, PLEDGED, OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR A VALID EXEMPTION FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE SECURITIES REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
The Holders consent to the Company making a notation in its records and giving instructions to any transfer agent of the Restricted Securities in order to implement the restrictions on transfer set forth in this Section 2.12.
(c) The holder of such Restricted Securities, by acceptance of ownership thereof, agrees to comply in all respects with the provisions of this Section 2. Before any proposed sale, pledge, or transfer of any Restricted Securities, unless there is in effect a registration statement under the Securities Act covering the proposed transaction, the Holder thereof shall give notice to the Company of such Holder’s intention to effect such sale, pledge, or transfer. Each such notice shall describe the manner and circumstances of the proposed sale, pledge, or transfer in sufficient detail and, if reasonably requested by the Company, shall be accompanied at such Holder’s expense by either (i) a written opinion of legal counsel who shall, and whose legal opinion shall, be reasonably satisfactory to the Company, addressed to the Company, to the effect that the proposed transaction may be effected without registration under the Securities Act; (ii) a “no action” letter from the SEC to the effect that the proposed sale, pledge, or transfer of such Restricted Securities without registration will not result in a recommendation by the staff of the SEC that action be taken with respect thereto; or (iii) any other evidence reasonably satisfactory to counsel to the Company to the effect that the proposed sale, pledge, or transfer of the Restricted Securities may be effected without registration under the Securities Act, whereupon the Holder of such Restricted Securities shall be entitled to sell, pledge, or transfer such Restricted Securities in accordance with the terms of the notice given by the Holder to the Company. The Company will not require such a legal opinion or “no action” letter (1) in any transaction in compliance with SEC Rule 144 or (2) in any transaction in which such Holder distributes Restricted Securities to an Affiliate of such Holder for no consideration; provided that each transferee agrees in writing to be subject to the terms of
this Section 2.12. Each certificate, instrument, or book entry representing the Restricted Securities transferred as above provided shall bear, except if such transfer is made pursuant to SEC Rule 144, the appropriate restrictive legend set forth in Section 2.12(b), except that such certificate, instrument, or book entry shall not bear such restrictive legend if, in the opinion of counsel for such Holder and the Company, such legend is not required in order to establish compliance with any provisions of the Securities Act.
2.13 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 2 may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities that (i) immediately after such assignment or transfer, holds at least ten percent (10%) of the shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, stock combinations and other recapitalizations) held by such Holder immediately prior to such assignment or transfer, (ii) is being assigned or transferred at least 350,000 shares of Registrable Securities held by such Holder (subject to appropriate adjustment for stock splits, stock dividends, stock combinations and other recapitalizations), (iii) is a subsidiary, Affiliate, parent, partner, member, limited partner, retired partner, retired member or stockholder of such Holder, or (iv) is a Holder’s Immediate Family Member or trust for the benefit of such Holder, provided: (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 registration rights are being assigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement; and (c) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Securities Act. For the purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferee or assignee (i) that is a subsidiary, parent, partner, limited partner, retired partner, member, retired member or stockholder of a Holder; (ii) that is an Affiliate of the Holder, which means with respect to a limited liability company or a limited liability partnership, a fund or entity managed by the same manager or managing member or general partner or management company or by an entity controlling, controlled by, or under common control with such manager or managing member or general partner or management company, (iii) who is a Holder’s Immediate Family Member, or (iv) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member, shall be aggregated together and with those of the assigning Holder; provided that all assignees and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Section 2.
2.14 Termination of Registration Rights. The right of any Holder to request registration or inclusion of Registrable Securities in any registration pursuant to Section 2.1 or Section 2.2 shall terminate upon the earliest to occur of: (a) the closing of a Deemed Liquidation Event, as such term is defined in the Company’s Amended and Restated Certificate of Incorporation; (b) such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Holder’s shares without limitation during a three-month period without registration; (c) the fifth (5th) anniversary of the IPO and (d) the fifth (5th) anniversary of the date of effectiveness of a registration statement on Form S-1 filed by the Company with the SEC for the Direct Listing.
3. Information and Observer Rights.
3.1 Delivery of Financial Statements. The Company shall deliver to each Major Investor:
(a) as soon as practicable, but in any event within one hundred and twenty (120) days after the end of each fiscal year of the Company, (i) an audited balance sheet as of the end of
such year, (ii) audited statements of income and of cash flows for such year, and a comparison between (1) the actual amounts as of and for such fiscal year and (2) the comparable amounts for the prior year and as included in the Annual Budget (as defined in Section 3.1(d)) for such year, with an explanation of any material differences between such amounts and a schedule as to the sources and applications of funds for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all such financial statements shall be audited and certified by independent public accountants of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, unaudited statements of income and of cash flows for such fiscal quarter, and an unaudited balance sheet and a statement of stockholders’ equity as of the end of such fiscal quarter, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments and (ii) not contain all notes thereto that may be required in accordance with GAAP);
(c) as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Common Stock and the exchange ratio or exercise price applicable thereto, and the number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit the Major Investors to calculate their respective percentage equity ownership in the Company, and certified by the chief financial officer or chief executive officer of the Company as being true, complete, and correct;
(d) as soon as practicable, but in any event within thirty (30) days of the end of each month, an unaudited condensed income statement and statement of cash flows for such month, and an unaudited balance sheet as of the end of such month, all prepared in accordance with GAAP (except that such financial statements may (i) be subject to normal year-end audit adjustments and (ii) not contain all notes thereto that may be required in accordance with GAAP);
(e) as soon as practicable, but in any event thirty (30) days before the end of each fiscal year, a budget and business plan for the next fiscal year (collectively, the “Annual Budget”), approved by the Board and prepared on a monthly basis, including balance sheets, income statements, and statements of cash flow for such months and, promptly after prepared, any other budgets or revised budgets prepared by the Company; and
(f) such other information relating to the financial condition, business, prospects, or corporate affairs of the Company as any Major Investor may from time to time reasonably request; provided, however, that the Company shall not be obligated under this Section 3.1 to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.
3.2 Inspection. The Company shall permit each Major Investor, or any of its authorized representatives, at such Major Investor’s expense, to visit and inspect the Company’s properties; examine its corporate and financial records; and discuss the Company’s affairs, finances, and accounts with its officers, during normal business hours of the Company as may be reasonably requested by the Major Investor; provided, however, that the Company shall not be obligated pursuant to this Section 3.2 to provide access to any information that it reasonably and in good faith considers to be a
trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.
3.3 Observer Rights. As long as Basepoint Ventures Opportunity I, LLC (“Basepoint”) and its Affiliates own not less than 25% of the shares of Preferred Stock (or Common Stock issued upon conversion thereof) and Common Stock (or Preferred Stock issued upon exchange thereof pursuant to the Common Purchase Agreement) purchased by Basepoint and/or its Affiliates pursuant to the Purchase Agreement or the Common Purchase Agreement, the Company shall invite a representative of Basepoint, who shall initially be David Travers, to attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors; provided, however, that such representative shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and provided further, that the Company reserves the right to withhold any information and to exclude such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if such Investor or its representative is a competitor of the Company.
3.4 Termination of Information, Observer and Inspection Rights. The covenants set forth in Section 3.1, Section 3.2 and Section 3.3 shall terminate and be of no further force or effect (a) immediately before the consummation of the IPO or the Direct Listing (whichever occurs first); (b) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act; or (c) upon a Deemed Liquidation Event, as such term is defined in the Company’s Amended and Restated Certificate of Incorporation, whichever event occurs first.
3.5 Confidentiality. Each Investor agrees that such Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general (other than as a result of a breach of this Section 3.5 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company, if such person is bound by an ethical duty to keep such information confidential or such person agrees to be bound by the provisions of this Section 3.5; (ii) to any prospective purchaser of any Registrable Securities from such Investor, if such prospective purchaser agrees to be bound by the provisions of this Section 3.5; (iii) to any Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.
4. Rights to Future Stock Issuances.
4.1 Right of First Offer. Subject to the terms and conditions of this Section 4 and applicable securities laws, if the Company proposes to offer or sell any New Securities, the Company
shall first offer such New Securities to each of the Major Investors. The Major Investors shall be entitled to apportion the right of first offer hereby granted to them in such proportions as the Major Investors deem appropriate, among (a) the Major Investors, themselves, (b) the Affiliates of the Major Investors, or the Affiliates of any Major Investor, and (c) the beneficial interest holders, such as limited partners, members or any other Person having “beneficial ownership,” as such term is defined in Rule 13d-3 promulgated under the Exchange Act, of any Major Investor (“Investor Beneficial Owners”); provided that, each such Affiliate or Investor Beneficial Owner agrees to enter into this Agreement and each of the Amended and Restated Voting Agreement the “Voting Agreement”) and Right of First Refusal and Co-Sale Agreement of even date herewith among the Company, the Investors and the other parties named therein, as an “Investor” under each such agreement.
4.2 Offer Notice. Prior to offering or selling any New Securities, the Company shall give notice (the “Offer Notice”) to each Major Investor, stating (a) its bona fide intention to offer such New Securities, (b) the number of such New Securities to be offered, and (c) the price and terms, if any, upon which it proposes to offer such New Securities.
4.3 Election to Purchase. By notification to the Company within twenty (20) days after the Offer Notice is given, each Major Investor may elect to purchase or otherwise acquire, at the price and on the terms specified in the Offer Notice, up to that portion of such New Securities which equals the proportion that the Common Stock outstanding, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by such Major Investor bears to the total Common Stock of the Company issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then outstanding. At the expiration of such twenty (20) day period, the Company shall promptly notify each Major Investor that elects to purchase or acquire all the shares available to it (each, a “Fully Exercising Investor”) of any other Major Investor’s failure to do likewise. During the ten (10) day period commencing after the Company has given such notice, each Fully Exercising Investor may, by giving notice to the Company, elect to purchase or acquire, in addition to the number of shares specified above, up to that portion of the New Securities for which Major Investors were entitled to subscribe but that were not subscribed for by the Major Investors which is equal to the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of Preferred Stock and any other Derivative Securities then held, by such Fully Exercising Investor bears to the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Preferred Stock and any other Derivative Securities then held, by all Fully Exercising Investors who wish to purchase such unsubscribed shares. The closing of any sale pursuant to this Section 4 shall occur within the later of ninety (90) days after the date that the Offer Notice is given and the date of initial sale of New Securities pursuant to this Section 4.
4.4 Failure to Purchase. If all New Securities referred to in the Offer Notice are not elected to be purchased or acquired as provided in this Section 4, the Company may, during the ninety (90) day period following the expiration of the period provided in Section 4.3, offer and sell the remaining unsubscribed portion of such New Securities to any Person or Persons at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice. If the Company does not enter into an agreement for the sale of the New Securities within such period, or if such agreement is not consummated within thirty (30) days of the execution thereof, the right provided hereunder shall be deemed to be revived and such New Securities shall not be offered unless first reoffered to the Major Investors in accordance with this Section 4.
4.5 Exceptions to Right of First Offer. The right of first offer in this Section 4 shall not be applicable to: (a) Exempted Securities (as defined in the Company’s Amended and Restated
Certificate of Incorporation); (b) shares of Common Stock issued in the IPO or the Direct Listing; and (c) transactions whereby at least a majority of the Major Investors waive the rights granted by this Section 4 with respect to such transaction; provided, however, that to the extent that less than a majority of the Major Investors waive the rights granted by this Section 4, any Major Investor who waived his, her or its rights shall be bound by such waiver and the right of first offer shall terminate as to such Major Investors.
4.6 Termination. The covenants set forth in this Section 4 shall terminate and be of no further force or effect (a) immediately before the consummation of the IPO or the Direct Listing (whichever occurs first); (b) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act; or (c) upon a Deemed Liquidation Event, as such term is defined in the Company’s Amended and Restated Certificate of Incorporation, whichever event occurs first.
5. Additional Covenants.
5.1 Insurance. The Company has, as of the date hereof, and shall use its commercially reasonable efforts to maintain, from financially sound and reputable insurers Directors and Officers liability insurance in an amount and on terms and conditions satisfactory to the Board of Directors (including the IVP Director, as defined in the Voting Agreement), and will use commercially reasonable efforts to cause such insurance policies to be maintained until such time as the Board of Directors determines that such insurance should be discontinued.
5.2 Proprietary Information and Inventions Agreements. Unless otherwise approved by the Board (including the IVP Director), the Company will cause each person now or hereafter employed by it or by any subsidiary (or engaged by the Company or any subsidiary as a consultant/independent contractor) with access to confidential information and/or trade secrets to enter into a nondisclosure and proprietary rights assignment agreement in a form approved by the Board. In addition, the Company shall not amend, modify, terminate, waive, or otherwise alter, in whole or in part, any of the above-referenced agreements or any restricted stock agreement between the Company and any employee, without the consent of the Board.
5.3 Stock Vesting. Unless otherwise approved by the Board of Directors (including the IVP Director), all stock options and other stock equivalents issued after the date of this Agreement to employees, directors, consultants and other service providers shall be subject to vesting as follows: (a) twenty-five percent (25%) of such stock shall vest at the end of the first year following the earlier of the date of issuance or such person’s vesting commencement date (as determined by the Board), and (b) seventy-five percent (75%) of such stock shall vest in equal monthly installments over the following thirty-six (36) months. In addition, unless otherwise approved by the Board, (1) each agreement evidencing such stock option or other stock equivalent shall provide for a market stand-off provision substantially similar to that in Section 2.11 and (2) the Company shall have the right to repurchase unvested shares at cost upon termination of employment of any holder of restricted stock.
5.4 Matters Requiring Investor Director Approval. So long as the holders of Preferred Stock are entitled to elect one or more Preferred Directors, the Company hereby covenants and agrees with each of the Investors that it shall not, without approval of the IVP Director:
(a) make, or permit any subsidiary to make, any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company;
(b) make, or permit any subsidiary to make, any loan or advance to any Person, including, without limitation, any employee or director of the Company or any subsidiary, except advances and similar expenditures in the ordinary course of business or under the terms of an employee stock or option plan approved by the Board of Directors;
(c) guarantee, directly or indirectly, or permit any subsidiary to guarantee, directly or indirectly, any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business;
(d) hire any new employee (i) with a title of Senior Vice President who will earn an annual base salary in excess of $250,000 in base salary and will receive an equity grant in excess of 0.45% of the Company’s capital stock, calculated on a fully-diluted, as-converted basis; (ii) with a C-level officer title or Executive Vice President who will earn an annual base salary in excess of $350,000 and will receive an equity grant in excess of 0.75% of the Company’s capital stock, calculated on a fully-diluted, as-converted basis; (iii) with a title below Senior Vice President who will earn an annual base salary in excess of $200,000 in annual base salary and will receive an equity grant in excess of 0.25% of the Company’s capital stock, calculated on a fully-diluted, as-converted basis.
(e) change the principal business of the Company, enter new material lines of business, or exit the current line of business;
(f) sell, assign, license, pledge, or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business;
(g) enter into any corporate strategic relationship involving the payment, contribution, or assignment by the Company or to the Company of money or assets greater than $10,000,000; or
(h) enter into or be a party to any transaction with any Common Director (as defined in the Company’s Amended and Restated Certificate of Incorporation) or officer of the Company or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such Person, including without limitation any “management bonus” or similar plan providing payments to any such persons in connection with a Deemed Liquidation Event, provided that each of (A) the Company’s Annual Incentive Plan for a calendar year, as adopted by the Board in respect of such year, (B) any bonus program component rewarding any such individual at a level of 30% or below such individual’s earned salary within the previous year, (C) any compensation arrangements entered into in the ordinary course of business and (D) any option acceleration provisions in the forms previously approved by the Board, shall not be included in this clause.
5.5 Board Matters. Unless otherwise determined by the vote of a majority of the directors then in office, the Board shall meet at least quarterly in accordance with an agreed-upon schedule. The Company shall reimburse the nonemployee directors for all reasonable out-of-pocket expenses incurred in connection with attending meetings of the Board, including without limitation travel expenses incurred.
5.6 Expenses of Counsel. In the event of a transaction which is a Sale of the Company (as defined in the Voting Agreement), the reasonable fees and disbursements, not to exceed $25,000, of one counsel for the Major Investors (“Investor Counsel”), in their capacities as stockholders, shall be borne and paid by the Company. At the outset of considering a transaction which, if consummated would constitute a Sale of the Company, the Company shall obtain the ability to share with the Investor Counsel (and such counsel's clients) and shall share the confidential information (including,
without limitation, the initial and all subsequent drafts of memoranda of understanding, letters of intent and other transaction documents and related noncompete, employment, consulting and other compensation agreements and plans) pertaining to and memorializing any of the transactions which, individually or when aggregated with others would constitute the Sale of the Company. The Company shall be obligated to share (and cause the Company's counsel and investment bankers to share) such materials when distributed to the Company's executives and/or any one or more of the other parties to such transaction(s). In the event that Investor Counsel deems it appropriate, in its reasonable discretion, to enter into a joint defense agreement or other arrangement to enhance the ability of the parties to protect their communications and other reviewed materials under the attorney client privilege, the Company shall, and shall direct its counsel to, execute and deliver to Investor Counsel and its clients such an agreement in form and substance reasonably acceptable to Investor Counsel. In the event that one or more of the other party or parties to such transactions require the clients of Investor Counsel to enter into a confidentiality agreement and/or joint defense agreement in order to receive such information, then the Company shall share whatever information can be shared without entry into such agreement and shall, at the same time, in good faith work expeditiously to enable Investor Counsel and its clients to negotiate and enter into the appropriate agreement(s) without undue burden to the clients of Investor Counsel.
5.7 Right to Conduct Activities. The Company hereby agrees and acknowledges that each of Institutional Venture Partners XV, L.P. (together with its affiliates and affiliated funds, “IVP”) and Hadley Harbor Master Investors (Cayman) II L.P. (together with its affiliates and affiliated funds, “Wellington”) is a professional investment fund, and as such invests in numerous portfolio companies, some of which may be deemed competitive with the Company’s business (as currently conducted or as currently propose to be conducted). The Company hereby agrees that, to the extent permitted under applicable law, IVP and Wellington shall not be liable to the Company for any claim arising out of, or based upon, (i) the investment by IVP or Wellington in any entity competitive with the Company, or (ii) actions taken by any partner, officer or other representative of IVP or Wellington to assist any such competitive company, whether or not such action was taken as a member of the board of directors of such competitive company or otherwise, and whether or not such action has a detrimental effect on the Company; provided, however, that the foregoing shall not relieve (x) any of the Investors from liability associated with the unauthorized disclosure of the Company’s confidential information obtained pursuant to this Agreement, or (y) any director or officer of the Company from any liability associated with his or her fiduciary duties to the Company.
5.8 D&O Insurance Tail Policy. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then Company shall obtain, from financially sound and reputable insurers, a customary Directors and Officers liability insurance “tail policy” in an amount, for a duration, and on other terms and conditions reasonably satisfactory to the Board of Directors (including the IVP Director).
5.9 Termination of Covenants. The covenants set forth in this Section 5 (except for Section 5.8) shall terminate and be of no further force or effect (a) immediately before the consummation of the IPO or the Direct Listing (whichever occurs first), (b) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (c) upon a Deemed Liquidation Event, as such term is defined in the Company’s Amended and Restated Certificate of Incorporation, whichever event occurs first.
6. Miscellaneous.
6.1 Successors and Assigns. The rights under this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee of Registrable Securities that (a) is an Affiliate of a Holder; (b) is a Holder’s Immediate Family Member or trust for the benefit of an individual Holder or one or more of such Holder’s Immediate Family Members; or (c) after such transfer, holds at least 350,000 shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, stock combinations, and other recapitalizations); provided, however, that (i) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee and the Registrable Securities with respect to which such rights are being transferred; and (ii) such transferee agrees in a written instrument delivered to the Company to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 2.11. For the purposes of determining the number of shares of Registrable Securities held by a transferee, the holdings of a transferee (1) that is an Affiliate or stockholder of a Holder; (2) who is a Holder’s Immediate Family Member; or (3) that is a trust for the benefit of an individual Holder or such Holder’s Immediate Family Member shall be aggregated together and with those of the transferring Holder; provided further that all transferees who would not qualify individually for assignment of rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices, or taking any action under this Agreement. The terms and conditions of this Agreement inure to the benefit of and are binding upon the respective successors and permitted assignees of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and permitted assignees any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.
6.2 Governing Law. This Agreement and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the laws of the State of Delaware.
6.3 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
6.4 Titles and Subtitles. The titles and subtitles used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.
6.5 Notices. All notices and other communications given or made pursuant to this Agreement shall be in writing and shall be deemed effectively given upon the earlier of actual receipt or: (a) personal delivery to the party to be notified; (b) when sent, if sent by electronic mail or facsimile during the recipient’s normal business hours, and if not sent during normal business hours, then on the recipient’s next business day; (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) one (1) business day after the business day of deposit with a nationally recognized overnight courier, freight prepaid, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the respective parties at their addresses as set forth on Schedule A hereto, or to the principal office of the Company and to the attention of the Chief Executive Officer, in the case of the Company, or to such email address, facsimile number, or address as subsequently modified by written notice given in accordance with this Section 6.4. If notice is given to
the Company, it shall be sent to ZipRecruiter, Inc., 401 Wilshire Blvd., 11th Floor, Santa Monica, CA 90401, Attention: Ian Siegel; and a copy (which shall not constitute notice) shall also be sent to Fenwick & West LLP, 801 California St., Mountain View, CA 94041, Attn: Kris Withrow, and if notice is given to the Investors, a copy shall also be given to Goodwin Procter LLP, 135 Commonwealth Drive, Menlo Park, CA 94025, Attn: Lawrence Chu and Wilmer Cutler Pickering Hale and Dorr LLP, 60 State Street, Boston, MA 02109, Attn: Jason Kropp.
6.6 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of (i) the Company and (ii) the holders of a majority of the Registrable Securities then outstanding; provided however that the Company may in its sole discretion waive compliance with Section 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Section 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. Notwithstanding the foregoing, this Agreement may not be amended or terminated and the observance of any term hereof may not be waived with respect to any Investor without the written consent of such Investor, unless such amendment, termination, or waiver applies to all Investors in the same fashion (it being agreed that a waiver of the provisions of Section 4 with respect to a particular transaction shall be deemed to apply to all Major Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that certain Major Investors may nonetheless, by agreement with the Company, purchase securities in such transaction). The Company shall give prompt notice of any amendment or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, termination, or waiver. Any amendment, termination, or waiver effected in accordance with this Section 6.5 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
6.7 HSR Expenses. The Company will reimburse IVP and Wellington for all expenses, including filing fees and attorney fees, incurred in connection with any necessary Hart Scott Rodino filings with respect to this financing and any future transactions involving the Company.
6.8 Dual-Class Common Stock. Any provision of this Agreement that provides for a designation right or consent right of the holders of Common Stock, Registrable Securities (on an as-converted basis) or shares of Common Stock issued or issuable upon conversion of outstanding shares of Preferred Stock or Registrable Securities, as applicable, including without limitation Sections 5.2 and 5.6, shall be based on the voting power of such shares taking into account the different voting rights of the Class A Common Stock and Class B Common Stock.
6.9 Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.
6.10 Aggregation of Stock. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.
6.11 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of Preferred Stock after the date hereof, whether pursuant to the Purchase Agreement or otherwise, any purchaser of such shares of Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement, and thereafter shall be deemed an “Investor” for all purposes hereunder. No action or consent by the Investors shall be required for such joinder to this Agreement by such additional Investor, so long as such additional Investor has agreed in writing to be bound by all of the obligations as an “Investor” hereunder.
6.12 Entire Agreement. This Agreement (including any Schedules and Exhibits hereto) constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled.
6.13 Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the state courts of Delaware or the United States District Court for the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
6.14 WAIVER OF JURY TRIAL: EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTS, THE SECURITIES OR THE SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER WARRANTS AND REPRESENTS THAT SUCH PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
6.15 Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
6.16 Acknowledgment. The Company acknowledges that the Investors are in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company. Nothing in this Agreement shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
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COMPANY:
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ZIPRECRUITER, INC.
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By:
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/s/ Ian Siegel
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Name:
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Ian Siegel
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Title:
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Chief Executive Officer
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[SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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INVESTOR:
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BASEPOINT VENTURES OPPORTUNITY I, LLC
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By:
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Basepoint Management LLC
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Its:
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Managing Member
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By:
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/s/ David Travers
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Name:
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David Travers
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Title:
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Authorized Signatory
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Date:
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4/22/2021
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BASEPOINT VENTURES OPPORTUNITY II, LLC
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By:
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Basepoint Management LLC
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Its:
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Managing Member
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By:
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/s/ David Travers
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Name:
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David Travers
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Title:
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Authorized Signatory
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Date:
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4/22/2021
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[SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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INVESTOR:
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INSTITUTIONAL VENTURE PARTNERS XIV, L.P.
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By:
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Institutional Venture Management XIV LLC
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Its:
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General Partner
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By:
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/s/ Eric Liaw
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Managing Director
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Date:
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4/22/2021
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INSTITUTIONAL VENTURE PARTNERS XV, L.P.
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By:
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Institutional Venture Management XV LLC
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Its:
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General Partner
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By:
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/s/ Eric Liaw
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Managing Director
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Date:
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4/22/2021
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INSTITUTIONAL VENTURE PARTNERS XV EXECUTIVE FUND, L.P.
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By:
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Institutional Venture Management XV LLC
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Its:
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General Partner
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By:
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/s/ Eric Liaw
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Managing Director
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Date:
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4/22/2021
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[SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
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INVESTOR:
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HADLEY HARBOR MASTER INVESTORS (CAYMAN) II, L.P.
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By:
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Wellington Management Company LLP, as investment adviser
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By:
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/s/ Emily Babalas
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Emily Babalas, Managing Director and Counsel
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Date:
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4/22/2021
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THIS INSTRUMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN SUBORDINATION AGREEMENT, DATED AS OF JUNE 22, 2020 (AS THE SAME MAY BE AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE “SUBORDINATION AGREEMENT”), BY AND AMONG SILICON VALLEY BANK, THE COMPANY AND HOLDER (EACH AS DEFINED BELOW); AND THE HOLDER OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF APPLICABLE STATES. THIS NOTE AND SUCH SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION UNDER SUCH LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THIS NOTE AND ANY SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS.
ZIPRECRUITER, INC.
FORM OF CONVERTIBLE PROMISSORY NOTE
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Note No.: [●]
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$[●]
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Made as of [●]
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Subject to the terms and conditions of this Convertible Promissory Note (this “Note”), for value received, ZipRecruiter, Inc., a Delaware corporation (the “Company”), with principal executive offices at 604 Arizona Avenue, Santa Monica, CA 90401, hereby promises to pay to the order of [●] or registered assigns (“Holder”), the principal sum of [●] Dollars ($[●]), or such lesser amount as shall then equal the outstanding principal amount hereunder, together with interest accrued on the unpaid principal amount at the Applicable Rate (as defined below). Interest shall begin to accrue on the date of this Note and shall continue to accrue on the outstanding principal until the entire Balance is paid (or converted, as provided in Section 6), and shall be computed based on the actual number of days elapsed and on a year of 365 days, compounded annually.
This Note has been issued pursuant to that certain Note Purchase Agreement, dated as of June 22, 2020, by and among the Company, the original holder of this Note and certain other investors (the “Purchase Agreement”) and is subject to the provisions of the Purchase Agreement. The following is a statement of the rights of Holder and the terms and conditions to which this Note is subject, and to which Holder hereof, by the acceptance of this Note, agrees.
1.DEFINITIONS. The following definitions shall apply for purposes of this Note.
“Actual Conversion Amount” means all (or if permitted by the terms of this Note, a lesser portion) of the Balance actually converted into Conversion Stock pursuant to Section 6.1, 6.2, 6.3 or 6.4 as applicable, on an Actual Conversion Date, including, if accrued interest and expenses convert pursuant
to the terms of this Note, interest and expenses accrued through such Actual Conversion Date and actually converted into Conversion Stock.
“Actual Conversion Date” means a date on which all (or if permitted by this Note, a lesser portion) of the Balance of this Note is converted pursuant to Section 6.1, 6.2, 6.3 or 6.4 as applicable.
“Affiliate” has the meaning ascribed to it in Rule 144 promulgated under the Securities Act.
“Applicable Rate” means a rate equal to the lower of: (a) 2.5% per annum for the two-year period following the Initial Closing (as defined in the Purchase Agreement), compounded annually based on a 365-day year, provided, however, that the Applicable Rate shall increase by 0.5% to 3.0% per annum on the two-year anniversary of the Initial Closing and shall further increase by an additional 0.5% on each six-month anniversary thereafter; and (b) the Highest Lawful Rate.
“Balance” means, at the applicable time, the sum of all then outstanding Principal Balance, all then accrued but unpaid interest and all other amounts then accrued but unpaid under this Note.
“Business Day” means a weekday on which banks are open for general banking business in Los Angeles, California.
“Change of Control” means a “Deemed Liquidation Event” as such term is defined in the Company’s Certificate of Incorporation.
“Common Stock” means the common stock of the Company, par value $0.00001 per share.
“Company” shall include, in addition to the Company identified in the opening paragraph of this Note, any corporation or other entity which succeeds to the Company’s obligations under this Note, whether by permitted assignment, by merger or consolidation, operation of law or otherwise.
“Conversion Price” means:
(a)in the case of a conversion in connection with the Qualified Financing in accordance with Section 6.1, an amount equal to the lower of (i) 75% of the Qualified Financing Price and (ii) the Series B Price Per Share;
(b)in the case of a conversion in connection with a Nonqualified Financing in accordance with Section 6.2, an amount equal to the lower of (i) 75% of the Nonqualified Financing Price and (ii) the Series B Price Per Share;
(c)in the case of a conversion in connection with the Maturity Date Conversion in accordance with Section 6.3, an amount equal to 80% of the Series B Price Per Share;
(d)in the case of a conversion in connection with a Change of Control in accordance with Section 6.4, an amount equal to the lower of (i) 75% of the total aggregate consideration to be paid for each share of the Company’s capital stock on an as-converted to Common Stock basis (including any earn-out amounts), as determined by the Board in good faith and (ii) the Series B Price Per Share;
(e)in the case of a conversion in connection with a Qualified IPO in accordance with Section 6.4, an amount equal to the lower of (i) 75% of the per share offering price of the Common Stock in such Qualified IPO and (ii) the Series B Price Per Share; and
(f)in the case of a conversion in connection with a Direct Listing in accordance with Section 6.4, an amount equal to the lower of (i) 75% of the volume-weighted average price of the Common Stock
on the first trading day following such listing as reported by Bloomberg L.P. and (ii) the Series B Price Per Share.
“Conversion Stock” means:
(a)in the case of conversion pursuant to Section 6.1, a new series of Preferred Stock having identical rights, privileges, preferences and restrictions as the Preferred Stock sold by the Company in the Qualified Financing, other than with respect to (i) the per share liquidation preference and the conversion price for purposes of price-based anti-dilution protection, which will equal the Conversion Price and (ii) the basis for any dividend rights, which will be based on the Conversion Price;
(b)in the case of conversion pursuant to Section 6.2, a new series of Preferred Stock having identical rights, privileges, preferences and restrictions as the Preferred Stock sold by the Company in the Nonqualified Financing, other than with respect to (i) the per share liquidation preference and the conversion price for purposes of price-based anti-dilution protection, which will equal the Conversion Price and (ii) the basis for any dividend rights, which will be based on the Conversion Price;
(c)the Series B-1 Preferred Stock in the case of the Maturity Date Conversion;
(d)Common Stock in the case of conversion in connection with a Liquidity Event.
The number and character of shares of Conversion Stock are subject to adjustment as provided in this Note and the term “Conversion Stock” shall include the stock and other securities and property that are, on an Actual Conversion Date, receivable or issuable upon such conversion of this Note in accordance with its terms.
“Direct Listing” means the registration of shares of existing capital stock of the Company for resale on a major U.S. based stock exchange such as the New York Stock Exchange (“NYSE”) or The Nasdaq Stock Market LLC (“Nasdaq”) not pursuant to an underwritten public offering.
“Event of Default” has the meaning set forth in Section 5.
“Financing Document” has the meaning set forth for such term in Section 1 of the Purchase Agreement.
“Highest Lawful Rate” means the maximum non-usurious rate of interest, as in effect from time to time, which may be charged, contracted for, reserved, received or collected by Holder in connection with this Note under applicable law.
“Liquidity Event” means a Change of Control, Qualified IPO or Direct Listing.
“Lost Note Documentation” means documentation satisfactory to the Company with regard to a lost or stolen Note, including, if required by the Company, an affidavit of lost note and an indemnification agreement by Holder in favor of the Company with respect to such lost or stolen Note.
“Majority Holders” has the meaning set forth for such term in Section 7.8 of the Purchase Agreement.
“Maturity Date” means the earlier of (a) 36 months from the date of the Purchase Agreement or (b) the time at which the Balance of this Note is due and payable upon an Event of Default; provided, that, that if the Event of Default is cured as permitted in this Note, then the Maturity Date shall not thereafter be deemed to have occurred with regard to such Event of Default under this clause (b).
“Nonqualified Financing” means the Company’s sale of shares of its preferred stock in an equity financing for the primary purpose of raising working capital that does not constitute a Qualified Financing.
“Nonqualified Financing Closing” means the initial closing of the Nonqualified Financing.
“Nonqualified Financing Price” means the per-share selling price of Conversion Stock sold by the Company in the Nonqualified Financing for new cash investment.
“Notes” means a series of convertible promissory notes aggregating up to $35,000,000.00 in original principal amount issued under the Purchase Agreement, of which this Note is one, each such note containing substantially identical terms and conditions as this Note.
“Person” means an individual, corporation, limited liability company, partnership, association, joint-stock company, trust, unincorporated organization, joint venture or other entity or any governmental authority.
“Principal Balance” means, at the applicable time, all the then outstanding principal of this Note.
“Qualified Financing” means the Company’s next sale of its preferred stock in a single transaction or a series of related transactions in each case occurring on or before the Maturity Date, for an aggregate gross purchase price paid to the Company of no less than Forty Million Dollars ($40,000,000.00) (excluding the principal amount of and accrued interest or any other amounts owing on all Notes and all other outstanding convertible promissory notes, SAFEs and other convertible instruments of the Company that are converted into Conversion Stock in such sale) and with the principal purpose of raising capital.
“Qualified Financing Closing” means the initial closing of the Qualified Financing.
“Qualified Financing Price” means the per-share selling price of Conversion Stock sold by the Company in the Qualified Financing for new cash investment.
“Qualified IPO” means the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act resulting in gross proceeds to the Company (before underwriting discounts, commissions or fees) of at least $50,000,000 and following which the Common Stock is listed for trading on a major U.S. based stock exchange such as the NYSE or Nasdaq.
“Securities Act” means the Securities Act of 1933, as amended.
“Series B Preferred Stock” means the Company’s Series B Preferred Stock, par value $0.00001 per share.
“Series B Price Per Share” means $8.2909 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Company’s Series B Preferred Stock.
“Series B-1 Preferred Stock” means a newly created series of the Company’s Preferred Stock having the identical rights, privileges, preferences and restrictions as the Series B Preferred Stock other than with respect to (i) the per share liquidation preference and the conversion price for purposes of price-based anti-dilution protection, which will equal the Conversion Price and (ii) the basis for any dividend rights, which will be based on the Conversion Price.
2.PAYMENT AT MATURITY DATE; INTEREST.
2.1Payment at Maturity Date. If this Note has not been previously converted (as provided in Section 6), then, upon the election of the Majority Holders, the Balance shall be due and payable in full on or after the Maturity Date.
2.2Payment of Interest. Anything herein to the contrary notwithstanding, if during any period for which interest is computed hereunder, the amount of interest computed on the basis provided for in this Note, together with all fees, charges and other payments which are treated as interest under applicable law, as provided for herein or in any other document executed in connection herewith, would exceed the amount of such interest computed on the basis of the Highest Lawful Rate, then the Company shall not be obligated to pay, and Holder shall not be entitled to charge, collect, receive, reserve or take, interest in excess of the Highest Lawful Rate, and during any such period the interest payable hereunder shall be computed on the basis of the Highest Lawful Rate. Any interest payable hereunder may be paid by the Company by setting off against fees owed to the Company by Holder for services rendered, subject to the Company’s prior written notice of such setting off, which written notice shall include the amount of interest set off and the invoice number of the fees due to the Company that will be set off. The Company shall also provide Holder with an updated invoice reflecting the new outstanding balance after such setting off.
3.NO PREPAYMENT. Except with regard to the conversion of this Note under Section 6, the Company may not pay any Balance of this Note before it becomes due without the prior written consent of the Majority Holders.
4.NOTES PARI PASSU; APPLICATION OF PAYMENTS. Each of the Notes shall rank equally without preference or priority of any kind over one another, and all payments and recoveries under any other Financing Document payable on account of principal and interest on the Notes shall be paid and applied ratably and proportionately on the Balances of all outstanding Notes on the basis of their original principal amount. Subject to Section 6 and the foregoing provisions of this Section, all payments will be applied first to the repayment of accrued fees and expenses under this Note, then to accrued interest until all then outstanding accrued interest has been paid in full, and then to the repayment of Principal Balance until all Principal Balance has been paid in full. If after all applications of such payments have been made as provided in this Section, then the remaining amount of such payment that are in either case in excess of the aggregate Balance of all outstanding Notes, shall be returned to the Company. The Notes shall be subordinated to all Bank Indebtedness (as defined in the Purchase Agreement).
5.EVENTS OF DEFAULT. Each of the following events shall constitute an “Event of Default” hereunder:
(a)the Company fails to make any payment when due under this Note on the applicable due date;
(b)a receiver is appointed for any material part of the Company’s property, the Company makes a general assignment for the benefit of creditors, or the Company becomes a debtor or alleged debtor in a case under the U.S. Bankruptcy Code or becomes the subject of any other bankruptcy or similar proceeding for the general adjustment of its debts or for its liquidation;
(c)the Company otherwise materially breaches this Note or any other Financing Document and does not cure such breach within 20 days after written notice thereof has been given by or on behalf of Holder to the Company; or
(d)the Company’s Board of Directors and the requisite stockholders adopt a resolution that validly approves the liquidation, dissolution or winding up of the Company.
Upon the occurrence of any Event of Default, all accrued but unpaid expenses, accrued but unpaid interest, all principal and any other amounts outstanding under this Note shall (i) in the case of any Event of Default under Section 5(b), become immediately due and payable in full without further notice or demand by Holder and (ii) in the case of any Event of Default other than under Section 5(b), become immediately due and payable upon written notice by or on behalf of the affected Holder(s) to the Company but only if such notice is given with the prior written consent of the Majority Holders. Notwithstanding any other provision of this Note, or of the other Financing Documents, Holder agrees that Holder will exercise Holder’s rights and remedies under this Note and the other Financing Documents only in concert with all other holders of outstanding Notes as provided in the Financing Documents and will not take any action, including commencement or prosecution of litigation or any other proceeding to collect this Note, except as agreed by the Majority Holders.
6.CONVERSION.
6.1Conversion in Qualified Financing. If the Company has not paid the entire Balance before the Qualified Financing Closing, then, at the Qualified Financing Closing, the entire Balance then outstanding shall automatically be cancelled and converted into that number of shares of Conversion Stock obtained by dividing (a) the entire Balance by (b) the Conversion Price then in effect, rounded down to the nearest whole number of shares. Such conversion shall be deemed to occur under this Section 6.1 as of immediately prior to the Qualified Financing Closing, without regard to whether Holder has then delivered to the Company this Note (or the Lost Note Documentation where applicable) or executed any other documents including, if applicable, the investors’ rights, co-sale, voting or other agreements, required to be executed by the investors purchasing the Conversion Stock in the Qualified Financing (the “Qualified Financing Documents”). Holder shall thereupon receive all of the rights, preferences and privileges granted to other investors generally in the Qualified Financing; provided, that, Holder shall be required to execute the Qualified Financing Documents. The holders of Conversion Stock shall vote together with the holders of the newly-created series of Preferred Stock issued in the Qualified Financing on all matters in which such series of Preferred Stock votes as a separate series (or by written consent in lieu of meeting) and otherwise the holders of the Conversion Stock will not have any separate voting rights voting as a separate series.
6.2Optional Conversion in Nonqualified Financing. If, prior to the earlier of (i) a Change of Control or (ii) the Maturity Date, the Company consummates a Nonqualified Financing, then, at the Nonqualified Financing Closing, the entire Balance then outstanding may be cancelled and converted, upon the election of the Majority Holders, into that number of shares of Conversion Stock obtained by dividing (a) the entire Balance by (b) the Conversion Price then in effect, rounded down to the nearest whole number of shares. The Company shall provide Holder with at least twenty (20) days prior notice of any contemplated Nonqualified Financing Closing. In connection with a conversion pursuant to this Section 6.2, Holder shall deliver to the Company this Note (or the Lost Note Documentation where applicable) and will execute and deliver to the Company at the Nonqualified Financing Closing any other documents including, if applicable, the investors’ rights, co-sale, voting or other agreements, required to be executed by the investors purchasing the Conversion Stock in the Nonqualified Financing (the “Nonqualified Financing Documents”). Holder shall thereupon receive all of the rights, preferences and privileges granted to other investors generally in the Nonqualified Financing. The holders of Conversion Stock shall vote together with the holders of the newly-created series of Preferred Stock issued in the Nonqualified Financing on all matters in which such series of
Preferred Stock votes as a separate series (or by written consent in lieu of meeting) and otherwise the holders of the Conversion Stock will not have any separate voting rights voting as a separate series.
6.3Optional Conversion after Maturity Date. If this Note has not been previously repaid (as provided in Section 2) or previously converted (as provided in Section 6), then, upon the election of the Majority Holders, the Balance then outstanding may be cancelled and converted into that number of shares of Conversion Stock obtained by dividing (a) the entire Balance by (b) the Conversion Price then in effect, rounded down to the nearest whole number of shares. In connection with a conversion pursuant to this Section 6.3 (the “Maturity Date Conversion”), Holder shall deliver to the Company on the conversion date, any other documents including, if applicable, the investors’ rights, co-sale, voting or other agreements, required to be executed by the investors purchasing the Conversion Stock in the Maturity Date Conversion (the “Maturity Date Conversion Documents”). Holder shall thereupon receive all of the rights, preferences and privileges granted to the holders of Series B-1 Preferred Stock which will be identical to rights, privileges, preferences and restrictions as the Series B Preferred Stock other than with respect to (i) the per share liquidation preference and the conversion price for purposes of price-based anti-dilution protection shall equal the Conversion Price and (ii) the per share dividend, which will be the same percentage of the Conversion Price as applied to determine the per share dividend of the Series B Preferred Stock. The holders of Series B-1 Preferred Stock shall vote together with the holders of Series B Preferred stock on all matters in which the Series B Preferred Stock votes as a separate series (or by written consent in lieu of meeting) and otherwise the holders of Series B-1 Preferred Stock will not have any separate voting rights voting as a separate series.
6.4Conversion Upon Liquidity Event. If at any time before payment or conversion of the entire Balance, the Company effects a Liquidity Event, the entire Balance then outstanding shall automatically be cancelled and converted into that number of shares of Conversion Stock obtained by dividing (a) the entire Balance by (b) the Conversion Price then in effect, rounded down to the nearest whole number of shares. Such conversion shall be deemed to occur under this Section 6.4 as of immediately prior to the consummation of the Liquidity Event (or in the case of a Direct Listing, immediately following the close of the first trading day of such Direct Listing), without regard to whether Holder has then delivered to the Company this Note (or the Lost Note Documentation where applicable) or executed any other documents including, if applicable, any stockholder agreements, market-standoff agreements or other agreements, required to be executed by the investors in the Liquidity Event (the “Liquidity Event Documents”); provided, that, Holder shall be required to execute the Liquidity Event Documents, as applicable.
6.5Termination of Rights. Except for the right to obtain certificates representing the Conversion Stock under Section 7, all rights with respect to this Note shall terminate upon the effective conversion of the entire Balance of the Note as provided in Section 6.1, 6.2, 6.3 or 6.4, whichever is applicable. Notwithstanding the foregoing, Holder agrees to surrender this Note to the Company (or Lost Note Documentation where applicable) as soon as practicable after conversion. In any event, Holder shall not be entitled to receive any stock certificates representing the shares of Conversion Stock issuable upon conversion of this Note unless and until Holder has surrendered the original of this Note (or Lost Note Documentation where applicable) and executed and delivered to the Company the Qualified Financing Documents, Nonqualified Financing Documents, Maturity Date Conversion Documents or Liquidity Event Documents, as applicable.
7.CERTIFICATES; NO FRACTIONAL SHARES. Subject to Section 6.5, as soon as practicable after conversion of this Note pursuant to Section 6.1, 6.2, 6.3 or 6.4, as applicable, the Company at its expense will cause to be issued in the name of Holder and to be delivered to Holder, a certificate or certificates for the number of shares of Conversion Stock to which Holder shall be entitled
upon such conversion (bearing such legends as may be required by applicable state and federal securities laws in the opinion of legal counsel of the Company, by the Company’s Certificate of Incorporation and Bylaws and by any agreement between the Company and Holder), together with any other securities and property to which Holder is entitled upon such conversion under the terms of this Note. No fractional shares shall be issued upon conversion of this Note. If upon any conversion of this Note (and after aggregating the amounts of all other Notes held by Holder which are converted at the same time as this Note), a fraction of a share would otherwise be issued, then in lieu of such fractional share, the Company shall pay to Holder an amount in cash equal to such fraction of a share multiplied by the applicable Conversion Price.
8.ADJUSTMENT PROVISIONS. So long as any of the Balance of this Note remains outstanding and the conversion right under Section 6 has not terminated, the number and character of shares of Conversion Stock issuable upon conversion of this Note upon an Actual Conversion Date and, to the extent set forth in this Section 8, the Conversion Price therefor, are each subject to adjustment upon each occurrence of an adjustment event described in Sections 8.1 through 8.4 occurring between the date this Note is issued and such Actual Conversion Date.
8.1Adjustment for Stock Splits and Stock Dividends. The Conversion Price and the number of shares of Conversion Stock shall each be proportionally adjusted to reflect any stock dividend, stock split, reverse stock split or other similar event affecting the number of outstanding shares of Conversion Stock without the payment of consideration to the Company therefor at any time before an Actual Conversion Date.
8.2Adjustment for Other Dividends and Distributions. If the Company shall make or issue, or shall fix a record date for the determination of eligible holders of its capital stock entitled to receive, a dividend or other distribution payable with respect to the Conversion Stock that is payable in securities of the Company (other than issuances with respect to which adjustment is made under Sections 8.1 or 8.3), or in assets (other than cash dividends) (each, a “Dividend Event”), and such dividend or other distribution is actually made, then, and in each such case, Holder, upon conversion of an Actual Conversion Amount at any time after such Dividend Event, shall receive, in addition to the Conversion Stock issuable upon such conversion of the Note, the securities or other assets that would have been issuable to Holder had Holder, immediately prior to such Dividend Event, converted such Actual Conversion Amount into Conversion Stock.
8.3Conversion of Stock. In each case where (a) all the outstanding Conversion Stock is converted, pursuant to the terms of the Company’s Certificate of Incorporation, into Common Stock or other securities or property, or (b) the Conversion Stock otherwise ceases to exist or to be authorized under the Company’s Certificate of Incorporation (each a “Stock Event”), then Holder, upon conversion of this Note at any time after such Stock Event, shall receive, in lieu of the number of shares of Conversion Stock that would have been issuable upon conversion of this Note immediately prior to such Stock Event, the stock and other securities and property that Holder would have been entitled to receive upon the Stock Event, if immediately prior to such Stock Event, Holder had converted the Actual Conversion Amount into Conversion Stock.
8.4Notice of Adjustments. The Company shall promptly give written notice of each adjustment of the Conversion Price or the number or type of shares of Conversion Stock or other securities or property issuable upon conversion of this Note that is required under this Section 8. The notice shall describe the adjustment or readjustment and show in reasonable detail the facts on which the adjustment or readjustment is based.
8.5No Change Necessary. The form of this Note may, but need not, be changed because of any adjustment in the Conversion Price or in the number or type of shares of Conversion Stock issuable upon its conversion, upon the written request and at the expense of Holder.
8.6Reservation of Stock. If the number of shares of Conversion Stock or other securities authorized and reserved for issuance upon conversion of this Note shall not be sufficient to effect the conversion of the Balance of this Note, then the Company shall take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Conversion Stock or other securities issuable upon conversion of this Note as shall be sufficient for such purpose.
9.PROVISIONS RELATING TO STOCKHOLDERS RIGHTS.
9.1Rights as Investor. Upon conversion of the Balance in connection with (a) the Qualified Financing and execution and delivery to the Company of the Qualified Financing Documents, Holder shall be entitled to the rights and be subject to all other obligations of the investors generally in the Conversion Stock issued in the Qualified Financing, (b) the Nonqualified Financing and execution and delivery to the Company of the Nonqualified Financing Documents, Holder shall be entitled to the rights and be subject to all other obligations of the investors generally in the Conversion Stock issued in the Nonqualified Financing, (c) the Maturity Date Conversion and execution and delivery to the Company of the Maturity Date Conversion Documents, Holder shall be entitled to the rights and be subject to all other obligations of the holders of Series B-1 Preferred Stock issued in such Maturity Date Conversion and (d) a Liquidity Event and execution and delivery to the Company of the Liquidity Event Documents, Holder shall be entitled to the rights and be subject to all other obligations of the holders of Common Stock.
9.2“Market Stand-Off” Agreement. Holder hereby agrees that Holder shall be bound by the market stand-off provisions contained in Section 2.11 of that certain Amended and Restated Investors Rights Agreement by and among the Company and the investors listed on Schedule A thereto, as may be amended from time to time.
9.3No Voting or Other Rights. This Note does not entitle Holder to any voting rights or other rights as a stockholder of the Company, unless and until (and only to the extent that) this Note is actually converted into shares of the Company’s capital stock in accordance with its terms. In the absence of conversion of this Note into Conversion Stock, no provisions of this Note and no enumeration herein of the rights or privileges of Holder, shall cause Holder to be a stockholder of the Company for any purpose.
10.REPRESENTATIONS AND WARRANTIES OF HOLDER. In order to induce the Company to enter into the Financing Documents and issue this Note to the original Holder, the original Holder has made representations and warranties to the Company as set forth in the Purchase Agreement.
11.SUBORDINATION. This Note shall be subject to the subordination provisions contained in Section 5 of the Purchase Agreement.
12.GENERAL PROVISIONS.
12.1Waivers. The Company and all endorsers of this Note hereby waive notice, presentment, protest and notice of dishonor.
12.2Attorneys’ Fees. In the event any party is required to engage the services of an attorney for the purpose of enforcing this Note, or any provision thereof, the prevailing party shall be entitled to recover its reasonable expenses and costs in enforcing this Note, including attorneys’ fees.
12.3Transfer. Other than a transfer in accordance with Section 4.9 of the Purchase Agreement, neither this Note nor any rights hereunder may be assigned, conveyed or transferred, in whole or in part, without the Company’s prior written consent, which the Company may withhold in its sole discretion. Subject to the foregoing, the rights and obligations of the Company and Holder under this Note and the other Financing Documents shall be binding upon and benefit their respective permitted successors, assigns, heirs, administrators and transferees.
12.4Governing Law. This Note shall be governed by and construed under the internal laws of the State of California as applied to agreements among California residents entered into and to be performed entirely within the State of California, without reference to principles of conflict of laws or choice of laws.
12.5Headings. The headings and captions used in this Note are used only for convenience and are not to be considered in construing or interpreting this Note. All references in this Note to sections and exhibits shall, unless otherwise provided, refer to sections hereof and exhibits attached hereto, all of which exhibits are incorporated herein by this reference.
12.6Notices. Unless otherwise provided herein, any notice required or permitted under this Note shall be given in writing and shall be deemed effectively given (a) at the time of personal delivery, if delivery is in person; (b) one (1) Business Day after deposit with an express overnight courier for United States deliveries, or three (3) Business Days after deposit with an international express overnight air courier for deliveries outside of the United States, in each case with proof of delivery from the courier requested; (c) four (4) Business Days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries; or (d) , when sent, if sent by electronic mail or facsimile during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day, in each case when such writing is addressed to the party to be notified at the address indicated for such party in Section 7.6 of the Purchase Agreement, or at such other address as any party hereto may designate for itself to receive notices by giving ten (10) days’ advance written notice to all other parties in accordance with the provisions of this Section. For purposes of this Section 12.6, a “business day” means a weekday on which banks are open for general banking business in Los Angeles, California.
12.7Amendments and Waivers. This Note and all other Notes issued under the Purchase Agreement may be amended and provisions may be waived by the Majority Holders and the Company as provided in Section 7.8 of the Purchase Agreement. Any amendment or waiver effected in accordance with Section 7.8 of the Purchase Agreement shall be binding upon each holder of any Notes at the time outstanding, each future holder of the Notes and the Company.
12.8Severability. If one or more provisions of this Note are held to be unenforceable under applicable law, then such provision(s) shall be excluded from this Note to the extent they are held
to be unenforceable and the remainder of the Note shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.
[Signature page follows]
IN WITNESS WHEREOF, the Company has caused this Convertible Promissory Note to be signed in its name as of the date first written above.
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THE COMPANY:
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ZIPRECRUITER, INC.
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By:
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Name:
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Ian Siegel
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Title:
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Chief Executive Officer
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AGREED AND ACKNOWLEDGED:
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HOLDER:
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[●]
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By:
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Name:
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Title:
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[SIGNATURE PAGE TO CONVERTIBLE PROMISSORY NOTE OF ZIPRECRUITER, INC.]
INDEMNITY AGREEMENT
This Indemnity Agreement, dated as of _________ ____, 2021 is made by and between ZipRecruiter, Inc., a Delaware corporation (collectively with its subsidiaries, the “Company”), and _____________________, a director, officer or key employee of the Company or one of the Company’s subsidiaries or other service provider who satisfies the definition of Indemnifiable Person set forth below (“Indemnitee”).
RECITALS
A. The Company is aware that competent and experienced persons are increasingly reluctant to serve as representatives of corporations unless they are protected by comprehensive liability insurance and indemnification, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no relationship to the compensation of such representatives;
B. The members of the Board of Directors of the Company (the “Board”) have concluded that to retain and attract talented and experienced individuals to serve as representatives of the Company and its Subsidiaries and Affiliates and to encourage such individuals to take the business risks necessary for the success of the Company and its Subsidiaries and Affiliates, it is necessary for the Company to contractually indemnify certain of its representatives and the representatives of its Subsidiaries and Affiliates, and to assume for itself maximum liability for Expenses and Other Liabilities in connection with claims against such representatives in connection with their service to the Company and its Subsidiaries and Affiliates;
C. Section 145 of the Delaware General Corporation Law (“Section 145”), empowers the Company to indemnify by agreement its officers, directors, employees and agents, and persons who serve, at the request of the Company, as directors, officers, employees or agents of other corporations, partnerships, joint ventures, trusts or other enterprises, and expressly provides that the indemnification provided thereby is not exclusive; and
D. The Company desires and has requested Indemnitee to serve or continue to serve as a representative of the Company and/or the Subsidiaries or Affiliates of the Company free from undue concern about inappropriate claims for damages arising out of or related to such services to the Company and/or the Subsidiaries or Affiliates of the Company.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
1. Definitions.
(a) Affiliate. For purposes of this Agreement, “Affiliate” of the Company means any corporation, partnership, limited liability company, joint venture, trust or other enterprise in respect of which Indemnitee is or was or will be serving as a director, officer, trustee, manager, member, partner, employee, agent, attorney, consultant, member of the entity’s governing body (whether constituted as a board of directors, board of managers, general partner or otherwise), fiduciary, or in any other similar capacity at the request, election or direction of the Company, and including, but not limited to, any employee benefit plan of the Company or a Subsidiary or Affiliate of the Company.
(b) Change in Control. For purposes of this Agreement, “Change in Control” means any event or circumstance where (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a Subsidiary or a trustee or other fiduciary holding securities under an employee benefit plan of the Company or Subsidiary, is or becomes the “Beneficial Owner” (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company’s then outstanding capital stock, (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation that would result in the outstanding capital stock of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into capital stock of the surviving entity) at least 50% of the total voting power represented by the capital stock of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all of the Company’s assets.
(c) Expenses. For purposes of this Agreement, “Expenses” means all reasonable direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’ fees and related disbursements, and other out-of-pocket costs), paid or incurred by Indemnitee in connection with either the investigation, defense or appeal of, or being a witness or otherwise involved in, a Proceeding (as defined below), or establishing or enforcing a right to indemnification under this Agreement, Section 145 or otherwise; provided, however, that Expenses shall not include any judgments, fines, taxes (including ERISA or other benefit plan related excise taxes or penalties) or amounts paid in settlement of a Proceeding.
(d) Indemnifiable Event. For purposes of this Agreement, “Indemnifiable Event” means any event or occurrence related to Indemnitee’s service for the Company or any Subsidiary or Affiliate as an Indemnifiable Person (as defined below), or by reason of anything done or not done, or any act or omission, by Indemnitee in any such capacity.
(e) Indemnifiable Person. For the purposes of this Agreement, “Indemnifiable Person” means any person who is or was a director, officer, trustee, manager, member, partner, employee, attorney, consultant, member of an entity’s governing body (whether constituted as a board of directors, board of managers, general partner or otherwise) or other agent or fiduciary of the Company or a Subsidiary or Affiliate of the Company.
(f) Independent Counsel. For purposes of this Agreement, “Independent Counsel” means legal counsel that has not performed services for the Company or Indemnitee in the five years preceding the time in question and that would not, under applicable standards of professional conduct, have a conflict of interest in representing either the Company or Indemnitee.
(g) Independent Director. For purposes of this Agreement, “Independent Director” means a member of the Board who is not a party to the Proceeding for which a claim is made under this Agreement.
(h) Other Liabilities. For purposes of this Agreement, “Other Liabilities” means any and all liabilities of any type whatsoever (including, but not limited to, judgments, fines, penalties, taxes (including ERISA or other benefit plan related excise taxes or penalties), and amounts paid in settlement and all interest, taxes, assessments and other charges paid or payable in connection with or in respect of any such judgments, fines, ERISA (or other benefit plan related) excise taxes or penalties, or amounts paid in settlement).
(i) Proceeding. For the purposes of this Agreement, “Proceeding” means any threatened, pending, or completed action, suit or other proceeding, whether civil, criminal, administrative, investigative, legislative or any other type whatsoever, preliminary, informal or formal, including any arbitration or other alternative dispute resolution and including any appeal of any of the foregoing.
(j) Subsidiary. For purposes of this Agreement, “Subsidiary” means any entity of which more than 50% of the outstanding voting securities is owned directly or indirectly by the Company.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an Indemnifiable Person in the capacity or capacities in which Indemnitee currently serves the Company as an Indemnifiable Person, and any additional capacity in which Indemnitee may agree to serve, until such time as Indemnitee’s service in a particular capacity shall end according to the terms of an agreement, the Company’s Certificate of Incorporation or Bylaws, governing law, or otherwise. Nothing contained in this Agreement is intended to create any right to continued employment or other form of service for the Company or a Subsidiary or Affiliate of the Company by Indemnitee.
3. Mandatory Indemnification.
(a) Agreement to Indemnify. In the event Indemnitee is a person who was or is a party to or witness in or is threatened to be made a party to or witness in any Proceeding by reason of an Indemnifiable Event, the Company shall indemnify Indemnitee from and against any and all Expenses and Other Liabilities reasonably incurred by Indemnitee in connection with (including in preparation for) such Proceeding to the fullest extent not prohibited by the provisions of the Company’s Bylaws and the Delaware General Corporation Law (“DGCL”), as the same may be amended from time to time (but only to the extent that such amendment permits the Company to provide broader indemnification rights than the Bylaws or the DGCL permitted prior to the adoption of such amendment).
(b) Exception for Amounts Covered by Insurance and Other Sources. Notwithstanding the foregoing, the Company shall not be obligated to indemnify Indemnitee for Expenses or Other Liabilities of any type whatsoever (including, but not limited to judgments, fines, penalties, ERISA excise taxes or penalties and amounts paid in settlement) to the extent such have been paid directly to Indemnitee (or paid directly to a third party on Indemnitee’s behalf) by any directors and officers, or other type, of insurance maintained by the Company; provided, however, that payment made to Indemnitee pursuant to an insurance policy purchased and maintained by Indemnitee at his or her own expense of any amounts otherwise indemnifiable or obligated to be made pursuant to this Agreement shall not reduce the Company’s obligations to Indemnitee pursuant to this Agreement.
(c) Company Obligations Primary. The Company hereby acknowledges that Indemnitee may have rights to indemnification for Expenses and Other Liabilities provided by a venture capital firm or other sponsoring organization (“Other Indemnitor”). The Company agrees with Indemnitee that the Company is the indemnitor of first resort of Indemnitee with respect to matters for which indemnification is provided under this Agreement and that the Company will be obligated to make
all payments due to or for the benefit of Indemnitee under this Agreement without regard to any rights that Indemnitee may have against the Other Indemnitor. The Company hereby waives any equitable rights to contribution or indemnification from the Other Indemnitor in respect of any amounts paid to Indemnitee hereunder. The Company further agrees that no reimbursement of Other Liabilities or payment of Expenses by the Other Indemnitor to or for the benefit of Indemnitee shall affect the obligations of the Company hereunder, and that the Company shall be obligated to repay the Other Indemnitor for all amounts so paid or reimbursed to the extent that the Company has an obligation to indemnify Indemnitee for such Expenses or Other Liabilities hereunder.
4. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses or Other Liabilities but not entitled, however, to indemnification for the total amount of such Expenses or Other Liabilities, the Company shall nevertheless indemnify Indemnitee for such total amount except as to the portion thereof for which indemnification is prohibited by the provisions of the Company’s Bylaws or the DGCL. In any review or Proceeding to determine the extent of indemnification, the Company shall bear the burden to establish, the lack of a successful resolution of a particular claim, issue or matter and which amounts sought in indemnity are allocable to claims, issues or matters which were not successfully resolved.
5. Liability Insurance. So long as Indemnitee shall continue to serve the Company or a Subsidiary or Affiliate of the Company as an Indemnifiable Person and thereafter so long as Indemnitee shall be subject to any possible claim or threatened, pending or completed Proceeding as a result of an Indemnifiable Event, the Company shall use reasonable efforts to maintain in full force and effect for the benefit of Indemnitee as an insured (i) liability insurance issued by one or more reputable insurers and having the policy amount and deductible deemed appropriate by the Board and providing in all respects coverage at least comparable to and in the same amount as that provided to the Chairman of the Board or the Chief Executive Officer of the Company and (ii) any replacement or substitute policies issued by one or more reputable insurers providing in all respects coverage at least comparable to and in the same amount as that being provided to the Chairman of the Board or the Chief Executive Officer of the Company. The purchase, establishment and maintenance of any such insurance or other arrangements shall not in any way limit or affect the rights and obligations of the Company or of Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and Indemnitee shall not in any way limit or affect the rights and obligations of the Company or the other party or parties thereto under any such insurance or other arrangement. In the event of a Change in Control subsequent to the date of this Agreement, or the Company’s becoming insolvent, including being placed into receivership or entering the federal bankruptcy process, the Company shall use reasonable efforts to maintain in force any and all insurance policies then maintained by the Company in providing insurance—directors’ and officers’ liability, fiduciary, employment practices or otherwise—in respect of the individual directors and officers of the Company, for a fixed period of six years thereafter. Such coverage shall be non-cancelable and shall be placed and serviced by the Company’s incumbent insurance broker or a broker selected by a majority of the Independent Directors.
6. Mandatory Advancement of Expenses. If requested by Indemnitee, the Company shall advance prior to the final disposition of the Proceeding all reasonable Expenses reasonably incurred by Indemnitee in connection with (including in preparation for) a Proceeding related to an Indemnifiable Event within (30) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee. The right to advances under this section shall in all events continue until final disposition of any Proceeding, including any appeal therein. Indemnitee hereby undertakes to repay such amounts advanced
if, and only if and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company under the provisions of this Agreement, the Company’s Bylaws or the DGCL, and no additional form of undertaking with respect to such obligation to repay shall be required. Indemnitee’s undertaking to repay any Expenses advanced to Indemnitee hereunder shall be unsecured and shall not be subject to the accrual or payment of any interest thereon. In the event that Indemnitee’s request for the advancement of expenses shall be accompanied by an affidavit of counsel to Indemnitee to the effect that such counsel has reviewed such Expenses and that such Expenses are reasonable in such counsel’s view, then such expenses shall be deemed reasonable in the absence of clear and convincing evidence to the contrary.
7. Notice and Other Indemnification Procedures.
(a) Notification. Promptly after receipt by Indemnitee of notice of the commencement of or the threat of commencement of any Proceeding, unless the Company is a named co-defendant with Indemnitee, Indemnitee shall, if Indemnitee believes that indemnification or advancement of Expenses with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof. However, a failure so to notify the Company promptly following Indemnitee’s receipt of such notice shall not relieve the Company from any liability that it may have to Indemnitee except to the extent that the Company is materially prejudiced in its defense of such Proceeding as a result of such failure.
(b) Insurance and Other Matters. If, at the time of the receipt of a notice of the commencement of a Proceeding pursuant to Section 7(a) above, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such Proceeding to the issuers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all reasonable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such insurance policies. In addition, the Company will instruct the insurers and the Company’s insurance broker that they may communicate directly with Indemnitee regarding such claim.
(c) Assumption of Defense. In the event the Company shall be obligated to advance the Expenses for any Proceeding against Indemnitee, the Company, if deemed appropriate by the Company, shall be entitled to assume the defense of such Proceeding as provided herein. Such defense by the Company may include the representation of two or more parties by one attorney or law firm as permitted under the ethical rules and legal requirements related to joint representations. Following delivery of written notice to Indemnitee of the Company’s election to assume the defense of such Proceeding, the approval by Indemnitee (which approval shall not be unreasonably withheld) of counsel designated by the Company and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees and expenses of counsel subsequently incurred by Indemnitee with respect to the same Proceeding. If (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have notified the Board in writing that Indemnitee has reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, (C) the Company fails to employ counsel to assume the defense of such Proceeding, or (D) after a Change in Control, the employment of counsel by Indemnitee has been approved by the Independent Counsel, the Expenses related to work conducted by Indemnitee’s counsel shall be subject to indemnification and/or advancement pursuant to the terms of this Agreement. Nothing herein shall prevent Indemnitee from employing counsel for any such Proceeding at Indemnitee’s expense. Indemnitee agrees that any such separate counsel retained by Indemnitee will be a
member of any approved list of panel counsel under the Company’s applicable directors’ and officers’ insurance policy, should the applicable policy provide for a panel of approved counsel.
(d) Settlement. The Company shall not be liable to indemnify Indemnitee under this Agreement or otherwise for any amounts paid in settlement of any Proceeding effected without the Company’s written consent; provided, however, that if a Change in Control has occurred subsequent to the date of this Agreement, the Company shall be liable for indemnification of Indemnitee for amounts paid in settlement if the Independent Counsel has approved the settlement. Neither the Company nor any Subsidiary or Affiliate shall enter into a settlement of any Proceeding that might result in the imposition of any Expense, Other Liability, penalty, limitation or detriment on Indemnitee, whether indemnifiable under this Agreement or otherwise, without Indemnitee’s written consent. Neither the Company nor Indemnitee shall unreasonably withhold consent from any settlement of any Proceeding. The Company shall promptly notify Indemnitee upon the Company’s receipt of an offer to settle, or if the Company makes an offer to settle, any Proceeding, and provide Indemnitee with a reasonable amount of time to consider such settlement, in the case of any such settlement for which the consent of Indemnitee would be required hereunder. The Company shall not, on its own behalf, settle any part of any Proceeding to which Indemnitee is a party with respect to other parties (including the Company) without the written consent of Indemnitee if any portion of the settlement is to be funded from insurance proceeds unless approved by a majority of the Independent Directors, provided that this sentence shall cease to be of any force and effect if it has been determined in accordance with this Agreement that Indemnitee is not entitled to indemnification hereunder with respect to such Proceeding or if the Company’s obligations hereunder to Indemnitee with respect to such Proceeding have been fully discharged.
8. Determination of Right to Indemnification.
(a) Success on the Merits or Otherwise. To the extent that Indemnitee has been successful on the merits or otherwise in defense of any Proceeding referred to in Section 3(a) above or in the defense of any claim, issue or matter described therein, the Company shall indemnify Indemnitee against Expenses actually and reasonably incurred in connection therewith.
(b) Indemnification in Other Situations. In the event that Section 8(a) is inapplicable, the Company shall also indemnify Indemnitee if Indemnitee has not failed to meet the applicable standard of conduct for indemnification.
(c) Forum. Indemnitee shall be entitled to select the forum in which determination of whether or not Indemnitee has met the applicable standard of conduct shall be decided, and such election will be made from among the following:
a. Those members of the Board who are Independent Directors even though less than a quorum;
b. A committee of Independent Directors designated by a majority vote of Independent Directors, even though less than a quorum; or
c. Independent Counsel selected by Indemnitee and approved by the Board, which approval may not be unreasonably withheld, which counsel shall make such determination in a written opinion.
If Indemnitee is an officer or a director of the Company at the time that Indemnitee is selecting the forum, then Indemnitee shall not select Independent Counsel as such forum
unless there are no Independent Directors or unless the Independent Directors agree to the selection of Independent Counsel as the forum.
The selected forum shall be referred to herein as the “Reviewing Party”. Notwithstanding the foregoing, following any Change in Control subsequent to the date of this Agreement, the Reviewing Party shall be Independent Counsel selected in the manner provided in c. above.
(d) Decision Timing and Expenses. As soon as practicable, and in no event later than thirty (30) days after receipt by the Company of written notice of Indemnitee’s choice of forum pursuant to Section 8(c) above, the Company and Indemnitee shall each submit to the Reviewing Party such information as they believe is appropriate for the Reviewing Party to consider. The Reviewing Party shall arrive at its decision within a reasonable period of time following the receipt of all such information from the Company and Indemnitee, but in no event later than thirty (30) days following the receipt of all such information, provided that the time by which the Reviewing Party must reach a decision may be extended by mutual agreement of the Company and Indemnitee. All Expenses associated with the process set forth in this Section 8(d), including but not limited to the Expenses of the Reviewing Party, shall be paid by the Company.
(e) Delaware Court of Chancery. Notwithstanding a final determination by any Reviewing Party that Indemnitee is not entitled to indemnification with respect to a specific Proceeding, Indemnitee shall have the right to apply to the Court of Chancery, for the purpose of enforcing Indemnitee’s right to indemnification pursuant to this Agreement.
(f) Expenses. The Company shall indemnify Indemnitee against all reasonable Expenses reasonably incurred by Indemnitee in connection with any hearing or Proceeding under this Section 8 involving Indemnitee and against all Expenses and Other Liabilities incurred by Indemnitee in connection with any other Proceeding between the Company and Indemnitee involving the interpretation or enforcement of the rights of Indemnitee under this Agreement unless a court of competent jurisdiction finds that each of the material claims of Indemnitee in any such Proceeding was frivolous or made in bad faith.
(g) Determination of “Good Faith”. For purposes of any determination of whether Indemnitee acted in “good faith” or acted in “bad faith”, Indemnitee shall be deemed to have acted in good faith or not acted in bad faith if in taking or failing to take the action in question Indemnitee relied on the records or books of account of the Company or a Subsidiary or Affiliate, including financial statements, or on information, opinions, reports or statements provided to Indemnitee by the officers or other employees of the Company or a Subsidiary or Affiliate in the course of their duties, or on the advice of legal counsel for the Company or a Subsidiary or Affiliate, or on information or records given or reports made to the Company or a Subsidiary or Affiliate by an independent certified public accountant or by an appraiser or other expert selected by the Company or a Subsidiary or Affiliate, or by any other person (including legal counsel, accountants and financial advisors) as to matters Indemnitee reasonably believes are within such other person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company or a Subsidiary or Affiliate. In connection with any determination as to whether Indemnitee is entitled to be indemnified hereunder, or to advancement of Expenses, the Reviewing Party or court shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification or advancement of Expenses, as the case may be, and the burden of proof shall be on the Company to establish, by clear and convincing evidence, that Indemnitee is not so entitled. The provisions of this Section 8(g) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the
applicable standard of conduct set forth in this Agreement. In addition, the knowledge and/or actions, or failures to act, of any other person serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person shall not be imputed to Indemnitee for purposes of determining the right to indemnification hereunder.
9. Exceptions. Any other provision herein to the contrary notwithstanding,
(a) Claims Initiated by Indemnitee. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify or advance Expenses to Indemnitee with respect to Proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except (1) with respect to Proceedings brought to establish or enforce a right to indemnification under this Agreement, any other statute or law, as permitted under Section 145, or otherwise, (2) where the Board has consented to the initiation of such Proceeding, or (3) with respect to Proceedings brought to discharge Indemnitee’s fiduciary responsibilities, whether under ERISA or otherwise, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if the Board finds it to be appropriate; or
(b) Actions Based on Federal Statutes Regarding Profit Recovery and Return of Bonus Payments. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of (i) any suit in which judgment is rendered against Indemnitee by a court of competent jurisdiction in a final adjudication not subject to further appeal for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of l934 and amendments thereto or similar provisions of any federal, state or local statutory law, or (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act); or
(c) Unlawful Indemnification. The Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee for Other Liabilities if such indemnification is prohibited by law as determined by a court of competent jurisdiction in a final adjudication not subject to further appeal.
10. Non-exclusivity. The provisions for indemnification and advancement of Expenses set forth in this Agreement shall not be deemed exclusive of any other rights which Indemnitee may have under any provision of law, the Company’s Certificate of Incorporation or Bylaws, the vote of the Company’s stockholders or disinterested directors, other agreements, or otherwise, both as to acts or omissions in his or her official capacity and to acts or omissions in another capacity while serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person and Indemnitee’s rights hereunder shall continue after Indemnitee has ceased serving the Company or a Subsidiary or Affiliate as an Indemnifiable Person and shall inure to the benefit of the heirs, executors and administrators of Indemnitee.
11. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
12. Supersession, Modification and Waiver. This Agreement supersedes any prior indemnification agreement between the Indemnitee and the Company, its Subsidiaries or its Affiliates. If the Company and Indemnitee have previously entered into an indemnification agreement providing for the indemnification of Indemnitee by the Company, parties entry into this Agreement shall be deemed to amend and restate such prior agreement to read in its entirety as, and be superseded by, this Agreement. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) and except as expressly provided herein, no such waiver shall constitute a continuing waiver.
13. Successors and Assigns. The terms of this Agreement shall bind, and shall inure to the benefit of, and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs and personal and legal representatives. In addition, the Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement and indemnify Indemnitee to the fullest extent permitted by law.
14. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and a receipt is provided by the party to whom such communication is delivered, (ii) if mailed by certified or registered mail with postage prepaid, return receipt requested, on the signing by the recipient of an acknowledgement of receipt form accompanying delivery through the U.S. mail, (iii) by personal service by a process server, or (iv) by delivery to the recipient’s address by overnight delivery (e.g., FedEx, UPS or DHL) or other commercial delivery service. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice complying with the provisions of this Section 14. Delivery of communications to the Company with respect to this Agreement shall be sent to the attention of the Company’s General Counsel.
15. No Presumptions. For purposes of this Agreement, the termination of any Proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law or otherwise. In addition, neither the failure of the Company or a Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Company or a Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of Proceedings by Indemnitee to secure a judicial determination by exercising Indemnitee’s rights under Section 8(e) of this Agreement shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has failed to meet any particular standard of conduct or did not have any particular belief or is not entitled to indemnification under applicable law or otherwise. Additionally,
any admission of liability by the Company in connection with any settlement by the Company with a regulatory agency shall not, of itself, create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law or otherwise.
16. Survival of Rights. The rights conferred on Indemnitee by this Agreement shall continue after Indemnitee has ceased to serve the Company or a Subsidiary or Affiliate of the Company as an Indemnifiable Person and shall inure to the benefit of Indemnitee’s heirs, executors and administrators.
17. Subrogation and Contribution. (a) Except as otherwise expressly provided in this Agreement, in the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights.
(b) To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by or on behalf of Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an Indemnifiable Event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).
18. Specific Performance, Etc. The parties recognize that if any provision of this Agreement is violated by the Company, Indemnitee may be without an adequate remedy at law. Accordingly, in the event of any such violation, Indemnitee shall be entitled, if Indemnitee so elects, to institute Proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as Indemnitee may elect to pursue.
19. Counterparts. This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
20. Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
21. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely with Delaware.
22. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the 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.
[Signature Page Follows]
The parties hereto have entered into this Indemnity Agreement effective as of the date first above written.
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ZIPRECRUITER, INC.:
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By:
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Its:
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INDEMNITEE:
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Address:
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SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT
ZIPRECRUITER, INC.
AMENDED AND RESTATED
2012 STOCK PLAN
ARTICLE I
GENERAL PROVISIONS
1.1 PURPOSE OF THE PLAN
This Amended and Restated 2012 Stock Plan (the "Plan") is intended to promote the interests of ZipRecruiter, Inc., a Delaware corporation, by providing eligible persons in the Corporation's employ or service with the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Corporation as an incentive for them to continue in such employ or service.
Capitalized terms herein shall have the meanings assigned to such terms in the attached Appendix.
1.2 STRUCTURE OF THE PLAN
(a) The Plan shall be divided into two (2) separate equity programs:
(i) the Option Grant Program, as set forth in Article II hereof, under which eligible persons may, at the discretion of the Plan Administrator, be granted options to purchase shares of Common Stock; and
(ii) the Stock Issuance Program, as set forth in Article III hereof, 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).
(b) The provisions of Articles I and IV shall apply to both equity programs under the Plan and shall accordingly govern the interests of all persons under the Plan.
1.3 ADMINISTRATION OF THE PLAN
(a) Plan Administrator. The Plan shall be administered by the Board. However, any or all administrative functions otherwise exercisable by the Board may be delegated to the Committee. Members of the Committee shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may also at any time terminate the functions of the Committee and reassume all powers and authority previously delegated to the Committee.
(b) Powers of the Plan Administrator. Subject to the provisions of the Plan and, in the case of the Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, including the approval, if required, of any Stock Exchange upon which the Common Stock is listed, the Plan Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value of the Common Stock;
(ii) to select which eligible persons, pursuant to Section l.4(a), below, are to be granted options under the Option Grant Program;
(iii) to determine whether, when and to what extent options are granted hereunder;
(iv) to determine the vesting schedule, if any, applicable to the option shares and the maximum term for which the option is to remain outstanding, subject to Section 2.1 hereof;
(v) to determine whether the option granted is an Incentive Option or Non-Statutory Option;
(vi) to select which eligible persons, pursuant to Section l.4(a), below, are to receive stock issuances under the Stock Issuance Program;
(vii) to determine whether and when stock issuances shall be made under the Stock Issuance Program;
(viii) to determine the number of shares to be covered by each such award granted under the Stock Issuance Program;
(ix) to determine the vesting schedule, if any, applicable to the shares issued under the Stock Issuance Program and the consideration to be paid by the Participant for such shares;
(x) to approve forms of agreement for use under the Plan;
(xi) to establish such rules and regulations as the Plan Administrator may deem appropriate for the proper administration of the Plan; and
(xii) to construe and interpret the terms of the Plan, including the rules and regulations, if any, established in connection with the Plan, and any outstanding options or stock issuances thereunder as the Plan Administrator may deem necessary or advisable.
(c) Effect of Plan Administrator's Decision. All decisions, determinations and interpretations of the Plan Administrator shall be final and binding on all Optionees, all Participants and all holders of shares of Common Stock issued upon exercise of options.
1.4 ELIGIBILITY
(a) The persons eligible to participate in the Plan are as follows: (i) Employees;
(ii) non-employee members of the Board or the non-employee members of 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) Neither the Plan nor any grant hereunder confer upon any Optionee or Participant any right with respect to continuation of his or her employment or consulting relationship with the Corporation, or any Parent or Subsidiary employing or retaining such person, nor shall it interfere in any way with his or her right or right of the Corporation (or Parent or Subsidiary, if applicable) to terminate his or her employment or consulting relationship at any time, with or without cause, which rights are hereby expressly reserved by each.
1.5 STOCK SUBJECT TO THE PLAN
(a) The stock issuable under the Plan shall be shares of authorized but unissued or reacquired Common Stock. The maximum number of shares of Common Stock which may be issued over the term of the Plan shall not exceed 1,455,000 shares (subject to Section 1.5( c) below).
(b) Shares of Common Stock subject to outstanding options shall be available for subsequent issuance under the Plan to the extent (i) the 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 II. Unvested shares issued under the Plan and subsequently repurchased by the Corporation, at the option exercise or direct 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.
(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 by the Plan Administrator to (i) the maximum number and/or class of securities issuable under the Plan, and (ii) the number and/or class of securities and the exercise price per share in effect under each outstanding option in order to prevent the dilution or enlargement of benefits thereunder. The adjustments determined by the Plan Administrator shall be final, binding and conclusive. In no event shall any such adjustments be made in connection with the conversion of one or more outstanding shares of the Corporation's preferred stock into shares of Common Stock.
ARTICLE II
OPTION GRANT PROGRAM
2.1 TERMS FOR ALL OPTIONS
Each option shall be evidenced by one or more documents in written or electronic form as 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.
(i) The exercise price per share shall be fixed by the Plan Administrator in accordance with the following provisions:
(1) The exercise price per share shall not be less than one-hundred percent (100%) of the Fair Market Value per share of Common Stock on the option grant date.
(2) If the person to whom the 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.
(ii) The exercise price shall become immediately due upon exercise of the option and shall, subject to the provisions of Section 4.1 of Article IV and the documents evidencing the option, be payable in cash, by check made payable to the Corporation or by electronic payment via Automatic Clearninghouse (ACH). Should the Common Stock be registered under Section 12 of the 1934 Act at the time the option is exercised, then the exercise price may also be paid as follows:
(1) in shares of Common Stock held by the Optionee for the requisite period necessary to avoid a charge to the Corporation's earnings for financial reporting purposes, duly endorsed for transfer to the Corporation and valued at Fair Market Value on the Exercise Date; or
(2) 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 (A) 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 applicable Federal, state and local income and employment taxes required to be withheld by the Corporation by reason of such exercise, and (B) 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 such sale and remittance procedure is utilized, payment of the exercise price for the purchased shares must be made on the Exercise Date.
(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 (in written or electronic form) evidencing the option grant. However, no option shall have a term in excess of ten (10) years measured from the option grant date.
(c) Effect of Termination of Continuous Service.
(i) The following provisions shall govern the exercise of any vested options held by the Optionee at the time of cessation of Continuous Service or death:
(1) Should the Optionee cease to remain in Continuous Service for any reason other than death, Disability or Misconduct, then the Optionee shall have a period of three (3) months following the date of such cessation of Continuous Service during which to exercise each outstanding vested option held by such Optionee.
(2) Should Optionee's Continuous Service terminate by reason of Disability, then the Optionee shall have a period of twelve (12) months following the date of such cessation of Continuous Service during which to exercise each outstanding vested option held by such Optionee.
(3) If the Optionee dies while holding any outstanding vested options, then the personal representative of his or her estate or the person or persons to whom the option is transferred pursuant to the Optionee's will or the laws of inheritance shall have a twelve (12) month period following the date of the Optionee's death to exercise such vested options.
(4) Under no circumstances, however, shall any vested option be exercisable after the specified expiration of the option term.
(5) During the applicable post-Continuous Service exercise period, the Optionee may exercise any vested options as of the date of the Optionee's cessation of Continuous Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the option term, vested but unexercised options shall terminate and cease to be outstanding. All unvested options held by Optionee, however, shall, immediately upon the Optionee's cessation of Continuous Service, terminate and cease to be outstanding.
(6) Notwithstanding the foregoing, should Optionee's Continuous Service be terminated for Misconduct, then all outstanding options, whether vested or unvested, held by the Optionee shall terminate immediately and cease to remain outstanding.
(ii) The Plan Administrator shall have the discretion, exercisable either at the time an option is granted or at any time while the option remains outstanding, to:
(1) extend the period of time for which the option is to remain exercisable following Optionee's cessation of Continuous Service or death from the limited 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
(2) permit the option to be exercised, during the applicable post-Continuous 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 Continuous Service but also with respect to one or more additional installments in which the Optionee would have vested under the option had the Optionee continued in Continuous Service.
(d) Rule 16b-3. Options granted to a person subject to Section 16(b) of the 1934 Act must comply with Rule 16b-3 and shall contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the 1934 Act with respect to Plan transactions.
(e) 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, become the recordholder of the purchased shares and executed and delivered any necessary documentation to effectuate the foregoing.
(f) Early Exercise of Unvested Shares. The Plan Administrator shall have the discretion to grant options which are exercisable for unvested shares of Common Stock. Should the Optionee cease Continuous 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.
(g) Vesting Schedule. The Plan Administrator may impose a vesting schedule upon any option grant or the shares of Common Stock. Unless otherwise determined by the Plan Administrator, the vesting schedule shall be as follows: (i) twenty-five percent (25%) of the options on the first anniversary of the date of grant of the option, and (ii) the remaining seventy-five percent (75%) of the shares in equal monthly installments over a thirty-six (36) month period commencing with such anniversary.
(h) First Refusal Rights. Until such time as the Common Stock is first registered under Section 12 of the 1934 Act, the Corporation shall have the right of first refusal with respect to any proposed disposition by the Optionee (or any successor in interest) of any shares of Common Stock issued under the Plan. Such right of first refusal shall be exercisable in accordance with the terms established by the Plan Administrator and set forth in the document evidencing such right. To the extent any options granted hereunder permit early exercise, such options shall provide for a repurchase option so that upon termination of the employment or services of the Optionee, the Company (or its assignee) retains the
option to repurchase any unvested shares at the lower of (i) cost or (ii) fair market value of such unvested shares.
(i) Limited Transferability of Options. During the lifetime of the Optionee, the option shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or by the laws of descent and distribution following the Optionee's death.
G) Withholding. The Corporation's obligation to deliver shares of Common Stock upon the exercise of any options granted under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements.
2.2 INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options. Except as modified by the provisions of this Section 2.2, all provisions of Articles I, II and IV shall be applicable to Incentive Options. Options which are specifically designated as Non-Statutory Options shall be subject to all provisions or Articles I, II and IV, but not subject to the terms of this Section 2.2.
(a) Eligibility. Incentive Options may only be granted to Employees.
(b) Exercise Price. The exercise price per share 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 (1) 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 option term shall not exceed five (5) years measured from the option grant date.
2.3 CORPORATE TRANSACTION
(a) The Plan Administrator shall have full power and authority, exercisable either at the time an option is granted or at any time while the option remains outstanding, to structure such option so that the shares subject to that option will automatically vest on an accelerated basis should the Optionee's Continuous Service 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 the option is assumed and the repurchase rights applicable to those shares do not otherwise terminate. The Plan Administrator also has the authority to modify the acceleration of options described herein such that the shares subject to each option outstanding under the Plan at the time of a Corporate Transaction would automatically vest in full so that each such option shall, immediately prior to the effective date of the Corporate Transaction, become fully exercisable for all of 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 of Common Stock. Notwithstanding the foregoing, the shares subject to an outstanding option shall not vest on such an accelerated basis if and to the extent: (i) such option is assumed by the successor corporation (or parent thereof) in the Corporate Transaction and any repurchase rights of the Corporation
with respect to the unvested option shares are concurrently assigned to such 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 on the unvested option shares at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to those unvested 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) 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 (i) the number and class of securities available for issuance under the Plan following the consummation of such Corporate Transaction and (ii) the exercise price payable per share under each outstanding option, provided the aggregate exercise price payable for such securities shall remain the same.
(c) The portion of any Incentive Option accelerated in connection with a Corporate Transaction shall remain exercisable as an Incentive Option only to the extent the applicable One Hundred Thousand Dollar ($100,000.00) limitation is not exceeded. To the extent such dollar limitation is exceeded, the accelerated portion of such option shall be exercisable as a Non-Statutory Option under the Federal tax laws.
(d) The grant of options under the Plan 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.
2.4 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 Plan and to grant in substitution therefor new options covering the same or 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 option grant date.
ARTICLE III
STOCK ISSUANCE PROGRAM
3.1 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.
(a) Purchase Price.
(i) The purchase price per share of the Common Stock issued under the Stock Issuance Plan shall be fixed by the Plan Administrator.
(ii) Subject to the provisions of Section 4.1 of Article IV, 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:
(1) cash or check made payable to the Corporation; or
(2) past services rendered to the Corporation (or any Parent or Subsidiary).
(b) Vesting Provisions.
(i) Vesting Schedule. Shares of Common Stock issued under the Stock Issuance Program may, in the discretion of the Plan Administrator, vest in one or more installments over the Participant's period of Continuous Service or upon attainment of specified performance objectives. Unless otherwise determined by the Plan Administrator, the Plan Administrator may shall impose a vesting schedule upon any shares of Common Stock issued hereunder of (i) twenty-five percent (25%) of the options on the first anniversary of the issuance of the Common Stock, and (ii) the remaining seventy- five percent (75%) of the shares in equal monthly installments over a thirty-six (36) month period commencing with such anniversary.
(ii) Additional Securities. 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 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.
(iii) Stockholder Rights. 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.
(iv) Repurchase of Unvested Shares on Cessation of Continuous Service. Should the Participant cease to remain in Continuous 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 repurchase such shares from the Participant for the amount of cash consideration originally paid by the Participant for such shares and shall cancel the unpaid principal balance of any outstanding purchase money note of the Participant attributable to such shares.
(v) Waiver. The Plan Administrator may in its discretion waive the surrender and cancellation of one or more unvested shares of Common Stock (or other assets attributable thereto) which would otherwise occur upon the non-completion of the vesting schedule 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 Continuous Service or the attainment or non-attainment of the applicable performance objectives.
(c) First Refusal Rights. Until such time as the Common Stock is first registered under Section 12 of the 1934 Act, the Corporation shall have the right of first refusal with respect to any proposed disposition by the Participant (or any successor in interest) of any shares of Common Stock
issued under the Stock Issuance Program. Such right of first refusal shall be exercisable in accordance with the terms established by the Plan Administrator and set forth in the document evidencing such right.
3.2 CORPORATE TRANSACTION
(a) The Plan Administrator shall have full power and authority, exercisable either at the time the unvested shares are issued or any time while the Corporation's repurchase rights with respect to those shares remain outstanding, to provide that those rights shall automatically terminate on an accelerated basis, and the shares of Common Stock subject to those terminated rights shall immediately vest, in the event the Participant's Continuous 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).
(b) Subject to 3.2(a) above, the Plan Administrator has the authority to determine that all outstanding repurchase rights under the Stock Issuance Program shall terminate automatically, and the shares of Common Stock subject to those terminated rights shall immediately vest in full, except to the extent: (i) those repurchase rights are assigned to the successor corporation (or parent thereof) in connection with such Corporate Transaction, or (ii) such shares of Common Stock are to be replaced with a cash incentive program of the successor corporation which preserves the spread between the repurchase price and the fair market value existing on the unvested shares of Common Stock at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to those unvested shares of Common Stock, or (iii) such accelerated vesting is precluded by other limitations imposed by the Plan Administrator at the time the repurchase right is issued.
3.3 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 appropriate restrictive legends on the certificates evidencing those unvested shares.
ARTICLE IV
MISCELLANEOUS
4.1 FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the option exercise price under the Option Grant Program or the purchase price for shares issued under the Stock Issuance Program by delivering a full-recourse, interest bearing promissory note payable in one or more installments and secured by the purchased shares. 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 those 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.
4.2 EFFECTIVE DATE AND TERM OF PLAN
(a) The Plan shall become effective when adopted by the Board, but no option 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 date of the Board's adoption of the Plan, then all options previously granted under
the Plan shall terminate and cease to be outstanding, and no further options shall be granted and no shares shall be issued under the Plan. Subject to such limitation, the Plan Administrator may grant options and issue shares under the Plan at any time after the effective date of the Plan and before the date fixed herein for termination of the Plan.
(b) The Plan shall terminate upon the earliest of (i) the expiration of the ten (10)-year period measured from the date the Plan is adopted by the Board, (ii) the date on which all shares available for issuance under the Plan shall have been issued as vested shares, or (iii) the termination of all outstanding options in connection with a Corporate Transaction. All options and unvested stock issuances outstanding at the time of a clause (i) termination event shall continue to have full force and effect in accordance with the provisions of the documents evidencing those options or issuances.
4.3 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 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 and regulations.
(b) Options may be granted under the Option Grant Program and shares may be issued under the Stock Issuance Program which are in each instance in excess of the number of shares of Common Stock 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 grants or 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.
4.4 WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon the exercise of any options or upon the issuance or vesting of any shares issued under the Plan shall be subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements.
4.5 REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under the Plan and the issuance of any shares of Common Stock (i) upon the exercise of any 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 options granted under it and the shares of Common Stock issued pursuant to it.
4.6 FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income statement at least annually to each individual holding an outstanding option under the Plan, unless such individual is a key Employee whose duties in connection with the Corporation (or any Parent or Subsidiary) assure such individual access to equivalent information.
4.7 MARKET STAND-OFF
Optionees and Participants hereunder shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock or other securities of the Company held by such Optionees or Participants (the "Restricted Securities"), for a period of time specified by the managing underwriter (not to exceed one hundred eighty (180) days) following the effective date of a registration statement of the Company filed under the Act. Optionees and Participants shall execute and deliver such other agreements as may be reasonably requested by the Corporation and/or the managing underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In order to enforce the foregoing covenant, the Corporation may impose stop-transfer instructions with respect to Optionees' or Participants' Restricted Securities until the end of such period.
APPENDIX
The following definitions shall be in effect under the Plan:
(a) "Affiliate" shall mean any parent corporation or subsidiary corporation of the Corporation, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended.
(b) "Board" shall mean the Corporation's Board of Directors. time.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to
(d) "Committee" shall mean a committee of two (2) or more Board members appointed by the Board to exercise one or more administrative functions under the Plan.
(e) "Common Stock" shall mean the Corporation's common stock.
(f) "Consultant" means any person, including an advisor, (i) engaged by the Corporation or an Affiliate to render consulting or advisory services and who is compensated for such services, or (ii) who is a member of the Board of Directors of an Affiliate. The term "Consultant", however, shall not include either Directors who are not compensated by the Corporation for their services as Directors or Directors who are merely paid a director's fee by the Corporation for their services as Directors.
(g) "Continuous Service" means that an Optionee's or Participant's service with the Corporation or an Affiliate, whether as an Employee, Director or Consultant not interrupted or terminated (except for the expiration of an employment or engagement agreement by the terms of such agreement). Purchaser's Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which Purchaser renders service to the Corporation or an Affiliate as an Employee, Consultant or Director or a change in the entity for which Purchaser renders such service, provided that there is no interruption or termination of Purchaser's Continuous Service. For example, a change in status from an Employee of the Corporation to a Consultant of an Affiliate or a Director will not constitute an interruption of Continuous Service. The Board or the chief executive officer (or president if there is no chief executive officer) of the Corporation, in that party's sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave
(h) "Corporate Transaction" shall mean either of the following stockholder-approved transactions to which the Corporation is a party:
(i) a merger, consolidation, sale, transfer or other disposition 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 to a third party or parties and/or in complete liquidation or dissolution of the Corporation.
(i) "Corporation" shall mean ZipRecruiter, Inc., a Delaware corporation, and any successor corporation to all or substantially all of the assets or voting stock of ZipRecruiter, Inc., which shall by appropriate action adopt the Plan.
(j) "Director" means a member of the Board.
(k) "Disability" 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 and shall be determined by the Plan Administrator on the basis of such medical evidence as the Plan Administrator deems warranted under the circumstances.
(l) Employee shall mean an individual who is in the employ of the Corporation (or any Parent or Subsidiary), subject to the control and directio.i of the employer entity as to both the work to be performed and the manner and method of performance. Mere service as a Director or payment of a director's fee by the Corporation or an Affiliate shall not be sufficient to constitute "employment" by the Corporation or an Affiliate.
(m) Exercise Date shall mean the date on which the Corporation shall have received written or electronic notice of the option exercise.
(n) 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. 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. 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
(iii) If the Common Stock is at the time neither listed on any Stock Exchange nor traded on the Nasdaq National Market, then the Fair Market Value shall be determined by the Plan Administrator in accordance with the requirements of Section 409 of the Code and proposed regulations Section 1A09A-l (b)(5)(iv) and any other successor provisions, after taking into account such factors as the Plan Administrator shall deem appropriate.
(o) Incentive Option shall mean an incentive stock option, which satisfies the requirements of Code Section 422.
(p) 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 material 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 material reduction in his or her level of compensation (including base salary, fringe benefits and target bonuses under any corporate-performance
based bonus or incentive programs), 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 without the individual's consent.
(q) "Misconduct" shall mean (i) the commission of any act of fraud, embezzlement or dishonesty by the Optionee or Participant, (ii) any unauthorized use or disclosure by such person of confidential information or trade secrets of the Corporation (or any Parent or Subsidiary), (iii) 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, or (iv) any material violation of any written Company policy.
(r) "1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
(s) "Non-Statutory Option" shall mean an option not intended to satisfy the requirements of Code Section 422.
(t) "Option Grant Program" shall mean the option grant program in effect under the Plan.
(u) "Optionee" shall mean any person to whom an option is granted under the Plan.
(v) "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.
(w) "Participant" shall mean any person who is issued shares of Common Stock under the Stock Issuance Program.
(x) "Plan" shall mean the Corporation's Amended and Restated 2012 Stock Plan, as set forth in this document.
(y) "Plan Administrator" shall mean either the Board or the Committee acting in its capacity as administrator of the Plan.
(z) "Stock Exchange" shall mean either the American Stock Exchange or the New York Stock Exchange.
(aa) "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.
(bb) "Stock Issuance Program" shall mean the stock issuance program effect under the Plan.
(cc) "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.
(dd) "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).
ZIPRECRUITER, INC.
2012 STOCK PLAN
STOCK OPTION AGREEMENT
A. SUMMARY OF STOCK OPTION GRANT
You have been granted an option to purchase Common Stock of ZipRecruiter, Inc., a Delaware corporation (the “Corporation”) as follows:
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Grantee:
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Board Approval Date:
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Date of Grant:
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Exercise Price per Share:
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Total Number of Shares Granted:
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Total Exercise Price:
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Type of Option:
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☐ Incentive Stock Option
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☐ Non-Statutory Option
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Expiration Date:
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Vesting Commencement Date:
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Vesting/Exercise Schedule:
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Options shall vest as follows: (a) twenty-five percent (25%) of the Options shall vest on the first anniversary of the later of (i) such person’s commencement of employment or services with the Corporation, and (ii) the date of grant of the Options, and (b) the remaining seventy-five percent (75%) of the Options shall vest in equal monthly installments over a thirty-six (36) month period commencing with such first anniversary.
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Termination Period:
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The Options shall terminate in accordance with the terms of the Corporation’s 2012 Stock Plan (the “Plan”).
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Transferability:
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This Option may not be transferred except as provided in Section B.6 below.
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B. TERMS OF STOCK OPTION AGREEMENT
1. Grant of Option. ZipRecruiter, Inc., a Delaware corporation (the “Corporation”), hereby grants to (“Grantee”), an option (the “Option” ) to purchase the total number of shares of Common Stock (the “Shares”) set forth in Section A above, at the exercise price per Share (the “Exercise Price”) subject to the terms, definitions and provisions of the ZipRecruiter, Inc. 2012 Stock Plan (the “Plan”) adopted by the Corporation, which is incorporated in this Agreement by reference, except as otherwise set forth herein. Unless otherwise defined in this Agreement, the terms used in this Agreement shall have the meanings defined in the Plan.
2. Designation of Option. This Option is intended to be a [Non-Statutory/Incentive] Stock Option.
3. Exercise of Option. This Option shall be exercisable during its term m accordance with the Vesting/Exercise Schedule set out in Section A above:
(a) Right to Exercise.
(i) This Option may not be exercised for a fraction of a share.
(ii) In no event may this Option be exercised after the Expiration Date of the Option as set forth in Section A above.
(b) Method of Exercise.
(i) This Option shall be exercisable by execution and delivery of the Exercise Notice and Stock Purchase Agreement attached hereto as Exhibit A (the “Exercise Agreement”) or of any other form of written notice approved for such purpose by the Corporation which shall state Grantee’s election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder’s investment intent with respect to such Shares as may be required by the Corporation pursuant to the provisions of the Plan. Such written notice shall be signed by Grantee and shall be delivered to the Corporation by such means as are determined by the Plan administrator in its discretion to constitute adequate delivery. The written notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon receipt by the Corporation of such written notice accompanied by the Exercise Price.
(ii) As a condition to the exercise of this Option, Grantee agrees to make adequate provision for federal, state or other tax withholding obligations, if any, which arise upon the vesting or exercise of the Option, or disposition of Shares, whether by withholding, direct payment to the Corporation, or otherwise.
(iii) The Corporation is not obligated, and will have no liability for failure, to issue or deliver any Shares upon exercise of the Option unless such issuance or delivery would comply with the applicable laws, with such compliance determined by the Corporation in consultation with its legal counsel. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such
shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 221 of Title 12 of the Code of Federal Regulations as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Corporation may require Grantee to make any representation and warranty to the Corporation as may be required by the applicable laws. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to Grantee on the date on which the Option is exercised with respect to such Shares.
4. Method of Payment. Payment of the Exercise Price shall be by any of the following, or a combination of the following, at the election of Grantee:
(a) cash or check; or
(b) cancellation of indebtedness; or
(c) prior to the date, if any, upon which the Common Stock becomes a Listed Security (as defined below), by surrender of other shares of Common Stock of the Corporation that have an aggregate fair market value on the date of surrender equal to the Exercise Price of the Shares as to which the Option is being exercised. In the case of shares acquired directly or indirectly from the Corporation, such shares must have been owned by Grantee for more than six (6) months on the date of surrender (or such other period of time as is necessary to avoid the Corporation’s incurring adverse accounting charges); or
(d) net share settlement or other form of “net” or “cashless” exercise, or
(e) any other manner approved by the Plan Administrator.
“Listed Security” means any security of the Corporation that is listed or approved for listing on a national securities exchange or designated or approved for designation as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc.
5. Termination of Relationship. Following the date of termination of Grantee’s Continuous Service for any reason (the “Termination Date”), Grantee may exercise the Option after the Termination Date only in accordance with the provisions of the Plan, and in no event may Grantee exercise any Option after the Expiration Date of the Option as set forth in Section A above.
6. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Grantee only by him or her. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of Grantee.
7. Tax Consequences. GRANTEE SHOULD CONSULT A TAX ADVISER PRIOR TO OR UPON RECEIPT OFF THIS OPTION AND BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
8. Lock-Up Agreement. In connection with the initial public offering of the Corporation’s securities and upon request of the Corporation or the underwriters managing any
underwritten offering of the Corporation’s securities, Grantee hereby agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Corporation (or agree to do any of the foregoing) however and whenever acquired (other than those included in the registration) without the prior written consent of the Corporation or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as may be requested by the Corporation or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the public offering.
9. Stockholders’ Agreements. Grantee agrees that, upon exercising any portion of the Option, Grantee shall execute and deliver any document or instrument necessary to be a party to, and be bound by the terms and conditions of, any agreements binding the Stockholders of the Corporation as required by the Corporation.
10. Acknowledgments Relating to Plan. By your signature and the signature of the Corporation’s representative below, you and the Corporation agree that this option is granted under and governed by the terms and conditions of the Plan (except as otherwise expressly stated) and this Agreement.
11. Effect of Agreement. Grantee acknowledges receipt of a copy of the Plan and represents that he or she is familiar with the terms and provisions thereof (and has had an opportunity to consult counsel regarding the Option terms), and hereby accepts this Option and agrees to be bound by its contractual terms as set forth herein, in Section A of this Agreement and in the Plan. Grantee hereby agrees to accept as binding, conclusive and final all decisions and interpretations of the Plan administrator regarding any questions relating to the Option. In the event of a conflict between the terms and provisions of the Plan and the terms and provisions of the Summary of Stock Option Grant, this Agreement, the Plan terms and provisions shall prevail. The Option, the Summary of Stock Option Grant and the Plan constitute the entire agreement between Grantee and the Corporation on the subject matter hereof and supersedes all proposals, written or oral, and all other communications between the parties relating to such subject matter.
EXHIBIT A
ZIPRECRUITER, INC.
2012 STOCK PLAN
EXERCISE NOTICE AND STOCK PURCHASE AGREEMENT
This Agreement (“Agreement”) is made as of [as described on Carta] by and between ZipRecruiter, Inc., a Delaware corporation (the “Corporation”), and [as described on Carta] (“Purchaser”). To the extent any capitalized terms used in this Agreement are not defined, they shall have the meaning ascribed to them in the 2012 Stock Plan (the “Plan”).
1. Exercise of Option. Subject to the terms and conditions hereof, Purchaser hereby elects to exercise his or her option to purchase [as described on Carta] shares of the Common Stock (the “Shares”) of the Corporation under and pursuant to the Plan and the Stock Option Agreement dated [as described on Carta] (the “Option Agreement”). The purchase price for the Shares shall be $[as described on Carta] per Share for a total purchase price of $[as described on Carta]. The term “Shares” refers to the purchased Shares and all securities received in replacement of the Shares or as stock dividends or splits, all securities received in replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties to which Purchaser is entitled by reason of Purchaser’s ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under this Agreement shall occur (i) at the principal office of the Corporation simultaneously with the execution and delivery of this Agreement in accordance with the provisions of Section 3(b) of the Option Agreement or (ii) electronically upon exercise by Purchaser on an electronic acceptance platform established and maintained by the Corporation or another third party designated by the Corporation. On such date, the Corporation will deliver or cause to be delivered to Purchaser an electronic certificate representing the Shares to be purchased by Purchaser (which shall be issued in Purchaser’s name) against payment of the exercise price therefor by Purchaser by any method listed in Section 4 of the Option Agreement.
3. Limitations on Transfer. In addition to any other limitation on transfer created by applicable securities laws, Purchaser shall not assign, encumber or dispose of any interest in the Shares except in compliance with the provisions below and applicable securities laws.
(a) Stockholders Agreement. Purchaser agrees that, upon and as a condition to the purchase of the Shares, Purchaser shall execute and deliver any document or instrument necessary to be a party to, and be bound by the terms and conditions of, any agreement between the Corporation and its Stockholders as required by the Corporation.
(b) Restrictions Binding on Transferees. All transferees of Shares or any interest therein will receive and hold such Shares or interest subject to the provisions of this Agreement. Any sale or transfer of the Corporation’s Shares shall be void unless the provisions of this Agreement are satisfied.
(c) Bylaws Restrictions. Purchaser and any transferee of Shares agree that the Shares and any interest therein are subject to the right of first refusal and any and all restrictions
on transfer set forth in the Corporation’s Amended and Restated Bylaws, as it may be amended from time to time (the “Bylaws”).
4. Investment and Taxation Representations. In connection with the purchase of the Shares, Purchaser represents to the Corporation the following:
(a) 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 Shares. Purchaser is purchasing these securities for investment for his or her own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act or under any applicable provision of state law. Purchaser does not have any present intention to transfer the Shares to any person or entity.
(b) Purchaser understands that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) by reason of a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Purchaser’s investment intent as expressed herein.
(c) Purchaser further acknowledges and understands that the securities must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Purchaser further acknowledges and understands that the Corporation is under no obligation to register the securities. Purchaser understands that the certificate(s) evidencing the securities will be imprinted with a legend which prohibits the transfer of the securities unless they are registered or such registration is not required in the opinion of counsel for the Corporation.
(d) Purchaser is familiar with the provisions of Rules 144 and 701, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly, from the issuer of the securities (or from an affiliate of such issuer), in a non-public offering subject to the satisfaction of certain conditions. Purchaser understands that the Corporation provides no assurances as to whether he or she will be able to resell any or all of the Shares pursuant to Rule 144 or Rule 701, which rules require, among other things, that the Corporation be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, that resales of securities take place only after the holder of the Shares has held the Shares for certain specified time periods, and under certain circumstances, that resales of securities be limited in volume and take place only pursuant to brokered transactions. Notwithstanding this paragraph (d), Purchaser acknowledges and agrees to the restrictions set forth in paragraph (e) below.
(e) Purchaser further understands that in the event all of the applicable requirements of Rule 144 or 701 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 Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission 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 or 701 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) Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Corporation for any tax advice.
5. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. The certificate or certificates representing the Shares, including electronic certificate(s), shall bear the following legends (as well as any legends required by applicable state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL FOR THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE CORPORATION AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE CORPORATION.
(iii) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS PROVIDED IN THE BYLAWS OF THE CORPORATION.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure compliance with the restrictions referred to herein and in the Bylaws, the Corporation may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Corporation transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Corporation shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or the Bylaws or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
6. No Employment Rights. Nothing in this Agreement shall affect in any manner whatsoever the right or power of the Corporation, or a parent or subsidiary of the Corporation, to terminate Purchaser’s employment or consulting relationship, for any reason, with or without cause.
7. Lock-Up Agreement. In connection with the initial public offering of the Corporation’s securities and upon request of the Corporation or the underwriters managing any underwritten offering of the Corporation’s securities, Purchaser agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Corporation (or agree to do any of the foregoing) however or whenever acquired (other than those included in the registration) without the prior written consent of the Corporation or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as may be requested by the Corporation or such managing underwriters and to execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of the public offering.
8. Miscellaneous.
(a) Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent by telegram or fax or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party’s address as set forth below or as subsequently modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by the Corporation’s successors and assigns. The rights and obligations of Purchaser under this Agreement may only be assigned with the prior written consent of the Corporation.
Exercise of the Option through an online or electronic system established and maintained by the Company or another third party designated by the Company shall be deemed to be Purchaser’s agreement and acceptance of the terms and conditions of this Exercise Notice.
ZIPRECRUITER, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
1. Purpose.
The purpose of the Plan is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing such persons with equity ownership opportunities and thereby better aligning the interests of such persons with those of the Company’s stockholders. Capitalized terms used in the Plan are defined in Section 11 below.
2 Eligibility.
Service Providers are eligible to be granted Awards under the Plan, subject to the limitations described herein.
3. Administration and Delegation.
(a) Administration. The Plan will be administered by the Administrator. The Administrator shall have authority to determine which Service Providers will receive Awards, to grant Awards and to set all terms and conditions of Awards (including, but not limited to, vesting, exercise and forfeiture provisions). In addition, the Administrator shall have the authority to take all actions and make all determinations contemplated by the Plan and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Administrator may correct any defect or ambiguity, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem necessary or appropriate to carry the Plan and any Awards into effect, as determined by the Administrator. The Administrator shall make all determinations under the Plan in the Administrator’s sole discretion and all such determinations shall be final and binding on all persons having or claiming any interest in the Plan or in any Award.
(b) Appointment of Committees. To the extent permitted by Applicable Laws, the Board may delegate any or all of its powers under the Plan to one or more Committees. The Board may abolish any Committee at any time and re-vest in itself any previously delegated authority.
4. Stock Available for Awards.
(a) Number of Shares. Subject to adjustment under Section 8 hereof, Awards may be made under the Plan covering up to Twenty-Six Million, Fifty-Seven Thousand, Eight Hundred Seventy-Two (26,057,872) shares of Common Stock. If any Award expires or lapses or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at or below the original issuance price), in any case in a manner that results in any shares of Common Stock covered by such Award not being issued or being so reacquired by the Company, the unused Common Stock covered by such Award shall again be available for the grant of Awards under the Plan. Further, shares of Common Stock delivered (either by actual delivery or attestation) to the Company by a Participant to satisfy the applicable exercise or purchase price of Award and/or to satisfy any applicable tax withholding obligation (including shares retained by the Company from the Award being exercised or purchased and/or creating the tax obligation) shall be added to the number of shares of Common Stock available for the grant of Awards under the Plan. However, in the case of Incentive Stock Options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the Code. Shares of
Common Stock issued under the Plan may consist in whole or in part of authorized but unissued shares, shares purchased on the open market or treasury shares.
(b) Substitute Awards. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Administrator may grant Awards in substitution for any options or other stock or stock-based awards granted prior to such merger or consolidation by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the Administrator deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall not count against the overall share limit set forth in Section 4(a) hereof, except as may be required by reason of Section 422 of the Code.
5. Stock Options.
(a) General. The Administrator may grant Options to any Service Provider, subject to the limitations on Incentive Stock Options described below. The Administrator shall determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to Applicable Laws, as it considers necessary or advisable.
(b) Incentive Stock Options. The Administrator may grant Options intended to qualify as Incentive Stock Options only to employees of the Company, any of the Company’s present or future “parent corporations” or “subsidiary corporations” as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code. All Options intended to qualify as Incentive Stock Options shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. Neither the Company nor the Administrator shall have any liability to a Participant, or any other party, (i) if an Option (or any part thereof) which is intended to qualify as an Incentive Stock Option fails to qualify as an Incentive Stock Option or (ii) for any action or omission by the Administrator that causes an Option not to qualify as an Incentive Stock Option, including without limitation, the conversion of an Incentive Stock Option to a Non-Qualified Stock Option or the grant of an Option intended as an Incentive Stock Option that fails to satisfy the requirements under the Code applicable to an Incentive Stock Option. Any Option that is intended to qualify as an Incentive Stock Option, but fails to so qualify for any reason, including without limitation, the portion of any Option becoming exercisable in excess of the $100,000 limitation described in Treasury Regulation Section 1.422-4, shall be treated as a Non-Qualified Stock Option for all purposes.
(c) Exercise Price. The Administrator shall establish the exercise price of each Option and specify the exercise price in the applicable Award Agreement. The exercise price shall be not less than 100% of the Fair Market Value on the date the Option is granted. In the case of an Incentive Stock Option granted to an employee who, at the time of grant of the Option, owns (or is treated as owning under Section 424 of the Code) stock representing more than 10% of the voting power of all classes of stock of the Company (or a “parent corporation” or “subsidiary corporation” thereof within the meaning of Sections 424(e) or 424(f) of the Code, respectively), the per share exercise price shall be no less than 110% of the Fair Market Value on the date the Option is granted.
(d) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as the Administrator may specify in the applicable Award Agreement, provided that the term of any Option shall not exceed ten years. In the case of an Incentive Stock Option granted to an employee who, at the time of grant of the Option, owns (or is treated as owning under Section 424 of the Code) stock representing more than 10% of the voting power of all classes of stock of the Company (or a “parent corporation” or “subsidiary corporation” thereof within the meaning of Sections 424(e) or 424(f) of the Code, respectively), the term of the Option shall not exceed five years.
(e) Exercise of Option; Notification of Disposition. Options may be exercised by delivery to the Company of a notice of exercise, in a form approved by the Administrator (which may be an electronic or written form), signed or exercised electronically by the person authorized to exercise the Option, together with payment in full (i) as specified in Section 5(f) hereof for the number of shares for which the Option is exercised and (ii) as specified in Section 9(e) hereof for any applicable withholding taxes. Unless otherwise determined by the Administrator, an Option may not be exercised for a fraction of a share of Common Stock. If an Option is designated as an Incentive Stock Option, the Participant shall give prompt notice to the Company of any disposition or other transfer of any shares of Common Stock acquired from the Option if such disposition or transfer is made (i) within two years from the grant date with respect to such Option or (ii) within one year after the transfer of such shares to the Participant (other than any such disposition made in connection with a Change in Control). Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Participant in such disposition or other transfer.
(f) Payment Upon Exercise. Common Stock purchased upon the exercise of an Option granted under the Plan shall be paid for in cash, by check payable to the order of the Company, by electronic payment via Automatic Clearinghouse (ACH), or, to the extent permitted by the Administrator, by:
(i) (A) delivery of an irrevocable and unconditional undertaking by a broker acceptable to the Company to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding, or (B) delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;
(ii) delivery (either by actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their Fair Market Value, provided (A) such method of payment is then permitted under Applicable Laws, (B) such Common Stock, if acquired directly from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Company at any time, and (C) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements;
(iii) surrendering shares of Common Stock then issuable upon exercise of the Option valued at their Fair Market Value on the date of exercise;
(iv) delivery of a promissory note of the Participant to the Company on terms determined by the Administrator;
(v) delivery of property of any other kind which constitutes good and valuable consideration as determined by the Administrator; or
(vi) any combination of the above permitted forms of payment (including cash or check).
(g) Early Exercise of Options. The Administrator may provide in the terms of an Award Agreement that the Service Provider may exercise an Option in whole or in part prior to the full vesting of the Option in exchange for unvested shares of Restricted Stock with respect to any unvested portion of the Option so exercised. Shares of Restricted Stock acquired upon the exercise of any unvested portion of an Option shall be subject to such terms and conditions as the Administrator shall determine.
6. Restricted Stock; Restricted Stock Units.
(a) General. The Administrator may grant Restricted Stock, or the right to purchase Restricted Stock, to any Service Provider, subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant (or to require forfeiture of such shares if issued at no cost) in the event that conditions specified by the Administrator in the applicable Award Agreement are not satisfied prior to the end of the applicable restriction period or periods established by the Administrator for such Award. In addition, the Administrator may grant to Service Providers Restricted Stock Units, which may be subject to vesting and forfeiture conditions during applicable restriction period or periods, as set forth in an applicable Award Agreement.
(b) Terms and Conditions for All Restricted Stock and Restricted Stock Unit Awards. The Administrator shall determine and set forth in the applicable Award Agreement the terms and conditions applicable to each Restricted Stock and Restricted Stock Unit Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, in each case, if any.
(c) Additional Provisions Relating to Restricted Stock.
(i) Dividends. Participants holding shares of Restricted Stock will be entitled to all ordinary cash dividends paid with respect to such shares, unless otherwise provided by the Administrator in the applicable Award Agreement. In addition, unless otherwise provided by the Administrator, if any dividends or distributions are paid in shares, or consist of a dividend or distribution to holders of Common Stock of property other than an ordinary cash dividend, the shares or other property will be subject to the same restrictions on transferability and forfeitability as the shares of Restricted Stock with respect to which they were paid. Each dividend payment will be made as provided in the applicable Award Agreement, but in no event later than the end of the calendar year in which the dividends are paid to shareholders of that class of stock or, if later, the 15th day of the third month following the later of (A) the date the dividends are paid to stockholders of that class of stock, and (B) the date the dividends are no longer subject to forfeiture.
(ii) Stock Certificates. The Company may require that any stock certificates issued in respect of shares of Restricted Stock be deposited in escrow by the Participant, together with a stock power endorsed in blank, with the Company (or its designee).
(d) Additional Provisions Relating to Restricted Stock Units.
(i) Settlement. Upon the vesting of a Restricted Stock Unit, the Participant shall be entitled to receive from the Company one share of Common Stock or an amount of cash or other property equal to the Fair Market Value of one share of Common Stock on the settlement date, as provided in the applicable Award Agreement. The Administrator may provide that settlement of Restricted Stock Units shall occur upon or as soon as reasonably practicable after the vesting of the Restricted Stock Units or shall instead be deferred, on a mandatory basis or at the election of the Participant, in a manner that complies with Section 409A.
(ii) Voting Rights. A Participant shall have no voting rights with respect to any Restricted Stock Units unless and until shares are delivered in settlement thereof.
(iii) Dividend Equivalents. To the extent provided by the Administrator, a grant of Restricted Stock Units may provide a Participant with the right to receive Dividend Equivalents. Dividend Equivalents may be paid currently or credited to an account for the Participant, may be settled in cash and/or shares of Common Stock and may be subject to the
same restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which the Dividend Equivalents are paid, as determined by the Administrator, subject, in each case, to such terms and conditions as the Administrator shall establish and set forth in the applicable Award Agreement.
7. Other Stock-Based Awards.
Other Stock-Based Awards may be granted hereunder to Participants, including, without limitation, Awards entitling Participants to receive shares of Common Stock to be delivered in the future. Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan, as stand-alone payments and/or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be paid in shares of Common Stock, cash or other property, as the Administrator shall determine. Subject to the provisions of the Plan, the Administrator shall determine the terms and conditions of each Other Stock-Based Award, including any purchase price, transfer restrictions, vesting conditions and other terms and conditions applicable thereto, which shall be set forth in the applicable Award Agreement.
8. Adjustments for Changes in Common Stock and Certain Other Events.
(a) In the event that the Administrator determines that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), reorganization, merger, consolidation, combination, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, as determined by the Administrator, affects the Common Stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award, then the Administrator may, in such manner as it may deem equitable, adjust any or all of:
(i) the number and kind of shares of Common Stock (or other securities or property) with respect to which Awards may be granted or awarded (including, but not limited to, adjustments of the limitations in Section 3 hereof on the maximum number and kind of shares which may be issued);
(ii) the number and kind of shares of Common Stock (or other securities or property) subject to outstanding Awards;
(iii) the grant or exercise price with respect to any Award; and
(iv) the terms and conditions of any Awards (including, without limitation, any applicable financial or other performance “targets” specified in an Award Agreement).
(b) In the event of any transaction or event described in Section 8(a) hereof (including without limitation any Change in Control) or any unusual or nonrecurring transaction or event affecting the Company or the financial statements of the Company, or any change in any Applicable Laws or accounting principles, the Administrator, on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to (i) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made
available under the Plan or with respect to any Award granted or issued under the Plan, (ii) to facilitate such transaction or event or (iii) give effect to such changes in Applicable Laws or accounting principles:
(i) To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of such Award or realization of the Participant’s rights had such Award been currently exercisable, payable and fully vested, as applicable; provided that, if the amount that could have been obtained upon the exercise or settlement of such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then such Award may be terminated without payment;
(ii) To provide that such Award shall vest and, to the extent applicable, be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;
(iii) To provide that such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and applicable exercise or purchase price, in all cases, as determined by the Administrator;
(iv) To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards, and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards which may be granted in the future;
(v) To replace such Award with other rights or property selected by the Administrator; and/or
(vi) To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.
(c) Notwithstanding the provisions of Section 8(b) above, if a Change in Control occurs and a Participant’s Awards are not continued, converted, assumed, or replaced with a substantially similar award by (i) the Company, or (ii) a successor entity or its parent or subsidiary (an “Assumption”), and provided that the Participant has not had a Termination of Service, then the Administrator may provide that, immediately prior to the Change in Control, such Awards shall become fully vested, exercisable and/or payable, as applicable, and all forfeiture, repurchase and other restrictions on such Awards shall lapse, in which case, such Awards shall be canceled upon the consummation of the Change in Control in exchange for the right to receive the Change in Control consideration payable to other holders of Common Stock (A) which may be on such terms and conditions as apply generally to holders of Common Stock under the Change in Control documents (including, without limitation, any escrow, earn-out or other deferred consideration provisions) or such other terms and conditions as the Administrator may provide, and (B) determined by reference to the number of shares subject to such Awards and net of any applicable exercise price; provided that to the extent that any Awards constitute “nonqualified deferred compensation” that may not be paid upon the Change in Control under Section 409A without the imposition of taxes thereon under Section 409A, the timing of such payments shall be governed by the applicable Award Agreement (subject to any deferred consideration provisions applicable under the Change in Control documents); and provided, further, that if the amount to which a Participant would be entitled upon the settlement or exercise of such Award at the time of the Change in Control is equal to or less than zero, then such Award may be terminated without payment. The
Administrator shall determine whether an Assumption of an Award has occurred in connection with a Change in Control.
(d) In connection with the occurrence of any Equity Restructuring, and notwithstanding anything to the contrary in this Section 8, the Administrator will equitably adjust each outstanding Award, which adjustments may include adjustments to the number and type of securities subject to each outstanding Award and/or the exercise price or grant price thereof, if applicable, the grant of new Awards to Participants, and/or the making of a cash payment to Participants, as the Administrator deems appropriate to reflect such Equity Restructuring. The adjustments provided under this Section 8(e) shall be nondiscretionary and shall be final and binding on the affected Participant and the Company; provided that whether an adjustment is equitable shall be determined by the Administrator.
(e) In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares of Common Stock or the share price of the Common Stock, including any Equity Restructuring, or if necessary to comply with Applicable Laws or the Code, or for reasons of administrative convenience, the Administrator may, in its sole discretion, refuse to permit the exercise of any Award during a period of up to thirty days prior to the consummation of any such transaction; provided, however, that in the event the vested portion of an Award is not exercisable on the date the Award would otherwise expire pursuant to the terms set forth in the Award Agreement governing such Award as a result of the Administrator’s exercise of discretion pursuant to this Section 8(e), then the expiration of the Award shall be extended through the date that is thirty days following the date on which the Administrator first permits the Award to be exercised (but in no event shall the expiration of the Award be extended beyond the tenth anniversary of the date of grant of such Award.
(f) Except as expressly provided in the Plan or pursuant to action of the Administrator under the Plan, no Participant shall have any rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to action of the Administrator under the Plan, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Common Stock subject to an Award or the grant or exercise price of any Award. The existence of the Plan, any Award Agreements and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Company to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger, consolidation dissolution or liquidation of the Company or sale of Company assets or (iii) any sale or issuance of securities, including without limitation, securities with rights superior to those of the Common Stock or which are convertible into or exchangeable for Common Stock. The Administrator may treat Participants and Awards (or portions thereof) differently under this Section 8.
9. General Provisions Applicable to Awards.
(a) Transferability of Awards. Except as the Administrator may otherwise determine or provide in an Award Agreement or otherwise, in any case in accordance with Applicable Laws, Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, shall be exercisable only by the
Participant.References to a Participant, to the extent relevant in the context, shall include references to authorized transferees.
(b) Documentation. Each Award shall be evidenced in an Award Agreement, which may be in such form (written, electronic or otherwise) as the Administrator shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.
(c) Discretion. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.
(d) Termination of Status. The Administrator shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or any other change or purported change in a Participant’s Service Provider status and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award, if applicable.
(e) Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Administrator for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. Except as the Administrator may otherwise determine, all such payments shall be made in cash or by certified check. Notwithstanding the foregoing, to the extent permitted by the Administrator, Participants may satisfy such tax obligations in whole or in part by delivery of shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value. The Company may, to the extent permitted by Applicable Laws, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.
(f) Amendment of Award. The Administrator may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or settlement, and converting an Incentive Stock Option to a Non-Qualified Stock Option. The Participant’s consent to such action shall be required unless (i) the Administrator determines that the action, taking into account any related action, would not materially and adversely affect the Participant, or (ii) the change is permitted under Section 8 and 10(f) hereof.
(g) Conditions on Delivery of Stock. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems necessary or appropriate to satisfy the requirements of any Applicable Laws. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is determined by the Administrator to be necessary to the lawful issuance and sale of any securities hereunder, 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.
(h) Acceleration. The Administrator may at any time provide that any Award shall become immediately vested and/or exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.
10. Miscellaneous.
(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an applicable Award Agreement.
(b) No Rights As Stockholder; Certificates. Subject to the provisions of the applicable Award Agreement, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such shares. Notwithstanding any other provision of the Plan, unless otherwise determined by the Administrator or required by any Applicable Laws, the Company shall not be required to deliver to any Participant certificates evidencing shares of Common Stock issued in connection with any Award and instead such shares of Common Stock may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). The Company may place legends on stock certificates issued under the Plan deemed necessary or appropriate by the Administrator in order to comply with Applicable Laws.
(c) Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board. No Awards shall be granted under the Plan after the completion of ten years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Awards previously granted may extend beyond that date in accordance with the terms of the Plan.
(d) Amendment of Plan. The Administrator may amend, suspend or terminate the Plan or any portion thereof at any time; provided that no amendment of the Plan shall materially and adversely affect any Award outstanding at the time of such amendment without the consent of the affected Participant. Awards outstanding under the Plan at the time of any suspension or termination of the Plan shall continue to be governed in accordance with the terms of the Plan and the applicable Award Agreement, as in effect prior to such suspension or termination. The Board shall obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Laws.
(e) Provisions for Foreign Participants. The Administrator may modify Awards granted to Participants who are foreign nationals or employed outside the United States or establish subplans or procedures under the Plan to address differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters.
(f) Section 409A.
(i) General. The Company intends that all Awards be structured in compliance with, or to satisfy an exemption from, Section 409A, such that no adverse tax consequences, interest, or penalties under Section 409A apply in connection with any Awards. Notwithstanding anything herein or in any Award Agreement to the contrary, the Administrator may, without a Participant’s prior consent, amend this Plan and/or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and actions with retroactive effect) as are necessary or appropriate to preserve the intended tax treatment of Awards under the Plan, including without limitation, any such actions intended to (A) exempt this Plan and/or any Award from the application of Section 409A, and/or (B) comply with the
requirements of Section 409A, including without limitation any such regulations, guidance, compliance programs and other interpretative authority that may be issued after the date of grant of any Award. The Company makes no representations or warranties as to the tax treatment of any Award under Section 409A or otherwise. The Company shall have no obligation under this Section 10(f) or otherwise to take any action (whether or not described herein) to avoid the imposition of taxes, penalties or interest under Section 409A with respect to any Award and shall have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute non-compliant, “nonqualified deferred compensation” subject to the imposition of taxes, penalties and/or interest under Section 409A.
(ii) Separation from Service. With respect to any Award that constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of such Award that is to be made upon a termination of a Participant’s Service Provider relationship shall, to the extent necessary to avoid the imposition of taxes under Section 409A, be made only upon the Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or subsequent to the termination of the Participant’s Service Provider relationship. For purposes of any such provision of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”
(iii) Payments to Specified Employees. Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” that are otherwise required to be made under an Award to a “specified employee” (as defined under Section 409A and determined by the Administrator) as a result of his or her “separation from service” shall, to the extent necessary to avoid the imposition of taxes under Code Section 409A(a)(2)(B)(i), be delayed until the expiration of the six-month period immediately following such “separation from service” (or, if earlier, until the date of death of the specified employee) and shall instead be paid (in a manner set forth in the Award agreement) on the day that immediately follows the end of such six-month period or as soon as administratively practicable thereafter (without interest). Any payments of “nonqualified deferred compensation” under such Award that are, by their terms, payable more than six months following the Participant’s “separation from service” shall be paid at the time or times such payments are otherwise scheduled to be made.
(g) Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer, other employee or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan or any Award, nor will such individual be personally liable with respect to the Plan because of any contract or other instrument he or she executes in his or her capacity as an Administrator, director, officer, other employee or agent of the Company. The Company will indemnify and hold harmless each director, officer, other employee and agent of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been or will be granted or delegated, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Administrator’s approval) arising out of any act or omission to act concerning this Plan unless arising out of such person’s own fraud or bad faith.
(h) Lock-Up Period. The Company may, at the request of any representative of the underwriters (the “Managing Underwriter”) or otherwise, in connection with any registration of the offering of any securities of the Company under the Securities Act, prohibit Participants from, directly or indirectly, selling or otherwise transferring any shares of Common Stock or other securities of the
Company during a period of up to one hundred eighty days following the effective date of a registration statement of the Company filed under the Securities Act.
(i) Right of First Refusal.
(i) Before any shares of Common Stock held by a Participant or any permitted transferee (each, a “Holder”) may be sold, pledged, assigned, hypothecated, transferred, or otherwise disposed of (each, a “Transfer”), the Company or its assignee(s) shall have a right of first refusal to purchase the shares of Common Stock proposed to be Transferred on the terms and conditions set forth in this Section 10(i) (the “Right of First Refusal”). In the event that the Company’s charter, bylaws and/or a stockholders’ agreement applicable to the shares of Common Stock contain a right of first refusal with respect to the shares of Common Stock, such right of first refusal shall apply to the shares of Common Stock to the extent such provisions are more restrictive than the Right of First Refusal set forth in this Section 10(i) and the Right of First Refusal set forth in this Section 10(i) shall not in any way restrict the operation of the Company’s charter, bylaws or the operation of any applicable stockholders’ agreement.
(ii) In the event any Holder desires to Transfer any shares of Common Stock, the Holder shall deliver to the Company a written notice (the “Notice”) stating: (A) the Holder’s bona fide intention to sell or otherwise Transfer such shares of Common Stock; (B) the name of each proposed purchaser or other transferee (“Proposed Transferee”); (C) the number of shares of Common Stock to be Transferred to each Proposed Transferee; and (D) the price for which the Holder proposes to Transfer the shares of Common Stock (the “Offered Price”), and the Holder shall offer such shares of Common Stock at the Offered Price to the Company or its assignee(s).
(iii) Within twenty-five days after receipt of the Notice, the Company and/or its assignee(s) may elect in writing to purchase all, but not less than all, of the shares of Common Stock proposed to be Transferred to any one or more of the Proposed Transferees by delivery of a written exercise notice to the Holder (a “Company Notice”). The purchase price (“Purchase Price”) for the shares of Common Stock repurchased under this Section 10(i) shall be the Offered Price.
(iv) Payment of the Purchase Price shall be made, at the option of the Company or its assignee(s), in cash (by check or wire transfer), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof, within five days after delivery of the Company Notice or in the manner and at the times mutually agreed to by the Company and the Holder. Should the Offered Price specified in the Notice be payable in property other than cash, the Company or its assignee shall have the right to pay the purchase price in the form of cash equal in amount to the value of such property, as determined by the Administrator.
(v) If all or a portion of the shares of Common Stock proposed in the Notice to be Transferred are not purchased by the Company and/or its assignee(s) as provided in this Section 10(i), then the Holder may sell or otherwise Transfer such shares of Common Stock to that Proposed Transferee at the Offered Price or at a higher price; provided that such sale or other Transfer is consummated within sixty days after the date of the Notice; and provided, further, that any such sale or other Transfer is effected in accordance with any Applicable Laws and the Proposed Transferee agrees in writing that the provisions of this Plan and the applicable Award Agreement and any other applicable agreements governing the shares of Common Stock to be Transferred shall continue to apply to the shares of Common Stock in the hands of such Proposed Transferee. If the shares of Common Stock described in the Notice are not Transferred to the
Proposed Transferee within such sixty-day period, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal, as provided herein, before any shares of Common Stock held by the Holder may be sold or otherwise Transferred.
(vi) Anything to the contrary contained in this Section 10(i) notwithstanding and to the extent permitted by the Administrator, the Transfer of any or all of the shares of Common Stock during a Participant’s lifetime or upon a Participant’s death by will or intestacy to the Participant’s Immediate Family or a trust for the benefit of the Participant’s Immediate Family shall be exempt from the Right of First Refusal. As used herein, “Immediate Family” shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister or stepchild (whether or not adopted). In such case, the transferee or other recipient shall receive and hold the shares of Common Stock so Transferred subject to the provisions of this Plan (including the Right of First Refusal), the applicable Award Agreement and any other applicable agreements governing the shares of Common Stock to be Transferred, and there shall be no further Transfer of such shares of Common Stock except in accordance with the terms of this Section 10(i) (or otherwise as expressly provided under the Plan).
(vii) The Right of First Refusal shall terminate as to all shares of Common Stock if the Company becomes a Publicly Listed Company upon such occurrence.
(j) Company Call Right.
(i) The Company shall have the right to purchase from the Participant, or the Participant’s beneficiary or personal representative, as the case may be, any or all of the Common Stock owned by the Participant as of the date of the Company’s exercise of its purchase right under this Section 10(j) (the “Call Right”) at a price equal to the Fair Market Value of the Common Stock on the date on which the closing of the Call Right occurs, but there is no intention to exercise the Call Right within six months following the date of issuance of any Shares under the Plan.
(ii) The Company may exercise the Company Call Right by delivering personally or by registered mail to the Participant (or his beneficiary or legal representative, as the case may be) a notice in writing indicating the Company’s intention to exercise the Company Call Right and setting forth a date for closing not later than thirty days from the mailing of such notice. The closing shall take place at the Company’s offices. At the closing, the holder of the certificates for the Common Stock being purchased shall deliver the stock certificate or certificates evidencing the Common Stock, and the Company shall deliver the purchase price therefor.
(iii) At its option, the Company may elect to make payment for the Shares to a bank selected by the Company. The Company shall avail itself of this option by a notice in writing to Participant stating the name and address of the bank, date of closing, and waiving the closing at the Company’s office. Payment of the purchase price shall be made, at the option of the Company or its assignee(s), in cash (by check or wire transfer), by cancellation of all or a portion of any outstanding indebtedness of the Participant to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof, at the closing.
(iv) If the Company does not elect to exercise the Company Call Right conferred above by giving the requisite notice within ninety days following the date on which a Participant ceases to be a Service Provider, the Company Call Right shall terminate.
(v) The Company Call Right shall terminate as to all Common Stock if the Company becomes a Publicly Listed Company or upon a Change in Control.
(k) Data Privacy. As a condition of receipt of any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this paragraph by and among, as applicable, the Company and its subsidiaries and affiliates for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan. The Company and its subsidiaries and affiliates may hold certain personal information about a Participant, including but not limited to, the Participant’s name, home address and telephone number, date of birth, social security or insurance number or other identification number, salary, nationality, job title(s), any shares of stock held in the Company or any of its subsidiaries and affiliates, details of all Awards, in each case, for the purpose of implementing, managing and administering the Plan and Awards (the “Data”). The Company and its subsidiaries and affiliates may transfer the Data amongst themselves as necessary for the purpose of implementation, administration and management of a Participant’s participation in the Plan, and the Company and its subsidiaries and affiliates may each further transfer the Data to any third parties assisting the Company in the implementation, administration and management of the Plan. These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than the recipients’ country. Through acceptance of an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Participant’s participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom the Company or the Participant may elect to deposit any shares of Common Stock. The Data related to a Participant will be held only as long as is necessary to implement, administer, and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data held by the Company with respect to such Participant, request additional information about the storage and processing of the Data with respect to such Participant, recommend any necessary corrections to the Data with respect to the Participant or refuse or withdraw the consents herein in writing, in any case without cost, by contacting his or her local human resources representative. The Company may cancel Participant’s ability to participate in the Plan and, in the Administrator’s discretion, the Participant may forfeit any outstanding Awards if the Participant refuses or withdraws his or her consents as described herein. For more information on the consequences of refusal to consent or withdrawal of consent, Participants may contact their local human resources representative.
(l) Severability. In the event any portion of the Plan or any action taken pursuant thereto shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provisions had not been included, and the illegal or invalid action shall be null and void.
(m) Governing Documents. In the event of any contradiction between the Plan and any Award Agreement or any other written agreement between a Participant and the Company or any Subsidiary of the Company that has been approved by the Administrator, the terms of the Plan shall govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan shall not apply.
(n) Governing Law. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding choice- of-law principles of the law of any state that would require the application of the laws of a jurisdiction other than such state.
(o) Restrictions on Shares; Claw-Back Provisions. Shares of Common Stock acquired in respect of Awards shall be subject to such terms and conditions as the Administrator shall determine, including, without limitation, restrictions on the transferability of shares of Common Stock, the right of the Company to repurchase shares of Common Stock, the right of the Company to require that shares of Common Stock be transferred in the event of certain transactions, tag-along rights, bring-along rights, redemption and co-sale rights and voting requirements. Such terms and conditions may be additional to those contained in the Plan and may, as determined by the Administrator, be contained in the applicable Award Agreement or in an exercise notice, stockholders’ agreement or in such other agreement as the Administrator shall determine, in each case in a form determined by the Administrator. The issuance of such shares of Common Stock shall be conditioned on the Participant’s consent to such terms and conditions and the Participant’s entering into such agreement or agreements. All Awards (including any proceeds, gains or other economic benefit actually or constructively received by Participant upon any receipt or exercise of any Award or upon the receipt or resale of any shares of Common Stock underlying the Award) shall be subject to the provisions of any claw-back policy implemented by the Company, including, without limitation, any claw-back policy adopted to comply with the requirements of the Dodd- Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, to the extent set forth in such claw-back policy and/or in the applicable Award Agreement. Notwithstanding the foregoing, it shall be a condition to the issuance of any shares of Common Stock pursuant to an Award under this Plan that the Participant shall agree in writing to be bound by the terms and conditions of, and become a party to, any stockholders’ agreement of the Company.
(p) Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
(q) Conformity to Securities Laws. Participant acknowledges that the Plan is intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan and all Awards granted hereunder shall be administered only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by Applicable Laws, the Plan and all Award Agreements shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
11. Definitions. As used in the Plan, the following words and phrases shall have the following meanings:
(a) “Administrator” means the Board or a Committee to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee.
(b) “Applicable Laws” means the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws and rules of any foreign country or other jurisdiction where Awards are granted or issued under the Plan.
(c) “Award” means, individually or collectively, a grant under the Plan of Options, Restricted Stock, Restricted Stock Units or Other Stock-Based Awards.
(d) “Award Agreement” means a written or electronic agreement evidencing an Award, which agreements may be in electronic medium and shall contain such terms and conditions with
respect to an Award as the Administrator shall determine, consistent with and subject to the terms and conditions of the Plan.
(e) “Board” means the Board of Directors of the Company.
(f) “Cause,” with respect to a Participant, means “Cause” (or any term of similar effect) as defined in such Participant’s employment agreement with the Company if such an agreement exists and contains a definition of Cause (or term of similar effect), or, if no such agreement exists or such agreement does not contain a definition of Cause (or term of similar effect), then Cause shall include, but not be limited to: (i) the Participant’s unauthorized use or disclosure of confidential information or trade secrets of the Company or any material breach of a written agreement between the Participant and the Company, including without limitation a material breach of any employment, confidentiality, non- compete, non-solicit or similar agreement; (ii) the Participant’s commission of, indictment for or the entry of a plea of guilty or nolo contendere by the Participant to, a felony under the laws of the United States or any state thereof or any crime involving dishonesty or moral turpitude (or any similar crime in any jurisdiction outside the United States); (iii) the Participant’s gross negligence or willful misconduct or the Participant’s willful or repeated failure or refusal to substantially perform assigned duties; (iv) any act of fraud, embezzlement, material misappropriation or dishonesty committed by the Participant against the Company; or (v) any acts, omissions or statements by a Participant which the Company reasonably determines to be materially detrimental or damaging to the reputation, operations, prospects or business relations of the Company.
(g) “Change in Control” means (i) a merger or consolidation of the Company with or into any other corporation or other entity or person, (ii) a sale, lease, exchange or other transfer in one transaction or a series of related transactions of all or substantially all of the Company’s assets, or (iii) any other transaction, including the sale by the Company of new shares of its capital stock or a transfer of existing shares of capital stock of the Company, the result of which is that a third party that is not an affiliate of the Company or its stockholders (or a group of third parties not affiliated with the Company or its stockholders) immediately prior to such transaction acquires or holds capital stock of the Company representing a majority of the Company’s outstanding voting power immediately following such transaction; provided that the following events shall not constitute a “Change in Control”: (A) a transaction (other than a sale of all or substantially all of the Company’s assets) in which the holders of the voting securities of the Company immediately prior to the merger or consolidation hold, directly or indirectly, at least a majority of the voting securities in the successor corporation or its parent immediately after the merger or consolidation; (B) a sale, lease, exchange or other transaction in one transaction or a series of related transactions of all or substantially all of the Company’s assets to an affiliate of the Company; (C) an initial public offering of any of the Company’s securities; (D) a reincorporation of the Company solely to change its jurisdiction; or (E) a transaction undertaken for the primary purpose of creating a holding company that will be owned in substantially the same proportion by the persons who held the Company’s securities immediately before such transaction. Notwithstanding the foregoing, if a Change in Control would give rise to a payment or settlement event with respect to any Award that constitutes “nonqualified deferred compensation,” the transaction or event constituting the Change in Control must also constitute a “change in control event” (as defined in Treasury Regulation §1.409A-3(i)(5)) in order to give rise to the payment or settlement event for such Award, to the extent required by Section 409A.
(h) “Code” means the Internal Revenue Code of 1986, as amended, and the regulations issued thereunder.
(i) “Committee” means one or more committees or subcommittees of the Board, which may be comprised of one or more directors and/or executive officers of the Company, in either case, to the extent permitted in accordance with Applicable Laws.
(j) “Common Stock” means the common stock of the Company.
(k) “Company” means ZipRecruiter, Inc., a Delaware corporation, or any successor thereto. Except where the context otherwise requires, the term “Company” includes any of the Company’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the Code and any other business venture (including, without limitation, joint venture or limited liability company) in which the Company has a significant interest, as determined by the Administrator.
(l) “Consultant” means any person, including any advisor, engaged by the Company or a parent or subsidiary of the Company to render services to such entity.
(m) “Designated Beneficiary” means the beneficiary or beneficiaries designated, in a manner determined by the Administrator, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death or incapacity In the absence of an effective designation by a Participant, “Designated Beneficiary” shall mean the Participant’s estate.
(n) “Director” means a member of the Board.
(o) “Disability” means a permanent and total disability within the meaning of Section 22(e)(3) of the Code, as it may be amended from time to time.
(p) “Dividend Equivalents” means a right granted to a Participant pursuant to Section 6(d)(3) hereof to receive the equivalent value (in cash or shares of Common Stock) of dividends paid on shares of Common Stock.
(q) “Employee” means any person, including officers and Directors, employed by the Company (within the meaning of Section 3401(c) of the Code) or any parent or subsidiary of the Company.
(r) “Equity Restructuring” means, as determined by the Administrator, a non- reciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split, spin-off or recapitalization through a large, nonrecurring cash dividend, that affects the shares of Common Stock (or other securities of the Company) or the share price of Common Stock (or other securities of the Company) and causes a change in the per share value of the Common Stock underlying outstanding Awards.
(s) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(t) “Fair Market Value” means, as of any date, the value of Stock determined as follows: (i) if the Common Stock is listed on any established stock exchange, its Fair Market Value shall be the closing sales price for such Common Stock as quoted on such exchange for such date, or if no sale occurred on such date, the first market trading day immediately prior to such date during which a sale occurred, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) if the Common Stock is not traded on a stock exchange but is quoted on a national market or other quotation system, the last sales price on such date, or if no sales occurred on such date, then on the date immediately prior to such date on which sales prices are reported, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (iii) in the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined by the Administrator.
(u) “Incentive Stock Option” means an “incentive stock option” as defined in Section 422 of the Code.
(v) “Non-Qualified Stock Option” means an Option that is not intended to be or otherwise does not qualify as an Incentive Stock Option.
(w) “Option” means an option to purchase Common Stock.
(x) “Other Stock-Based Awards” means other Awards of shares of Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property.
(y) “Participant” means a Service Provider who has been granted an Award under the Plan.
(z) “Plan” means this Amended and Restated 2014 Equity Incentive Plan.
(aa) “Publicly Listed Company” means that the Company or its successor (i) is required to file periodic reports pursuant to Section 12 of the Exchange Act and (ii) the Common Stock is listed on one or more National Securities Exchanges (within the meaning of the Exchange Act) or is quoted on NASDAQ or a successor quotation system.
(bb) “Restricted Stock” means Common Stock awarded to a Participant pursuant to Section 6 hereof that is subject to certain vesting conditions and other restrictions.
(cc) “Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one share of Common Stock or an amount in cash or other consideration determined by the Administrator equal to the value thereof as of such payment date, which right may be subject to certain vesting conditions and other restrictions.
(dd) “Section 409A” means Section 409A of the Code and all regulations, guidance, compliance programs and other interpretative authority thereunder.
(ee) “Securities Act” means the Securities Act of 1933, as amended from time to time.
(ff) “Service Provider” means an Employee, Consultant or Director.
(gg) “Termination of Service” means the date the Participant ceases to be a Service Provider.
ZIPRECRUITER, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
CALIFORNIA SUPPLEMENT
The Administrator has adopted this supplement for purposes of satisfying the requirements of Section 25102(o) of the California Corporations Code and the regulations issued thereunder (“Section 25102(o)”). Notwithstanding anything to the contrary contained in the Plan and except as otherwise determined by the Administrator, the provisions set forth in this supplement shall apply to all Awards granted under the Plan to a Participant who is a resident of the State of California on the date of grant (a “California Participant”) and which are intended to be exempt from registration in California pursuant to Section 25102(o). This supplement shall not apply to Awards granted to California Participants or after the date on which the Company becomes a Publicly Listed Company. Definitions in the Plan are applicable to this supplement.
1. Additional Limitations On Options.
(a) Maximum Duration of Options. No Options granted to California Participants will be granted for a term in excess of 10 years.
(b) Minimum Exercise Period Following Termination. Unless a California Participant’s Service Provider relationship is terminated for Cause, in the event of termination of such Participant’s Service Provider relationship, to the extent required by Applicable Laws, he or she shall have the right to exercise an Option, to the extent that he or she was otherwise entitled to exercise such Option on the date employment terminated, as follows: (i) at least six months from the date of termination, if termination was caused by such Participant’s death or Disability and (ii) at least 30 days from the date of termination, if termination was caused other than by such Participant’s death or Disability.
2. Additional Limitations For Restricted Stock Awards, Restricted Stock Units and Other Stock-Based Awards. The terms of all Restricted Stock Awards, Restricted Stock Units and Other Stock- Based Awards granted to California Participants shall comply, to the extent applicable, with Section 260.140.41 or Section 260.140.42 of the California Code of Regulations.
3. Adjustments. The Administrator will make such adjustments to an Award held by a California Participant as may be required by Section 260.140.41 or Section 260.140.42 of the California Code of Regulations.
4. Additional Requirement To Provide Information To California Participants. To the extent required by Section 260.140.46 of the California Code of Regulations, the Company shall provide to each California Participant and to each California Participant who acquires Common Stock pursuant to the Plan, not less frequently than annually, copies of annual financial statements (which need not be audited). The Company shall not be required to provide such statements to key persons whose duties in connection with the Company assure their access to equivalent information. In addition, this information requirement shall not apply to the Plan to the extent that it complies with all conditions of Rule 701 of the Securities Act (“Rule 701”) as determined by the Administrator; provided that for purposes of determining such compliance, any registered domestic partner shall be considered a “family member” as that term is defined in Rule 701.
5. Stockholder Approval; Additional Limitations On Timing Of Awards. The Plan will be submitted for the approval of the Company’s stockholders within twelve (12) months after the date of the Board’s adoption of the Plan. Awards may be granted or awarded prior to such stockholder approval;
provided that no Award granted to a California Participant shall become exercisable, vested or realizable, as applicable to such Award, unless the Plan has been approved by the Company’s stockholders within twelve months before or after the date the Plan was adopted by the Administrator; and provided, further, that if such approval has not been obtained at the end of said twelve-month period, all Awards previously granted or awarded under the Plan to California Participants shall thereupon be canceled and become null and void.
ZIPRECRUITER, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE AND
STOCK OPTION AGREEMENT
ZipRecruiter, Inc. (the “Company”), pursuant to its Amended and Restated 2014 Equity Incentive Plan (the “Plan”), which Plan includes, in respect of UK Participants, as defined therein, the Sub-Plan) hereby grants to Participant an Option to purchase the number of shares of the Company’s Common Stock (referred to herein as “Shares”) set forth below. This Option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Grant Notice (“Grant Notice”) and the Agreement.
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Participant:
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As described on Carta
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Grant Date:
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As described on Carta
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Vesting Commencement Date:
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As described on Carta
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Exercise Price per Share:
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As described on Carta
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Total Number of Shares Subject to Option:
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As described on Carta
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Expiration Date:
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As described on Carta
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Type of Option:
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As described on Carta
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Vesting Schedule
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As described on Carta
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By Participant’s acceptance of this Option, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Agreement and the Plan. By acceptance of this Option, Participant agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator of the Plan upon any questions arising under the Plan or the Agreement.
EXHIBIT A
TO STOCK OPTION GRANT NOTICE
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant an Option under the Plan to purchase the number of Shares indicated in the Grant Notice.
1. Grant of Option. In consideration of Participant’s past and/or continued employment with or service to the Company and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice, the Company irrevocably grants to Participant an Option to purchase any part or all of an aggregate of the number of Shares set forth in the Grant Notice at the Exercise Price per Share set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement.
2. Vesting. The Option shall become vested in such amounts and at such times as are set forth in the vesting schedule in the Grant Notice. The installments provided for in the vesting schedule are cumulative. No portion of the Option which has not become vested at the date Participant incurs a Termination of Service shall thereafter become vested, except as may be otherwise provided by the Administrator or as set forth in another written agreement between the Company and Participant.
3. Exercise.
(a) Duration of Exercisability. Any vested portion of the Option may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 4.
(b) Person Eligible to Exercise. During the lifetime of Participant, only Participant may exercise the Option or any portion thereof. After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 4, be exercised by Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then Applicable Laws of descent and distribution.
(c) Manner of Exercise. The Option, or any portion thereof, may be exercised solely by delivery to the Secretary of the Company or the Secretary’s office, or such other place as may be determined by the Administrator, including pursuant to an electronic acceptance platform established and maintained by the Company or another third party designated by the Company, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 4:
(i) A written exercise notice in substantially in the form attached as Exhibit B to the Grant Notice (or such other form as is prescribed by the Administrator, which may be an electronic form) (the “Exercise Notice”) signed by Participant or any other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such Exercise Notice complying with all applicable rules established by the Administrator; and
(ii) Subject to Section 5(f) of the Plan, full payment for the Shares with respect to which the Option or portion thereof is exercised by:
(A) Cash or check, payable to the order of the Company; or
(B) With the consent of the Administrator, surrendering shares of Common Stock then issuable upon exercise of the Option valued at their Fair Market Value on the date of exercise; or
(C) On and after the date the Company becomes a Publicly Listed Company, through the (A) delivery by Participant to the Company of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price or (B) delivery by Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price; or
(D) With the consent of the Administrator, any other form of payment permitted under Section 5(f) of the Plan; or
(E) any combination of the above permitted forms of payment; and
(iii) Subject to Section 9(e) of the Plan, full payment for any applicable withholding taxes (including without limitation any sums due pursuant to any Option Tax Liability and (if applicable) Secondary NIC Liability, as such terms are defined in the Sub- Plan) in cash or by check or in the form of consideration permitted by the Administrator for the payment of the exercise price pursuant to Section 3(c)(ii) above or pursuant to Section 3(d) below, which, following the date the Company becomes a Publicly Listed Company shall include the method provided for in Section 3(c)(ii)(C) above; and
(iv) In the event the Option or portion thereof shall be exercised pursuant to Section 3.1 by any person or persons other than Participant, appropriate proof of the right of such person or persons to exercise the Option.
(v) If so requested by the Committee, the Participant shall enter into a Section 431 Election (as defined in the Sub-Plan) with respect to any shares of Common Stock acquired pursuant to the exercise of the Option and shall make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign tax obligations (including, but not limited to, any sums due pursuant to any Option Tax Liability and (if applicable) Secondary NIC Liability) with respect to such acquisition upon the making of such election. If the Participant is required to make a Section 431 Election such election shall be made within 14 days following the acquisition of the shares of Common Stock.
(d) Tax Withholding. The Company shall have the authority and the right to deduct or withhold, or require Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including Participant’s employment tax obligation together with any sums due pursuant to any Option Tax Liability and (if applicable) Secondary NIC Liability) required by law to be withheld with respect to any taxable event concerning Participant arising as a result of the Option or otherwise under this Agreement, including, without limitation, the authority to deduct such amounts from other compensation payable to Participant by the Company.
(e) Fractional Shares. The Option may only be exercised for whole shares of Common Stock. Any fractional Shares shall be rounded down to the nearest whole share.
4. Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:
(a) The Expiration Date set forth in the Grant Notice;
(b) The expiration of three months following the date of Participant’s Termination of Service, unless such Termination of Service occurs by reason of Participant’s death or Disability or Participant’s discharge by the Company for Cause;
(c) The expiration of one year following the date of Participant’s Termination of Service by reason of Participant’s death or Disability;
(d) The date of Participant’s Termination of Service as a result of Participant’s discharge by the Company for Cause; or
(e) With respect to any unvested portion of the Option, the date that is thirty days following Participant’s Termination of Service for any reason other than as a result of Participant’s discharge by the Company for Cause, or such shorter period as may be determined by the Administrator.
Participant acknowledges that an Incentive Stock Option exercised more than three months after Participant’s termination of status as an Employee, other than by reason of death or Disability, will be taxed as a Non-Qualified Stock Option.
5. Transferability. The Option shall not be sold, assigned, transferred, pledged or otherwise encumbered by Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, the Option shall be exercisable only by the Participant.
6. Bylaws Restrictions. Participant and any transferee of the Shares agree that the Shares and any interest therein are subject to the right of first refusal and any and all restrictions on transfer set forth in the Company’s Amended and Restated Bylaws, as it may be amended from time to time (the “Bylaws”).
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Participant understands and agrees that the Company shall cause any certificates, including electronic certificates, issued evidencing the Shares to have the legends set forth below or legends substantially equivalent thereto, together with any other legends that may be required by Applicable Laws:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY
WITH THE ACT AND WITH APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL AND REPURCHASE RIGHT SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH REPURCHASE OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE COMPANY.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER AS PROVIDED IN THE BYLAWS OF THE COMPANY.
(b) Stop Transfer Orders. Participant agrees that, in order to ensure compliance with the restrictions referred to in the Plan, this Agreement and the Bylaws, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Impermissible Transfers Void. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or the Bylaws or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
8. Taxes. Participant understands that Participant may suffer adverse tax and national insurance consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s tax liability that may arise as a result of the transactions contemplated by this Agreement.
9. Miscellaneous.
(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or this Agreement.
(b) Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office or to the then-current email address for the Secretary of the Company, and any notice to be given to Participant shall be addressed to Participant at the most- recent physical or email address for Participant listed in the Company’s personnel records. By a notice given pursuant to this Section 9(b), either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled to exercise his or her Option by written notice under this Section 9(b). Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
(c) Successors and Assigns. The Company may assign any of its rights under this Agreement and the Exercise Notice to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
(d) Severability. In the event any portion of the Plan or this Agreement or any action taken pursuant thereto shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan and this Agreement, and the Plan and this Agreement shall be construed and enforced as if the illegal or invalid provisions had not been included, and the illegal or invalid action shall be null and void.
(e) Entire Agreement; Governing Documents. The Plan (including the Sub-Plan), the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. In the event of any contradiction between the Plan and any Award Agreement or any other written agreement between a Participant and the Company that has been approved by the Administrator, the terms of the Plan shall govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan shall not apply.
(f) Governing Law. The provisions of the Plan and all Awards made thereunder, including the Option, shall be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding choice-of-law principles of the law of any state that would require the application of the laws of a jurisdiction other than such state.
(g) Titles and Headings. The titles and headings of the Sections in this Agreement are for convenience of reference only and, in the event of any conflict, the text of this Agreement, rather than such titles or headings, shall control.
EXHIBIT B
STOCK OPTION GRANT NOTICE
FORM OF EXERCISE NOTICE
Effective as of [as described in Carta], the undersigned (“Participant”) hereby elects to exercise Participant’s option to purchase [as described in Carta] Shares of ZipRecruiter, Inc. (the “Company”) under and pursuant to the ZipRecruiter, Inc. Amended and Restated 2014 Equity Incentive Plan (the “Plan”) and the Stock Option Grant Notice and Stock Option Agreement dated [as described in Carta] (the “Agreement”). Capitalized terms used herein without definition shall have the meanings given in the Agreement.
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Grant Date:
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As described on Carta
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Number of Shares as to which Option is Exercised:
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As described on Carta
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Exercise Price per Share:
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As described on Carta
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Total Exercise Price:
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As described on Carta
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Electronic certificate to be issued in name of:
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As described on Carta
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Cash Payment delivered herewith:
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As described on Carta (Representing the full Exercise Price for the Shares, as well as any applicable withholding tax)
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Type of Option:
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As described on Carta
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1. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan and the Agreement. Participant agrees to abide by and be bound by their terms and conditions. Participant further acknowledges that it is a condition to the issuance of the Shares to Participant upon exercise of the Option listed above that Participant agree to be bound by the terms and conditions of, and become a party to, any stockholders’ agreement of the Company. Participant hereby agrees to be so bound and to execute any additional documents as may be deemed necessary or advisable by the Company in order to effectuate the foregoing agreement.
2. Tax Consultation. Participant understands that Participant may suffer adverse tax and national insurance consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
3. Participant Representations. In the event the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), on the Exercise Date, the Participant shall, if required by the Company, concurrently with the exercise of all or any portion of the Option, deliver to the Company any other representations necessary or appropriate, in the judgment of the Administrator, to comply with Applicable Law. Participant hereby makes the following certifications and representations with respect to the Shares listed above:
(a) Participant 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 Shares. Participant is acquiring these Shares for investment for Participant’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act. The Participant hereby acknowledges that the Participant has had ample opportunity to ask questions of the Company’s representatives concerning this investment. Participant has had a preexisting personal or business relationship with the Company and/or certain of its officers and/or directors of a nature and duration sufficient to make the Participant aware of the character, business acumen and general business and financial circumstances of the Company and/or such officers and directors. By reason of the Participant’s business or financial experience, the Participant is capable of evaluating the merits and risks of this investment, and the Participant has the ability to protect his/her own interests in this transaction.
(b) Participant acknowledges and understands that the Shares constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed herein. In this connection, the Participant understands that, in the view of the Securities and Exchange Commission, the statutory basis for such exemption may be unavailable if the Participant’s representation was predicated solely upon a present intention to hold these Shares for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Shares, or for a period of one year or any other fixed period in the future. Participant understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further acknowledges and understands that the Company is under no obligation to register the Shares. Participant understands that the electronic certificate evidencing the Shares will be imprinted with a legend which prohibits the transfer of the Shares unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company and any other legend required under Applicable Laws.
(c) Participant is familiar with 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, in a non-public offering subject to the satisfaction of certain conditions. The Shares may be resold in certain limited circumstances subject to the provisions of Rule 144, which may require (i) the availability of current public information about the Company; (ii) the resale to occur more than a specified period after the purchase and full payment (within the meaning of Rule 144) for the Shares; and (iii) in the case of the sale of Shares by an affiliate, the satisfaction of certain conditions set forth in Rule 144.
(d) The Participant hereby acknowledges that at no time (a) has the Participant or any of its officers, directors, employees or other agents, been presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale or purchase of the Shares, whether or not such advertising or solicitation was received directly from the Company or indirectly from a broker, finder or other person or entity, nor (b) has the Participant or any of its officers, directors, employees or other agents attended any public meeting or seminar concerning an investment in the Shares.
(e) The Participant is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act (i.e., (a) a natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his or her purchase exceeds $1,000,000 (excluding the value of such person’s primary residence), (b) a natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income with that person’s spouse in excess of $300,000 in each of those two years and has a reasonable expectation of reaching the same income level in the current year, (c) a corporation, limited liability company or partnership having total assets in excess of $5,000,000 that was not formed for the purpose of investing in the Company pursuant to the Exercise Notice or (d) otherwise meets the requirements for an “accredited investor” under Regulation D promulgated by the Securities and Exchange Commission under the Securities Act) as attached hereto as Annex A.
(f) Participant further understands that in the event all of the applicable 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 Securities and Exchange Commission 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. Participant understands that no assurances can be given that any such other registration exemption will be available in such event.
(g) Participant acknowledges that the Shares remain subject to the Company’s right of first refusal and certain transfer restrictions all in accordance with the Agreement and the Company’s Amended and Restated Bylaws, as it may be amended from time to time.
4. Notices. Any notice required or permitted hereunder shall be given in accordance with the provisions set forth in Section 9(b) of the Agreement.
5. Entire Agreement. The Plan (including the Sub-Plan) and Agreement are incorporated herein by reference. This Notice, the Plan and the Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
Exercise of the Option through an online or electronic system established and maintained by the Company or another third party designated by the Company shall be deemed to be Participant’s agreement to and acceptance of the terms and conditions of this Exercise Notice.
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ACCEPTED BY:
ZIPRECRUITER, INC.
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SUBMITTED BY
PARTICIPANT:
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By:
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By:
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Print Name:
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Print Name:
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Title:
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ZIPRECRUITER, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE AND
STOCK OPTION AGREEMENT
ZipRecruiter, Inc. (the “Company”), pursuant to its Amended and Restated 2014 Equity Incentive Plan (the “Plan”), hereby grants to Participant an Option to purchase the number of shares of the Company’s Common Stock (referred to herein as “Shares”) set forth below. This Option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Grant Notice (“Grant Notice”) and the Agreement.
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Participant:
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As described on Carta
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Grant Date:
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As described on Carta
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Vesting Commencement Date:
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As described on Carta
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Exercise Price per Share:
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As described on Carta
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Total Number of Shares
Subject to Option:
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As described on Carta
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Expiration Date:
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As described on Carta
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Type of Option:
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As described on Carta
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Vesting Schedule
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As described on Carta
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By Participant’s acceptance of this Option, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Agreement and the Plan. By acceptance of this Option, Participant agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator of the Plan upon any questions arising under the Plan or the Agreement.
EXHIBIT A
TO STOCK OPTION GRANT NOTICE
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant an Option under the Plan to purchase the number of Shares indicated in the Grant Notice.
1. Grant of Option. In consideration of Participant’s past and/or continued employment with or service to the Company and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice, the Company irrevocably grants to Participant an Option to purchase any part or all of an aggregate of the number of Shares set forth in the Grant Notice at the Exercise Price per Share set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement.
2. Vesting. The Option shall become vested in such amounts and at such times as are set forth in the vesting schedule in the Grant Notice. The installments provided for in the vesting schedule are cumulative. No portion of the Option which has not become vested at the date Participant incurs a Termination of Service shall thereafter become vested, except as may be otherwise provided by the Administrator or as set forth in another written agreement between the Company and Participant.
3. Exercise.
(a) Duration of Exercisability. Any vested portion of the Option may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 4.
(b) Person Eligible to Exercise. During the lifetime of Participant, only Participant may exercise the Option or any portion thereof. After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 4, be exercised by Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then Applicable Laws of descent and distribution.
(c) Manner of Exercise. The Option, or any portion thereof, may be exercised solely by delivery to the Secretary of the Company or the Secretary’s office, or such other place as may be determined by the Administrator, including pursuant to an electronic acceptance platform established and maintained by the Company or another third party designated by the Company, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 4:
(i) A written exercise notice in substantially in the form attached as Exhibit B to the Grant Notice (or such other form as is prescribed by the Administrator, which may be an electronic form) (the “Exercise Notice”) signed by Participant or any other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such Exercise Notice complying with all applicable rules established by the Administrator; and
(ii) Subject to Section 5(f) of the Plan, full payment for the Shares with respect to which the Option or portion thereof is exercised by:
(A) Cash or check, payable to the order of the Company; or
(B) With the consent of the Administrator, surrendering shares of Common Stock then issuable upon exercise of the Option valued at their Fair Market Value on the date of exercise; or
(C) On and after the date the Company becomes a Publicly Listed Company, through the (A) delivery by Participant to the Company of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price or (B) delivery by Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price; or
(D) With the consent of the Administrator, any other form of payment permitted under Section 5(f) of the Plan; or
(E) any combination of the above permitted forms of payment; and
(iii) Subject to Section 9(e) of the Plan, full payment for any applicable withholding taxes in cash or by check or in the form of consideration permitted by the Administrator for the payment of the exercise price pursuant to Section 3(c)(ii) above or pursuant to Section 3(d) below, which, following the date the Company becomes a Publicly Listed Company shall include the method provided for in Section 3(c)(ii)(C) above; and
(iv) In the event the Option or portion thereof shall be exercised pursuant to Section 3.1 by any person or persons other than Participant, appropriate proof of the right of such person or persons to exercise the Option.
(d) Tax Withholding. The Company shall have the authority and the right to deduct or withhold, or require Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including Participant’s employment tax obligation) required by law to be withheld with respect to any taxable event concerning Participant arising as a result of the Option or otherwise under this Agreement, including, without limitation, the authority to deduct such amounts from other compensation payable to Participant by the Company.
(e) Fractional Shares. The Option may only be exercised for whole shares of Common Stock. Any fractional Shares shall be rounded down to the nearest whole share.
4. Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:
(a) The Expiration Date set forth in the Grant Notice;
(b) The expiration of three months following the date of Participant’s Termination of Service, unless such Termination of Service occurs by reason of Participant’s death or Disability or Participant’s discharge by the Company for Cause;
(c) The expiration of one year following the date of Participant’s Termination of Service by reason of Participant’s death or Disability;
(d) The date of Participant’s Termination of Service as a result of Participant’s discharge by the Company for Cause; or
(e) With respect to any unvested portion of the Option, the date that is thirty days following Participant’s Termination of Service for any reason other than as a result of Participant’s discharge by the Company for Cause, or such shorter period as may be determined by the Administrator.
Participant acknowledges that an Incentive Stock Option exercised more than three months after Participant’s termination of status as an Employee, other than by reason of death or Disability, will be taxed as a Non-Qualified Stock Option.
5. Transferability. The Option shall not be sold, assigned, transferred, pledged or otherwise encumbered by Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, the Option shall be exercisable only by the Participant.
6. Bylaws Restrictions. Participant and any transferee of the Shares agree that the Shares and any interest therein are subject to the right of first refusal and any and all restrictions on transfer set forth in the Company’s Amended and Restated Bylaws, as it may be amended from time to time (the “Bylaws”).
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Participant understands and agrees that the Company shall cause any certificates, including electronic certificates, issued evidencing the Shares to have the legends set forth below or legends substantially equivalent thereto, together with any other legends that may be required by Applicable Laws:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL AND REPURCHASE RIGHT SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH
HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH REPURCHASE OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE COMPANY.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS PROVIDED IN THE BYLAWS OF THE COMPANY.
(b) Stop Transfer Orders. Participant agrees that, in order to ensure compliance with the restrictions referred to in the Plan, this Agreement and the Bylaws, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Impermissible Transfers Void. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or the Bylaws or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
8. Taxes. Participant understands that Participant may suffer adverse tax as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s tax liability that may arise as a result of the transactions contemplated by this Agreement.
9. Miscellaneous.
(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or this Agreement.
(b) Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office or to the then-current email address for the Secretary of the Company, and any notice to be given to Participant shall be addressed to Participant at the most-recent physical or email address for Participant listed in the Company’s personnel records. By a notice given pursuant to this Section 9(b), either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled to exercise his or her Option by written notice under this Section 9(b). Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
(c) Successors and Assigns. The Company may assign any of its rights under this Agreement and the Exercise Notice to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set
forth, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
(d) Severability. In the event any portion of the Plan or this Agreement or any action taken pursuant thereto shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan and this Agreement, and the Plan and this Agreement shall be construed and enforced as if the illegal or invalid provisions had not been included, and the illegal or invalid action shall be null and void.
(e) Entire Agreement; Governing Documents. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. In the event of any contradiction between the Plan and any Award Agreement or any other written agreement between a Participant and the Company that has been approved by the Administrator, the terms of the Plan shall govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan shall not apply.
(f) Governing Law. The provisions of the Plan and all Awards made thereunder, including the Option, shall be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding choice-of-law principles of the law of any state that would require the application of the laws of a jurisdiction other than such state.
(g) Titles and Headings. The titles and headings of the Sections in this Agreement are for convenience of reference only and, in the event of any conflict, the text of this Agreement, rather than such titles or headings, shall control.
EXHIBIT B
TO STOCK OPTION GRANT NOTICE
FORM OF EXERCISE NOTICE
Effective as of [as described on Carta], the undersigned (“Participant”) hereby elects to exercise Participant’s option to purchase [as described on Carta] Shares of ZipRecruiter, Inc. (the “Company”) under and pursuant to the ZipRecruiter, Inc. 2014 Equity Incentive Plan (the “Plan”) and the Stock Option Grant Notice and Stock Option Agreement dated [as described on Carta] (the “Agreement”). Capitalized terms used herein without definition shall have the meanings given in the Agreement.
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Grant Date:
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As described on Carta
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Number of Shares as to which Option is Exercised:
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As described on Carta
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Exercise Price per Share:
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As described on Carta
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Total Exercise Price:
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As described on Carta
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Electronic certificate to be issued in name of:
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As described on Carta
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Cash Payment delivered herewith:
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As described on Carta
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Type of Option:
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As described on Carta
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1. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan and the Agreement. Participant agrees to abide by and be bound by their terms and conditions. Participant further acknowledges that it is a condition to the issuance of the Shares to Participant upon exercise of the Option listed above that Participant agree to be bound by the terms and conditions of, and become a party to, any stockholders’ agreement of the Company. Participant hereby agrees to be so bound and to execute any additional documents as may be deemed necessary or advisable by the Company in order to effectuate the foregoing agreement.
2. Tax Consultation. Participant understands that Participant may suffer adverse tax and national insurance consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
3. Participant Representations. Participant hereby makes the following certifications and representations with respect to the Shares listed above:
(a) Participant 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 Shares. Participant is acquiring these Shares for investment for Participant’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.
(b) Participant acknowledges and understands that the Shares constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed herein. Participant understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further acknowledges and understands that the Company is under no obligation to register the Shares. Participant understands that the electronic certificate evidencing the Shares will be imprinted with a legend which prohibits the transfer of the Shares unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company and any other legend required under Applicable Laws.
(c) Participant is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to Participant, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, ninety days thereafter (or such longer period as any market stand-off agreement may require) the securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144.
(d) In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the securities may be resold in certain limited circumstances subject to the provisions of Rule 144.
(e) Participant further understands that in the event all of the applicable requirements of Rule 701 or 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 Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 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. Participant understands that no assurances can be given that any such other registration exemption will be available in such event.
(f) Participant acknowledges that the Shares remain subject to the Company’s right of first refusal and certain transfer restrictions all in accordance with the Agreement and the Company’s Amended and Restated Bylaws, as it may be amended from time to time.
4. Notices. Any notice required or permitted hereunder shall be given in accordance with the provisions set forth in Section 9(b) of the Agreement.
5. Entire Agreement. The Plan and Agreement are incorporated herein by reference. This Notice, the Plan and the Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
Exercise of the Option through an online or electronic system established and maintained by the Company or another third party designated by the Company shall be deemed to be Participant’s agreement to and acceptance of the terms and conditions of this Exercise Notice.
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ACCEPTED BY:
ZIPRECRUITER, INC.
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SUBMITTED BY
PARTICIPANT:
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By:
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By:
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Print Name:
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Print Name:
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Title:
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ZIPRECRUITER, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE AND
STOCK OPTION AGREEMENT
ZipRecruiter, Inc. (the “Company”), pursuant to its Amended and Restated 2014 Equity Incentive Plan (the “Plan”), which Plan includes, in respect of UK Participants, as defined therein, the Sub-Plan) hereby grants to Participant an Option to purchase the number of shares of the Company’s Common Stock (referred to herein as “Shares”) set forth below. This Option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Grant Notice (“Grant Notice”) and the Agreement.
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Participant:
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As described on Carta
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Grant Date:
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As described on Carta
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Vesting Commencement Date:
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As described on Carta
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Exercise Price per Share:
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As described on Carta
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Total Number of Shares Subject to Option:
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As described on Carta
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Expiration Date:
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As described on Carta
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Type of Option:
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As described on Carta
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Exercise Schedule:
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As described on Carta
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Vesting Schedule:
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As described on Carta
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By Participant’s acceptance of this Option, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Agreement and the Plan. By acceptance of this Option, Participant agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator of the Plan upon any questions arising under the Plan or the Agreement.
EXHIBIT A
TO STOCK OPTION GRANT NOTICE
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant an Option under the Plan to purchase the number of Shares indicated in the Grant Notice.
1. Grant of Option. in consideration of participant’s past and/or continued employment with or service to the company and for other good and valuable consideration, effective as of the grant date set forth in the grant notice, the company irrevocably grants to participant an option to purchase any part or all of an aggregate of the number of shares set forth in the grant notice at the exercise price per share set forth in the grant notice, upon the terms and conditions set forth in the plan and this agreement.
2. Vesting. The Option shall become vested in such amounts and at such times as are set forth in the vesting schedule in the Grant Notice. The installments provided for in the vesting schedule are cumulative. No portion of the Option which has not become vested at the date Participant incurs a Termination of Service shall thereafter become vested, except as may be otherwise provided by the Administrator or as set forth in another written agreement between the Company and Participant.
3. Exercise.
(a) Exercisability. Any portion of the Option or the entire Option may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 4, provided that each unvested Share with respect to which the Option is exercised (each a “Restricted Share”) shall be subject to the Company Repurchase Right (as defined in Section 5 below) for so long as the Option shall remain unvested with respect to such Share under the terms of this Agreement. The Restricted Shares shall be released from the Company Repurchase Right as set forth in Section 5. For the avoidance of doubt, all Shares with respect to which the Option is exercised shall at all times be assumed to be Restricted Shares to the fullest extent possible under the terms of this Agreement, unless otherwise provided by the Administrator.
(b) Person Eligible to Exercise. During the lifetime of Participant, only Participant may exercise the Option or any portion thereof. After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 4, be exercised by Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then Applicable Laws of descent and distribution.
(c) Manner of Exercise. The Option, or any portion thereof, may be exercised solely by delivery to the Secretary of the Company or the Secretary’s office, or such other place as may be determined by the Administrator, including pursuant to an electronic acceptance platform established and maintained by the Company or another third party designated by the Company, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 4:
(i) A written exercise notice in substantially in the form attached as Exhibit B to the Grant Notice (or such other form as is prescribed by the Administrator, which may be an A written exercise notice in substantially in the form attached as Exhibit electronic form) (the “Exercise Notice”) signed by Participant or any other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such Exercise Notice complying with all applicable rules established by the Administrator; and
(ii) Subject to Section 5(f) of the Plan, full payment for the Shares with respect to which the Option or portion thereof is exercised by:
(A) Cash or check, payable to the order of the Company; or
(B) With the consent of the Administrator, surrendering shares of Common Stock then issuable upon exercise of the Option valued at their Fair Market Value on the date of exercise; or
(C) On and after the date the Company becomes a Publicly Listed Company, through the (A) delivery by Participant to the Company of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price or (B) delivery by Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price; or
(D) With the consent of the Administrator, any other form of payment permitted under Section 5(f) of the Plan; or
(E) any combination of the above permitted forms of payment; and
(iii) Subject to Section 9(e) of the Plan, full payment for any applicable withholding taxes in cash or by check or in the form of consideration permitted by the Administrator for the payment of the exercise price pursuant to Section 3(c)(ii) above or pursuant to Section 3(d) below, which, following the date the Company becomes a Publicly Listed Company shall include the method provided for in Section 3(c)(ii)(C) above; and
(iv) In the event the Option or portion thereof shall be exercised pursuant to Section 3.1 by any person or persons other than Participant, appropriate proof of the right of such person or persons to exercise the Option; and
(v) In the event the Option or portion thereof shall be exercised as to Restricted Shares, the following (collectively, the “Additional Documents”):
(A) the stock assignment duly endorsed in blank, attached as Exhibit C to the Grant Notice (the “Stock Assignment”), executed by Participant; and
(B) if Participant has a spouse of Participant, the Consent of Spouse attached as Exhibit D to the Grant Notice, executed by Participant’s spouse
(d) Tax Withholding. The Company shall have the authority and the right to deduct or withhold, or require Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including Participant’s employment tax obligation) required by law to be withheld with respect to any taxable event concerning Participant arising as a result of the Option or otherwise under this Agreement, including, without limitation, the authority to deduct such amounts from other compensation payable to Participant by the Company.
(e) Fractional Shares. The Option may only be exercised for whole shares of Common Stock. Any fractional Shares shall be rounded down to the nearest whole share.
4. Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:
(a) The Expiration Date set forth in the Grant Notice;
(b) The expiration of three months following the date of Participant’s Termination of Service, unless such Termination of Service occurs by reason of Participant’s death or Disability or Participant’s discharge by the Company for Cause;
(c) The expiration of one year following the date of Participant’s Termination of Service by reason of Participant’s death or Disability;
(d) The date of Participant’s Termination of Service as a result of Participant’s discharge by the Company for Cause; or
(e) With respect to any unvested portion of the Option, the date that is thirty days following Participant’s Termination of Service for any reason other than as a result of Participant’s discharge by the Company for Cause, or such shorter period as may be determined by the Administrator.
Participant acknowledges that an Incentive Stock Option exercised more than three months after Participant’s termination of status as an Employee, other than by reason of death or Disability, will be taxed as a Non-Qualified Stock Option.
5. Company Repurchase Right.
(a) Company Repurchase Right. Upon Participant’s Termination of Service for any reason, the Company shall have the right and option to repurchase all of the Restricted Shares from Participant, or Participant’s transferee or legal representative, as the case may be, for a purchase price equal to the price per Share paid for such Restricted Shares (the “Company Repurchase Right”).
(b) Exercise of Company Repurchase Right. The Company may exercise the Company Repurchase Right by delivering to Participant (or his or her transferee or legal representative, as the case may be), within ninety days of the date of Participant’s Termination of Service, a written notice indicating the Company’s intention to exercise the Company Repurchase Right and setting forth a date for closing not later than thirty days from the issuance of such notice. The closing shall take place at the Company’s office. At the closing, the Company shall cause the electronic stock certificate(s) evidencing the Restricted Shares to be cancelled and the Company shall deliver the purchase price therefore. At its option, the Company may elect to make payment for the Restricted Shares to a bank selected by the Company. The Company shall avail itself of this option by a written notice to Participant stating the name and address of the bank, date of closing, and waiving the closing at the Company’s office. If the Company does not elect to exercise the Company Repurchase Right by giving the requisite notice within ninety days following the date of Participant’s Termination of Service, the Company Repurchase Right shall terminate.
(c) Release of Restricted Shares. The Restricted Shares shall be released from the Company Repurchase Right upon vesting of the Option with respect to such Shares in accordance with the terms of this Agreement. For the avoidance of doubt, all Shares with respect to which the Option is exercised shall at all times be assumed to be Restricted Shares to the fullest extent possible under the terms of this Agreement, unless otherwise provided by the Administrator. Fractional Shares shall be rounded down to the nearest whole share.
6. Escrow. To insure the availability for delivery of the Restricted Shares upon repurchase by the Company pursuant to the Company Repurchase Right, Participant appoints the Secretary of the Company, or such other person designated by the Administrator from time to time as escrow agent, as its attorney-in-fact to sell, assign and transfer unto the Company, such Restricted Shares, if any, repurchased
by the Company pursuant to the Company Repurchase Right and shall, upon execution of the applicable Exercise Notice, consent to the delivery and deposit with the Secretary of the Company, or such other person designated by the Administrator from time to time, the electronic share certificate(s) representing the Restricted Shares, together with the Stock Assignment. The Restricted Shares and Stock Assignment shall be held by the Secretary, or such other person designated by the Administrator from time to time, in escrow, until the Company exercises the Company Repurchase Right, until such Restricted Shares are released from the Company Repurchase Right as set forth in Section 5 or until such time as this Agreement no longer is in effect. Upon release of the Restricted Shares from the Company’s Repurchase Right, the escrow agent shall be discharged of all further obligations hereunder. The Company, or its designee, shall not be liable for any act it may do or omit to do with respect to holding the Restricted Shares in escrow and while acting in good faith and in the exercise of its judgment.
7. Transferability.
(a) Transferability of Option and Restricted Shares. Neither the Option nor the Restricted Shares shall be sold, assigned, transferred, pledged or otherwise encumbered by Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, the Option shall be exercisable only by the Participant.
(b) Transferees Subject to Restrictions. Any transferee of the Shares shall hold such Shares subject to all of the provisions hereof and the Plan and the Exercise Notice and Additional Documents executed by Purchaser with respect to such Shares.
8. Bylaws Restrictions. Participant and any transferee of the Shares agree that the Shares and any interest therein are subject to the right of first refusal and any and all restrictions on transfer set forth in the Company’s Amended and Restated Bylaws, as it may be amended from time to time (the “Bylaws”).
9. Rights as a Stockholder. Except as otherwise provided herein, upon exercise of the Option and the issuance of the Shares to Participant (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), Participant shall have all the rights of a stockholder with respect to the Restricted Shares, including the right to receive any cash or stock dividends or other distributions paid to or made with respect to the Restricted Shares, subject to the restrictions described in the following sentence, which restrictions shall lapse when the Restricted Shares are released from the Company Repurchase Right as set forth in Section 5. Unless otherwise provided by the Administrator, if any dividends or distributions are paid in shares, or consist of a dividend or distribution to holders of Common Stock of property other than an ordinary cash dividend, the shares or other property will be subject to same restrictions on transferability as the Restricted Shares with respect to which they were paid and shall automatically be forfeited to the Company for no consideration in the event the Company exercises the Company Repurchase Right for the Restricted Shares with respect to which they were paid. In no event shall a dividend or distribution be paid with respect to Restricted Shares later than the end of the calendar year in which the dividends are paid to holders of Common Stock or, if later, the 15th day of the third month following the later of (a) the date the dividends are paid to holders of Common Stock and (b) the date the Restricted Shares with respect to which the dividends are paid vest. Participant shall enjoy rights as a stockholder until such time as Participant disposes of the Shares or the Company and/or its assignee(s) exercises the Right of First Refusal hereunder. Upon such exercise, Participant shall have no further rights as a holder of the Shares so purchased except the right to receive payment for the Shares so purchased in accordance with the provisions of this Agreement, and the Company shall forthwith cause the certificate(s), if any issued, evidencing the Shares so purchased to be cancelled.
10. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Participant understands and agrees that the Company shall cause any certificates, including electronic certificates, issued evidencing the Shares to have the legends set forth below or legends substantially equivalent thereto, together with any other legends that may be required by Applicable Laws:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE SUBJECT TO REPURCHASE PURSUANT TO, AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH, THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. SUCH REPURCHASE AND/OR TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS PROVIDED IN THE BYLAWS OF THE COMPANY.
(b) Stop Transfer Orders. Participant agrees that, in order to ensure compliance with the restrictions referred to in the Plan, this Agreement and the Bylaws, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Impermissible Transfers Void. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or the Bylaws or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. Any transfer or attempted transfer of the Option or any of the Restricted Shares not in accordance with the terms of this Agreement shall be void
11. Taxes.
(a) Tax Consequences of Award. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the
purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s tax liability that may arise as a result of the transactions contemplated by this Agreement.
(b) Section 83(b) Election for Restricted Shares Purchased Pursuant to a Non-Qualified Stock Option. Participant acknowledges that, with respect to the exercise of a Non-Qualified Stock Option for Restricted Shares, unless an election is filed by Participant with the Internal Revenue Service and, if necessary, the proper state taxing authorities, within thirty days of the purchase of the Shares, electing pursuant to Section 83(b) of the Code (and similar state tax provisions if applicable) to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase, there will be a recognition of taxable income to the Purchaser, measured by the excess, if any, of the Fair Market Value of the Shares, at the time the Company Repurchase Right lapses over the purchase price for the Shares. Participant represents that Participant has consulted any tax consultant(s) Participant deems advisable in connection with the purchase of the Shares or the filing of the election under Section 83(b) of the Code and similar tax provisions.
(c) Section 83(b) Election for Restricted Shares Purchased Pursuant to a Non-Qualified Stock Option. Participant acknowledges that, with respect to the exercise of a Non-Qualified Stock Option for Restricted Shares, unless an election is filed by Participant with the Internal Revenue Service and, if necessary, the proper state taxing authorities, within thirty days of the purchase of the Shares, electing pursuant to Section 83(b) of the Code (and similar state tax provisions if applicable) to be taxed currently on any difference between the purchase price of the Shares and their Fair Market Value on the date of purchase, there will be a recognition of taxable income to the Purchaser, measured by the excess, if any, of the Fair Market Value of the Shares, at the time the Company Repurchase Right lapses over the purchase price for the Shares. Participant represents that Participant has consulted any tax consultant(s) Participant deems advisable in connection with the purchase of the Shares or the filing of the election under Section 83(b) of the Code and similar tax provisions.
PARTICIPANT ACKNOWLEDGES THAT IT IS PARTICIPANT’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(B) OF THE CODE, EVEN IF PARTICIPANT REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON PARTICIPANT’S BEHALF.
12. Miscellaneous.
(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or this Agreement.
(b) Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office or to the then-current email address for the Secretary of the Company, and any notice to be given to Participant shall be addressed to Participant at the most-recent physical or email address for Participant listed in the Company’s personnel records. By a notice given pursuant to this Section 12(b), either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled to exercise his or her Option by written notice under this Section 12(b). Any notice shall be deemed duly
given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
(c) Successors and Assigns. The Company may assign any of its rights under this Agreement and the Exercise Notice to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
(d) Severability. I the event any portion of the Plan or this Agreement or any action taken pursuant thereto shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan and this Agreement, and the Plan and this Agreement shall be construed and enforced as if the illegal or invalid provisions had not been included, and the illegal or invalid action shall be null and void.
(e) Entire Agreement; Governing Documents. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. In the event of any contradiction between the Plan and any Award Agreement or any other written agreement between a Participant and the Company that has been approved by the Administrator, the terms of the Plan shall govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan shall not apply.
(f) Governing Law. The provisions of the Plan and all Awards made thereunder, including the Option, shall be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding choice-of-law principles of the law of any state that would require the application of the laws of a jurisdiction other than such state.
(g) Titles and Headings. The titles and headings of the Sections in this Agreement are for convenience of reference only and, in the event of any conflict, the text of this Agreement, rather than such titles or headings, shall control.
EXHIBIT B
TO STOCK OPTION GRANT NOTICE
FORM OF EXERCISE NOTICE
Effective as of [as described on Carta], the undersigned (“Participant”) hereby elects to exercise Participant’s option to purchase [as described on Carta] Shares of ZipRecruiter, Inc. (the “Company”) under and pursuant to the ZipRecruiter, Inc. 2014 Equity Incentive Plan (the “Plan”) and the Stock Option Grant Notice and Stock Option Agreement dated [as described on Carta] (the “Agreement”). Capitalized terms used herein without definition shall have the meanings given in the Agreement.
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Grant Date:
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As described on Carta
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Number of Shares as to which Option is Exercised:
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As described on Carta
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Exercise Price per Share:
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As described on Carta
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Total Exercise Price:
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As described on Carta
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Electronic certificate to be issued in name of:
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As described on Carta
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Cash Payment delivered herewith:
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As described on Carta
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Type of Option:
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As described on Carta
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1. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan and the Agreement. Participant agrees to abide by and be bound by their terms and conditions. Participant further acknowledges that it is a condition to the issuance of the Shares to Participant upon exercise of the Option listed above that Participant agree to be bound by the terms and conditions of, and become a party to, any stockholders’ agreement of the Company. Participant hereby agrees to be so bound and to execute any additional documents as may be deemed necessary or advisable by the Company in order to effectuate the foregoing agreement.
2. Tax Consultation. Participant understands that Participant may suffer adverse tax and national insurance consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
3. Participant Representations. Participant hereby makes the following certifications and representations with respect to the Shares listed above:
(a) Participant 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 Shares. Participant is acquiring these Shares for investment for Participant’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.
(b) Participant acknowledges and understands that the Shares constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed herein. Participant understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further acknowledges and understands that the Company is under no obligation to register the Shares. Participant understands that the electronic certificate evidencing the Shares will be imprinted with a legend which prohibits the transfer of the Shares unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company and any other legend required under Applicable Laws.
(c) Participant is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to Participant, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, ninety days thereafter (or such longer period as any market stand-off agreement may require) the securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144.
(d) In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the securities may be resold in certain limited circumstances subject to the provisions of Rule 144.
(e) Participant further understands that in the event all of the applicable requirements of Rule 701 or 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 Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 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. Participant understands that no assurances can be given that any such other registration exemption will be available in such event.
(f) Participant acknowledges that the Shares remain subject to the Company’s right of first refusal and certain transfer restrictions all in accordance with the Agreement and the Company’s Amended and Restated Bylaws, as it may be amended from time to time.
4. Notices. Any notice required or permitted hereunder shall be given in accordance with the provisions set forth in Section 9(b) of the Agreement.
5. Entire Agreement. The Plan and Agreement are incorporated herein by reference. This Notice, the Plan and the Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
Exercise of the Option through an online or electronic system established and maintained by the Company or another third party designated by the Company shall be deemed to be Participant’s agreement to and acceptance of the terms and conditions of this Exercise Notice.
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ACCEPTED BY:
ZIPRECRUITER, INC.
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SUBMITTED BY
PARTICIPANT:
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By:
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By:
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Print Name:
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Print Name:
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Title:
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EXHIBIT C
TO STOCK OPTION GRANT NOTICE
STOCK ASSIGNMENT
[See instructions below]
FOR VALUE RECEIVED I,_________________, hereby sell, assign and transfer unto____________the shares of the Common Stock of ZipRecruiter, Inc. registered in my name on the books of said corporation represented by Certificate No.______and do hereby irrevocably constitute and appoint to transfer the said stock on the books of the within named corporation with full power of substitution in the premises.
This Assignment Separate from Certificate may be used only in accordance with the Stock Option Grant Notice and Stock Option Agreement between ZipRecruiter, Inc. and the undersigned governing the option granted to the undersigned on__________.
INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise the Company Repurchase Right, as set forth in the Stock Option Grant Notice and Stock Option Agreement, without requiring additional signatures on the part of Purchaser.
EXHIBIT D
TO STOCK OPTION GRANT NOTICE
CONSENT OF SPOUSE
I,________________, spouse of ________________, have read and approved the Stock Option Grant Notice and Stock Option Agreement governing the option granted to the undersigned on _______, between my spouse and ZipRecruiter, Inc. In consideration of granting of the right to my spouse to purchase shares of ZipRecruiter, Inc. set forth in the Stock Option Grant Notice and Stock Option Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Stock Option Grant Notice and Stock Option Agreement and agree to be bound by the provisions of the Stock Option Grant Notice and Stock Option Agreement insofar as I may have any rights in said Stock Option Grant Notice and Stock Option Agreement or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the Stock Option Grant Notice and Stock Option Agreement or the exercise of the option granted thereunder.
INSTRUCTIONS: Please do not fill in the blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise its “Repurchase Option,” as set forth in the Stock Option Grant Notice and Stock Option Agreement, without requiring additional signatures on the part of Participant.
ZIPRECRUITER, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD
AND RESTRICTED STOCK UNIT AGREEMENT
ZipRecruiter, Inc. (the “Company”), pursuant to its Amended and Restated 2014 Equity Incentive Plan (the “Plan”), pursuant to this Notice of Restricted Stock Unit Award (this “Notice of Grant”) grants to Participant an award of restricted stock units (“RSUs”) representing shares of the Company’s Common Stock (the “Shares”) subject to the terms and conditions of the Plan and the attached Restricted Stock Unit Agreement attached hereto as Exhibit A (the “Agreement”) under the Plan, each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Grant Notice (“Grant Notice”) and the Agreement.
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Participant:
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As described on Carta
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Grant Date:
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As described on Carta
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Vesting Commencement Date:
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As described on Carta
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Total Number of RSUs:
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As described on Carta
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Expiration Date:
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As described on Carta
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Vesting:
(a) Two-Tiered Vesting: Vesting of RSUs is conditioned on satisfaction of two vesting requirements before the Expiration Date or earlier termination of RSUs pursuant to the Plan or Agreement: a time- and service-based requirement (the “Time and Service Requirement”) and a liquidity-event requirement (the “Liquidity Event Requirement”), each as described below.
(1) Time and Service Requirement: For so long as Participant continues to be a Service Provider through each applicable date, the Time and Service Requirement will be satisfied as to (i) twenty-five percent (25%) of the Total Number of RSUs (as set forth above) subject to this award on the first anniversary of the Vesting Commencement Date, provided that the Initial Vesting Event has not occurred before such date, or 1/16 of the Total Number of RSUs for each Quarterly Vesting Date (as defined below) that occurred between the Vesting Commencement Date and Initial Vesting Event and (ii) an additional 1/16 of the Total Number of RSUs thereafter on each subsequent March 15, June 15, September 15 and December 15 (each, a “Quarterly Vesting Date”).
(2) Liquidity Event Requirement: The Liquidity Event Requirement will be satisfied on the earliest to occur of: (i) the first trading day following expiration of the “lockup” period applicable to the Company’s initial public offering pursuant to an effective registration statement under the Securities Act covering the offer and sale by the Company of its equity securities (such initial public offering, the “IPO”), (ii) March 15 of the calendar year following the year in which the IPO was declared effective and (iii) a Change in Control (the earliest of these, the “Initial Vesting Event”).
(b) RSUs Vested at Initial Vesting Event. If at the time of the Initial Vesting Event Participant is not a Service Provider and did not meet the Time and Service Requirement with respect to any portion of the RSUs, then no portion of the RSUs shall vest. If at the time of the Initial Vesting Event, Participant is a Service Provider or has ceased to be a Service Provider but did meet the Time and Service Requirement with respect to any portion of the RSUs, then the RSUs shall vest as to the number of RSUs, if any, that have satisfied the Time and Service Requirement as of the Initial Vesting Event in accordance with clause (a)(1) above.
(c) RSUs Vested after Initial Vesting Event. If Participant is a Service Provider at the time of the Initial Vesting Event, then with respect to RSUs that have not vested as of such Initial Vesting Event under the preceding clause (b) above, vesting shall continue after the Initial Vesting Event in accordance with the Time and Service Requirement set forth in clause (a)(1) above (each subsequent vesting date, a “Subsequent Vesting Event”).
Acceleration:
(a) [If the Company undergoes a Change in Control while the Participant is a Service Provider, then conditioned upon Participant’s execution of a general release of claims in favor of the Company in a form provided by the Company (such release, the “Change-in- Control Release”) and satisfaction, no later than the Change-in-Control Release’s effective date, of all conditions to make the Change-in-Control Release effective and irrevocable upon (x) the closing of such Change in Control, an additional [ ]% of the then-unvested RSUs (besides any RSUs that have satisfied the Time and Service Requirement prior to the closing of the Change in Control) shall immediately accelerate in their vesting and be deemed to have satisfied the Time and Service Requirement immediately prior to the closing of the Change in Control.
(b)] If Participant is subject to a Qualifying Termination (as defined below) within [ ] months preceding the closing of a Change in Control or [within [_] months] following the closing of such Change in Control, then conditioned upon Participant’s execution of a general release of claims in favor of the Company in a form provided by the Company (such release, the “Termination Release”) and satisfaction, no later than the Termination Release’s effective date, of all conditions to make the Termination Release effective (x) within thirty (30) days following Participant’s Qualifying Termination (as defined below) and, (y) in the case of a Qualifying Termination (as defined below) before the closing of such Change in Control, before the closing of such Change in Control, an additional [_]% of the then-unvested RSUs (besides any RSUs that have satisfied the Time and Service Requirement prior to Participant’s Qualifying Termination (as defined below) [and besides any RSUs that may accelerate pursuant to the preceding clause (a)]) shall immediately accelerate in their vesting and be deemed to have satisfied the Time and Service Requirement on the later of (x) the first Quarterly Vesting Date on or after the thirty-first (31st) day following Participant’s Qualifying Termination (as defined below) and (y) the closing of the Change in Control.
(b) Participant’s “Qualifying Termination” means [either of] the following:
(i) Participant’s Termination of Service by the Company other than for Cause (as defined below). “Cause” means (i) Participant’s willful or continued failure to substantially perform Participant’s duties for the Company, or to carry out the business plan, as determined by the Board; provided that failure to achieve quantified goals or objectives despite good faith performance of duties shall not be deemed a “Cause” event under this subsection (i); (ii) Participant’s conviction of a felony, or guilty plea to, or entry of, a nolo contendere plea to a felony charge; (iii) the willful or grossly negligent engaging by Participant in conduct that is materially injurious to the Company, financially or otherwise; or (iv) Participant’s material breach of any term of the Company’s code of ethics, code of conduct or policies and procedures, as in effect from time to time; provided that with respect to (i) or (iv) above, such termination for Cause shall only be effective after notice to Participant and a period of not less than seven (7) calendar days during which time Participant shall have an opportunity to demonstrate that Participant has cured the conduct that constitutes Cause; provided further, that the foregoing opportunity to cure shall not apply if the Company reasonably determines that Participant’s conduct is not capable of being cured.
[(ii) Participant’s Termination of Service by the Participant with Good Reason (as defined below). “Good Reason” means the occurrence of any of the following events without Participant’s consent: (i) a material reduction by the Company of Participant’s then-current base salary, unless such reduction is part of a reduction program equally applicable to other Participants of the Company; (ii) a material reduction in Participant’s authority, duties or responsibilities; or (iii) the Company relocating the facility that is Participant’s principal place of business with the Company to a location that requires an increase in Participant’s one-way driving distance by more than 350 miles; provided however, that any resignation by Participant due to any of the foregoing conditions shall only be deemed for Good Reason if: (A) Participant gives the Company written notice of the intent to terminate for Good Reason within 90 days following the first occurrence of the condition(s) that Participant believes constitutes Good Reason, which notice shall describe such condition(s); (B) the Company fails to remedy, if remediable, such condition(s) within 30 days following receipt of the written notice (the “Cure Period”) of such condition(s) from Participant; and (C) Participant actually resigns his or her employment within the first 15 days after expiration of the Cure Period.]
Settlement:
(a) RSUs that vest as of the Initial Vesting Event shall be settled immediately upon the Initial Vesting Event. Within 30 days following the occurrence of any Subsequent Vesting Event, RSUs that vest as of the Subsequent Vesting Event shall be settled. Settlement means the delivery of the Shares vested under an RSU. Settlement of RSUs on
the Initial Vesting Event or any Subsequent Vesting Event shall be in Shares. Settlement of vested RSUs shall occur regardless of whether Participant has undergone a Service Provider at the time of settlement. No fractional RSUs or rights for fractional Shares shall be created pursuant to this Notice of Grant.
(b) Participant understands that Participant’s employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”) and that nothing in this Notice of Grant, the Agreement or the Plan changes the at-will nature of that relationship. Participant acknowledges that the vesting of the RSUs pursuant to this Notice of Grant is conditioned on the occurrence of an Initial Vesting Event or a Subsequent Vesting Event. Participant also understands that this Notice of Grant is subject to the terms and conditions of both the Agreement and the Plan, both of which are incorporated herein by reference. Participant has read both the Agreement and the Plan.
(c) By Participant’s acceptance hereof (whether written, electronic or otherwise), Participant agrees, to the fullest extent permitted by law, that in lieu of receiving documents in paper format, Participant accepts the electronic delivery of any documents the Company, or any third party involved in administering the Plan which the Company may designate, may deliver in connection with this grant (including the Plan, the Notice of Grant, the Agreement, any disclosures provided pursuant to Rule 701, account statements or other communications or information) whether via the Company’s intranet or the internet site of another such third party or via email, or such other means of electronic delivery specified by the Company.
Termination:
(a) The RSUs shall terminate on the Expiration Date or earlier, as provided in this paragraph. If Participant undergoes a Termination of Service for any reason, all RSUs for which vesting is no longer possible under the terms of this Notice of Grant and the Agreement shall be forfeited to the Company immediately, and all rights of Participant to such RSUs shall immediately terminate. In case of any dispute as to whether such Termination of Service has occurred, the Administrator shall have sole discretion to determine whether such Termination of Service has occurred and the effective date of such Termination of Service. For clarity: All RSUs for which vesting is still possible[, including in connection with the acceleration provisions set forth above,] will remain outstanding for the minimum amount of time necessary to determine whether such RSUs will vest [(for example, in the case of unvested RSUs upon Participant’s Qualifying Termination, such RSUs will remain outstanding for up to [three] months following such Qualifying Termination to permit the acceleration described above in case the closing of the Change in Control occurs within that [three]-month period, and if the closing of the Change in Control has not occurred by the end of that [three]-month period, then such RSUs will immediately terminate)].
(b) By Participant’s and the Company’s acceptance hereof (in each case, whether written, electronic or otherwise), Participant and the Company agree that this RSU is granted under and governed by the terms and conditions of the Plan, this Notice of Grant and the Agreement.
EXHIBIT A
TO RESTRICTED STOCK UNIT AWARD NOTICE
RESTRICTED STOCK UNIT AGREEMENT
Participant has been granted Restricted Stock Units (“RSUs”) subject to the terms, restrictions and conditions of the Company’s Amended and Restated 2014 Equity Incentive Plan (the “Plan”), the Notice of Restricted Stock Unit Award (“Notice of Grant”) and this Restricted Stock Unit Agreement (this “RSU Agreement”). Unless otherwise defined herein or in the Notice of Grant, the terms defined in the Plan shall have the same defined meanings in this RSU Agreement.
1. No Stockholder Rights. Unless and until such time as Shares are issued in settlement of vested RSUs, Participant shall have no ownership of the Shares allocated to the RSUs and shall have no right to dividends or to vote such Shares.
2. Dividend Equivalents. Dividend equivalents, if any, shall not be credited to Participant in respect of Participant’s RSUs.
3. No Transfer. The RSUs and any interest therein may not be transferred in any manner otherwise than by will or by the laws of descent or distribution. The terms of the Plan, the Notice of Grant and this RSU Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Participant. Further, until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or after the Administrator determines that it is, will, or may no longer be relying upon the exemption from registration of RSUs under the Exchange Act as set forth in Rule 12h-1(f) promulgated under the Exchange Act (the “Reliance End Date”), Participant shall not transfer these RSUs in any manner other than (i) to persons who are “family members” (as defined in Rule 701(c)(3) of the Securities Act) through gifts or domestic relations orders or (ii) to an executor or guardian of Participant upon the death or disability of Participant. Until the Reliance End Date, the RSUs may not be pledged, hypothecated or otherwise transferred or disposed of, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than as permitted in clauses (i) and (ii) of this paragraph.
4. Acknowledgement. The Company and Participant agree that the RSUs are granted under and governed by the Notice of Grant, this RSU Agreement and by the provisions of the Plan (incorporated herein by reference). Participant (i) acknowledges receipt of a copy of each of the foregoing documents, (ii) represents that Participant has carefully read and is familiar with their provisions and (iii) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice of Grant.
5. Limitations on Transfer of Stock. In addition to any other limitation on transfer created by applicable securities laws, Participant shall not assign, encumber or dispose of any interest in the Shares issued pursuant to this RSU Agreement except with the Company’s prior written consent and in compliance with the Company’s Bylaws, the Company’s then-current Insider Trading Policy and applicable securities laws. The restrictions on transfer also include a prohibition on any short position, any “put equivalent position” or any “call equivalent position” by the RSU holder with respect to the RSU itself as well as any Shares issuable upon settlement of the RSU prior to the settlement thereof until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.
6. Restrictions Binding on Transferees. All transferees of Shares or any interest therein will receive and hold such shares or interest subject to the provisions of this RSU Agreement, including the
transfer restrictions of Sections 3 and 5, and the transferee shall acknowledge such restrictions in writing. Any sale or transfer of the Shares shall be void unless the provisions of this RSU Agreement are satisfied.
7. Withholding of Tax. When the RSUs are vested and/or settled, the fair market value of the Shares shall be treated as income subject to withholding by the Company for income and employment taxes if Participant is or was an employee of the Company. Prior to any relevant taxable or tax withholding event, as applicable, Participant shall pay or make adequate arrangements satisfactory to the Company to satisfy any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to the Participant's participation in this Plan and legally applicable to the Participant (collectively, “Tax-Related Obligations”). In this regard, Participant authorizes the Company to withhold all applicable Tax-Related Obligations legally payable by Participant from Participant’s wages or other cash compensation paid to Participant by the Company and/or a Parent or Subsidiary of the Company. With the Company’s consent, these arrangements may also include, if permissible under local law, (i) withholding Shares that otherwise would be issued to Participant when Participant’s RSUs are settled, (ii) having the Company withhold taxes from the proceeds of the sale of the Shares, through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf and Participant hereby authorizes such sales by this authorization), (iii) Participant’s payment of a cash amount or (iv) any other arrangement approved by the Company, all under such rules as may be established by the Administrator and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable, provided, however, that if Participant is a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be through a mandatory sale under (ii) above. Depending on the withholding method, the Company and/or a Parent or Subsidiary of the Company may withhold or account for Tax-Related Obligations by considering up to the applicable maximum statutory withholding rates, in which case Participant may receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent in Shares. In the case of withholding in Shares, the Company shall issue the net number of Shares to Participant by deducting the Shares retained for Tax-Related Obligations from the Shares issuable upon vesting. For tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Obligations.
8. Code Section 409A. For purposes of this RSU Agreement, a termination of employment will be determined consistent with the rules relating to a “separation from service” as defined in Section 409A of the Code and the regulations thereunder (“Section 409A”). Notwithstanding anything else provided herein, to the extent any payments provided under this RSU Agreement in connection with Participant’s termination of employment constitute deferred compensation subject to Section 409A, and Participant is deemed at the time of such termination of employment to be a “specified employee” under Section 409A, then such payment shall not be made or commence until the earlier of (i) the expiration of the six-month period measured from Participant’s separation from service from the Company or (ii) the date of Participant’s death following such a separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to Participant including, without limitation, the additional tax for which Participant would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral. The first payment thereof will include a catch-up payment covering the amount that would have otherwise been paid during the period between Participant’s termination of employment and the first payment date but for the application of this provision, and the balance of the installments (if any) will be payable in accordance with their original schedule. To the extent that any provision of this RSU Agreement is ambiguous as to its exemption from or compliance with Section 409A, the provision will be read in such a manner so that all payments hereunder are exempt from Section 409A to the maximum permissible extent and, for any payments where such construction is
not reasonable, that those payments comply with Section 409A. To the extent any payment under this RSU Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.
9. U.S. Tax Consequences. Participant acknowledges that there will be tax consequences upon vesting and/or settlement of the RSUs and/or disposition of the Shares, if any, received in connection therewith, and Participant should consult a tax adviser regarding Participant’s tax obligations prior to such settlement or disposition.
10. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and Participant (including any written representations, warranties and agreements as the Administrator may request of Participant for compliance with Applicable Laws) with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Common Stock may be listed or quoted at the time of such issuance or transfer. Participant may not be issued any Shares if such issuance 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 Shares may then be listed. 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 shall relieve the Company of any liability in respect of the failure to issue or sell such Shares.
11. Legend on Certificates. The certificates representing the Shares issued hereunder shall be subject to such stop transfer orders and other restrictions as the Administrator may deem advisable under the Plan, this RSU Agreement, the Company’s Bylaws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which such shares of the Common Stock are listed and any applicable state, Federal or foreign laws, and the Administrator may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
12. Successors and Assigns. The Company may assign any of its rights under this RSU Agreement. This RSU Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. This RSU Agreement will be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives, successors and assigns.
13. Entire Agreement; Severability. The Plan and Notice of Grant are incorporated herein by reference. The Plan, the Notice of Grant and this RSU Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof (including, without limitation, any commitment to make any other form of equity award (such as stock options) that may have been set forth in any employment offer letter or other agreement between the parties). If any provision of this RSU Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.
14. No Rights as Employee, Director or Consultant. Nothing in this RSU Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to cause Participant as a Service Provider, for any reason, with or without cause.
15. Information to Participants. If the Company is relying on an exemption from registration under Section 12(h)-1 of the Exchange Act and such information is required to be provided by such Section 12(h)-1, the Company shall provide the information described in Rules 701(e)(3), (4) and (5) of the Securities Act by a method allowed under Section 12(h)-1 of the Exchange Act in accordance with Section 12(h)-1 of the Exchange Act, provided, that Participant agrees to keep the information confidential.
16. Delivery of Documents and Notices. Any document relating to participating in the Plan and/or notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this RSU Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery or deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, with postage and fees prepaid, addressed to the other party at the address, if any, provided for Participant by the Company or at such other address as such party may designate in writing from time to time to the other party.
17. Choice of Law and Venue. This RSU Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State. For purposes of any action, lawsuit or other proceedings brought to enforce this RSU Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of Los Angeles County, California, or the federal courts for the United States for the Southern District of California, and no other courts, where this grant is made and/or to be performed.
ZIPRECRUITER INC.
AMENDED AND RESTATED
2015 ISRAELI EQUITY INCENTIVE SUB PLAN TO THE
AMENDED AND RESTATED
2014 EQUITY INCENTIVE PLAN
I. GENERAL
This Amended and Restated 2015 Israeli Equity Incentive Sub Plan (the “Sub-Plan”) is a sub plan to the Amended and Restated 2014 Equity Incentive Plan (the “Plan”) of ZipRecruiter Inc. (the “Company”) and set forth the terms for the grant of Awards to an Israeli Employee or to an Israeli Non- Employee (as defined below).
II. DEFINITIONS
1. Any capitalized term not specifically defined in this Sub-Plan shall have the meaning assigned to it in the Plan.
2. As used in this Sub-Plan, the following definitions shall apply:
“3(i) Award” means an Award granted pursuant to Section 3(i) of the Ordinance.
“Affiliate” means an affiliate of, or person affiliated with, a specified person or company or other trade or business that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such person within the meaning of Rule 405 of Regulation C under the Securities Act including, without limitation, any of its parent or subsidiary corporations. For the purpose of Awards granted pursuant to Section 102 shall mean also an “employing company” within the meaning of Section 102(a) of the Ordinance.
“Award” means an Award granted pursuant to Section 3(i) and/or Section 102 of the Ordinance
“Award Agreement” means a written or electronic agreement between the Company and a holder of an Award evidencing the terms and conditions of an individual Award grant. Each Award Agreement shall be subject to the terms and conditions of the Plan and this Sub-Plan.
“Capital Gain Option” means a Trustee 102 Award intended to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) of the Ordinance.
“Controlling Shareholder” shall have the meaning ascribed to it in Section 32(9) of the Ordinance as amended from time to time.
“Israeli Employee” means any employee of the Company or its Affiliate who is a resident of the State of Israel, and any individual who is serving as Nosei Misra - Officer Holder (as such term is defined in the Israeli Companies' Law, 5759-1999, including directors) of the Company or its Affiliate, but excluding any Controlling Shareholder.
“Israeli Non-Employee” means any individual or an entity who is a resident of the State of Israel providing services to the Company or its Affiliate who is not an Israeli Employee.
“ITA” means the Israeli Tax Authority.
“Non-Trustee102 Award” means an Award granted to an Israeli Employee pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee.
“Ordinance” means the Income Tax Ordinance [New Version], 5721, 1961 as now in effect or as hereafter amended.
“Ordinary Income Option” means a Trustee 102 Award intended to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) of the Ordinance.
“Section 102” means Section 102 of the Ordinance and any regulations, rules, orders or procedures promulgated thereunder as now in effect or as hereafter amended.
“Trustee” means any individual or entity appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance and the regulations thereof.
“Trustee 102 Award” means an Award granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of an Israeli Employee.
III. AWARD GRANTS
1. Eligibility. The persons eligible to receive Awards under this Sub-Plan are Israeli Employees and/or Israeli Non-Employees.
2. Types of Awards. The Board shall have the authority to grant an Award under this Sub- Plan classified as (i) a Trustee 102 Award, (ii) a Non Trustee 102 Award or (iii) a 3(i) Award; provided, however, that a Trustee 102 Award and a Non-Trustee 102 Award may only be granted to an Israeli Employee, and a 3(i) Award shall be granted only to an Israeli Non Employee.
3. Trustee 102 Award.
(a) The grant of Trustee 102 Award under this Sub-Plan shall be conditioned upon the approval of this Sub-Plan and the Trustee by the ITA, and the filing of the Company's Election (as defined below) with the ITA at least thirty (30) days before the first date of grant of Awards under this Sub-Plan. The grant of Trustee 102 Award shall be in accordance with the terms and conditions of Section 102.
(b) The Company election to grant Trustee 102 Award as either Capital Gain Option or Ordinary Income Option shall be subject to the terms of Section 102(g). below.
(c) All Trustee 102 Award will be held in trust by a Trustee, as described in Section IV
4. Non-Trustee 102 Award. The grant of a Non-Trustee 102 Award to an Israeli Employee shall be made in accordance with the provisions of Section 102(c) of the Ordinance. With respect to Non- Trustee 102 Award, in the event of termination of Israeli Employee's engagement with the Company or any of its Affiliate, then the Israeli Employee shall extend to the Company and/or its Affiliate a security or guarantee for the payment of tax and/or social charges due at the time of sale of Non-Trustee 102 Award, all in accordance with the provisions of Section 102.
5. 3(i) Award. The Company may grant 3(i) Award to any person who is an Israeli Non Employee.
IV. TRUSTEE
1. Appointment of Trustee. A Trustee shall be appointed by the Board to administer each Trustee 102 Award in accordance with the provisions of Section 102 and pursuant to a written agreement to be entered into between the Trustee and the Company (the “Trust Agreement”).
2. Grants of Trustee 102 Award. All Trustee 102 Award granted under this Sub-Plan as well as shares allocated or issued upon exercise of such Trustee 102 Award and/or bonus shares and/or any rights granted with respect to such Trustee 102 Award, shall be registered and held by the Trustee for the benefit of the Israeli Employee for the requisite period of time as required by Section 102 or any regulations, rules or orders or procedures promulgated thereunder (the “Holding Period”). The Trustee shall be exempt from any liability in respect of any action or decision duly taken in its capacity as a Trustee, provided, however, that the Trustee acted at all times in good faith.
3. Grants of 3(i) Award. The Board may determine to deposit the 3(i) Award with the Trustee. In such event, the Trustee shall hold such 3(i) Award in trust, until exercised by the holder of Award, pursuant to the Company's instructions from time to time.
4. Release of Awards. The Trustee shall not release any Trustee 102 Award granted under this Sub-Plan as well as shares allocated or issued upon exercise of such Trustee 102 Award and/or bonus shares and/or any rights granted with respect to such Trustee 102 Award, until all required payments have been fully made: (i) the receipt by the Trustee of an acknowledgment from the ITA that the Israeli Employee has paid any applicable tax due pursuant to the Ordinance, or (ii) the Company has made other arrangements for the deduction of tax at source acceptable to the Trustee.
V. THE HOLDING PERIOD REQUIREMENT
1. Holding Period Requirements.
(a) Trustee 102 Award may not be sold, transferred, assigned, pledged, given as collateral, or mortgaged (other than through a transfer by will or by operation of law), nor may they be subject of an attachment, seizure power of attorney or transfer deed (other than a power of attorney for the purpose of participation in stockholders meetings or voting such shares) unless Section 102 and/or the regulations, rules, orders or procedures promulgated thereunder allow otherwise.
(b) With respect to any Awards granted as Trustee 102 Award, and subject to the provisions of Section 102, an Israeli Employee shall not be entitled to sell or release from trust any Trustee 102 Award, Share received upon the exercise of any such Trustee 102 Award and/or bonus shares granted with respect to such Trustee 102 Award, until the lapse of the Holding Period and in accordance with Section 102. Notwithstanding the above, if any such sale or release occurs during the Holding Period it will result in adverse tax consequences to the Israeli Employee under Section 102 of the Ordinance and the Rules, which shall apply to and shall be borne solely by such Israeli Employee.
2. Trustee 102 Award Requirements. In the event that the requirements of Section 102 with respect to Trustee 102 Award are not met, then it shall be treated in accordance with the provisions of Section 102 and any regulations promulgated thereunder.
3. Award Agreement. Upon receipt of Trustee 102 Award, Israeli Employee shall sign an Award Agreement under which the Israeli Employee shall, among others, (i) agree to be subject to the trust agreement between the Company and the Trustee, stating, among others, that the Trustee will be released from any liability in respect of any action or decision duly taken and bona fide executed in relation with the Plan, or any Awards granted to him or her thereunder; (ii) declare that he/she
understands the provisions of Section 102 and the applicable tax track and approve the tax arrangement; and (iii) confirm that he/she shall not sell nor transfer the Awards from the Trustee until the lapse of the Holding Period.
VI. DIVIDEND
Any dividends payable with respect to shares acquired upon exercise of a Trustee 102 Award or shares issued under the Sub-Plan and the Plan shall also be subject to the provisions of Section 102 and the rules, regulations or orders promulgated thereunder, as applicable.
VII. TAX CONSEQUENCES
1. Israeli Employee.
(a) Any tax consequences arising from the grant or exercise of any Award or from sale or release or transfer of such Award or shares (including, without limitation, the Israeli Employee’s social security taxes and health insurance, if applicable) or from any other event or act (of the Company and/or its Affiliate, the Trustee or the Israeli Employee), shall be borne solely by the Israeli Employee. Notwithstanding the forgoing, the Company and/or its Affiliate and/or the Trustee shall withhold taxes according to the requirements under the laws, rules, and regulations, including withholding taxes at source under Section 102.
(b) Furthermore, the Israeli Employee shall indemnify the Company and/or Affiliate that employs the Israeli Employee and/or the Trustee, and/or the Company’s stockholders and/or directors and/or officers if applicable, and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Israeli Employee.
(c) The Company shall not be obligated to honor the exercise of any Award by or on behalf of an Israeli Employee until all tax consequences (if any) arising from the exercise of such Awards or sale of shares are resolved to the full satisfaction of the Company. Without derogating from the above, the Company and/or the Trustee when applicable shall not be required to release any share certificate to an Israeli Employee until all required payments (including tax payments) have been fully made in accordance with Section 102.
(d) If at the date of grant the Company’s shares (or Awards) are listed on any established stock exchange or a national market system or if the Company’s shares will be registered for trading within ninety (90) days following the date of grant, the tax liability and the classification of any income as either capital gain or ordinary income shall be determined pursuant to Section 102(b)(3) of the Ordinance or any tax ruling obtained from the Israeli tax authority.
2. Israeli Non Employee. Any tax consequences arising from the grant or exercise of any Award or grant of shares, or from sale or transfer of such shares or from any other event or act (of the Company and/or its Affiliate or the Israeli Non Employee), hereunder shall be borne solely by the Israeli Non-Employee.
VIII. COORDINATION WITH THE PLAN
Section 102 and any regulations, rules, orders or procedures promulgated thereunder as now in effect or as hereafter amended shall apply to grant of Awards under Section 102 pursuant to the provisions of this Sub Plan. The Plan is hereby incorporated by reference and shall be deemed as integral part of this Sub- Plan. Without derogating from the provisions of Section 102 of the Ordinance, all
the terms and conditions of the Plan shall apply to grant of Awards to Israeli Employee or Israeli Non-Employee. In the event of conflict between the Sub-Plan and the Plan the Sub-Plan would take precedence as for the provisions with respect to Section 102 of the Ordinance.
IX. VOTING PROXY
Until immediately after the date on which the initial registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act first becomes effective or the listing for trading on a stock exchange or market or trading system of the Company’s (or the Successor Company’s) shares, the Shares subject to an Award or to be issued pursuant to an Award or any other Securities, shall, unless otherwise determined by the Plan Administrator, be subject to an irrevocable proxy and power of attorney by the Participant or the Trustee (as defined in the Israeli Appendix) (if so requested from the Trustee), as the case may be, to the Company, which shall designate such person or persons (with a right of substitution) from time to time as determined by the Plan Administrator (and in the absence of such determination, the CEO or Chairman of the Board, ex officio). The Trustee is deemed to be instructed by the Participant to sign such proxy, as requested by the Company. The proxy shall entitle the holder thereof to receive notices, vote and take such other actions in respect of the Shares or other Securities. Any person holding or exercising such voting proxies shall do so solely in his capacity as the proxy holder and not individually. All Awards granted hereunder shall be conditioned upon the execution of such irrevocable proxy in substantially the form prescribed by the Plan Administrator from time to time. So long as any such Shares are subject to such irrevocable proxy and power of attorney or held by a Trustee (and unless a proxy was given by the Trustee as aforesaid), (i) in any shareholders meeting or written consent in lieu thereof, such Shares shall be voted by the proxy holder (or the Trustee, as applicable), unless directed otherwise by the Board, in the same proportion as the result of the vote at the shareholders’ meeting (or written consent in lieu thereof) in respect of which the Shares are being voted (whether an extraordinary or annual meeting, and whether of the share capital as one class or of any class thereof), and (ii) or in any act or consent of shareholders under the Company’s Certificate of Incorporation or otherwise, such Shares shall be cast by the proxy holder (or the Trustee, as applicable), unless directed otherwise by the Board, in the same proportion as the result of the shareholders’ act or consent. The provisions of this Section shall apply to the Participant and to any purchaser, assignee or transferee of any Shares.
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ZIPRECRUITER INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE
ZipRecruiter Inc. (the "Company") hereby grants to you an Option (the "Option") to purchase shares of the Company's Common Stock under the Company's Amended and Restated 2014 Equity Incentive Plan (including the Amended and Restated 2015 Israeli Equity Incentive Sub Plan, the "Plan"). The Option is subject to all the terms and conditions set forth in this Stock Option Grant Notice (this "Grant Notice"), in the Stock Option Agreement and in the Plan, which are attached to and incorporated into this Grant Notice in their entirety.
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Participant:
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As described on Carta
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Grant Date:
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As described on Carta
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Vesting Commencement Date:
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As described on Carta
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Number of Shares Subject to Option:
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As described on Carta
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Exercise Price (per Share):
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As described on Carta
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Option Expiration Date:
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As described on Carta
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Type of Option:
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As described on Carta
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Vesting and Exercisability Schedule:
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As described on Carta
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Additional Terms/Acknowledgement: By accepting this Option, you acknowledge receipt of, and understand and agree to, this Grant Notice, the Stock Option Agreement and the Plan. You further acknowledge that as of the Grant Date, this Grant Notice, the Stock Option Agreement and the Plan set forth the entire understanding between you and the Company regarding the Option and supersede all prior oral and written agreements on the subject, with the exception of your Employment Agreement, dated {DATE}.
In accordance with the requirements of Section 102, by acceptance of this Option, the Israeli resident Grantee agrees to the provisions of Section 102 and to the terms of the Plan attached hereto.
EXHIBIT A
TO STOCK OPTION GRANT NOTICE
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant an Option under the Plan to purchase the number of Shares indicated in the Grant Notice.
1. Grant of Option. In consideration of Participant’s past and/or continued employment with or service to the Company and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice, the Company irrevocably grants to Participant an Option to purchase any part or all of an aggregate of the number of Shares set forth in the Grant Notice at the Exercise Price per Share set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement.
2. Vesting. The Option shall become vested in such amounts and at such times as are set forth in the vesting schedule in the Grant Notice. The installments provided for in the vesting schedule are cumulative. No portion of the Option which has not become vested at the date Participant incurs a Termination of Service shall thereafter become vested, except as may be otherwise provided by the Administrator or as set forth in another written agreement between the Company and Participant.
3. Exercise.
(a) Duration of Exercisability. Any vested portion of the Option may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 4.
(b) Person Eligible to Exercise. During the lifetime of Participant, only Participant may exercise the Option or any portion thereof. After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 4, be exercised by Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then Applicable Laws of descent and distribution.
(c) Manner of Exercise. The Option, or any portion thereof, may be exercised solely by delivery to the Secretary of the Company or the Secretary’s office, or such other place as may be determined by the Administrator, including pursuant to an electronic acceptance platform established and maintained by the Company or another third party designated by the Company, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 4:
(i) A written exercise notice in substantially in the form attached as Exhibit B to the Grant Notice (or such other form as is prescribed by the Administrator, which may be an electronic form) (the “Exercise Notice”) signed by Participant or any other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such Exercise Notice complying with all applicable rules established by the Administrator; and
(ii) Subject to Section 5(f) of the Plan, full payment for the Shares with respect to which the Option or portion thereof is exercised by:
(A) Cash or check, payable to the order of the Company; or (B) With the consent of the Administrator, surrendering shares of Common Stock then issuable upon exercise of the Option valued at their Fair Market Value on the date of exercise; or
(B) With the consent of the Administrator, surrendering shares of Common Stock then issuable upon exercise of the Option valued at their Fair Market Value on the date of exercise; or
(C) On and after the date the Company becomes a Publicly Listed Company, through the (A) delivery by Participant to the Company of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price or (B) delivery by Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price; or
(D) With the consent of the Administrator, any other form of payment permitted under Section 5(f) of the Plan; or
(E) any combination of the above permitted forms of payment; and
(iii) Subject to Section 9(e) of the Plan, full payment for any applicable withholding taxes (including without limitation any sums due pursuant to any Option Tax Liability and (if applicable) Secondary NIC Liability, as such terms are defined in the Sub-Plan) in cash or by check or in the form of consideration permitted by the Administrator for the payment of the exercise price pursuant to Section 3(c)(ii) above or pursuant to Section 3(d) below, which, following the date the Company becomes a Publicly Listed Company shall include the method provided for in Section 3(c)(ii)(C) above; and
(iv) In the event the Option or portion thereof shall be exercised pursuant to Section 3.1 by any person or persons other than Participant, appropriate proof of the right of such person or persons to exercise the Option.
(v) If so requested by the Committee, the Participant shall enter into a Section 431 Election (as defined in the Sub-Plan) with respect to any shares of Common Stock acquired pursuant to the exercise of the Option and shall make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign tax obligations (including, but not limited to, any sums due pursuant to any Option Tax Liability and (if applicable) Secondary NIC Liability) with respect to such acquisition upon the making of such election. If the Participant is required to make a Section 431 Election such election shall be made within 14 days following the acquisition of the shares of Common Stock.
(d) Tax Withholding. The Company shall have the authority and the right to deduct or withhold, or require Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including Participant’s employment tax obligation together with any sums due pursuant to any Option Tax Liability and (if applicable) Secondary NIC Liability) required by law to be withheld with respect to any taxable event concerning Participant arising as a result of the Option or otherwise under this Agreement, including, without limitation, the authority to deduct such amounts from other compensation payable to Participant by the Company.
(e) Fractional Shares. The Option may only be exercised for whole shares of Common Stock. Any fractional Shares shall be rounded down to the nearest whole share.
4. Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:
(a) The Expiration Date set forth in the Grant Notice;
(b) The expiration of three months following the date of Participant’s Termination of Service, unless such Termination of Service occurs by reason of Participant’s death or Disability or Participant’s discharge by the Company for Cause;
(c) The expiration of one year following the date of Participant’s Termination of
Service by reason of Participant’s death or Disability;
(d) The date of Participant’s Termination of Service as a result of Participant’s discharge by the Company for Cause; or
(e) With respect to any unvested portion of the Option, the date that is thirty days following Participant’s Termination of Service for any reason other than as a result of Participant’s discharge by the Company for Cause, or such shorter period as may be determined by the Administrator.
Participant acknowledges that an Incentive Stock Option exercised more than three months after Participant’s termination of status as an Employee, other than by reason of death or Disability, will be taxed as a Non-Qualified Stock Option.
5. Transferability. The Option shall not be sold, assigned, transferred, pledged or otherwise encumbered by Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, the Option shall be exercisable only by the Participant.
6. Bylaws Restrictions. Participant and any transferee of the Shares agree that the Shares and any interest therein are subject to the right of first refusal and any and all restrictions on transfer set forth in the Company’s Amended and Restated Bylaws, as it may be amended from time to time (the “Bylaws”).
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Participant understands and agrees that the Company shall cause any certificates, including electronic certificates, issued evidencing the Shares to have the legends set forth below or legends substantially equivalent thereto, together with any other legends that may be required by Applicable Laws:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL AND REPURCHASE RIGHT SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH REPURCHASE OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE COMPANY.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS PROVIDED IN THE BYLAWS OF THE COMPANY.
(b) Stop Transfer Orders. Participant agrees that, in order to ensure compliance with the restrictions referred to in the Plan, this Agreement and the Bylaws, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Impermissible Transfers Void. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or the Bylaws or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
8. Taxes. Participant understands that Participant may suffer adverse tax and national insurance consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s tax liability that may arise as a result of the transactions contemplated by this Agreement.
9. Miscellaneous.
(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or this Agreement.
(b) Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office or to the then-current email address for the Secretary of the Company, and any notice to be given to Participant shall be addressed to Participant at the most-recent physical or email address for Participant listed in the Company’s personnel records. By a notice given pursuant to this Section 9(b), either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled to exercise his or her Option by written notice under this Section 9(b). Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
(c) Successors and Assigns. The Company may assign any of its rights under this Agreement and the Exercise Notice to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
(d) Severability. In the event any portion of the Plan or this Agreement or any action taken pursuant thereto shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan and this Agreement, and the Plan and this Agreement shall be construed and enforced as if the illegal or invalid provisions had not been included, and the illegal or invalid action shall be null and void.
(e) Entire Agreement; Governing Documents. The Plan (including the Sub-Plan),
the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. In the event of any contradiction between the Plan and any Award Agreement or any other written agreement between a Participant and the Company that has been approved by the Administrator, the terms of the Plan shall govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan shall not apply.
(f) Governing Law. The provisions of the Plan and all Awards made thereunder, including the Option, shall be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding choice-of-law principles of the law of any state that would require the application of the laws of a jurisdiction other than such state.
(g) Titles and Headings. The titles and headings of the Sections in this Agreement are for convenience of reference only and, in the event of any conflict, the text of this Agreement, rather than such titles or headings, shall control.
EXHIBIT B
TO STOCK OPTION GRANT NOTICE
FORM OF EXERCISE NOTICE
Effective as of [as described in Carta], the undersigned (“Participant”) hereby elects to exercise Participant’s option to purchase [as described in Carta] Shares of ZipRecruiter, Inc. (the “Company”) under and pursuant to the ZipRecruiter, Inc. Amended and Restated 2014 Equity Incentive Plan (the “Plan”) and the Stock Option Grant Notice and Stock Option Agreement dated [as described in Carta] (the “Agreement”). Capitalized terms used herein without definition shall have the meanings given in the Agreement.
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Grant Date:
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As described on Carta
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Number of Shares as to which Option is Exercised:
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As described on Carta
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Exercise Price per Share:
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As described on Carta
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Total Exercise Price:
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As described on Carta
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Electronic certificate to be issued in name of:
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As described on Carta
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Cash Payment delivered herewith:
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As described on Carta (Representing the full Exercise Price for the Shares, as well as any applicable withholding tax)
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Type of Option:
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As described on Carta
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1. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan and the Agreement. Participant agrees to abide by and be bound by their terms and conditions. Participant further acknowledges that it is a condition to the issuance of the Shares to Participant upon exercise of the Option listed above that Participant agree to be bound by the terms and conditions of, and become a party to, any stockholders’ agreement of the Company. Participant hereby agrees to be so bound and to execute any additional documents as may be deemed necessary or advisable by the Company in order to effectuate the foregoing agreement.
2. Tax Consultation. Participant understands that Participant may suffer adverse tax and national insurance consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
3. Participant Representations. Participant hereby makes the following certifications and representations with respect to the Shares listed above:
(a) Participant 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 Shares. Participant is acquiring these Shares for investment for Participant’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.
(b) Participant acknowledges and understands that the Shares constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed herein. Participant understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further acknowledges and understands that the Company is under no obligation to register the Shares. Participant understands that the electronic certificate evidencing the Shares will be imprinted with a legend which prohibits the transfer of the Shares unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company and any other legend required under Applicable Laws.
(c) Participant is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to Participant, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, ninety days thereafter (or such longer period as any market stand-off agreement may require) the securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144.
(d) In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the securities may be resold in certain limited circumstances subject to the provisions of Rule 144.
(e) Participant further understands that in the event all of the applicable requirements of Rule 701 or 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 Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 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. Participant understands that no assurances can be given that any such other registration exemption will be available in such event.
(f) Participant acknowledges that the Shares remain subject to the Company’s right of first refusal and certain transfer restrictions all in accordance with the Agreement and the Company’s Amended and Restated Bylaws, as it may be amended from time to time.
4. Regulation S. if Participant’s address is an address located outside of the United States, participant will make the following additional representations, warranties and agreements:
(a) Non-US. Participant is not a U.S. Person as defined in Rule 902(k) of Regulation S under the Securities Act. The offer and sale of the Shares to Participant was made in an offshore transaction (as defined in Rule 902(h) of Regulation S), no directed selling efforts (as defined in Rule 902(c) of Regulation S) were made in the United States, and Participant is not acquiring the Shares for the account or benefit of any U.S. Person.
(b) No Offer or Sale. Participant will not, during the Restricted Period applicable to the Shares set forth in the legend set forth below (the “Restricted Period”) and to any certificate, including electronic certificates, representing the Purchased Shares, offer or
sell any of the foregoing securities (or create or maintain any derivative position equivalent thereto) in the United States, to or for the account or benefit of a U.S. Person or other than in accordance with Regulation S.
(c) Registration or Exemption. Participant will, after the expiration of the applicable Restricted Period, offer, sell, pledge or otherwise transfer the Shares (or create or maintain any derivative position equivalent thereto) only pursuant to registration under the Securities Act or any available exemption therefrom and, in any case, in accordance with applicable state securities laws.
(d) No Transfer in Violation of Restrictions; Legend. Participant acknowledges and agrees that the Company shall not register the transfer of the Shares in violation of these restrictions. Participant acknowledges and agrees that the electronic certificate(s) evidencing the Shares will bear the legend set forth below (in addition to any other legend required by applicable federal, state or foreign securities laws or provided in any other agreement with the Company:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, AND THE COMPANY DOES NOT INTEND TO REGISTER THEM. PRIOR TO A DATE THAT IS ONE-YEAR STARTING FROM THE DATE OF SALE OF THE STOCK, THE SHARES MAY NOT BE OFFERED OR SOLD (INCLUDING OPENING A SHORT POSITION IN SUCH SECURITIES) IN THE UNITED STATES OR TO U.S. PERSONS AS DEFINED BY RULE 902(k) ADOPTED UNDER THE ACT, OTHER THAN TO DISTRIBUTORS, UNLESS THE SHARES ARE REGISTERED UNDER THE ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE. HOLDERS OF SHARES PRIOR TO ONE-YEAR STARTING FROM THE DATE OF SALE OF THE STOCK, MAY RESELL SUCH SECURITIES ONLY PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT OR OTHERWISE IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S OF THE ACT, OR IN TRANSACTIONS EFFECTED OUTSIDE OF THE UNITED STATES PROVIDED THEY DO NOT SOLICIT (AND NO ONE ACTING ON THEIR BEHALF SOLICITS) PARTICIPANTS IN THE UNITED STATES OR OTHERWISE ENGAGE(S) IN SELLING EFFORTS IN THE UNITED STATES AND PROVIDED THAT HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT. A HOLDER OF THE SECURITIES WHO IS A DISTRIBUTOR, DEALER, SUB-UNDERWRITER OR OTHER SECURITIES PROFESSIONAL, IN ADDITION, CANNOT PRIOR TO ONE-YEAR STARTING FROM THE DATE OF SALE OF THE STOCK RESELL THE SECURITIES TO A U.S. PERSON AS DEFINED BY RULE 902(k) OF REGULATION S UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
5. Notices. Any notice required or permitted hereunder shall be given in accordance with the provisions set forth in Section 9(b) of the Agreement.
6. Entire Agreement. The Plan (including the Sub-Plan) and Agreement are incorporated herein by reference. This Notice, the Plan and the Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
Exercise of the Option through an online or electronic system established and maintained by the Company or another third party designated by the Company shall be deemed to be Participant’s agreement to and acceptance of the terms and conditions of this Exercise Notice.
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ACCEPTED BY:
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SUBMITTED BY
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ZIPRECRUITER, INC.
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PARTICIPANT:
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By:
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By:
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Print Name:
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Print Name:
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Title:
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ZIPRECRUITER, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD AND
RESTRICTED STOCK UNIT AGREEMENT
FOR ISRAELI PARTICIPANTS
ZipRecruiter, Inc. (the “Company”), pursuant to its Amended and Restated 2014 Equity Incentive Plan and the 2015 Israeli Equity Incentive Sub Plan (collectively, the “Plan”), pursuant to this Notice of Restricted Stock Unit Award (this “Notice of Grant”) grants to Participant an award of restricted stock units (“RSUs”) representing shares of the Company’s Common Stock (the “Shares”) subject to the terms and conditions of the Plan and the attached Restricted Stock Unit Agreement attached hereto as Exhibit A (the “Agreement”) under the Plan, each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Grant Notice (“Grant Notice”) and the Agreement.
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Participant:
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As described on Carta
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Grant Date:
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As described on Carta
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Type of Award:
(check one)
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RSU designated as 102 Capital Gains Track Award (with Trustee) (Israel)
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RSU designated as 102 Ordinary Income Track Award (with Trustee) (Israel) (“Trustee 102 Award”)
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RSU designated as 102 Non-Trustee Award (Israel)
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RSU designated as 3(9) Award (Israel)
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Vesting Commencement Date:
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As described on Carta
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Total Number of RSUs:
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As described on Carta
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Expiration Date:
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As described on Carta
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Vesting:
(a) Two-Tiered Vesting: Vesting of RSUs is conditioned on satisfaction of two vesting requirements before the Expiration Date or earlier termination of RSUs pursuant to the Plan or Agreement: a time- and service-based requirement (the “Time and Service Requirement”) and a liquidity-event requirement (the “Liquidity Event Requirement”), each as described below.
(1) Time and Service Requirement: For so long as Participant continues to be a Service Provider through each applicable date, the Time and Service Requirement will be satisfied as to (i) twenty-five percent (25%) of the Total Number of RSUs (as set forth above) subject to this award on the first anniversary of the Vesting Commencement Date, provided that the Initial Vesting Event has not occurred before such date, or 1/16 of the Total Number of RSUs for each Quarterly Vesting Date (as defined below) that occurred between the Vesting Commencement Date and Initial Vesting Event and (ii) an additional 1/16 of the Total Number of RSUs thereafter on each subsequent March 15, June 15, September 15 and December 15 (each, a “Quarterly Vesting Date”).
(2) Liquidity Event Requirement: The Liquidity Event Requirement will be satisfied on the earliest to occur of: (i) the first trading day following expiration of the “lockup” period applicable to the Company’s initial public offering pursuant to an effective registration statement under the Securities Act covering the offer and sale by the Company of its equity securities (such initial public offering, the “IPO”), (ii) March 15 of the calendar year following the year in which the IPO was declared effective and (iii) a Change in Control (the earliest of these, the “Initial Vesting Event”).
(b) RSUs Vested at Initial Vesting Event. If at the time of the Initial Vesting Event Participant is not a Service Provider and did not meet the Time and Service Requirement with respect to any portion of the RSUs, then no portion of the RSUs shall vest. If at the time of the Initial Vesting Event, Participant is a Service Provider or has ceased to be a Service Provider but did meet the Time and Service Requirement with respect to any portion of the RSUs, then the RSUs shall vest as to the number of RSUs, if any, that have satisfied the Time and Service Requirement as of the Initial Vesting Event in accordance with clause (a)(1) above.
(c) RSUs Vested after Initial Vesting Event. If Participant is a Service Provider at the time of the Initial Vesting Event, then with respect to RSUs that have not vested as of such Initial Vesting Event under the preceding clause (b) above, vesting shall continue after the Initial Vesting Event in accordance with the Time and Service Requirement set forth in clause (a)(1) above (each subsequent vesting date, a “Subsequent Vesting Event”).
Settlement:
(a) RSUs that vest as of the Initial Vesting Event shall be settled immediately upon the Initial Vesting Event. Within 30 days following the occurrence of any Subsequent Vesting Event, RSUs that vest as of the Subsequent Vesting Event shall be settled. Settlement means the delivery of the Shares vested under an RSU. Settlement of RSUs on the Initial Vesting Event or any Subsequent Vesting Event shall be in Shares. Settlement of vested RSUs shall occur regardless of whether Participant has undergone a Service Provider at the time of settlement. No fractional RSUs or rights for fractional Shares shall be created pursuant to this Notice of Grant.
(b) Participant understands that Participant’s employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”) and that nothing in this Notice of Grant, the Agreement or the Plan changes the at-will nature of that relationship. Participant acknowledges that the vesting of the RSUs pursuant to this Notice of Grant is conditioned on the occurrence of an Initial Vesting Event or a Subsequent Vesting Event. Participant also understands that this Notice of Grant is subject to the terms and conditions of both the Agreement and the Plan, both of which are incorporated herein by reference. Participant has read both the Agreement and the Plan.
(c) By Participant’s acceptance hereof (whether written, electronic or otherwise), Participant agrees, to the fullest extent permitted by law, that in lieu of receiving documents in paper format, Participant accepts the electronic delivery of any documents the Company, or any third party involved in administering the Plan which the Company may designate, may deliver in connection with this grant (including the Plan, the Notice of Grant, the Agreement, any disclosures provided pursuant to Rule 701, account statements or other communications or information) whether via the Company’s intranet or the internet site of another such third party or via email, or such other means of electronic delivery specified by the Company.
(d) In case of RSUs designated as Trustee 102 Award, settled during the Required Holding Period, the Shares shall be issued to and in the name of the Trustee for the benefit of the Participant. In the case of 102 RSU Award (with Trustee) settled after the Holding Period, the Shares issued upon the settlement shall be issued either in the name of the Trustee or the Participant, at the election of Participant; provided, however, that in the event the Participant elects to receive the Shares directly to his/her possession, the issuance shall be subject to the payment of any and all applicable taxes and compulsory payments by the Participant. The Participant shall have no rights as a shareholder with respect to any Shares subject to RSUs until the Participant shall have, if required, paid all applicable taxes and compulsory payments therefor and becomes the record holder of the subject Shares.
(e) Without derogating from the provision of the Plan, in the event that the Company or, with respect to Trustee 102 Award, the Trustee determines that it is required to withhold any tax as a result of the settlement of RSUs, the Participant, as a condition to the settlement of RSUs, shall make arrangements satisfactory to the Company and the Trustee, if applicable, to enable it to satisfy all withholding requirements. The Participant shall also make arrangements satisfactory to the Company and the Trustee, if applicable, to enable it to satisfy any withholding requirements that may arise in connection with the vesting or disposition of Shares acquired pursuant to the grant of an RSU under the Plan. Furthermore, the Participant shall indemnify the Company and the Trustee, if applicable, and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to withholding.
Termination:
(a) The RSUs shall terminate on the Expiration Date or earlier, as provided in this paragraph. If Participant undergoes a Termination of Service for any reason, all RSUs for which vesting is no longer possible under the terms of this Notice of Grant and the Agreement shall be forfeited to the Company immediately, and all rights of Participant to such RSUs shall immediately terminate. In case of any dispute as to whether such Termination of Service has occurred, the Administrator shall have sole discretion to determine whether such Termination of Service has occurred and the effective date of such Termination of Service. For clarity: All RSUs for which vesting is still possible will remain outstanding for the minimum amount of time necessary to determine whether such RSUs will vest.
(b) By Participant’s and the Company’s acceptance hereof (in each case, whether written, electronic or otherwise), Participant and the Company agree that this RSU is granted under and governed by the terms and conditions of the Plan, this Notice of Grant and the Agreement.
EXHIBIT A
TO RESTRICTED STOCK UNIT AWARD NOTICE
RESTRICTED STOCK UNIT AGREEMENT
Participant has been granted Restricted Stock Units (“RSUs”) subject to the terms, restrictions and conditions of the Company’s Amended and Restated 2014 Equity Incentive Plan (the “Plan”), the Notice of Restricted Stock Unit Award (“Notice of Grant”) and this Restricted Stock Unit Agreement (this “RSU Agreement”). Unless otherwise defined herein or in the Notice of Grant, the terms defined in the Plan shall have the same defined meanings in this RSU Agreement.
1. No Stockholder Rights. Unless and until such time as Shares are issued in settlement of vested RSUs, Participant shall have no ownership of the Shares allocated to the RSUs and shall have no right to dividends or to vote such Shares.
2. Dividend Equivalents. Dividend equivalents, if any, shall not be credited to Participant in respect of Participant’s RSUs.
3. No Transfer. The RSUs and any interest therein may not be transferred in any manner otherwise than by will or by the laws of descent or distribution. The terms of the Plan, the Notice of Grant and this RSU Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Participant. Further, until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or after the Administrator determines that it is, will, or may no longer be relying upon the exemption from registration of RSUs under the Exchange Act as set forth in Rule 12h- 1(f) promulgated under the Exchange Act (the “Reliance End Date”), Participant shall not transfer these RSUs in any manner other than (i) to persons who are “family members” (as defined in Rule 701(c)(3) of the Securities Act) through gifts or domestic relations orders or (ii) to an executor or guardian of Participant upon the death or disability of Participant. Until the Reliance End Date, the RSUs may not be pledged, hypothecated or otherwise transferred or disposed of, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than as permitted in clauses (i) and (ii) of this paragraph.
4. Acknowledgement. The Company and Participant agree that the RSUs are granted under and governed by the Notice of Grant, this RSU Agreement and by the provisions of the Plan (incorporated herein by reference). Participant (i) acknowledges receipt of a copy of each of the foregoing documents, (ii) represents that Participant has carefully read and is familiar with their provisions and (iii) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice of Grant.
5. Limitations on Transfer of Stock. In addition to any other limitation on transfer created by applicable securities laws, Participant shall not assign, encumber or dispose of any interest in the Shares issued pursuant to this RSU Agreement except with the Company’s prior written consent and in compliance with the Company’s Bylaws, the Company’s then-current Insider Trading Policy and applicable securities laws. The restrictions on transfer also include a prohibition on any short position, any “put equivalent position” or any “call equivalent position” by the RSU holder with respect to the RSU itself as well as any Shares issuable upon settlement of the RSU prior to the settlement thereof until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.
6. Restrictions Binding on Transferees. All transferees of Shares or any interest therein will receive and hold such shares or interest subject to the provisions of this RSU Agreement, including the
transfer restrictions of Sections 3 and 5, and the transferee shall acknowledge such restrictions in writing. Any sale or transfer of the Shares shall be void unless the provisions of this RSU Agreement are satisfied.
7. Section 102 of the Ordinance. To the extent and with respect to Trustee 102 Awards, the Participant acknowledges, undertakes and confirms that: (i) the Participant fully understands that Section 102 Ordinance and the rules and regulations enacted thereunder apply to the RSUs, and (ii) the Participant understands the provisions of Section 102 of the Ordinance, the tax track chosen thereunder and the implications thereof. With respect to RSUs granted under Section 102, the terms of such RSUs shall also be subject to the terms of the Trust Agreement made between the Company and the Trustee (the “Trust Agreement”) for the benefit of the Participant as well as the requirements of the ITA. The Participant shall sign all documents requested by the Company or the Trustee, in accordance with and under the Trust Agreement. A copy of the Trust Agreement is available for the Participant’s review, during normal working hours, at the Company’s offices.
7.1. Participant Undertaking. Without derogating from the generality of the foregoing, to the extent and with respect to any RSUs that are 102 Capital Gain Track Awards, and as required by Section 102 of the Ordinance and the Income Tax Rules (Tax Benefits in Stock Issuance to Employees) 5763- 2003 or such other rules so adopted from time to time, the Participant acknowledges, undertakes and confirms in writing the following (which shall be apply and relate to all Awards granted to the Participant, whether under this Plan or other plans maintained by the Company, and whether prior to or after the date hereof, if any):
(a) The Participant shall comply with all terms and conditions set forth in Section 102 of the Ordinance with regard to the “Capital Gain Track” and the applicable rules and regulations promulgated thereunder, as amended from time to time;
(b) The Participant is familiar with, and understands the provisions of, Section 102 of the Ordinance in general, and the tax arrangement under the “Capital Gain Track” in particular, and its tax consequences; the Participant agrees that the RSUs and Shares that may be issued upon settlement of the RSUs (or otherwise in relation to the RSUs), will be held by a trustee appointed pursuant to Section 102 of the Ordinance for at least the duration of the Holding Period, as defined in Section 102 under the “Capital Gain Track”. The Participant understands that any release of such RSUs or Shares from trust, or any sale of the Share prior to the termination of the Holding Period, will result in taxation at marginal tax rates, in addition to deductions of appropriate social security, health tax contributions or other compulsory payments; and
(c) The Participant agrees to the trust agreement signed between the Company, his/ her employing company and the trustee appointed pursuant to Section 102 of the Ordinance and shall sign all documents requested by the Company or the Trustee, in accordance with and under the trust agreement.
8. Withholding of Tax. When the RSUs are vested and/or settled, the fair market value of the Shares shall be treated as income subject to withholding by the Company for income and employment taxes if Participant is or was an employee of the Company. Prior to any relevant taxable or tax withholding event, as applicable, Participant shall pay or make adequate arrangements satisfactory to the Company to satisfy any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to the Participant's participation in this Plan and legally applicable to the Participant (collectively, “Tax-Related Obligations”). In this regard, Participant authorizes the Company to withhold all applicable Tax-Related Obligations legally payable by Participant from Participant’s wages or other cash compensation paid to Participant by the Company and/or a Parent or Subsidiary of the Company. With the Company’s consent, these arrangements may also include, if
permissible under local law, (i) withholding Shares that otherwise would be issued to Participant when Participant’s RSUs are settled, (ii) having the Company withhold taxes from the proceeds of the sale of the Shares, through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf and Participant hereby authorizes such sales by this authorization), (iii) Participant’s payment of a cash amount or (iv) any other arrangement approved by the Company, all under such rules as may be established by the Administrator and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable, provided, however, that if Participant is a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be through a mandatory sale under (ii) above. Depending on the withholding method, the Company and/or a Parent or Subsidiary of the Company may withhold or account for Tax-Related Obligations by considering up to the applicable maximum statutory withholding rates, in which case Participant may receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent in Shares. In the case of withholding in Shares, the Company shall issue the net number of Shares to Participant by deducting the Shares retained for Tax-Related Obligations from the Shares issuable upon vesting. For tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Obligations.
9. Code Section 409A. For purposes of this RSU Agreement, a termination of employment will be determined consistent with the rules relating to a “separation from service” as defined in Section 409A of the Code and the regulations thereunder (“Section 409A”). Notwithstanding anything else provided herein, to the extent any payments provided under this RSU Agreement in connection with Participant’s termination of employment constitute deferred compensation subject to Section 409A, and Participant is deemed at the time of such termination of employment to be a “specified employee” under Section 409A, then such payment shall not be made or commence until the earlier of (i) the expiration of the six-month period measured from Participant’s separation from service from the Company or (ii) the date of Participant’s death following such a separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to Participant including, without limitation, the additional tax for which Participant would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral. The first payment thereof will include a catch-up payment covering the amount that would have otherwise been paid during the period between Participant’s termination of employment and the first payment date but for the application of this provision, and the balance of the installments (if any) will be payable in accordance with their original schedule. To the extent that any provision of this RSU Agreement is ambiguous as to its exemption from or compliance with Section 409A, the provision will be read in such a manner so that all payments hereunder are exempt from Section 409A to the maximum permissible extent and, for any payments where such construction is not reasonable, that those payments comply with Section 409A. To the extent any payment under this RSU Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.
10. Tax Consequences. Participant acknowledges that there will be tax consequences upon vesting and/or settlement of the RSUs and/or disposition of the Shares, if any, received in connection therewith, and Participant should consult a tax adviser regarding Participant’s tax obligations prior to such settlement or disposition. THE COMPANY DOES NOT ASSUME ANY RESPONSIBILITY TO ADVISE THE PARTICIPANT ON SUCH MATTERS, WHICH SHALL REMAIN SOLELY THE RESPONSIBILITY OF THE PARTICIPANT. Without derogating from the Plan, and notwithstanding anything to the contrary, including the indication under “Type of Award” above, the Company shall be
under no duty to ensure, and no representation or commitment is made, that the RSU qualifies or will qualify under any particular tax treatment (e.g., Section 102 or any other treatment), nor shall the Company be required to take any action for the qualification of any RSU under such tax treatment. If the RSUs do not qualify under any particular tax treatment it could result in adverse tax consequences to the Participant. By signing below, Participant agrees that the Company and its Affiliates and their respective employees, directors, officers and shareholders shall not be liable for any tax, penalty, interest or cost incurred by Participant as a result of such determination, nor will any of them have any liability of any kind or nature in the event that, for any reason whatsoever, an RSU does not qualify for any particular tax treatment.
11. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and Participant (including any written representations, warranties and agreements as the Administrator may request of Participant for compliance with Applicable Laws) with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Common Stock may be listed or quoted at the time of such issuance or transfer. Participant may not be issued any Shares if such issuance 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 Shares may then be listed. 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 shall relieve the Company of any liability in respect of the failure to issue or sell such Shares.
12. Legend on Certificates. The certificates representing the Shares issued hereunder shall be subject to such stop transfer orders and other restrictions as the Administrator may deem advisable under the Plan, this RSU Agreement, the Company’s Bylaws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which such shares of the Common Stock are listed and any applicable state, Federal or foreign laws, and the Administrator may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
13. Successors and Assigns. The Company may assign any of its rights under this RSU Agreement. This RSU Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. This RSU Agreement will be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives, successors and assigns.
14. Entire Agreement; Severability. The Plan and Notice of Grant are incorporated herein by reference. The Plan, the Notice of Grant and this RSU Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof (including, without limitation, any commitment to make any other form of equity award (such as stock options) that may have been set forth in any employment offer letter or other agreement between the parties). If any provision of this RSU Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.
15. No Rights as Employee, Director or Consultant. Nothing in this RSU Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to cause Participant as a Service Provider, for any reason, with or without cause.
16. Information to Participants. If the Company is relying on an exemption from registration under Section 12(h)-1 of the Exchange Act and such information is required to be provided by such Section
12(h)-1, the Company shall provide the information described in Rules 701(e)(3), (4) and (5) of the Securities Act by a method allowed under Section 12(h)-1 of the Exchange Act in accordance with Section 12(h)-1 of the Exchange Act, provided, that Participant agrees to keep the information confidential.
17. Delivery of Documents and Notices. Any document relating to participating in the Plan and/or notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this RSU Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery or deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, with postage and fees prepaid, addressed to the other party at the address, if any, provided for Participant by the Company or at such other address as such party may designate in writing from time to time to the other party.
18. Choice of Law and Venue. This RSU Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State. For purposes of any action, lawsuit or other proceedings brought to enforce this RSU Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of Los Angeles County, California, or the federal courts for the United States for the Southern District of California, and no other courts, where this grant is made and/or to be performed.
Neither this document, nor any stock option agreement connected with it, is an approved prospectus for the purposes of section 85(1) of the Financial Services and Markets Act 2000 ("FSMA") and no offer of transferable securities to the public (for the purposes of section 102B of FSMA) is being made in connection with the Amended and Restated UK Sub-Plan to the ZipRecruiter, Inc. Amended and Restated 2014 Equity Incentive Plan (the "Sub-Plan"). The Sub- Plan is exclusively available to bona fide UK employees and former employees of ZipRecruiter, Inc. or any of its subsidiaries.
AMENDED AND RESTATED UK SUB-PLAN TO THE
ZIPRECRUITER, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
Additional terms and conditions for Options received by Participants tax resident in the UK, pursuant to section 10(e) of the ZipRecruiter, Inc. Amended and Restated 2014 Equity Incentive Plan (the "Plan").
1. The purpose of this Sub-Plan is to provide incentives for UK Participants (as defined below) through the grant of options over shares of Common Stock of ZipRecruiter, Inc. (the "Company").
2. This Sub-Plan shall apply to all UK Participants. In the event that a Participant becomes a UK Participant subsequent to the grant of an Option under the Plan, then such Option shall immediately and automatically be amended in a manner consistent with this Sub-Plan unless otherwise determined by the Committee.
3. Capitalized terms used in this Sub-Plan are defined in the Plan, subject to the provisions of this Sub-Plan.
4. References to Incentive Stock Options and Non-Qualified Stock Options shall not apply to Options granted under the Sub-Plan.
5. The Options granted under this Sub-Plan shall be designated as Non tax-advantaged Options. References to Awards shall be replaced with Options, where applicable.
6. All references to Service Provider(s) shall be replaced by references to Employee(s).
7. This Sub-Plan is governed by the Plan and all its provisions shall be identical to those of the Plan SAVE THAT (i) "Sub-Plan" shall be substituted for "Plan" where applicable and (ii) the following provisions shall be as stated in this Sub-Plan in order to accommodate the specific requirements of the laws of England and Wales:
8. SECTION 2. ELIGIBILITY
Section 2 shall be amended to read as follows:
"Employees are eligible to be granted Options under the Plan, subject to the limitations described herein."
9. SECTION 3. ADMINISTRATION AND DELEGATION
A new section 3(c) shall be added as follows:
"No term of the Plan or any Award Agreement shall be construed so as to require the Company or the Committee to grant, or alter the terms of, any Award to a UK Participant so as to confer any “tax-advantaged” status on that Award for United Kingdom tax purposes."
A new section 3(d) shall be added as follows:
"The Committee may provide in an Award Agreement that the grant or satisfaction of an Award, or the exercise of an Option (or any portion thereof), is conditioned upon the UK Participant’s making or refraining from making a Section 431 Election with respect to the shares of Common Stock acquired pursuant to the grant or satisfaction of such Award or the exercise of such Option. If a UK Participant makes a Section 431 Election in respect of any shares of Common Stock so acquired, such election shall be made no later than fourteen (14) days from the date of acquisition of the shares."
10. SECTION 11. DEFINITIONS
The following definitions shall be deleted:
"Consultant"
"Incentive Stock Option"
"Non-qualified Stock Option"
"Restricted Stock"
"Restricted Stock Unit"
"Service Provider"
The following definitions shall be amended to read:
"Plan" means this Amended and Restated UK Sub-Plan to the Amended and Restated 2014 Equity Incentive Plan.
The following definitions shall be added:
"Data" means certain personal information about the Participant, including, but not limited to, name, home address and telephone number, date of birth, national insurance number, salary, nationality, job title, any stock, units or directorships held in the Company or any Subsidiary including the UK Subsidiary, details of all options or other entitlement to shares awarded, cancelled, exercised, vested, unvested, or outstanding in the Participant's favour.
"Data Recipients" means third parties assisting the Company or the UK Subsidiary in the implementation, administration, and management of the Plan.
"HMRC" means HM Revenue & Customs.
"ITEPA" means the Income Tax (Earnings and Pensions) Act 2003.
"Joint Election" means an election (in such terms and such form as provided in paragraphs 3A and 3B of Schedule 1 to the Social Security Contributions and Benefits Act 1992), which has been approved by HMRC for the transfer of the whole of or any liability of the Secondary Contributor for any Secondary NIC Liability.
"Non tax-advantaged Option" shall mean an Option over Shares that is neither an option granted pursuant to a CSOP scheme under Schedule 4 ITEPA nor an enterprise management incentive (EMI) option which meets the requirements of Schedule 5 ITEPA.
"Option Tax Liability" shall mean any liability or obligation of the Company and/or any Subsidiary, including the UK Subsidiary to account (or pay) for income tax (under the United Kingdom withholding system of PAYE (pay as you earn)) or any other taxation provisions and primary class 1 National Insurance Contributions in the United Kingdom to the extent arising from the grant, exercise, assignment, release, cancellation or any other disposal of an Option or arising out of the acquisition, retention and disposal of the Shares acquired under this Plan.
"Personal Representative" shall mean the personal representative(s) of a UK Participant (being either the executors of his will or if he dies intestate the duly appointed administrator(s) of his estate) who have provided to the Committee evidence of their appointment as such.
"Secondary Contributor" shall mean a person or company who has a liability to account (or pay) the Secondary NIC Liability to HMRC.
"Secondary NIC Liability" shall mean any liability to employer's Class 1 National Insurance Contributions to the extent arising from the grant, exercise, release or cancellation of an Option or arising out of the acquisition, retention and/or disposal of the Shares acquired pursuant to an Option.
"Section 431 Election" shall mean an election made under section 431 of ITEPA. "Shares" means shares of Common Stock.
"Taxable Event" shall mean any occasion on which an Option Tax Liability and/or Secondary NIC Liability arises in connection with an Option or any award of Shares under it, including but not limited to the grant, exercise, release or cancellation of an Option or arising out of the acquisition, retention and/or disposal of the Shares acquired pursuant to an Option.
"UK Participant" means a Participant resident in the United Kingdom for United Kingdom tax purposes, or otherwise within the scope of United Kingdom taxation on employment income as a result of duties performed in the United Kingdom.
"UK Subsidiary" shall mean a Subsidiary which is incorporated in the UK.
11. SECTION 5. STOCK OPTIONS.
Section 5(e) shall be amended so that the following words are added after the reference to "withholding taxes":
", including without limitation any sums due pursuant to any Option Tax Liability and (if applicable) Secondary NIC Liability."
12. SECTION 6: RESTRICTED STOCK, RESTRICTED STOCK UNITS, SECTION 7 OTHER STOCK-BASED AWARDS
These sections shall be deleted in their entirety.
13. SECTION 9(a). TRANSFERABILITY OF AWARDS
This section shall be amended to read as follows:
"Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than on the UK Participant's death to the UK Participant's Personal Representative, and may be exercised during the lifetime of the UK Participant, only by the UK Participant."
14. SECTION 9(e). WITHHOLDING
Section 9(e) shall be amended to read as follows:
"The Participant shall be responsible for payment of any taxes or similar charges required by law to be paid in respect of, or withheld from, an Award or an amount paid in satisfaction of an Award. Any such required payments or withholdings shall be made good by the Participant on or prior to the event that results in taxable income in respect of an Award. The Company (or the Participant’s employer, if different) shall have the power and the right to deduct or withhold automatically from any amount deliverable under an Award or otherwise, or require a Participant to remit to the Company in cash, the minimum statutory amount to satisfy such taxes or charges (including, but not limited to, any Option Tax Liability and, to the extent legally permissible, Secondary NIC Liability) with respect to any Taxable Event. The Award Agreement may specify the manner in which the payment or withholding obligation shall be satisfied with respect to the particular type of Award, which may include permitting the Participant to elect to satisfy such obligation by tendering shares of Common Stock to the Company or having the Company withhold a number of shares of Common Stock having a value equal to the minimum statutory tax (or similar charge or contribution required to be paid or withheld) or as otherwise specified in an Award Agreement.
ZIPRECRUITER, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
STOCK OPTION GRANT NOTICE AND
STOCK OPTION AGREEMENT
ZipRecruiter, Inc. (the “Company”), pursuant to its Amended and Restated 2014 Equity Incentive Plan (the “Plan”), which Plan includes, in respect of UK Participants, as defined therein, the Sub-Plan hereby grants to Participant an Option to purchase the number of shares of the Company’s Common Stock (referred to herein as “Shares”) set forth below. This Option is subject to all of the terms and conditions as set forth herein and in the Stock Option Agreement attached hereto as Exhibit A (the “Agreement”) and the Plan, each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Grant Notice (“Grant Notice”) and the Agreement.
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Participant:
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As described on Carta
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Grant Date:
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As described on Carta
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Vesting Commencement Date:
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As described on Carta
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Exercise Price per Share:
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As described on Carta
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Total Number of Shares
Subject to Option:
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As described on Carta
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Expiration Date:
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As described on Carta
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Type of Option:
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As described on Carta
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Vesting Schedule:
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As described on Carta
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By Participant’s acceptance of this Option, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Agreement and the Plan. By acceptance of this Option, Participant agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator of the Plan upon any questions arising under the Plan or the Agreement.
EXHIBIT A
TO STOCK OPTION GRANT NOTICE
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice to which this Agreement is attached, the Company has granted to Participant an Option under the Plan to purchase the number of Shares indicated in the Grant Notice.
1. Grant of Option. In consideration of Participant’s past and/or continued employment with or service to the Company and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice, the Company irrevocably grants to Participant an Option to purchase any part or all of an aggregate of the number of Shares set forth in the Grant Notice at the Exercise Price per Share set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement.
2. Vesting. The Option shall become vested in such amounts and at such times as are set forth in the vesting schedule in the Grant Notice. The installments provided for in the vesting schedule are cumulative. No portion of the Option which has not become vested at the date Participant incurs a Termination of Service shall thereafter become vested, except as may be otherwise provided by the Administrator or as set forth in another written agreement between the Company and Participant.
3. Exercise.
(a) Duration of Exercisability. Any vested portion of the Option may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 4.
(b) Person Eligible to Exercise. During the lifetime of Participant, only Participant may exercise the Option or any portion thereof. After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 4, be exercised by Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then Applicable Laws of descent and distribution.
(c) Manner of Exercise. The Option, or any portion thereof, may be exercised solely by delivery to the Secretary of the Company or the Secretary’s office, or such other place as may be determined by the Administrator, including pursuant to an electronic acceptance platform established and maintained by the Company or another third party designated by the Company, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 4:
(i) A written exercise notice in substantially in the form attached as Exhibit B to the Grant Notice (or such other form as is prescribed by the Administrator, which may be an electronic form) (the “Exercise Notice”) signed by Participant or any other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such Exercise Notice complying with all applicable rules established by the Administrator; and
(ii) Subject to Section 5(f) of the Plan, full payment for the Shares with respect to which the Option or portion thereof is exercised by:
(A) Cash or check, payable to the order of the Company; or
(B) With the consent of the Administrator, surrendering shares of Common Stock then issuable upon exercise of the Option valued at their Fair Market Value on the date of exercise; or
(C) On and after the date the Company becomes a Publicly Listed Company, through the (A) delivery by Participant to the Company of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price or (B) delivery by Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price; or
(D) With the consent of the Administrator, any other form of payment permitted under Section 5(f) of the Plan; or
(E) any combination of the above permitted forms of payment; and
(iii) Subject to Section 9(e) of the Plan, full payment for any applicable withholding taxes (including without limitation any sums due pursuant to any Option Tax Liability and (if applicable) Secondary NIC Liability, as such terms are defined in the Sub-Plan) in cash or by check or in the form of consideration permitted by the Administrator for the payment of the exercise price pursuant to Section 3(c)(ii) above or pursuant to Section 3(d) below, which, following the date the Company becomes a Publicly Listed Company shall include the method provided for in Section 3(c)(ii)(C) above; and
(iv) In the event the Option or portion thereof shall be exercised pursuant to Section 3.1 by any person or persons other than Participant, appropriate proof of the right of such person or persons to exercise the Option.
(v) If so requested by the Committee, the Participant shall enter into a Section 431 Election (as defined in the Sub-Plan) with respect to any shares of Common Stock acquired pursuant to the exercise of the Option and shall make such arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign tax obligations (including, but not limited to, any sums due pursuant to any Option Tax Liability and (if applicable) Secondary NIC Liability) with respect to such acquisition upon the making of such election. If the Participant is required to make a Section 431 Election such election shall be made within 14 days following the acquisition of the shares of Common Stock.
(d) Tax Withholding. The Company shall have the authority and the right to deduct or withhold, or require Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and foreign taxes (including Participant’s employment tax obligation together with any sums due pursuant to any Option Tax Liability and (if applicable) Secondary NIC Liability) required by law to be withheld with respect to any taxable event concerning Participant arising as a result of the Option or otherwise under this Agreement, including, without limitation, the authority to deduct such amounts from other compensation payable to Participant by the Company.
(e) Fractional Shares. The Option may only be exercised for whole shares of Common Stock. Any fractional Shares shall be rounded down to the nearest whole share.
4. Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:
(a) The Expiration Date set forth in the Grant Notice;
(b) The expiration of three months following the date of Participant’s Termination of Service, unless such Termination of Service occurs by reason of Participant’s death or Disability or Participant’s discharge by the Company for Cause;
(c) The expiration of one year following the date of Participant’s Termination of Service by reason of Participant’s death or Disability;
(d) The date of Participant’s Termination of Service as a result of Participant’s discharge by the Company for Cause; or
(e) With respect to any unvested portion of the Option, the date that is thirty days following Participant’s Termination of Service for any reason other than as a result of Participant’s discharge by the Company for Cause, or such shorter period as may be determined by the Administrator.
Participant acknowledges that an Incentive Stock Option exercised more than three months after Participant’s termination of status as an Employee, other than by reason of death or Disability, will be taxed as a Non-Qualified Stock Option.
5. Transferability. The Option shall not be sold, assigned, transferred, pledged or otherwise encumbered by Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the life of the Participant, the Option shall be exercisable only by the Participant.
6. Bylaws Restrictions. Participant and any transferee of the Shares agree that the Shares and any interest therein are subject to the right of first refusal and any and all restrictions on transfer set forth in the Company’s Amended and Restated Bylaws, as it may be amended from time to time (the “Bylaws”).
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Participant understands and agrees that the Company shall cause any certificates, including electronic certificates, issued evidencing the Shares to have the legends set forth below or legends substantially equivalent thereto, together with any other legends that may be required by Applicable Laws:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“ACT”), NOR HAVE THEY BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE. NO TRANSFER OF SUCH SECURITIES WILL BE PERMITTED UNLESS A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER, THE TRANSFER IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR IN THE OPINION OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REGISTRATION UNDER THE ACT IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE ACT AND WITH APPLICABLE STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. SUCH TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL AND REPURCHASE RIGHT SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH REPURCHASE OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE COMPANY.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AS PROVIDED IN THE BYLAWS OF THE COMPANY.
(b) Stop Transfer Orders. Participant agrees that, in order to ensure compliance with the restrictions referred to in the Plan, this Agreement and the Bylaws, the Company may issue appropriate “stop transfer” instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records.
(c) Impermissible Transfers Void. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or the Bylaws or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred.
8. Taxes. Participant understands that Participant may suffer adverse tax and national insurance consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s tax liability that may arise as a result of the transactions contemplated by this Agreement.
9. Miscellaneous.
(a) No Right To Employment or Other Status. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or this Agreement.
(b) Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office or to the then-current email address for the Secretary of the Company, and any notice to be given to Participant shall be addressed to Participant at the most-recent physical or email address for Participant listed in the Company’s personnel records. By a notice given pursuant to this Section 9(b),
either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled to exercise his or her Option by written notice under this Section 9(b). Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
(c) Successors and Assigns. The Company may assign any of its rights under this Agreement and the Exercise Notice to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
(d) Severability. In the event any portion of the Plan or this Agreement or any action taken pursuant thereto shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan and this Agreement, and the Plan and this Agreement shall be construed and enforced as if the illegal or invalid provisions had not been included, and the illegal or invalid action shall be null and void.
(e) Entire Agreement; Governing Documents. The Plan (including the Sub-Plan),the Grant Notice and this Agreement (including all Exhibits thereto) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof. In the event of any contradiction between the Plan and any Award Agreement or any other written agreement between a Participant and the Company that has been approved by the Administrator, the terms of the Plan shall govern, unless it is expressly specified in such Award Agreement or other written document that a specific provision of the Plan shall not apply.
(f) Governing Law. The provisions of the Plan and all Awards made thereunder, including the Option, shall be governed by and interpreted in accordance with the laws of the State of Delaware, disregarding choice-of-law principles of the law of any state that would require the application of the laws of a jurisdiction other than such state.
(g) Titles and Headings. The titles and headings of the Sections in this Agreement are for convenience of reference only and, in the event of any conflict, the text of this Agreement, rather than such titles or headings, shall control.
EXHIBIT B
TO STOCK OPTION GRANT NOTICE
FORM OF EXERCISE NOTICE
Effective as of [as described on Carta], the undersigned (“Participant”) hereby elects to exercise Participant’s option to purchase [as described on Carta] Shares of ZipRecruiter, Inc. (the “Company”) under and pursuant to the ZipRecruiter, Inc. Amended and Restated 2014 Equity Incentive Plan (the “Plan”) and the Stock Option Grant Notice and Stock Option Agreement dated [as described on Carta] (the “Agreement”). Capitalized terms used herein without definition shall have the meanings given in the Agreement.
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Grant Date:
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As described on Carta
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Number of Shares as to which Option is Exercised:
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As described on Carta
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Exercise Price per Share:
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As described on Carta
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Total Exercise Price:
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As described on Carta
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Electronic certificate to be issued in name of:
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As described on Carta
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Cash Payment delivered herewith:
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As described on Carta (Representing the full Exercise Price for the Shares, as well as any applicable withholding tax)
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Type of Option:
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As described on Carta
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1. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan and the Agreement. Participant agrees to abide by and be bound by their terms and conditions. Participant further acknowledges that it is a condition to the issuance of the Shares to Participant upon exercise of the Option listed above that Participant agree to be bound by the terms and conditions of, and become a party to, any stockholders’ agreement of the Company. Participant hereby agrees to be so bound and to execute any additional documents as may be deemed necessary or advisable by the Company in order to effectuate the foregoing agreement.
2. Tax Consultation. Participant understands that Participant may suffer adverse tax and national insurance consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.
3. Participant Representations. Participant hereby makes the following certifications and representations with respect to the Shares listed above:
(a) Participant 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 Shares. Participant is acquiring these Shares for investment for Participant’s own account only and not with a view to, or for resale in connection with, any “distribution” thereof within the meaning of the Securities Act.
(b) Participant acknowledges and understands that the Shares constitute “restricted securities” under the Securities Act and have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of Participant’s investment intent as expressed herein. Participant understands that the Shares must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. Participant further acknowledges and understands that the Company is under no obligation to register the Shares. Participant understands that the electronic certificate evidencing the Shares will be imprinted with a legend which prohibits the transfer of the Shares unless they are registered or such registration is not required in the opinion of counsel satisfactory to the Company and any other legend required under Applicable Laws.
(c) Participant is familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of “restricted securities” acquired, directly or indirectly from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of the grant of the Option to Participant, the exercise will be exempt from registration under the Securities Act. In the event the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, ninety days thereafter (or such longer period as any market stand-off agreement may require) the securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144.
(d) In the event that the Company does not qualify under Rule 701 at the time of grant of the Option, then the securities may be resold in certain limited circumstances subject to the provisions of Rule 144.
(e) Participant further understands that in the event all of the applicable requirements of Rule 701 or 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 Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange Commission has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rules 144 or 701 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. Participant understands that no assurances can be given that any such other registration exemption will be available in such event.
(f) Participant acknowledges that the Shares remain subject to the Company’s right of first refusal and certain transfer restrictions all in accordance with the Agreement and the Company’s Amended and Restated Bylaws, as it may be amended from time to time.
4. Regulation S. If Participant’s address is an address located outside of the United States, participant will make the following additional representations, warranties and agreements:
(e) Non-US. Participant is not a U.S. Person as defined in Rule 902(k) of Regulation S under the Securities Act. The offer and sale of the Shares to Participant was made in an offshore transaction (as defined in Rule 902(h) of Regulation S), no directed selling efforts (as defined in Rule 902(c) of Regulation S) were made in the United States, and Participant is not acquiring the Shares for the account or benefit of any U.S. Person.
(f) No Offer or Sale. Participant will not, during the Restricted Period applicable to the Shares set forth in the legend set forth below (the “Restricted Period”) and to any certificate, including electronic certificates, representing the Shares, offer or sell any of the foregoing
securities (or create or maintain any derivative position equivalent thereto) in the United States, to or for the account or benefit of a U.S. Person or other than in accordance with Regulation S.
(g) Registration or Exemption. Participant will, after the expiration of the applicable Restricted Period, offer, sell, pledge or otherwise transfer the Shares (or create or maintain any derivative position equivalent thereto) only pursuant to registration under the Securities Act or any available exemption therefrom and, in any case, in accordance with applicable state securities laws.
(h) No Transfer in Violation of Restrictions; Legend. Participant acknowledges and agrees that the Company shall not register the transfer of the Shares in violation of these restrictions. Participant acknowledges and agrees that the electronic certificate(s) evidencing the Shares will bear the legend set forth below (in addition to any other legend required by applicable federal, state or foreign securities laws or provided in any other agreement with the Company:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION, AND THE COMPANY DOES NOT INTEND TO REGISTER THEM. PRIOR TO A DATE THAT IS ONE-YEAR STARTING FROM THE DATE OF SALE OF THE STOCK, THE SHARES MAY NOT BE OFFERED OR SOLD (INCLUDING OPENING A SHORT POSITION IN SUCH SECURITIES) IN THE UNITED STATES OR TO U.S. PERSONS AS DEFINED BY RULE 902(k) ADOPTED UNDER THE ACT, OTHER THAN TO DISTRIBUTORS, UNLESS THE SHARES ARE REGISTERED UNDER THE ACT, OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT IS AVAILABLE. HOLDERS OF SHARES PRIOR TO ONE-YEAR STARTING FROM THE DATE OF SALE OF THE STOCK, MAY RESELL SUCH SECURITIES ONLY PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT OR OTHERWISE IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S OF THE ACT, OR IN TRANSACTIONS EFFECTED OUTSIDE OF THE UNITED STATES PROVIDED THEY DO NOT SOLICIT (AND NO ONE ACTING ON THEIR BEHALF SOLICITS) PARTICIPANTS IN THE UNITED STATES OR OTHERWISE ENGAGE(S) IN SELLING EFFORTS IN THE UNITED STATES AND PROVIDED THAT HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT. A HOLDER OF THE SECURITIES WHO IS A DISTRIBUTOR, DEALER, SUB-UNDERWRITER OR OTHER SECURITIES PROFESSIONAL, IN ADDITION, CANNOT PRIOR TO ONE-YEAR STARTING FROM THE DATE OF SALE OF THE STOCK RESELL THE SECURITIES TO A U.S. PERSON AS DEFINED BY RULE 902(k) OF REGULATION S UNLESS THE SECURITIES ARE REGISTERED UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION UNDER THE ACT IS AVAILABLE.
5. Notices. Any notice required or permitted hereunder shall be given in accordance with the provisions set forth in Section 9(b) of the Agreement.
6. Entire Agreement. The Plan (including the Sub-Plan) and Agreement are incorporated herein by reference. This Notice, the Plan and the Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.
Exercise of the Option through an online or electronic system established and maintained by the Company or another third party designated by the Company shall be deemed to be Participant’s agreement to and acceptance of the terms and conditions of this Exercise Notice.
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ACCEPTED BY:
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SUBMITTED BY
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ZIPRECRUITER, INC.
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PARTICIPANT:
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By:
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By:
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Print Name:
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Print Name:
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Title:
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ZIPRECRUITER, INC.
2021 EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain, and motivate eligible persons whose present and potential contributions are important to the success of the Company, and any Parents, Subsidiaries, and Affiliates that exist now or in the future, by offering them an opportunity to participate in the Company’s future performance through the grant of Awards. Capitalized terms not defined elsewhere in the text are defined in Section 28.
2. SHARES SUBJECT TO THE PLAN.
2.1. Number of Shares Available. Subject to Sections 2.6 and 21 and any other applicable provisions hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan as of the date of adoption of the Plan by the Board, is Ten Million Six Hundred Sixty Four Thousand Four Hundred Seventy Six (10,664,476) Shares, plus (a) any reserved Shares not issued or subject to outstanding awards granted under the Company’s Amended & Restated 2012 Stock Plan and the Company’s Amended & Restated 2014 Equity Incentive Plan (collectively, the “Prior Plans”) that cease to be subject to such awards by forfeiture or otherwise after the Effective Date, (b) Shares issued under the Prior Plans before or after the Effective Date pursuant to the exercise of stock options that are, after the Effective Date, forfeited, (c) Shares issued under the Prior Plans that are repurchased by the Company at the original purchase price or are otherwise forfeited, and (d) Shares that are subject to stock options or other awards under the Prior Plans that are used to pay the exercise price of a stock option or withheld to satisfy the tax withholding obligations related to any award.
2.2. Lapsed, Returned Awards. Shares subject to Awards, and Shares issued under the Plan under any Award, will again be available for grant and issuance in connection with subsequent Awards under this Plan to the extent such Shares: (a) are subject to issuance upon exercise of an Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any reason other than exercise of the Option or SAR, (b) are subject to Awards granted under this Plan that are forfeited or are repurchased by the Company at the original issue price, (c) are subject to Awards granted under this Plan that otherwise terminate without such Shares being issued or (d) are surrendered pursuant to an Exchange Program. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Shares used to pay the exercise price of an Award or withheld to satisfy the tax withholding obligations related to an Award will become available for grant and issuance in connection with subsequent Awards under this Plan. For the avoidance of doubt, Shares that otherwise become available for grant and issuance because of the provisions of this Section 2.2 will not include Shares subject to Awards that initially became available because of the substitution clause in Section 21.2 hereof.
2.3. Minimum Share Reserve. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all outstanding Awards granted under this Plan.
2.4. Automatic Share Reserve Increase. The number of Shares available for grant and issuance under the Plan will be increased on January 1st of each of 2022 through 2031, by the lesser of (a) five percent (5%) of the number of shares of all classes of the Company’s common stock issued and outstanding on each December 31 immediately prior to the date of increase or (b) such number of Shares determined by the Board.
2.5. ISO Limitation. No more than Twenty Five Million (25,000,000) Shares will be issued pursuant to the exercise of ISOs granted under the Plan.
2.6. Adjustment of Shares. If the number or class of outstanding Shares is changed by a stock dividend, extraordinary dividend or distribution (whether in cash, shares, or other property, other than a regular cash dividend), recapitalization, stock split, reverse stock split, subdivision, combination, consolidation, reclassification, spin-off, or similar change in the capital structure of the Company, without consideration, then (a) the number and class of Shares reserved for issuance and future grant under the Plan set forth in Section 2.1, including Shares reserved under sub-clauses (a)-(e) of Section 2.1, (b) the Exercise Prices of and number and class of Shares subject to outstanding Options and SARs, (c) the number and class of Shares subject to other outstanding Awards and (d) the maximum number and class of Shares that may be issued as ISOs set forth in Section 2.5, will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities or other laws, provided that fractions of a Share will not be issued.
If, by reason of an adjustment pursuant to this Section 2.6, a Participant’s Award Agreement or other agreement related to any Award, or the Shares subject to such Award, covers additional or different shares of stock or securities, then such additional or different shares, and the Award Agreement or such other agreement in respect thereof, will be subject to all of the terms, conditions, and restrictions which were applicable to the Award or the Shares subject to such Award prior to such adjustment.
3. ELIGIBILITY. ISOs may be granted only to Employees. All other Awards may be granted to Employees, Consultants, Directors, and Non-Employee Directors, provided that such Consultants, Directors, and Non-Employee Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction.
4. ADMINISTRATION.
4.1. Committee Composition; Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms, and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan, except, however, the Board will establish the terms for the grant of an Award to Non-Employee Directors. The Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement, and any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend, and rescind rules and regulations relating to this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the Exercise Price, the time or times when Awards may vest and be exercised (which may be based on performance criteria) or settled, any vesting acceleration or waiver of forfeiture restrictions, the method to satisfy tax withholding obligations or any other tax liability legally due, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine;
(e) determine the number of Shares or other consideration subject to Awards;
(f) determine the Fair Market Value in good faith and interpret the applicable provisions of this Plan and the definition of Fair Market Value in connection with circumstances that impact the Fair Market Value, if necessary;
(g) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent, Subsidiary, or Affiliate;
(h) grant waivers of Plan or Award conditions;
(i) determine the vesting, exercisability, and payment of Awards;
(j) correct any defect, supply any omission or reconcile any inconsistency in this Plan, any Award or any Award Agreement;
(k) determine whether an Award has been vested and/or earned;
(l) determine the terms and conditions of any, and to institute any Exchange Program;
(m) reduce, waive or modify any criteria with respect to Performance Factors;
(n) adjust Performance Factors to take into account changes in law and accounting or tax rules as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events, or circumstances to avoid windfalls or hardships;
(o) adopt terms and conditions, rules, and/or procedures (including the adoption of any subplan under this Plan) relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United States or to qualify Awards for special tax treatment under laws of jurisdictions other than the United States;
(p) exercise discretion with respect to Performance Awards;
(q) make all other determinations necessary or advisable for the administration of this Plan; and
(r) delegate any of the foregoing to a subcommittee or to one or more executive officers pursuant to a specific delegation as permitted by applicable law, including Section 157(c) of the Delaware General Corporation Law.
4.2. Committee Interpretation and Discretion. Any determination made by the Committee with respect to any Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination will be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement will be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee will be final and binding on the Company and the Participant. The Committee may delegate to one or more executive officers the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution will be final and binding on the Company and the Participant.
4.3. Section 16 of the Exchange Act. Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more “non-employee directors” (as defined in the regulations promulgated under Section 16 of the Exchange Act).
4.4. Documentation. The Award Agreement for a given Award, the Plan, and any other documents may be delivered to, and accepted by, a Participant or any other person in any manner (including electronic distribution or posting) that meets applicable legal requirements.
4.5. Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws and practices in other countries in which the Company, its Subsidiaries, and Affiliates operate or have Employees or other individuals eligible for Awards, the Committee, in its sole discretion, will have the power and authority to: (a) determine which Subsidiaries and Affiliates will be covered by the Plan; (b) determine which individuals outside the United States are eligible to participate in the Plan, which may include individuals who provide services to the Company, Subsidiary or Affiliate under an agreement with a foreign nation or agency; (c) modify the terms and conditions of any Award granted to individuals outside the United States or foreign nationals to comply with applicable foreign laws, policies, customs, and practices; (d) establish subplans and modify exercise procedures, vesting conditions, and other terms and procedures to the extent the Committee determines such actions to be necessary or advisable (and such subplans and/or modifications will be attached to this Plan as appendices, if necessary); and (e) take any action, before or after an Award is made, that the Committee determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals, provided, however, that no action taken under this Section 4.5 will increase the Share limitations contained in Section 2.1 hereof. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards will be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.
5. OPTIONS. An Option is the right but not the obligation to purchase a Share, subject to certain conditions, if applicable. The Committee may grant Options to eligible Employees, Consultants, and Directors and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may vest and be exercised, and all other terms and conditions of the Option, subject to the following terms of this section.
5.1. Option Grant. Each Option granted under this Plan will identify the Option as an ISO or an NSO. An Option may be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will: (a) determine the nature, length, and starting date of any Performance Period for each Option; and (b) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to Options that are subject to different performance goals and other criteria.
5.2. Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, or a specified future date. The Award Agreement will be delivered to the Participant within a reasonable time after the granting of the Option.
5.3. Exercise Period. Options may be vested and exercisable within the times or upon the conditions as set forth in the Award Agreement governing such Option, provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary (“Ten Percent Stockholder”) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for
Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.
5.4. Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted, provided that: (a) the Exercise Price of an Option will be not less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant, and (b) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 11 and the Award Agreement and in accordance with any procedures established by the Company.
5.5. Method of Exercise. Any Option granted hereunder will be vested and exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An Option will be deemed exercised when the Company receives: (a) notice of exercise (in such form as the Committee may specify from time to time) from the person entitled to exercise the Option (and/or via electronic execution through the authorized third-party administrator), and (b) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 2.6 of the Plan. Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
5.6. Termination of Service. If the Participant’s Service terminates for any reason except for Cause or the Participant’s death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates no later than three (3) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise of an ISO beyond three (3) months after the date Participant’s employment terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options.
(a) Death. If the Participant’s Service terminates because of the Participant’s death (or the Participant dies within three (3) months after Participant’s Service terminates other than for Cause or because of the Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant’s legal representative, or authorized assignee, no later than twelve (12) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee), but in any event no later than the expiration date of the Options.
(b) Disability. If the Participant’s Service terminates because of the Participant’s Disability, then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant (or the Participant’s legal representative or authorized assignee) no later than
twelve (12) months after the date Participant’s Service terminates (or such shorter or longer time period as may be determined by the Committee, with any exercise beyond (a) three (3) months after the date Participant’s employment terminates when the termination of Service is for a Disability that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code or (b) twelve (12) months after the date Participant’s employment terminates when the termination of Service is for a Disability that is a “permanent and total disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NSO), but in any event no later than the expiration date of the Options.
(c) Cause. Unless otherwise determined by the Committee, if the Participant’s Service terminates for Cause, then Participant’s Options (whether or not vested) will expire on the date of termination of Participant’s Service if the Committee has reasonably determined in good faith that such cessation of Services has resulted in connection with an act or failure to act constituting Cause (or such Participant’s Services could have been terminated for Cause (without regard to the lapsing of any required notice or cure periods in connection therewith) at the time such Participant terminated Service), or at such later time and on such conditions as are determined by the Committee, but in any event no later than the expiration date of the Options. Unless otherwise provided in an employment agreement, Award Agreement, or other applicable agreement, Cause will have the meaning set forth in the Plan.
5.7. Limitations on ISOs. With respect to Awards granted as ISOs, to the extent that the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as NSOs. For purposes of this Section 5.7, ISOs will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
5.8. Modification, Extension or Renewal. The Committee may modify, extend, or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed, or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 18 of this Plan, by written notice to affected Participants, the Committee may reduce the Exercise Price of outstanding Options without the consent of such Participants, provided, however, that the Exercise Price may not be reduced below the Fair Market Value on the date the action is taken to reduce the Exercise Price.
5.9. No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended, or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.
6. RESTRICTED STOCK UNITS. A Restricted Stock Unit (“RSU”) is an award to an eligible Employee, Consultant, or Director covering a number of Shares that may be settled by issuance of those Shares (which may consist of Restricted Stock) or in cash. All RSUs will be made pursuant to an Award Agreement.
6.1. Terms of RSUs. The Committee will determine the terms of an RSU including, without limitation: (a) the number of Shares subject to the RSU, (b) the time or times during which the RSU may
be settled, (c) the consideration to be distributed on settlement, and (d) the effect of the Participant’s termination of Service on each RSU, provided that no RSU will have a term longer than ten (10) years. An RSU may be awarded upon satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participant’s Award Agreement. If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length, and starting date of any Performance Period for the RSU; (ii) select from among the Performance Factors to be used to measure the performance, if any; and (iii) determine the number of Shares deemed subject to the RSU. Performance Periods may overlap and Participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria.
6.2. Form and Timing of Settlement. Payment of earned RSUs will be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement. The Committee, in its sole discretion, may settle earned RSUs in cash, Shares, or a combination of both. The Committee may also permit a Participant to defer payment under a RSU to a date or dates after the RSU is earned, provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
6.3. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
7. RESTRICTED STOCK AWARDS. A Restricted Stock Award is an offer by the Company to sell to an eligible Employee, Consultant, or Director Shares that are subject to restrictions (“Restricted Stock”). The Committee will determine to whom an offer will be made, the number of Shares the Participant may purchase, the Purchase Price, the restrictions under which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the Plan.
7.1. Restricted Stock Purchase Agreement. All purchases under a Restricted Stock Award will be evidenced by an Award Agreement. Except as may otherwise be provided in an Award Agreement, a Participant accepts a Restricted Stock Award by signing and delivering to the Company an Award Agreement with full payment of the Purchase Price, within thirty (30) days from the date the Award Agreement was delivered to the Participant. If the Participant does not accept such Award within thirty (30) days, then the offer to purchase such Restricted Stock Award will terminate, unless the Committee determines otherwise.
7.2 Purchase Price. The Purchase Price for Shares issued pursuant to a Restricted Stock Award will be determined by the Committee and may be less than Fair Market Value on the date the Restricted Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section 11 of the Plan, and the Award Agreement and in accordance with any procedures established by the Company.
7.3. Terms of Restricted Stock Awards. Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are required by law. These restrictions may be based on completion of a specified period of Service with the Company or upon completion of Performance Factors, if any, during any Performance Period as set out in advance in the Participant’s Award Agreement. Prior to the grant of a Restricted Stock Award, the Committee will: (a) determine the nature, length, and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a
Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.
7.4. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
8. STOCK BONUS AWARDS. A Stock Bonus Award is an award to an eligible Employee, Consultant, or Director of Shares for Services to be rendered or for past Services already rendered to the Company or any Parent, Subsidiary, or Affiliate. All Stock Bonus Awards will be made pursuant to an Award Agreement. No payment from the Participant will be required for Shares awarded pursuant to a Stock Bonus Award.
8.1. Terms of Stock Bonus Awards. The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These restrictions may be based upon completion of a specified period of Service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participant’s Stock Bonus Agreement. Prior to the grant of any Stock Bonus Award the Committee will: (a) determine the restrictions to which the Stock Bonus Award is subject, including the nature, length, and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors, if any, to be used to measure performance goals; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria.
8.2. Form of Payment to Participant. Payment may be made in the form of cash, whole Shares, or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, as determined in the sole discretion of the Committee.
8.3. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
9. STOCK APPRECIATION RIGHTS. A Stock Appreciation Right (“SAR”) is an award to an eligible Employee, Consultant, or Director that may be settled in cash or Shares (which may consist of Restricted Stock) having a value equal to (a) the difference between the Fair Market Value on the date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled (subject to any maximum number of Shares that may be issuable as specified in an Award Agreement). All SARs will be made pursuant to an Award Agreement.
9.1 Terms of SARs. The Committee will determine the terms of each SAR including, without limitation: (a) the number of Shares subject to the SAR, (b) the Exercise Price and the time or times during which the SAR may be exercised and settled, (c) the consideration to be distributed on exercise and settlement of the SAR, and (d) the effect of the Participant’s termination of Service on each SAR. The Exercise Price of the SAR will be determined by the Committee when the SAR is granted and may not be less than Fair Market Value of the Shares on the date of grant. A SAR may be awarded upon satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length, and starting date of any Performance Period for each SAR; and (ii) select from among the Performance Factors to be used to
measure the performance, if any. Performance Periods may overlap and Participants may participate simultaneously with respect to SARs that are subject to different Performance Factors and other criteria.
9.2. Exercise Period and Expiration Date. A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Award Agreement governing such SAR. The SAR Agreement will set forth the expiration date, provided that no SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted. The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee). Notwithstanding the foregoing, the rules of Section 5.6 also will apply to SARs.
9.3. Form of Settlement. Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price, by (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the Company for the SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The portion of a SAR being settled may be paid currently or on a deferred basis with such interest, if any, as the Committee determines, provided that the terms of the SAR and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
9.4. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee).
10. PERFORMANCE AWARDS.
10.1. Types of Performance Awards. A Performance Award is an award to an eligible Employee, Consultant, or Director that is based upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee, and may be settled in cash, Shares (which may consist of, without limitation, Restricted Stock), other property, or any combination thereof. Grants of Performance Awards will be made pursuant to an Award Agreement that cites Section 10 of the Plan.
(a) Performance Shares. The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded, and determine the number of Performance Shares and the terms and conditions of each such Award. Performance Shares will consist of a unit valued by reference to a designated number of Shares, the value of which may be paid to the Participant by delivery of Shares or, if set forth in the instrument evidencing the Award, of such property as the Committee will determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. The amount to be paid under an Award of Performance Shares may be adjusted on the basis of such further consideration as the Committee will determine in its sole discretion.
(b) Performance Units. The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded, and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units will consist of a unit valued by reference to a designated amount of property other than Shares, which value may be paid
to the Participant by delivery of such property as the Committee will determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee.
(c) Cash-Settled Performance Awards. The Committee may also grant cash-settled Performance Awards to Participants under the terms of this Plan. Such awards will be based on the attainment of performance goals using the Performance Factors within this Plan that are established by the Committee for the relevant performance period.
10.2. Terms of Performance Awards. The Committee will determine, and each Award Agreement will set forth, the terms of each Performance Award including, without limitation: (a) the amount of any cash bonus, (b) the number of Shares deemed subject to an award of Performance Shares, (c) the Performance Factors and Performance Period that will determine the time and extent to which each award of Performance Shares will be settled, (d) the consideration to be distributed on settlement, and (e) the effect of the Participant’s termination of Service on each Performance Award. In establishing Performance Factors and the Performance Period the Committee will: (i) determine the nature, length, and starting date of any Performance Period; (ii) select from among the Performance Factors to be used; and (iii) determine the number of Shares deemed subject to the award of Performance Shares. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant. Prior to settlement the Committee will determine the extent to which Performance Awards have been earned. Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods and different performance goals and other criteria.
10.3. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee).
11. PAYMENT FOR SHARE PURCHASES. Payment from a Participant for Shares purchased pursuant to this Plan may be made in cash or by check or, where expressly approved for the Participant by the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement):
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares of the Company held by the Participant that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Award will be exercised or settled;
(c) by waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent or Subsidiary;
(d) by consideration received by the Company pursuant to a broker-assisted or other form of cashless exercise program implemented by the Company in connection with the Plan;
(e) by any combination of the foregoing; or
(f) by any other method of payment as is permitted by applicable law.
The Committee may limit the availability of any method of payment, to the extent the Committee determines, in its discretion, such limitation is necessary or advisable to comply with applicable law or facilitate the administration of the Plan.
12. GRANTS TO NON-EMPLOYEE DIRECTORS.
12.1. General. Non-Employee Directors are eligible to receive any type of Award offered under this Plan except ISOs. Awards pursuant to this Section 12 may be automatically made pursuant to policy adopted by the Board, or made from time to time as determined in the discretion of the Board. No Non-Employee Director may receive Awards under the Plan that, when combined with cash compensation received for service as a Non-Employee Director, exceed Seven Hundred Fifty Thousand Dollars ($750,000) in value (as described below) in any calendar year. The value of Awards for purposes of complying with this maximum will be determined as follows: (a) for Options and SARs, grant date fair value will be calculated using the Company’s regular valuation methodology for determining the grant date fair value of Options for reporting purposes, and (b) for all other Awards other than Options and SARs, grant date fair value will be determined by either (i) calculating the product of the Fair Market Value per Share on the date of grant and the aggregate number of Shares subject to the Award, or (ii) calculating the product using an average of the Fair Market Value over a number of trading days and the aggregate number of Shares subject to the Award as determined by the Committee. Awards granted to an individual while he or she was serving in the capacity as an Employee or while he or she was a Consultant but not a Non-Employee Director will not count for purposes of the limitations set forth in this Section 12.1.
12.2. Eligibility. Awards pursuant to this Section 12 will be granted only to Non-Employee Directors. A Non-Employee Director who is elected or re-elected as a member of the Board will be eligible to receive an Award under this Section 12.
12.3. Vesting, Exercisability and Settlement. Except as set forth in Section 21, Awards will vest, become exercisable, and be settled as determined by the Board. With respect to Options and SARs, the exercise price granted to Non-Employee Directors will not be less than the Fair Market Value of the Shares at the time that such Option or SAR is granted.
12.4. Election to Receive Awards in Lieu of Cash. A Non-Employee Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash or Awards or a combination thereof, if permitted, and as determined, by the Committee. Such Awards will be issued under the Plan. An election under this Section 12.4 will be filed with the Company on the form prescribed by the Company.
13. WITHHOLDING TAXES.
13.1. Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan or a tax event occurs, the Company may require the Participant to remit to the Company, or to the Parent, Subsidiary, or Affiliate, as applicable, employing the Participant an amount sufficient to satisfy applicable U.S. federal, state, local, and international income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items (the “Tax-Related Items”) legally due from the Participant prior to the delivery of Shares pursuant to exercise or settlement of any Award. Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash, such payment will be net of an amount sufficient to satisfy applicable withholding obligations for Tax-Related Items. Unless otherwise determined by the Committee, the Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld and such Shares will be valued based on the value of the actual trade or, if there is none, the Fair Market Value of the Shares as of the previous trading day.
13.2. Stock Withholding. The Committee, or its delegate(s), as permitted by applicable law, in its sole discretion and pursuant to such procedures as it may specify from time to time and to limitations
of local law, may require or permit a Participant to satisfy such Tax Related Items legally due from the Participant, in whole or in part by (without limitation) (a) paying cash, (b) having the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the Tax-Related Items to be withheld, (c) delivering to the Company already-owned shares having a Fair Market Value equal to the Tax-Related Items to be withheld, or (d) withholding from the proceeds of the sale of otherwise deliverable Shares acquired pursuant to an Award either through a voluntary sale or through a mandatory sale arranged by the Company. The Company may withhold or account for these Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory tax rate for the applicable tax jurisdiction, to the extent consistent with applicable laws.
14. TRANSFERABILITY. Unless determined otherwise by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. If the Committee makes an Award transferable, including, without limitation, by instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or by domestic relations order to a Permitted Transferee, such Award will contain such additional terms and conditions as the Committee deems appropriate. All Awards will be exercisable: (a) during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative; (b) after the Participant’s death, by the legal representative of the Participant’s heirs or legatees; and (c) in the case of all awards except ISOs, by a Permitted Transferee.
15. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.
15.1. Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant, except for any Dividend Equivalent Rights permitted by an applicable Award Agreement. Any Dividend Equivalent Rights will be subject to the same vesting or performance conditions as the underlying Award. In addition, the Committee may provide that any Dividend Equivalent Rights permitted by an applicable Award Agreement will be deemed to have been reinvested in additional Shares or otherwise reinvested. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant will have no right to such stock dividends or stock distributions with respect to Unvested Shares, and any such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. The Committee, in its discretion, may provide in the Award Agreement evidencing any Award that the Participant will be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Shares underlying an Award during the period beginning on the date the Award is granted and ending, with respect to each Share subject to the Award, on the earlier of the date on which the Award is exercised or settled or the date on which it is forfeited provided, that no Dividend Equivalent Right will be paid with respect to the Unvested Shares, and such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. Such Dividend Equivalent Rights, if any, will be credited to the Participant in the form of additional whole Shares as of the date of payment of such cash dividends on Shares.
15.2 Restrictions on Shares. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) a right to repurchase (a “Right of Repurchase”) a portion of any or all
Unvested Shares held by a Participant following such Participant’s termination of Service at any time within ninety (90) days (or such longer or shorter time determined by the Committee) after the later of the date Participant’s Service terminates and the date the Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant’s Purchase Price or Exercise Price, as the case may be.
16. CERTIFICATES. All Shares or other securities whether or not certificated, delivered under this Plan will be subject to such stock transfer orders, legends, and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable U.S. federal, state, or foreign securities law, or any rules, regulations, and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted, and any non-U.S. exchange controls or securities law restrictions to which the Shares are subject.
17. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of the Participant’s obligation to the Company under the promissory note, provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.
18. REPRICING; EXCHANGE AND BUYOUT OF AWARDS. Without prior stockholder approval the Committee may (a) reprice Options or SARs (and where such repricing is a reduction in the Exercise Price of outstanding Options or SARs, the consent of the affected Participants is not required provided written notice is provided to them, notwithstanding any adverse tax consequences to them arising from the repricing), and (b) with the consent of the respective Participants (unless not required pursuant to Section 5.9 of the Plan), pay cash or issue new Awards in exchange for the surrender and cancellation of any, or all, outstanding Awards.
19. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable U.S. and foreign federal and state securities and exchange control and other laws, rules, and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable and/or (b) completion of any registration or other qualification of such Shares under any state, federal, or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification, or listing requirements of any foreign or state securities laws, exchange control laws, stock
exchange, or automated quotation system, and the Company will have no liability for any inability or failure to do so.
20. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent, Subsidiary, or Affiliate or limit in any way the right of the Company or any Parent, Subsidiary, or Affiliate to terminate Participant’s employment or other relationship at any time.
21. CORPORATE TRANSACTIONS.
21.1. Assumption or Replacement of Awards by Successor. In the event that the Company is subject to a Corporate Transaction, outstanding Awards acquired under the Plan shall be subject to the agreement evidencing the Corporate Transaction, which need not treat all outstanding Awards in an identical manner. Such agreement, without the Participant’s consent, shall provide for one or more of the following with respect to all outstanding Awards as of the effective date of such Corporate Transaction:
(a) The continuation of an outstanding Award by the Company (if the Company is the successor entity).
(b) The assumption of an outstanding Award by the successor or acquiring entity (if any) of such Corporate Transaction (or by its parents, if any), which assumption, will be binding on all selected Participants; provided that the exercise price and the number and nature of shares issuable upon exercise of any such option or stock appreciation right, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable.
(c) The substitution by the successor or acquiring entity in such Corporate Transaction (or by its parents, if any) of equivalent awards with substantially the same terms for such outstanding Awards (except that the exercise price and the number and nature of shares issuable upon exercise of any such option or stock appreciation right, or any award that is subject to Section 409A of the Code, will be adjusted appropriately pursuant to Section 424(a) of the Code and/or Section 409A of the Code, as applicable).
(d) The full or partial acceleration of exercisability or vesting and accelerated expiration of an outstanding Award and lapse of the Company’s right to repurchase or re-acquire shares acquired under an Award or lapse of forfeiture rights with respect to shares acquired under an Award.
(e) The settlement of the full value of such outstanding Award (whether or not then vested or exercisable) in cash, cash equivalents, or securities of the successor entity (or its parent, if any) with a fair market value equal to the required amount, followed by the cancellation of such Awards; provided however, that such Award may be cancelled if such Award has no value, as determined by the Committee, in its discretion. Subject to Section 409A of the Code, such payment may be made in installments and may be deferred until the date or dates the Award would have become exercisable or vested. Such payment may be subject to vesting based on the Participant’s continued service, provided that the vesting schedule shall not be less favorable to the Participant than the schedule under which the Award would have become vested or exercisable. For purposes of this Section 21.1(e), the fair market value of any security shall be determined without regard to any vesting conditions that may apply to such security.
(f) The cancellation of outstanding Awards in exchange for no consideration.
The Board shall have full power and authority to assign the Company’s right to repurchase or re-acquire or forfeiture rights to such successor or acquiring corporation. In addition, in the event such successor or acquiring corporation (if any) refuses to assume, convert, replace or substitute Awards, as provided above, pursuant to a Corporate Transaction, the Committee will notify the Participant in writing or electronically that such Participant’s Award will, if exercisable, be exercisable for a period of time determined by the Committee in its sole discretion, and such Award will terminate upon the expiration of such period. Awards need not be treated similarly in a Corporate Transaction and treatment may vary from Award to Award and/or from Participant to Participant.
21.2. Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either: (a) granting an Award under this Plan in substitution of such other company’s award, or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the Purchase Price or the Exercise Price, as the case may be, and the number and nature of Shares issuable upon exercise or settlement of any such Award will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option in substitution rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. Substitute Awards will not reduce the number of Shares authorized for grant under the Plan or authorized for grant to a Participant in a calendar year.
21.3. Non-Employee Directors’ Awards. Notwithstanding any provision to the contrary herein, in the event of a Corporate Transaction, the vesting of all Awards granted to Non-Employee Directors will accelerate and such Awards will become exercisable (as applicable) in full prior to the consummation of such event at such times and on such conditions as the Committee determines.
22. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will be submitted for the approval of the Company’s stockholders, consistent with applicable laws, within twelve (12) months before or after the date this Plan is adopted by the Board.
23. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date and will terminate ten (10) years from the date this Plan is adopted by the Board. This Plan and all Awards granted hereunder will be governed by and construed in accordance with the laws of the State of Delaware (excluding its conflict of laws rules).
24. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend this Plan in any respect, including, without limitation, amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan, provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval, provided further that a Participant’s Award will be governed by the version of this Plan then in effect at the time such Award was granted. No termination or amendment of the Plan will affect any then-outstanding Award unless expressly provided by the Committee. In any event, no termination or amendment of the Plan or any outstanding Award may adversely affect any then outstanding Award without the consent of the Participant, unless such termination or amendment is necessary to comply with applicable law, regulation, or rule.
25. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock awards and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
26. INSIDER TRADING POLICY. Each Participant who receives an Award will comply with any policy adopted by the Company from time to time covering transactions in the Company’s securities by Employees, officers, and/or Directors of the Company, as well as with any applicable insider trading or market abuse laws to which the Participant may be subject.
27. ALL AWARDS SUBJECT TO COMPANY CLAWBACK OR RECOUPMENT POLICY. All Awards, subject to applicable law, will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant’s employment or other service with the Company that is applicable to officers, Employees, Directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards.
28. DEFINITIONS. As used in this Plan, and except as elsewhere defined herein, the following terms will have the following meanings:
28.1. “Affiliate” means (a) any entity that, directly or indirectly, is controlled by, controls, or is under common control with, the Company, and (b) any entity in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
28.2. “Award” means any award under the Plan, including any Option, Performance Award, Restricted Stock, Stock Bonus, Stock Appreciation Right, or Restricted Stock Unit.
28.3. “Award Agreement” means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, and country-specific appendix thereto for grants to non-U.S. Participants, which will be in substantially a form (which need not be the same for each Participant) that the Committee (or in the case of Award agreements that are not used for Insiders, the Committee’s delegate(s)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.
28.4. “Board” means the Board of Directors of the Company.
28.5. “Cause” means a determination by the Company that the Participant has committed an act or acts constituting any of the following: (i) dishonesty, fraud, misconduct or negligence in connection with Participant’s duties to the Company, (ii) unauthorized disclosure or use of the Company’s confidential or proprietary information, (iii) misappropriation of a business opportunity of the Company, (iv) materially aiding Company competitor, (v) a felony conviction, (vi) failure or refusal to attend to the duties or obligations of the Participant’s position, (vii) violation or breach of, or failure to comply with, the Company’s code of ethics or conduct, any of the Company’s rules, policies or procedures applicable to the Participant or any agreement in effect between the Company and the Participant or (viii) other conduct by such Participant that could be expected to be harmful to the business, interests or reputation of the Company. The determination as to whether Cause for a Participant’s termination exists will be made in good faith by the Company and will be final and binding on the Participant. This definition does not in any way limit the Company’s or any Parent’s or Subsidiary’s ability to terminate a Participant’s
employment or services at any time as provided in Section 20 above. Notwithstanding the foregoing, the foregoing definition of “Cause” may, in part or in whole, be modified or replaced in each individual employment agreement, Award Agreement, or other applicable agreement with any Participant, provided that such document supersedes the definition provided in this Section 28.5.
28.6. “Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
28.7. “Committee” means the Compensation Committee of the Board or those persons to whom administration of the Plan, or part of the Plan, has been delegated as permitted by law.
28.8. “Common Stock” means the Class A common stock of the Company.
28.9. “Company” means ZipRecruiter, Inc., a Delaware corporation, or any successor corporation.
28.10. “Consultant” means any natural person, including an advisor or independent contractor, engaged by the Company or a Parent, Subsidiary, or Affiliate to render services to such entity.
28.11. “Corporate Transaction” means the occurrence of any of the following events: (a) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities, provided, however, that for purposes of this subclause (a) the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (c) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; (d) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of capital stock of the Company), or (e) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purpose of this subclause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction. For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase, or acquisition of stock, or similar business transaction with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Corporate Transaction, such amount will become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final
Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.
28.12. “Direct Listing Registration Date” means the date on which the Company’s registration statement on Form S-1 in connection with its direct listing of Common Stock is declared effective by the SEC under the Securities Act.
28.13. “Director” means a member of the Board.
28.14. “Disability” means in the case of incentive stock options, total and permanent disability as defined in Section 22(e)(3) of the Code and in the case of other Awards, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months.
28.15. “Dividend Equivalent Right” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash, stock, or other property dividends in amounts equal equivalent to cash, stock, or other property dividends for each Share represented by an Award held by such Participant.
28.16. “Effective Date” means the day immediately prior to the Company’s Direct Listing Registration Date, subject to approval of the Plan by the Company’s stockholders.
28.17. “Employee” means any person, including officers and Directors, providing services as an employee to the Company or any Parent, Subsidiary, or Affiliate. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.
28.18. “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
28.19. “Exchange Program” means a program pursuant to which (a) outstanding Awards are surrendered, cancelled, or exchanged for cash, the same type of Award, or a different Award (or combination thereof); or (b) the exercise price of an outstanding Award is increased or reduced.
28.20. “Exercise Price” means, with respect to an Option, the price at which a holder may purchase the Shares issuable upon exercise of an Option and with respect to a SAR, the price at which the SAR is granted to the holder thereof.
28.21. “Fair Market Value” means, as of any date, the value of a Share, determined as follows:
(a) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(b) if such Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(c) in the case of an Option or SAR grant made on the Direct Listing Registration Date, the price per share at which Shares are initially offered for sale to the public as set forth in the
Company’s final prospectus included within the registration statement on Form S-1 filed with the SEC under the Securities Act; or
(d) by the Board or the Committee in good faith.
28.22. “Insider” means an officer or Director of the Company or any other person whose transactions in the Company’s Common Stock are subject to Section 16 of the Exchange Act.
28.23. “IRS” means the United States Internal Revenue Service.
28.24. “Non-Employee Director” means a Director who is not an Employee of the Company or any Parent, Subsidiary, or Affiliate.
28.25. “Option” means an award of an option to purchase Shares pursuant to Section 5.
28.26. “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns 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.
28.27. “Participant” means a person who holds an Award under this Plan.
28.28. “Performance Award” means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
28.29. “Performance Factors” means any of the factors selected by the Committee and specified in an Award Agreement, from among the following measures, either individually, alternatively or in any combination, applied to the Company as a whole or any business unit or Subsidiary, either individually, alternatively, or in any combination, on a GAAP or non-GAAP basis, and measured, to the extent applicable on an absolute basis or relative to a pre-established target, to determine whether the performance goals established by the Committee with respect to applicable Awards have been satisfied:
(a) profit before tax;
(b) billings;
(c) revenue;
(d) net revenue;
(e) earnings (which may include earnings before interest and taxes, earnings before taxes, net earnings, stock-based compensation expenses, depreciation, and amortization);
(f) operating income;
(g) operating margin;
(h) operating profit;
(i) controllable operating profit or net operating profit;
(j) net profit;
(k) gross margin;
(l) operating expenses or operating expenses as a percentage of revenue;
(m) net income;
(n) earnings per share;
(o) total stockholder return;
(p) market share;
(q) return on assets or net assets;
(r) the Company’s stock price;
(s) growth in stockholder value relative to a pre-determined index;
(t) return on equity;
(u) return on invested capital;
(v) cash flow (including free cash flow or operating cash flows);
(w) cash conversion cycle;
(x) economic value added;
(y) individual confidential business objectives;
(z) contract awards or backlog;
(aa) overhead or other expense reduction;
(bb) credit rating;
(cc) strategic plan development and implementation;
(dd) succession plan development and implementation;
(ee) improvement in workforce diversity;
(ff) customer indicators and/or satisfaction;
(gg) new product invention or innovation;
(hh) attainment of research and development milestones;
(ii) improvements in productivity;
(jj) bookings;
(kk) attainment of objective operating goals and employee metrics;
(ll) sales;
(mm) expenses;
(nn) balance of cash, cash equivalents, and marketable securities;
(oo) completion of an identified special project;
(pp) completion of a joint venture or other corporate transaction;
(qq) employee satisfaction and/or retention;
(rr) research and development expenses;
(ss) working capital targets and changes in working capital; and
(tt) any other metric that is capable of measurement as determined by the Committee.
The Committee may provide for one or more equitable adjustments to the Performance Factors to preserve the Committee’s original intent regarding the Performance Factors at the time of the initial award grant, such as but not limited to, adjustments in recognition of unusual or non-recurring items such as acquisition related activities or changes in applicable accounting rules. It is within the sole discretion of the Committee to make or not make any such equitable adjustments.
28.30. “Performance Period” means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Factors will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Award.
28.31. “Performance Share” means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
28.32. “Performance Unit” means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
28.33. “Permitted Transferee” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Employee, any person sharing the Employee’s household (other than a tenant or employee), a trust in which these persons (or the Employee) have more than 50% of the beneficial interest, a foundation in which these persons (or the Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than 50% of the voting interests.
28.34. “Plan” means this ZipRecruiter, Inc. 2021 Equity Incentive Plan.
28.35. “Purchase Price” means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option or SAR.
28.36. “Restricted Stock Award” means an Award as defined in Section 6 and granted under the Plan, or issued pursuant to the early exercise of an Option.
28.37. “Restricted Stock Unit” means an Award as defined in Section 9 and granted under the Plan.
28.38. “SEC” means the United States Securities and Exchange Commission.
28.39. “Securities Act” means the United States Securities Act of 1933, as amended.
28.40. “Service” will mean service as an Employee, Consultant, Director, or Non-Employee Director, to the Company or a Parent, Subsidiary, or Affiliate, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. An Employee will not be deemed to have ceased to provide Service in the case of any leave of absence approved by the Company. In the case of any Employee on an approved leave of absence or a reduction in hours worked (for illustrative purposes only, a change in schedule from that of full-time to part-time), the Committee may make such provisions respecting suspension of or modification to vesting of the Award while on leave from the employ of the Company or a Parent, Subsidiary or Affiliate or during such change in working hours as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement. In the event of military or other protected leave, if required by applicable laws, vesting will continue for the longest period that vesting continues under any other statutory or Company approved leave of absence and, upon a Participant’s returning from military leave, he or she will be given vesting credit with respect to Awards to the same extent as would have applied had the Participant continued to provide Service to the Company throughout the leave on the same terms as he or she was providing Service immediately prior to such leave. An employee shall have terminated employment as of the date he or she ceases to provide Service (regardless of whether the termination is in breach of local employment laws or is later found to be invalid) and employment shall not be extended by any notice period or garden leave mandated by local law, provided, however, that a change in status between an Employee, Consultant, Director or Non-Employee Director shall not terminate the Participant’s Service, unless determined by the Committee, in its discretion or to the extent set forth in the applicable Award Agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide Service and the effective date on which the Participant ceased to provide Service. An employee will have terminated employment as of the date he or she ceases to provide Service (regardless of whether the termination is in breach of local employment laws or is later found to be invalid) and employment will not be extended by any notice period or garden leave mandated by local law, provided, however, that a change in status from an Employee to a Consultant or Non-Employee Director (or vice versa) will not terminate the Participant’s Service, unless determined by the Committee, in its discretion. The Committee will have sole discretion to determine whether a Participant has ceased to provide Service and the effective date on which the Participant ceased to provide Service.
28.41. “Shares” means shares of the Common Stock and the common stock of any successor entity of the Company.
28.42. “Stock Appreciation Right” means an Award defined in Section 8 and granted under the Plan.
28.43. “Stock Bonus” means an Award defined in Section 7 and granted under the Plan.
28.44. “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns 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.
28.45. “Treasury Regulations” means regulations promulgated by the United States Treasury Department.
28.46. “Unvested Shares” means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any successor thereto).
ZIPRECRUITER, INC.
2021 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. ZipRecruiter, Inc. adopted the Plan effective as of the Effective Date. The purpose of this Plan is to provide eligible employees of the Company and the Participating Corporations with a means of acquiring an equity interest in the Company, to enhance such employees’ sense of participation in the affairs of the Company. Capitalized terms not defined elsewhere in the text are defined in Section 28.
2. ESTABLISHMENT OF PLAN. The Company proposes to grant rights to purchase shares of Common Stock to eligible employees of the Company and its Participating Corporations pursuant to this Plan. The Company intends this Plan to qualify as an “employee stock purchase plan” under Section 423 of the Code (including any amendments to or replacements of such Section), and this Plan shall be so construed, although the Company makes no undertaking or representation to maintain such qualification. Any term not expressly defined in this Plan but defined for purposes of Section 423 of the Code shall have the same definition herein. In addition, with regard to offers of options to purchase shares of Common Stock under the Plan to employees working for a Subsidiary or an Affiliate outside the United States, this Plan authorizes the grant of options under a Non- Section 423 Component that is not intended to meet Section 423 requirements, provided, to the extent necessary under Section 423 of the Code, the other terms and conditions of the Plan are met.
Subject to Section 14, a total One Million Three Hundred Thirty Three Thousand Fifty Nine (1,333,059) shares of Common Stock is reserved for issuance under this Plan. In addition, on each January 1 of each of 2022 through 2031, the aggregate number of shares of Common Stock reserved for issuance under the Plan shall be increased automatically by the number of shares equal to one percent (1%) of the total number of outstanding shares of Common Stock and shares of preferred stock of the Company outstanding (on an as converted to common stock basis) on the immediately preceding December 31st (rounded down to the nearest whole share); provided, that the Board or the Committee may in its sole discretion reduce the amount of the increase in any particular year. Subject to Section 14, no more than Thirteen Million Three Hundred Thirty Thousand Five Hundred Ninety (13,330,590) shares of Common Stock may be issued over the term of this Plan. The number of shares initially reserved for issuance under this Plan and the maximum number of shares that may be issued under this Plan shall be subject to adjustments effected in accordance with Section 14. Any or all such shares may be granted under the Section 423 Component.
3. ADMINISTRATION. The Plan will be administered by the Committee. Subject to the provisions of this Plan and the limitations of Section 423 of the Code or any successor provision in the Code, all questions of interpretation or application of this Plan shall be determined by the Committee and its decisions shall be final and binding upon all eligible employees and Participants. The Committee will have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility, to designate the Participating Corporations, to determine whether Participating Corporations shall participate in the Section 423 Component or Non-Section 423 Component and to decide upon any and all claims filed under the Plan. Every finding, decision and determination made by the Committee will, to the full extent permitted by law, be final and binding upon all parties. Notwithstanding any provision to the contrary in this Plan, the Committee may adopt rules, sub-plans, and/or procedures relating to the operation and administration of the Plan designed to comply with local laws, regulations or customs or to achieve tax, securities law or other objectives for eligible employees outside of the United States. The Committee will have the authority to determine the Fair Market Value of the Common Stock (which determination shall be final, binding and conclusive for all purposes) in accordance with Section 8 below and to interpret Section 8 of the Plan in connection with circumstances
that impact the Fair Market Value. Members of the Committee shall receive no compensation for their services in connection with the administration of this Plan, other than standard fees as established from time to time by the Board for services rendered by Board members serving on Board committees. All expenses incurred in connection with the administration of this Plan shall be paid by the Company. For purposes of this Plan, the Committee may designate separate offerings under the Plan (the terms of which need not be identical) in which eligible employees of one or more Participating Corporations will participate, and the provisions of the Plan will separately apply to each such separate offering even if the dates of the applicable Offering Periods of each such offering are identical. To the extent permitted by Section 423 of the Code, the terms of each separate offering under the Plan need not be identical, provided that the rights and privileges established with respect to a particular offering are applied in an identical manner to all employees of every Participating Corporation whose employees are granted options under that particular offering. The Committee may establish rules to govern the terms of the Plan and the offering that will apply to Participants who transfer employment between the Company and Participating Corporations or between Participating Corporations, in accordance with requirements under Section 423 of the Code to the extent applicable.
4. ELIGIBILITY.
(a) Any employee of the Company or the Participating Corporations is eligible to participate in an Offering Period under this Plan, except that one or more of the following categories of employees may be excluded from coverage under the Plan if determined by the Committee (other than where such exclusion is prohibited by applicable law):
(i) employees who do not meet eligibility requirements that the Committee may choose to impose (within the limits permitted by the Code);
(ii) employees who are not employed by the Company or a Participating Corporation prior to the beginning of such Offering Period or prior to such other time period as specified by the Committee;
(iii) employees who are customarily employed for twenty (20) or less hours per week;
(iv) employees who are customarily employed for five (5) months or less in a calendar year;
(v) (a) employees who are “highly compensated employees” of the Company or any Participating Corporation (within the meaning of Section 414(q) of the Code), or (b) any employees who are “highly compensated employees” with compensation above a specified level, who is an officer and/or is subject to the disclosure requirements of Section 16(a) of the Exchange Act;
(vi) employees who are citizens or residents of a foreign jurisdiction (without regard to whether they are also a citizen of the United States or a resident alien (within the meaning of Section 7701(b)(1)(A) of the Code)) if either (i) such employee’s participation is prohibited under the laws of the jurisdiction governing such employee, or (ii) compliance with the laws of the foreign jurisdiction would violate the requirements of Section 423 of the Code; and
(vii) individuals who provide services to the Company or any of its Participating Corporations who are reclassified as common law employees for any reason except for federal income and employment tax purposes.
The foregoing notwithstanding, an individual shall not be eligible if his or her participation in the Plan is prohibited by the law of any country that has jurisdiction over him or her, if complying with the laws of the applicable country would cause the Plan to violate Section 423 of the Code, or if he or she is subject to a collective bargaining agreement that does not provide for participation in the Plan.
(b) No employee who, together with any other person whose stock would be attributed to such employee pursuant to Section 424(d) of the Code, owns stock or holds options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary or who, as a result of being granted an option under this Plan with respect to such Offering Period, would own stock or hold options to purchase stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or its Parent or Subsidiary shall be granted an option to purchase Common Stock under the Plan. Notwithstanding the foregoing, the rules of Section 424(d) of the Code shall apply in determining share ownership and the extent to which shares held under outstanding equity awards are to be treated as owned by the employee.
5. OFFERING DATES.
(a) Each Offering Period of this Plan may be of up to twenty-seven (27) months duration and shall commence and end at the times designated by the Committee. Each Offering Period shall consist of one or more Purchase Periods during which Contributions made by Participants are accumulated under this Plan.
(b) The initial Offering Period shall commence on a date selected by the Committee which is no more than twenty-seven (27) months after the commencement of the initial Offering period. The initial Offering Period shall consist of one or more Purchase Periods as determined by the Committee. Thereafter, a new Offering Period shall commence on such dates determined by the Committee. The Committee may at any time establish a different duration for an Offering Period or Purchase Period to be effective after the next scheduled Purchase Date, up to a maximum duration of twenty-seven (27) months.
6. PARTICIPATION IN THIS PLAN.
(a) The Committee may provide that any employee who is an eligible employee determined in accordance with Section 4 immediately prior to the initial Offering Period will be automatically enrolled in the initial Offering Period under this Plan for the minimum number of shares of Common Stock purchasable. With respect to subsequent Offering Periods, any eligible employee determined in accordance with Section 4 will be eligible to participate in this Plan, subject to the requirement of Section 6(b) hereof and the other terms and provisions of this Plan.
(b) With respect to Offering Periods (including the initial Offering Period if the Committee does not elect auto-enroll under Section 6(a)), a Participant may elect to participate in this Plan by submitting an enrollment agreement prior to the commencement of the Offering Period (or such earlier date as the Committee may determine) to which such agreement relates.
(c) Once an employee becomes a Participant in an Offering Period, then such Participant will automatically participate in each subsequent Offering Period commencing immediately following the last day of the prior Offering Period unless the Participant withdraws or is deemed to withdraw from this Plan or terminates further participation in an Offering Period as set forth in Section 11 below. A Participant who is continuing participation pursuant to the preceding sentence is not required to file any additional enrollment agreement in order to continue participation in this Plan; a Participant who
is not continuing participation pursuant to the preceding sentence is required to file an enrollment agreement prior to the commencement of the Offering Period (or such earlier date as the Committee may determine) to which such agreement relates.
7. GRANT OF OPTION ON ENROLLMENT. Becoming a Participant with respect to an Offering Period will constitute the grant (as of the Offering Date) by the Company to such Participant of an option to purchase on the Purchase Date up to that number of shares of Common Stock determined by a fraction, the numerator of which is the amount accumulated in such Participant’s Contribution account during such Purchase Period and the denominator of which is the lower of (i) eighty-five percent (85%) of the Fair Market Value of a share of Common Stock on the Offering Date (but in no event less than the par value of a share of the Common Stock), or (ii) eighty-five percent (85%) of the Fair Market Value of a share of the Common Stock on the Purchase Date; provided, however, that for the Purchase Period within the initial Offering Period the numerator shall be fifteen percent (15%) of the Participant’s compensation for such Purchase Period, or such lower percentage as determined by the Committee prior to the start of the Offering Period, and provided, further, that the number of shares of Common Stock subject to any option granted pursuant to this Plan shall not exceed the lesser of (x) the maximum number of shares set by the Committee pursuant to Section 10(b) below with respect to the applicable Purchase Date, or (y) the maximum number of shares which may be purchased pursuant to Section 10(a) below with respect to the applicable Purchase Date.
8. PURCHASE PRICE. The Purchase Price per share at which a share of Common Stock will be sold in any Offering Period shall be eighty-five percent (85%) of the lesser of:
(a) The Fair Market Value on the Offering Date; or
(b) The Fair Market Value on the Purchase Date.
9. PAYMENT OF PURCHASE PRICE; CONTRIBUTION CHANGES; SHARE ISSUANCES.
(a) The Purchase Price shall be accumulated by regular payroll deductions made during each Offering Period, unless the Committee determines that contributions may be made in another form (including but not limited to with respect to categories of Participants outside the United States that Contributions may be made in another form due to local legal requirements). The Contributions are made as a percentage of the Participant’s Compensation in one percent (1%) increments not less than one percent (1%), nor greater than fifteen percent (15%) or such lower limit set by the Committee. “Compensation” shall mean base salary or regular hourly wages; however, the Committee shall have discretion to adopt a definition of Compensation from time to time of all cash compensation reported on the employee's Form W-2 or corresponding local country tax return, including without limitation base salary or regular hourly wages, bonuses, incentive compensation, commissions, overtime, shift premiums, pay during leaves of absence, and draws against commissions (or in foreign jurisdictions, equivalent cash compensation). For purposes of determining a Participant’s Compensation, any election by such Participant to reduce his or her regular cash remuneration under Sections 125 or 401(k) of the Code (or in foreign jurisdictions, equivalent deductions) shall be treated as if the Participant did not make such election. Contributions shall commence on the first payday following the last Purchase Date (with respect to the initial Offering Period, as soon as practicable following the effective date of filing with the U.S. Securities and Exchange Commission a securities registration statement for the Plan) and shall continue to the end of the Offering Period unless sooner altered or terminated as provided in this Plan. Notwithstanding the foregoing, the terms of any sub-plan may permit matching shares without the payment of any purchase price.
(b) A Participant may decrease the rate of Contributions during an Offering Period by filing with the Company or a third party designated by the Company a new authorization for Contributions, with the new rate to become effective no later than the second payroll period commencing after the Company’s receipt of the authorization and continuing for the remainder of the Offering Period unless changed as described below. A decrease in the rate of Contributions may be made twice during the initial Offering Period and once during any subsequent Offering Periods, or more frequently under rules determined by the Committee. A Participant may increase or decrease the rate of Contributions for any subsequent Offering Period by filing with the Company or a third party designated by the Company a new authorization for Contributions prior to the beginning of such Offering Period, or such other time period as specified by the Committee.
(c) A Participant may reduce his or her Contribution percentage to zero during an Offering Period by filing with the Company or a third party designated by the Company a request for cessation of Contributions. Such reduction shall be effective beginning no later than the second payroll period after the Company’s receipt of the request and no further Contributions will be made for the duration of the Offering Period. Contributions credited to the Participant’s account prior to the effective date of the request shall be used to purchase shares of Common Stock in accordance with Subsection (e) below. A reduction of the Contribution percentage to zero shall be treated as such Participant’s withdrawal from such Offering Period and the Plan, effective as of the day after the next Purchase Date following the filing date of such request with the Company.
(d) All Contributions made for a Participant are credited to his or her book account under this Plan and are deposited with the general funds of the Company, except to the extent local legal restrictions outside the United States require segregation of such Contributions. No interest accrues on the Contributions, except to the extent required due to local legal requirements. All Contributions received or held by the Company may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such Contributions, except to the extent necessary to comply with local legal requirements outside the United States.
(e) On each Purchase Date, so long as this Plan remains in effect and provided that the Participant has not submitted a signed and completed withdrawal form before that date which notifies the Company that the Participant wishes to withdraw from that Offering Period under this Plan and have all Contributions accumulated in the account maintained on behalf of the Participant as of that date returned to the Participant, the Company shall apply the funds then in the Participant’s account to the purchase of whole shares of Common Stock reserved under the option granted to such Participant with respect to the Offering Period to the extent that such option is exercisable on the Purchase Date. The Purchase Price per share shall be as specified in Section 8 of this Plan. Any fractional share, as calculated under this Subsection (e), shall be rounded down to the next lower whole share, unless the Committee determines with respect to all Participants that any fractional share shall be credited as a fractional share. Any amount remaining in a Participant’s account on a Purchase Date which is less than the amount necessary to purchase a full share of the Common Stock shall be refunded without interest; however, the Committee may determine for future Offering Periods that such amounts shall be carried forward without interest (except to the extent necessary to comply with local legal requirements outside the United States) into the next Purchase Period; however, the Committee may determine that such amounts should be refunded without interest. In the event that this Plan has been oversubscribed, all funds not used to purchase shares on the Purchase Date shall be returned to the Participant, without interest (except to the extent required due to local legal requirements outside the United States). No Common Stock shall be purchased on a Purchase Date on behalf of any employee whose participation in this Plan has terminated prior to such Purchase Date, except to the extent required due to local legal requirements outside the United States.
(f) As promptly as practicable after the Purchase Date, the Company shall issue shares for the Participant’s benefit representing the shares purchased upon exercise of his or her option.
(g) During a Participant’s lifetime, his or her option to purchase shares hereunder is exercisable only by him or her. The Participant will have no interest or voting right in shares covered by his or her option until such option has been exercised.
(h) To the extent required by applicable federal, state, local or foreign law, a Participant shall make arrangements satisfactory to the Company and the Participating Corporation employing the Participant for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company or any Subsidiary or Affiliate, as applicable, may withhold, by any method permissible under the applicable law, the amount necessary for the Company or Subsidiary or Affiliate, as applicable, to meet applicable withholding obligations, including any withholding required to make available to the Company or Subsidiary or Affiliate, as applicable, any tax deductions or benefits attributable to the sale or early disposition of shares of Common Stock by a Participant. The Company shall not be required to issue any shares of Common Stock under the Plan until such obligations are satisfied.
10. LIMITATIONS ON SHARES TO BE PURCHASED.
(a) Any other provision of the Plan notwithstanding, no Participant shall purchase Common Stock with a Fair Market Value in excess of the following limit:
(i) In the case of Common Stock purchased during an Offering Period that commenced in the current calendar year, the limit shall be equal to (A) $25,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased in the current calendar year (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary).
(ii) In the case of Common Stock purchased during an Offering Period that commenced in the immediately preceding calendar year, the limit shall be equal to (A) $50,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary) in the current calendar year and in the immediately preceding calendar year.
(iii) In the case of Common Stock purchased during an Offering Period that commenced two calendar years prior, the limit shall be equal to (A) $75,000 minus (B) the Fair Market Value of the Common Stock that the Participant previously purchased (under this Plan and all other employee stock purchase plans of the Company or any Parent or Subsidiary) in the current calendar year and in the two immediately preceding calendar years.
For purposes of this Subsection (a), the Fair Market Value of Common Stock shall be determined in each case as of the beginning of the Offering Period in which such Common Stock is purchased. Employee stock purchase plans not described in Section 423 of the Code shall be disregarded. If a Participant is precluded by this Subsection (a) from purchasing additional Common Stock under the Plan, then his or her Contributions shall automatically be discontinued and shall automatically resume at the beginning of the earliest Purchase Period that will end in the next calendar year (if he or she then is an eligible employee), provided that when the Company automatically resumes such Contributions, the Company must apply the rate in effect immediately prior to such suspension.
(b) In no event shall a Participant be permitted to purchase more than 5,000 shares on any one Purchase Date or such lesser number as the Committee shall determine. If a lower limit is set
under this Subsection (b), then all Participants will be notified of such limit prior to the commencement of the next Offering Period for which it is to be effective.
(c) If the number of shares to be purchased on a Purchase Date by all Participants exceeds the number of shares then available for issuance under this Plan, then the Company will make a pro rata allocation of the remaining shares in as uniform a manner as shall be reasonably practicable and as the Committee shall determine to be equitable. In such event, the Company will give notice of such reduction of the number of shares to be purchased under a Participant’s option to each Participant affected.
(d) Any Contributions accumulated in a Participant’s account which are not used to purchase stock due to the limitations in this Section 10, and not covered by Section 9(e), shall be returned to the Participant as soon as practicable after the end of the applicable Purchase Period, without interest (except to the extent required due to local legal requirements outside the United States).
11. WITHDRAWAL.
(a) Each Participant may withdraw from an Offering Period under this Plan pursuant to a method specified for such purpose by the Company. Such withdrawal may be elected at any time prior to the end of an Offering Period, or such other time period as specified by the Committee.
(b) Upon withdrawal from this Plan, the accumulated Contributions shall be returned to the withdrawn Participant, without interest (except to the extent required due to local legal requirements outside the United States), and his or her interest in this Plan shall terminate. In the event a Participant voluntarily elects to withdraw from this Plan, he or she may not resume his or her participation in this Plan during the same Offering Period, but he or she may participate in any Offering Period under this Plan which commences on a date subsequent to such withdrawal by filing a new authorization for Contributions in the same manner as set forth in Section 6 above for initial participation in this Plan.
(c) To the extent applicable, if the Fair Market Value on the first day of the current Offering Period in which a participant is enrolled is higher than the Fair Market Value on the first day of any subsequent Offering Period, the Company will automatically enroll such participant in the subsequent Offering Period. Any funds accumulated in a Participant’s account prior to the first day of such subsequent Offering Period will be applied to the purchase of shares on the Purchase Date immediately prior to the first day of such subsequent Offering Period, if any.
12. TERMINATION OF EMPLOYMENT. Termination of a Participant’s employment for any reason, including retirement, death, disability, or the failure of a Participant to remain an eligible employee of the Company or of a Participating Corporation, immediately terminates his or her participation in this Plan (except as required due to local legal requirements outside the United States). In such event, accumulated Contributions credited to the Participant’s account will be returned to him or her or, in the case of his or her death, to his or her legal representative, without interest (except to the extent required due to local legal requirements outside the United States). For purposes of this Section 12, an employee will not be deemed to have terminated employment or failed to remain in the continuous employ of the Company or of a Participating Corporation in the case of sick leave, military leave, or any other leave of absence approved by the Company; provided that such leave is for a period of not more than ninety (90) days or reemployment upon the expiration of such leave is guaranteed by contract or statute. The Company will have sole discretion to determine whether a Participant has terminated employment and the effective date on which the Participant terminated employment, regardless of any notice period or garden leave required under local law.
13. RETURN OF CONTRIBUTIONS. In the event a Participant’s interest in this Plan is terminated by withdrawal, termination of employment or otherwise, or in the event this Plan is terminated by the Board, the Company shall deliver to the Participant all accumulated Contributions credited to such Participant’s account. No interest shall accrue on the Contributions of a Participant in this Plan (except to the extent required due to local legal requirements outside the United States).
14. CAPITAL CHANGES. If the number and class of outstanding shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then the Committee shall adjust the number and class of Common Stock that may be delivered under the Plan, the Purchase Price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised, and the numerical limits of Sections 2 and 10 shall be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with the applicable securities laws; provided that fractions of a share will not be issued.
15. NONASSIGNABILITY. Neither Contributions credited to a Participant’s account nor any rights with regard to the exercise of an option or to receive shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 22 below) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be void and without effect.
16. USE OF PARTICIPANT FUNDS AND REPORTS. The Company may use all Contributions received or held by it under the Plan for any corporate purpose, and the Company will not be required to segregate Participant Contributions (except to the extent required due to local legal requirements outside the United States). Until shares are issued, Participants will only have the rights of an unsecured creditor unless otherwise required under local law. Each Participant shall receive, or have access to, promptly after the end of each Purchase Period a report of his or her account setting forth the total Contributions accumulated, the number of shares purchased, the per share price thereof and the remaining cash balance, if any, carried forward to the next Purchase Period or Offering Period, as the case may be.
17. NOTICE OF DISPOSITION. Each U.S. taxpayer Participant shall notify the Company in writing if the Participant disposes of any of the shares purchased in any Offering Period pursuant to this Plan if such disposition occurs within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased (the “Notice Period”). The Company may, at any time during the Notice Period, place a legend or legends on any certificate representing shares acquired pursuant to this Plan requesting the Company’s transfer agent to notify the Company of any transfer of the shares. The obligation of the Participant to provide such notice shall continue notwithstanding the placement of any such legend on the certificates.
18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant of any option hereunder shall confer any right on any employee to remain in the employ of the Company or any Participating Corporation or restrict the right of the Company or any Participating Corporation to terminate such employee’s employment.
19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees granted an option under the Section 423 Component of this Plan shall have equal rights and privileges with respect to this Plan or within any separate offering under the Plan so that this Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 or any successor provision of the Code and the related regulations. Any provision of this Plan which is inconsistent with Section 423 or any successor provision of the Code, without further act or amendment by the Company, the Committee or the Board, shall be
reformed to comply with the requirements of Section 423. This Section 19 shall take precedence over all other provisions in this Plan.
20. NOTICES. All notices or other communications by a Participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
21. TERM; STOCKHOLDER APPROVAL. This Plan will become effective on the Effective Date. This Plan shall be approved by the stockholders of the Company, in any manner permitted by applicable corporate law, within twelve (12) months before or after the date this Plan is adopted by the Board. No purchase of shares that are subject to such stockholder approval before becoming available under this Plan shall occur prior to stockholder approval of such shares and the Board or Committee may delay any Purchase Date and postpone the commencement of any Offering Period subsequent to such Purchase Date as deemed necessary or desirable to obtain such approval (provided that if a Purchase Date would occur more than six (6) months after commencement of the Offering Period to which it relates, then such Purchase Date shall not occur and instead such Offering Period shall terminate without the purchase of such shares and Participants in such Offering Period shall be refunded their Contributions without interest). This Plan shall continue until the earlier to occur of (a) termination of this Plan by the Board (which termination may be effected by the Board at any time pursuant to Section 25 below), (b) issuance of all of the shares of Common Stock reserved for issuance under this Plan, or (c) the tenth anniversary of the Effective Date.
22. DESIGNATION OF BENEFICIARY.
(a) If authorized by the Committee, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant’s account under this Plan in the event of such Participant’s death prior to a Purchase Date. Such form shall be valid only if it was filed with the Company at the prescribed location before the Participant’s death.
(b) If authorized by the Company, such designation of beneficiary may be changed by the Participant at any time by written notice filed with the Company at the prescribed location before the Participant’s death. In the event of the death of a Participant and in the absence of a beneficiary validly designated under this Plan who is living at the time of such Participant’s death, the Company shall deliver such cash to the executor or administrator of the estate of the Participant or to the legal heirs of the Participant.
23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the U.S. Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange or automated quotation system upon which the shares may then be listed, exchange control restrictions and/or securities law restrictions outside the United States, and shall be further subject to the approval of counsel for the Company with respect to such compliance. Shares may be held in trust or subject to further restrictions as permitted by any subplan.
24. APPLICABLE LAW. The Plan shall be governed by the substantive laws (excluding the conflict of laws rules) of the State of Delaware.
25. AMENDMENT OR TERMINATION. The Committee, in its sole discretion, may amend, suspend, or terminate the Plan, or any part thereof, at any time and for any reason. Unless otherwise required by applicable law, if the Plan is terminated, the Committee, in its discretion, may elect to terminate all outstanding Offering Periods either immediately or upon completion of the purchase of shares of Common Stock on the next Purchase Date (which may be sooner than originally scheduled, if determined by the Committee in its discretion), or may elect to permit Offering Periods to expire in accordance with their terms (and subject to any adjustment pursuant to Section 14). If an Offering Period is terminated prior to its previously-scheduled expiration, all amounts then credited to Participants’ accounts for such Offering Period, which have not been used to purchase shares of Common Stock, shall be returned to those Participants (without interest thereon, except as otherwise required under local laws) as soon as administratively practicable. Further, the Committee will be entitled to change the Purchase Periods and Offering Periods, limit the frequency and/or number of changes in the amount contributed during an Offering Period, establish the exchange ratio applicable to amounts contributed in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the administration of the Plan, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts contributed from the Participant’s base salary and other eligible compensation, and establish such other limitations or procedures as the Committee determines in its sole discretion advisable which are consistent with the Plan. Such actions will not require stockholder approval or the consent of any Participants. However, no amendment shall be made without approval of the stockholders of the Company (obtained in accordance with Section 21 above) within twelve (12) months of the adoption of such amendment (or earlier if required by Section 21) if such amendment would: (a) increase the number of shares that may be issued under this Plan; or (b) change the designation of the employees (or class of employees) eligible for participation in this Plan. In addition, in the event the Board or Committee determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board or Committee may, in its discretion and, to the extent necessary or desirable, modify, amend or terminate the Plan to reduce or eliminate such accounting consequences including, but not limited to: (i) amending the definition of compensation, including with respect to an Offering Period underway at the time; (ii) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; (iii) shortening any Offering Period by setting a Purchase Date, including an Offering Period underway at the time of the Committee’s action; (iv) reducing the maximum percentage of Compensation a participant may elect to set aside as Contributions; and (v) reducing the maximum number of shares a Participant may purchase during any Offering Period. Such modifications or amendments will not require approval of the stockholders of the Company or the consent of any Participants.
26. CORPORATE TRANSACTIONS. In the event of a Corporate Transaction, the Offering Period for each outstanding right to purchase Common Stock will be shortened by setting a new Purchase Date and will end on the new Purchase Date. The new Purchase Date shall occur on or prior to the consummation of the Corporate Transaction, as determined by the Board or Committee, and the Plan shall terminate on the consummation of the Corporate Transaction.
27. CODE SECTION 409A; TAX QUALIFICATION.
(a) Options granted under the Plan generally are exempt from the application of Section 409A of the Code. However, options granted to U.S. taxpayers which are not intended to meet the Code Section 423 requirements are intended to be exempt from the application of Section 409A of the Code under the short-term deferral exception and any ambiguities shall be construed and interpreted in accordance with such intent. Subject to Subsection (b), options granted to U.S. taxpayers outside of the
Code Section 423 requirements shall be subject to such terms and conditions that will permit such options to satisfy the requirements of the short-term deferral exception available under Section 409A of the Code, including the requirement that the shares of Common Stock subject to an option be delivered within the short-term deferral period. Subject to Subsection (b), in the case of a Participant who would otherwise be subject to Section 409A of the Code, to the extent the Committee determines that an option or the exercise, payment, settlement or deferral thereof is subject to Section 409A of the Code, the option shall be granted, exercised, paid, settled or deferred in a manner that will comply with Section 409A of the Code, including Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding the foregoing, the Company shall have no liability to a Participant or any other party if the option that is intended to be exempt from or compliant with Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee with respect thereto.
(b) Although the Company may endeavor to (i) qualify an option for favorable tax treatment under the laws of the United States or jurisdictions outside of the United States or (ii) avoid adverse tax treatment (e.g., under Section 409A of the Code), the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything to the contrary in this Plan, including Subsection (a). The Company shall be unconstrained in its corporate activities without regard to the potential negative tax impact on Participants under the Plan.
28. DEFINITIONS.
(a) “Affiliate” means any entity, other than a Subsidiary or Parent, (i) that, directly or indirectly, is controlled by, controls or is under common control with, the Company and (ii) in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
(b) “Board” shall mean the Board of Directors of the Company.
(c) “Code” shall mean the U.S. Internal Revenue Code of 1986, as amended.
(d) “Committee” shall mean the Compensation Committee of the Board that consists exclusively of one or more members of the Board appointed by the Board.
(e) “Common Stock” shall mean the Class A common stock of the Company.
(f) “Company” shall mean ZipRecruiter, Inc.
(g) “Contributions” means payroll deductions taken from a Participant's Compensation and used to purchase shares of Common Stock under the Plan and, to the extent payroll deductions are not permitted by applicable laws (as determined by the Committee in its sole discretion) contributions by other means, provided, however, that allowing such other contributions does not jeopardize the qualification of the Plan as an “employee stock purchase plan” under Section 423 of the Plan.
(h) “Corporate Transaction” means the occurrence of any of the following events: (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company’s then outstanding voting securities; or (ii) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; or (iii) the consummation of a merger or
consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation.
(i) “Effective Date” shall mean the date on which the Company’s registration statement on Form S-1 in connection with its direct listing of Common Stock is declared effective by the U.S. Securities and Exchange Commission.
(j) “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.
(k) “Fair Market Value” shall mean, as of any date, the value of a share of Common Stock determined as follows:
(1) if such Common Stock is then quoted on the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market (collectively, the “Nasdaq Market”), its closing price on the Nasdaq Market on the date of determination, or if there are no sales for such date, then the last preceding business day on which there were sales, as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;
(2) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;
(3) if such Common Stock is publicly traded but is neither quoted on the Nasdaq Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Board or the Committee deems reliable;
(4) if none of the foregoing is applicable, by the Board or the Committee in good faith.
(l) “Non-Section 423 Component” means the part of the Plan which is not intended to meet the requirements set forth in Section 423 of the Code.
(m) “Notice Period” shall mean within two (2) years from the Offering Date or within one (1) year from the Purchase Date on which such shares were purchased.
(n) “Offering Date” shall mean the first business day of each Offering Period. However, for the initial Offering Period the Offering Date shall be the Effective Date.
(o) “Offering Period” shall mean a period with respect to which the right to purchase Common Stock may be granted under the Plan, as determined by the Committee pursuant to Section 5(a).
(p) “Parent” shall have the same meaning as “parent corporation” in Sections 424(e) and 424(f) of the Code.
(q) “Participant” shall mean an eligible employee who meets the eligibility requirements set forth in Section 4 and who is either automatically enrolled in the initial Offering Period or who elects to participate in this Plan pursuant to Section 6(b).
(r) “Participating Corporation” shall mean any Parent, Subsidiary or Affiliate that the Committee designates from time to time as eligible to participate in this Plan. For purposes of the Section 423 Component, only the Parent and Subsidiaries may be Participating Corporations, provided, however, that at any given time a Parent or Subsidiary that is a Participating Corporation under the Section 423 Component shall not be a Participating Corporation under the Non-Section 423 Component. The Committee may provide that any Participating Corporation shall only be eligible to participate in the Non-Section 423 Component.
(s) “Plan” shall mean this ZipRecruiter, Inc. 2021 Employee Stock Purchase Plan, as may be amended from time to time.
(t) “Purchase Date” shall mean the last business day of each Purchase Period.
(u) “Purchase Period” shall mean a period during which Contributions may be made toward the purchase of Common Stock under the Plan, as determined by the Committee pursuant to Section 5(b).
(v) “Purchase Price” shall mean the price at which Participants may purchase shares of Common Stock under the Plan, as determined pursuant to Section 8.
(w) “Section 423 Component” means the part of the Plan, which excludes the Non-Section 423 Component, pursuant to which options to purchase shares of Common Stock under the Plan that satisfy the requirements for “employee stock purchase plans” set forth in Section 423 of the Code may be granted to eligible employees.
(x) “Subsidiary” shall have the same meaning as “subsidiary corporation” in Sections 424(e) and 424(f) of the Code.
April 22, 2021
Ian Siegel
via email
Dear Ian:
This letter agreement amends and restates the offer letter between you and ZipRecruiter, Inc. (the “Company”), dated August 12, 2014 (the “Prior Agreement”) effective as of the date on which the Company’s registration statement on Form S-1 in connection with its direct listing of common stock is declared effective by the SEC.
You will continue to work in the role of Chief Executive Officer, reporting to the Company’s Board of Directors.
1.Cash Compensation. In this position, the Company will pay you an annual base salary payable in accordance with the Company’s standard payroll schedule. Your pay will be subject to periodic review and increase, but not decrease, as a part of the Company’s regular reviews of compensation.
2.Employee Benefits. You will continue to be eligible to participate in a number of Company-sponsored benefits to the extent that you comply with the eligibility requirements of each such benefit plan. The Company, in its sole discretion, may amend, suspend or terminate its employee benefits at any time, with or without notice. In addition, you will be entitled to paid vacation in accordance with the Company’s vacation policy, as in effect from time to time.
3.Termination Benefits. You will continue to be eligible to receive change in control and severance payments and benefits under the Change in Control and Severance Agreement (the “Severance Agreement”) between you and the Company, dated April 22, 2021 attached to this offer letter as Exhibit A.
4.Confidentiality Agreement. By signing this letter agreement, you reaffirm the terms and conditions of the Confidential Information and Invention Assignment Agreement by and between you and the Company.
5.No Conflicting Obligations. You understand and agree that by signing this letter agreement, you represent to the Company that your performance will not breach any other agreement to which you are a party and that you have not, and will not during the term of your employment with the Company, enter into any oral or written agreement in conflict with any of the provisions of this letter or the Company’s policies. You are not to bring with you to the Company, or use or disclose to any person associated with the Company, any confidential or proprietary information belonging to any former employer or other person or entity with respect to which you owe an obligation of confidentiality under any agreement or otherwise. The Company does not need and will not use such information and we will assist you in any way possible to preserve and protect the confidentiality of proprietary information belonging to third parties. Also, we expect you to abide by any obligations to refrain from soliciting any person employed by or otherwise associated with any former employer and suggest that you refrain from having any contact with such persons until such time as any non-solicitation obligation expires.
6.Outside Activities. You will disclose to the Company in writing any other gainful employment, business or activity that you are currently associated with or participate in that competes with the Company. In addition, while you render services to the Company, you will not assist any person or entity in competing with the Company, in preparing to compete with the Company or in hiring any employees
or consultants of the Company. Notwithstanding the foregoing, Employee may serve (without pay) on corporate, civic or charitable boards or committees, deliver unpaid lectures, fulfill unpaid speaking engagements, or manage personal investments (including making passive investments in other businesses).
7.General Obligations. As an employee, you will be expected to continue to adhere to the Company’s standards of professionalism, loyalty, integrity, honesty, reliability and respect for all. You will also be expected to continue to comply with the Company’s policies and procedures. The Company is an equal opportunity employer.
8.At-Will Employment. Your employment with the Company continues to be for no specific period of time. Your employment with the Company will continue to be on an “at will” basis, meaning that either you or the Company may terminate your employment at any time for any reason or no reason. The Company also reserves the right to modify or amend the terms of your employment at any time for any reason. Any contrary representations which may have been made to you are superseded by this letter agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and the Company’s Board of Directors.
9.Withholdings. All forms of compensation paid to you as an employee of the Company shall be less all applicable withholdings.
[SIGNATURE PAGE FOLLOWS]
This letter agreement supersedes and replaces any prior understandings or agreements, whether oral, written or implied, between you and the Company regarding the matters described in this letter (other than the Severance Agreement), including, without limitation, the Prior Agreement. This letter will be governed by the laws of California, without regard to its conflict of laws provisions.
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Very truly yours,
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ZIPRECRUITER, INC.
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/s/
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David Travers
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By:
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David Travers
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Chief Financial Officer
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ACCEPTED AND AGREED
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Ian Siegel
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/s/ Ian Siegel
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Signature
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April 22, 2021
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Date
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[Signature Page to Amended and Restated Offer Letter]
April 22, 2021
Boris Shimanovsky
via email
Dear Boris:
This letter agreement amends and restates the offer letter between you and ZipRecruiter, Inc. (the “Company”), dated May 1, 2020 (the “Prior Agreement”) effective as of the date on which the Company’s registration statement on Form S-1 in connection with its direct listing of common stock is declared effective by the SEC.
You will continue to work in the role of Chief Technology Officer, reporting to the Company’s Chief Executive Officer.
1.Cash Compensation. In this position, the Company will pay you an annual base salary payable in accordance with the Company’s standard payroll schedule. Your pay will be periodically reviewed as a part of the Company’s regular reviews of compensation.
2.Employee Benefits. You will continue to be eligible to participate in a number of Company-sponsored benefits to the extent that you comply with the eligibility requirements of each such benefit plan. The Company, in its sole discretion, may amend, suspend or terminate its employee benefits at any time, with or without notice. In addition, you will be entitled to paid vacation in accordance with the Company’s vacation policy, as in effect from time to time.
3.Termination Benefits. You will continue to be eligible to receive change in control and severance payments and benefits under the Change in Control and Severance Agreement (the “Severance Agreement”) between you and the Company, dated April 22, 2021, attached to this offer letter as Exhibit A.
4.Confidentiality Agreement. By signing this letter agreement, you reaffirm the terms and conditions of the Confidential Information and Invention Assignment Agreement by and between you and the Company.
5.No Conflicting Obligations. You understand and agree that by signing this letter agreement, you represent to the Company that your performance will not breach any other agreement to which you are a party and that you have not, and will not during the term of your employment with the Company, enter into any oral or written agreement in conflict with any of the provisions of this letter or the Company’s policies. You are not to bring with you to the Company, or use or disclose to any person associated with the Company, any confidential or proprietary information belonging to any former employer or other person or entity with respect to which you owe an obligation of confidentiality under any agreement or otherwise. The Company does not need and will not use such information and we will assist you in any way possible to preserve and protect the confidentiality of proprietary information belonging to third parties. Also, we expect you to abide by any obligations to refrain from soliciting any person employed by or otherwise associated with any former employer and suggest that you refrain from having any contact with such persons until such time as any non-solicitation obligation expires.
6.Outside Activities. You will disclose to the Company in writing any other gainful employment, business or activity that you are currently associated with or participate in that competes with the Company. In addition, while you render services to the Company, you will not assist any person or entity
in competing with the Company, in preparing to compete with the Company or in hiring any employees or consultants of the Company.
7.General Obligations. As an employee, you will be expected to continue to adhere to the Company’s standards of professionalism, loyalty, integrity, honesty, reliability and respect for all. You will also be expected to continue to comply with the Company’s policies and procedures. The Company is an equal opportunity employer.
8.At-Will Employment. Your employment with the Company continues to be for no specific period of time. Your employment with the Company will continue to be on an “at will” basis, meaning that either you or the Company may terminate your employment at any time for any reason or no reason. The Company also reserves the right to modify or amend the terms of your employment at any time for any reason. Any contrary representations which may have been made to you are superseded by this letter agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and the Company’s Chief Executive Officer.
9.Withholdings. All forms of compensation paid to you as an employee of the Company shall be less all applicable withholdings.
[SIGNATURE PAGE FOLLOWS]
This letter agreement supersedes and replaces any prior understandings or agreements, whether oral, written or implied, between you and the Company regarding the matters described in this letter (other than the Severance Agreement), including, without limitation, the Prior Agreement. This letter will be governed by the laws of California, without regard to its conflict of laws provisions.
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Very truly yours,
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ZIPRECRUITER, INC.
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/s/ Ian Siegel
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By: Ian Siegel
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Chief Executive Officer
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ACCEPTED AND AGREED:
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Boris Shimanovsky
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/s/ Boris Shimanovsky
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Signature
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4/22/2021
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Date
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[Signature Page to Amended and Restated Offer Letter]
April 22, 2021
Renata Dionello
via email
Dear Renata:
This letter agreement amends and restates the offer letter between you and ZipRecruiter, Inc. (the “Company”), dated August 28, 2020 (the “Prior Agreement”) effective as of the date on which the Company’s registration statement on Form S-1 in connection with its direct listing of common stock is declared effective by the SEC.
You will continue to work in the role of Chief People Officer, reporting to the Company’s Chief Executive Officer.
1.Cash Compensation. In this position, the Company will pay you an annual base salary payable in accordance with the Company’s standard payroll schedule. Your pay will be periodically reviewed as a part of the Company’s regular reviews of compensation.
2.Employee Benefits. You will continue to be eligible to participate in a number of Company-sponsored benefits to the extent that you comply with the eligibility requirements of each such benefit plan. The Company, in its sole discretion, may amend, suspend or terminate its employee benefits at any time, with or without notice. In addition, you will be entitled to paid vacation in accordance with the Company’s vacation policy, as in effect from time to time.
3.Termination Benefits. You will continue to be eligible to receive change in control and severance payments and benefits under the Change in Control and Severance Agreement (the “Severance Agreement”) between you and the Company, dated April 22, 2021, attached to this offer letter as Exhibit A.
4.Confidentiality Agreement. By signing this letter agreement, you reaffirm the terms and conditions of the Confidential Information and Invention Assignment Agreement by and between you and the Company.
5.No Conflicting Obligations. You understand and agree that by signing this letter agreement, you represent to the Company that your performance will not breach any other agreement to which you are a party and that you have not, and will not during the term of your employment with the Company, enter into any oral or written agreement in conflict with any of the provisions of this letter or the Company’s policies. You are not to bring with you to the Company, or use or disclose to any person associated with the Company, any confidential or proprietary information belonging to any former employer or other person or entity with respect to which you owe an obligation of confidentiality under any agreement or otherwise. The Company does not need and will not use such information and we will assist you in any way possible to preserve and protect the confidentiality of proprietary information belonging to third parties. Also, we expect you to abide by any obligations to refrain from soliciting any person employed by or otherwise associated with any former employer and suggest that you refrain from having any contact with such persons until such time as any non-solicitation obligation expires.
6.Outside Activities. You will disclose to the Company in writing any other gainful employment, business or activity that you are currently associated with or participate in that competes with the Company. In addition, while you render services to the Company, you will not assist any person or entity
in competing with the Company, in preparing to compete with the Company or in hiring any employees or consultants of the Company.
7.General Obligations. As an employee, you will be expected to continue to adhere to the Company’s standards of professionalism, loyalty, integrity, honesty, reliability and respect for all. You will also be expected to continue to comply with the Company’s policies and procedures. The Company is an equal opportunity employer.
8.At-Will Employment. Your employment with the Company continues to be for no specific period of time. Your employment with the Company will continue to be on an “at will” basis, meaning that either you or the Company may terminate your employment at any time for any reason or no reason. The Company also reserves the right to modify or amend the terms of your employment at any time for any reason. Any contrary representations which may have been made to you are superseded by this letter agreement. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and the Company’s Chief Executive Officer.
9.Withholdings. All forms of compensation paid to you as an employee of the Company shall be less all applicable withholdings.
[SIGNATURE PAGE FOLLOWS]
This letter agreement supersedes and replaces any prior understandings or agreements, whether oral, written or implied, between you and the Company regarding the matters described in this letter (other than the Severance Agreement), including, without limitation, the Prior Agreement. This letter will be governed by the laws of California, without regard to its conflict of laws provisions.
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Very truly yours,
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ZIPRECRUITER, INC.
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/s/ Ian Siegel
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By: Ian Siegel
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Chief Executive Officer
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ACCEPTED AND AGREED:
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Renata Dionello
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/s/ Renata Dionello
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Signature
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April 22, 2021
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Date
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[Signature Page to Amended and Restated Offer Letter]
CHANGE IN CONTROL AND SEVERANCE AGREEMENT
This Change in Control and Severance Agreement (the “Agreement”) is entered into by and between [l] (the “Executive”) and ZipRecruiter, Inc., a Delaware corporation (the “Company”), effective as of [l], 2021 (the “Effective Date”).
1.Term of Agreement.
This Agreement shall terminate the earlier of the third (3rd) anniversary of the Effective Date (the “Expiration Date”) or the date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination or CIC Qualifying Termination; provided however, if a definitive agreement relating to a Change in Control has been signed by the Company on or before the Expiration Date, then this Agreement shall remain in effect through the earlier of:
(a)The date the Executive’s employment with the Company terminates for a reason other than a Qualifying Termination or CIC Qualifying Termination, or
(b)The date the Company has met all of its obligations under this Agreement following a termination of the Executive’s employment with the Company due to a Qualifying Termination or CIC Qualifying Termination.
This Agreement shall renew automatically and continue in effect for three (3) year periods measured from the initial Expiration Date, unless the Company provides Executive notice of non-renewal at least three (3) months prior to the date on which this Agreement would otherwise renew. For the avoidance of doubt, and notwithstanding anything to the contrary in Section 2 or 3 below, the Company’s non-renewal of this Agreement shall not constitute a Qualifying Termination or CIC Qualifying Termination, as applicable.
2.Qualifying Termination. If the Executive is subject to a Qualifying Termination, then, subject to Sections 4, 8, and 9 below, Executive will be entitled to the following benefits:
(a)Severance Benefits. The Company shall pay the Executive six (6) months of his/her monthly base salary and a portion of his/her annual target bonus corresponding to 100% achievement of target, prorated for the actual portion of the performance period during which Executive was employed (in each case, at the rate in effect immediately prior to the actions that resulted in the Qualifying Termination). The Executive will receive his or her severance payment in a cash lump-sum in accordance with the Company’s standard payroll procedures, which payment will be made no later than the first regular payroll date occurring after the sixtieth (60th) day following the Separation, provided that the Release Conditions have been satisfied.
(b)Continued Employee Benefits. If Executive timely elects continued coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), the Company shall pay the full amount of Executive’s COBRA premiums on behalf of the Executive for the Executive’s continued coverage under the Company’s health, dental and vision plans, including coverage for the Executive’s eligible dependents, for a period of twelve (12) months following the Executive’s Separation or, if earlier, until Executive is eligible to be covered under another substantially equivalent medical insurance plan by a subsequent employer. Notwithstanding the foregoing, the Company may elect to provide Executive, in lieu of any portion of such continued coverage, taxable installment payments equal in amount to the applicable premiums in effect as of Executive’s Separation for the remainder of the COBRA continuation period; provided that, Executive shall have no right to an additional gross-up payment to account for the fact that such COBRA premium amounts are paid on an after-tax basis.
3.CIC Qualifying Termination. If the Executive is subject to a CIC Qualifying Termination, then, subject to Sections 4, 8, and 9 below, Executive will be entitled to the following benefits:
(a)Severance Payments. The Company or its successor shall pay the Executive twelve (12) months of his/her monthly base salary and a portion of his/her annual target bonus corresponding to 100% achievement of target, in each case, at the rate in effect immediately prior to the actions that resulted in the Separation. Such payment shall be paid in a cash lump sum payment in accordance with the Company’s standard payroll procedures, which payment will be made no later than the first regular payroll date occurring after the sixtieth (60th) day following the Separation, provided that the Release Conditions have been satisfied. For the avoidance of doubt, in the event that a Change of Control occurs within three (3) months following a Qualifying Termination, then, provided that such Qualifying Termination followed a Potential Change of Control, then in addition to any prior payments under Section 2(a), Executive shall receive an additional payment in order to provide the benefits described in this Section 3(a).
(b)Equity. Each of Executive’s then outstanding Equity Awards, other than awards that vest on the satisfaction of performance criteria, shall accelerate and become vested and exercisable as to 100% of the total shares underlying such Equity Awards. As to outstanding Equity Awards that would vest only upon satisfaction of performance criteria, such awards shall accelerate and become vested and exercisable as if such awards had been achieved at the greater of (x) actual achievement (if measurable on the date of Executive’s Separation) or (y) target levels; provided, however, that the Company may specify, in any individual Equity Award agreement, that the acceleration provisions of such award agreement shall specifically overwrite the acceleration provisions set forth herein. Subject to Section 4, the accelerated vesting described above shall be effective as of the Separation. For the avoidance of doubt, in order to give effect to the acceleration contemplated by this Section 3(b), each of Executive’s outstanding Equity Awards shall remain outstanding and eligible to vest (solely pursuant to the terms of this Section 3(b)) for a period of three (3) months following a Qualifying Termination in order to give effect to this Section 3(b).
(c)COBRA; Pay in Lieu of Continued Employee Benefits. Continuation of COBRA or a cash benefit, in both cases on the same terms as set forth in Section 2(b) above, for a period of twelve (12) months following the Executive’s Separation or, if earlier, until Executive is eligible to be covered under another substantially equivalent medical insurance plan by a subsequent employer.
4.General Release. Any other provision of this Agreement notwithstanding, the benefits under Section 2 and 3 shall not apply unless the Executive (i) has executed a general release (in a form prescribed by the Company) of all known and unknown claims that he or she may then have against the Company or persons affiliated with the Company and such release has become effective and (ii) has agreed not to prosecute any legal action or other proceeding based upon any of such claims. The release must be in the form prescribed by the Company, without alterations (this document effecting the foregoing, the “Release”). The Company will deliver the form of Release to the Executive within thirty (30) days after the Executive’s Separation. The Executive must execute and return the Release within the time period specified in the form and in any event no later than sixty (60) days following the date of Executive’s Separation.
5.Accrued Compensation and Benefits. Notwithstanding anything to the contrary in Section 2 and 3 above, in connection with any termination of employment (whether or not a Qualifying Termination or CIC Qualifying Termination), the Company shall pay Executive’s earned but unpaid base salary and other vested but unpaid cash entitlements for the period through and including the termination of employment, including unreimbursed documented business expenses incurred by Executive through and including the date of termination (collectively “Accrued Compensation and Expenses”), as required by law and the applicable Company plan or policy. In addition, Executive shall be entitled to any other vested benefits earned by Executive for the period through and including the termination date of Executive’s
employment under any other employee benefit plans and arrangements maintained by the Company, in accordance with the terms of such plans and arrangements, except as modified herein.
6.Definitions.
(a)The term “Cause” means the occurrence of any of the following events, as reasonably determined by the Company:
(i)Executive's willful or continued failure to substantially perform his/her duties for the Company, or to carry out the business plan, as determined by the Board; provided that a failure to achieve quantified goals or objectives despite good faith performance of duties shall not be deemed a "Cause" event under this subjection (i);
(ii)Executive's conviction of a felony, or his/her guilty plea to, or entry of, a nolo contendere plea to a felony charge;
(iii)the willful or grossly negligent engaging by Executive in conduct that is materially injurious to the Company, financially or otherwise; or
(iv)Executive's material breach of any term of the Company's policies and procedures, as in effect from time to time;
provided that with respect to (iv) above, such termination for Cause shall only be effective after notice to Executive and a period of not less than seven (7) calendar days during which time Executive shall have an opportunity to demonstrate that Executive has cured the conduct that constitutes Cause; provided further, that the foregoing opportunity to cure shall not apply if the Company reasonably determines Executive's conduct is not capable of being cured.
(b)“Code” means the Internal Revenue Code of 1986, as amended.
(c)“Change in Control.” For all purposes under this Agreement, a Change in Control shall mean a “Corporate Transaction,” as such term is defined in the Plan, provided that the transaction (including any series of transactions) also qualifies as a change in control event under U.S. Treasury Regulation 1.409A-3(i)(5).
(d)“CIC Qualifying Termination” means a Separation (A) within twelve (12) months following a Change in Control or (B) within three (3) months preceding a Change in Control (but as to part (B), only if the Separation occurs after a Potential Change in Control) resulting, in either case (A) or (B), from (i) the Company terminating the Executive’s employment for any reason other than Cause or (ii) the Executive voluntarily resigning his or her employment for Good Reason. A termination or resignation due to the Executive’s death or disability shall not constitute a CIC Qualifying Termination. A “Potential Change in Control” means the date of execution of a legally binding and definitive agreement for a corporate transaction which, if consummated, would constitute the applicable Change in Control (which for the avoidance of doubt, would include a merger agreement, but not a term sheet for a merger agreement). In the case of a termination following a Potential Change in Control and before a Change in Control, solely for purposes of benefits under this Agreement, the date of Separation will be deemed the date the Change in Control is consummated.
(e)“Equity Awards” means all options to purchase shares of Company common stock, as well as all other stock-based awards granted to the Executive, including, but not limited to, stock bonus awards, restricted stock, restricted stock units and stock appreciation rights.
(f)“Good Reason” means, without the Executive’s consent, (i) a material reduction in the Executive’s level of responsibility and/or scope of authority in a manner that disproportionately adversely affects the Executive, as compared to all other Company officers, provided, however that the unilateral change, by a surviving or acquiring entity (or its parent) in the Executive’s title and duties to a position that is comparable in salary with respect to the acquired or surviving entity or a division or unit thereof created out of the Company or its assets (whether it becomes a subsidiary, unit or division) to the Executive’s current position shall not constitute “Good Reason,” (ii) a material reduction in Executive’s base salary (other than in connection with a general decrease in the salary of all similarly situated employees or to the extent necessary to make Executive’s salary commensurate with those of other employees of the Company or its successor entity or parent entity who are similarly situated with Executive following a Change in Control), or (iii) a relocation of Executive’s principal workplace that increases Executive’s one-way commute by at least 40 miles. For the Executive to receive the benefits under this Agreement as a result of a voluntary resignation under this subsection (e), all of the following requirements must be satisfied: (1) the Executive must provide notice to the Company of his or her intent to assert Good Reason within thirty (30) days of the initial existence of one or more of the conditions set forth in subclauses (i) through (iii); (2) the Company will have thirty (30) days from the date of such notice to remedy the condition and, if it does so, the Executive may withdraw his or her resignation or may resign with no benefits; and (3) any termination of employment under this provision must occur within ten (10) days of the earlier of expiration of the thirty day company cure period or written notice from the Company that it will not undertake to cure the condition. Should the Company remedy the condition as set forth above and then one or more of the conditions arises again within twelve months following the occurrence of a Change in Control, the Executive may assert Good Reason again subject to all of the conditions set forth herein.
(g)“Plan” means the Company’s 2021 Equity Incentive Plan, as may be amended from time to time.
(h)“Release Conditions” mean the following conditions: (i) Company has received the Executive’s executed Release and (ii) any rescission period applicable to the Executive’s executed Release has expired (without Executive having rescinded the executed Release).
(i)“Qualifying Termination” means a Separation that is not a CIC Qualifying Termination, but which results from (i) the Company terminating the Executive’s employment for any reason other than Cause or (ii) the Executive voluntarily resigning his or her employment for Good Reason. A termination or resignation due to the Executive’s death or disability shall not constitute a Qualifying Termination.
(j)“Separation” means a “separation from service,” as defined in the regulations under Section 409A of the Code.
7.Successors.
(a)Company’s Successors. The Company shall require any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets, by an agreement in substance and form satisfactory to the Executive, to assume this Agreement and to agree expressly to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets or which becomes bound by this Agreement by operation of law.
(b)Executive’s Successors. This Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
8.Golden Parachute Taxes.
(a)Best After-Tax Result. In the event that any payment or benefit received or to be received by Executive pursuant to this Agreement or otherwise (“Payments”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this subsection (a), be subject to the excise tax imposed by Section 4999 of the Code, any successor provisions, or any comparable federal, state, local or foreign excise tax (“Excise Tax”), then, subject to the provisions of Section 8, such Payments shall be either (A) provided in full pursuant to the terms of this Agreement or any other applicable agreement, or (B) provided as to such lesser extent which would result in no portion of such Payments being subject to the Excise Tax (“Reduced Amount”), whichever of the foregoing amounts, taking into account the applicable federal, state, local and foreign income, employment and other taxes and the Excise Tax (including, without limitation, any interest or penalties on such taxes), results in the receipt by Executive, on an after-tax basis, of the greatest amount of payments and benefits provided for hereunder or otherwise, notwithstanding that all or some portion of such Payments may be subject to the Excise Tax. Unless the Company and Executive otherwise agree in writing, any determination required under this Section shall be made by independent tax counsel designated by the Company and reasonably acceptable to Executive (“Independent Tax Counsel”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required under this Section, Independent Tax Counsel may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code; provided that Independent Tax Counsel shall assume that Executive pays all taxes at the highest marginal rate. The Company and Executive shall furnish to Independent Tax Counsel such information and documents as Independent Tax Counsel may reasonably request in order to make a determination under this Section. The Company shall bear all costs that Independent Tax Counsel may reasonably incur in connection with any calculations contemplated by this Section. In the event that Section 8(a)(ii)(B) above applies, then based on the information provided to Executive and the Company by Independent Tax Counsel, Executive may, in Executive’s sole discretion and within thirty (30) days of the date on which Executive is provided with the information prepared by Independent Tax Counsel, determine which and how much of the Payments (including the accelerated vesting of equity compensation awards) to be otherwise received by Executive shall be eliminated or reduced (as long as after such determination the value (as calculated by Independent Tax Counsel in accordance with the provisions of Sections 280G and 4999 of the Code) of the amounts payable or distributable to Executive equals the Reduced Amount). If the Internal Revenue Service (the “IRS”) determines that any Payment is subject to the Excise Tax, then Section 8(b) hereof shall apply, and the enforcement of Section 8(b) shall be the exclusive remedy to the Company.
(b)Adjustments. If, notwithstanding any reduction described in Section 8(a) hereof (or in the absence of any such reduction), the IRS determines that Executive is liable for the Excise Tax as a result of the receipt of one or more Payments, then Executive shall be obligated to surrender or pay back to the Company, within one-hundred twenty (120) days after a final IRS determination, an amount of such payments or benefits equal to the “Repayment Amount.” The Repayment Amount with respect to such Payments shall be the smallest such amount, if any, as shall be required to be surrendered or paid to the Company so that Executive’s net proceeds with respect to such Payments (after taking into account the payment of the Excise Tax imposed on such Payments) shall be maximized. Notwithstanding the foregoing, the Repayment Amount with respect to such Payments shall be zero (0) if a Repayment Amount of more than zero (0) would not eliminate the Excise Tax imposed on such Payments or if a Repayment Amount of more than zero would not maximize the net amount received by Executive from the Payments. If the Excise Tax is not eliminated pursuant to this Section 8(b), Executive shall pay the Excise Tax.
9.Miscellaneous Provisions.
(a)Section 409A. To the extent (i) any payments to which Executive becomes entitled under this Agreement, or any agreement or plan referenced herein, in connection with Executive’s
termination of employment with the Company constitute deferred compensation subject to Section 409A of the Code and (ii) Executive is deemed at the time of such termination of employment to be a “specified” employee under Section 409A of the Code, then such payment or payments shall not be made or commence until the earlier of (i) the expiration of the six (6)-month period measured from the Executive’s Separation; or (ii) the date of Executive’s death following such Separation; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to Executive, including (without limitation) the additional twenty percent (20%) tax for which Executive would otherwise be liable under Section 409A(a)(1)(B) of the Code in the absence of such deferral. Upon the expiration of the applicable deferral period, any payments which would have otherwise been made during that period (whether in a single sum or in installments) in the absence of this paragraph shall be paid to Executive or Executive’s beneficiary in one lump sum (without interest). Except as otherwise expressly provided herein, to the extent any expense reimbursement or the provision of any in-kind benefit under this Agreement (or otherwise referenced herein) is determined to be subject to (and not exempt from) Section 409A of the Code, the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect the expenses eligible for reimbursement or in kind benefits to be provided in any other calendar year, in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which Executive incurred such expenses, and in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit. To the extent that any provision of this Agreement is ambiguous as to its exemption or compliance with Section 409A, the provision will be read in such a manner so that all payments hereunder are exempt from Section 409A to the maximum permissible extent, and for any payments where such construction is not tenable, that those payments comply with Section 409A to the maximum permissible extent. To the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this Agreement (or referenced in this Agreement) are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the regulations under Section 409A.
(b)Other Arrangements. This Agreement supersedes any and all cash severance arrangements and vesting acceleration arrangements under any agreement governing Equity Awards, severance and salary continuation arrangements, programs and plans which were previously offered by the Company to the Executive, including under any employment agreement or offer letter, and Executive hereby waives Executive’s rights to such other benefits. In no event shall any individual receive cash severance benefits under both this Agreement and any other vesting acceleration, severance pay or salary continuation program, plan or other arrangement with the Company. For the avoidance of doubt, in no event shall Executive receive payment under both Section 2 and Section 3 with respect to Executive’s Separation. The vesting acceleration provisions set forth in any employment agreement or letter or similar agreement between the Company and Executive in effect on the Effective Date, to the extent more favorable to the Executive, will continue to apply to the Equity Awards held by the Executive on such date.
(c)Dispute Resolution. To ensure rapid and economical resolution of any and all disputes that might arise in connection with this Agreement, Executive and the Company agree that any and all disputes, claims, and causes of action, in law or equity, arising from or relating to this Agreement or its enforcement, performance, breach, or interpretation, will be resolved solely and exclusively by final, binding, and confidential arbitration, by a single arbitrator, in Los Angeles County, California and conducted by Judicial Arbitration & Mediation Services, Inc. (“JAMS”) under its then-existing employment rules and procedures. Nothing in this section, however, is intended to prevent either party from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Each party to an arbitration or litigation hereunder shall be responsible for the payment of its own attorneys’ fees.
(d)Notice. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S.
registered or certified mail, return receipt requested and postage prepaid or deposited with Federal Express Corporation, with shipping charges prepaid. In the case of the Executive, mailed notices shall be addressed to him or her at the home address which he or she most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of its Secretary.
(e)Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.
(f)Withholding Taxes. All payments made under this Agreement shall be subject to reduction to reflect taxes or other charges required to be withheld by law.
(g)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.
(h)No Retention Rights. Nothing in this Agreement shall confer upon the Executive 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 Company or any subsidiary of the Company or of the Executive, which rights are hereby expressly reserved by each, to terminate his or her service at any time and for any reason, with or without Cause.
(i)Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California (other than its choice-of-law provisions).
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written.
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EXECUTIVE
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ZIPRECRUITER, INC.
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By:
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Title:
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COMMERCIAL LEASE
This Commercial Lease (“Lease”) is entered into as of November 8, 2016 (the “Effective Date”), by and between COUSINS FUND II PHOENIX III, LLC, a Delaware limited liability company (“Landlord”), and ZIPRECRUITER, INC., a Delaware corporation (“Tenant”). In consideration of the mutual covenants set forth herein, Landlord and Tenant agree as follows:
1. Terms and Definitions. The following definitions and terms apply to this Lease (other words are defined elsewhere in the text of this Lease):
(a) “Tenant’s Current Address”: 80 E. Rio Salado Parkway, Suite 115, Tempe, Arizona 85281
(b) “Premises”: The entire second (2nd) floor in the Hayden Ferry Lakeside III building (the “Building”) located on land with an address of 40 E. Rio Salado Parkway, Tempe, Arizona 85281 (the “Land”)
(c) “Rentable Area of Premises”: 27,135 rentable square feet (“RSF”) which has been measured and calculated in accordance with the BOMA Standard using a load factor of 12%.
(d) “Rentable Area of Building”: 264,239 RSF
(e) “Pro-rata Share”: Tenant’s pro-rata share is ten and twenty-seven hundredths percent (10.27%), which is determined by dividing the Rentable Area of Premises by the Rentable Area of Building.
(f) “Term”: a period of sixty-six (66) full calendar months plus, if the Commencement Date does not fall on the first day of a calendar month, that period from the Commencement Date to the last day of the calendar month in which the Commencement Date falls, beginning on the Commencement Date and expiring at 6 o’clock PM local time on the Expiration Date.
(g) “Lease Year”: each successive twelve (12) month period throughout the Term; provided that the first Lease Year shall commence on the Commencement Date and expire (i) on the last day of the month preceding the first anniversary of the Commencement Date, if the Commencement Date occurs on the first day of the month; or (ii) on the last day of the month in which the first anniversary of the Commencement Date occurs, if the Commencement Date occurs on a day other than the first day of the month; each subsequent Lease Year shall commence on the day following the expiration of the previous Lease Year; and, the last Lease Year shall expire upon the expiration of the Term.
(h) “Commencement Date”: Subject to and upon the terms and conditions set forth herein, the Commencement Date of this Lease shall be the earlier of: (i) the date that Tenant opens for business at the Premises; or (ii) December 15, 2016 (the “Anticipated Commencement Date”); provided that Landlord has delivered possession of the Premises to Tenant on or before November 15, 2016 (the “Anticipated Delivery Date”); provided, however, in the event that Landlord fails to deliver possession of the Premises to Tenant on the Anticipated Delivery Date, the Anticipated Commencement Date shall be extended on a day-per-day basis for each day past the Anticipated Delivery Date until such date that Landlord delivers actual possession of the Premises to Tenant. By way of example, in the event that Landlord delivers possession of the Premises to Tenant on December 1, 2016, (i) the period from the Anticipated Delivery Date (i.e., November 15, 2016) through December 1, 2016 (the actual delivery date) shall be the “delayed possession period”, (ii) there are fifteen (15) days in the “delayed possession period”, and, as such, (iii) the Commencement Date of this Lease will be deemed to be December 30, 2016, which date is fifteen (15) calendar days following the Anticipated Commencement Date; provided
that Tenant has not opened for business at the Premises prior to the foregoing date. In addition, Landlord shall promptly inform Tenant of the date Landlord gives written notice to the existing occupant of the Premises to vacate, and periodic updates with regard to the date Landlord anticipates that the existing occupant of the Premises will vacate the Premises. In the event the Commencement Date has not occurred within ninety (90) days after the Effective Date, Tenant may terminate this Lease by delivering written notice to Landlord at any time, in which event this Lease shall terminate, Landlord shall return the Security Deposit and any prepaid rent to Tenant, and neither party shall have any further duty, responsibility, obligation or liability to the other in connection with this Lease.
(i) “Expiration Date”: The last day of the sixth (6th) Lease Year provided, however, that the last Lease Year of the Term shall contain six (6) full calendar months.
(j) “Base Rent”: the amounts specified in the chart below, to be paid by Tenant according to the provisions hereof:
Base Rent
Entire Second Floor
27,135 RSF
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Lease Year or Period
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Base Rent per RSF
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Monthly Amount
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Periodic Amount
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Months 1-12
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$40.00
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$90,450.00
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$1,085,400.00#
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Months 13-24
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$40.75
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$92,145.93
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$1,105,751.20
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Months 25-36
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$41.50
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$93,841.88
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$1,126,102.50
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Months 37-48
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$42.25
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$95,537.81
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$1,146,453.70
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Months 49-60
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$43.00
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$97,233.75
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$1,166,805.00
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Months 61-66
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$43.75
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$98,929.68
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$593,578.08
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#Subject to the Abated Rent provision set forth below.
Provided that no Default, defined below, exists at the time of the abatement provided below, Tenant’s monthly installment of Base Rent shall be abated for the first full six (6) calendar months of the Term of this Lease (the “Abatement Period”), in the amount of Ninety Thousand Four Hundred Fifty and 00/100 Dollars ($90,450.00) per month, for a total abatement of Base Rent in the amount of Five Hundred Forty-Two Thousand Seven Hundred and 00/100 Dollars ($542,700.00) (the “Abated Rent”). The principal amount of the Abated Rent, together with interest thereon calculated at the Default Rate, defined below, shall be amortized evenly over the Term. So long as no uncured Default, defined below, occurs under this Lease that leads to the Landlord either repossessing the Premises or terminating the Lease, then upon Landlord’s receipt of the final monthly installment of Rent, defined below, Tenant shall have no liability to Landlord for the repayment of any portion of the Abated Rent. In the event of an uncured Default, then in addition to all of Landlord’s other remedies available under the Lease, Tenant shall also become immediately liable to Landlord for the unamortized portion of the Abated Rent existing as of the date of such uncured Default, and interest shall accrue thereon at the Default Rate. Provided, however, that if Landlord elects to exercise its rights under Section 32 of this Lease to accelerate the entire amount of all Rent and other charges due from Tenant for the balance of the Term (in accordance with the terms of such Section), and Landlord obtains a judgment for, or is paid by Tenant, the entire amount of such accelerated sum, then such judgment for or payment of such accelerated sum shall preclude a separate recovery by Landlord under the foregoing terms of this Section of such unamortized
portion of the Abated Rent and any interest thereon. In the event the Commencement Date is other than the first day of a calendar month, the foregoing Abated Rent shall be applied from the Commencement Date, and any prorated amount not due for the first month shall be applied to the seventh (7th) month (which, in effect, will be the sixth full calendar month after the Commencement Date).
(k) “Base Year”: Calendar year 2017
(l) “Initial Improvements”: None; Tenant accepts the Premises in its current “as-is, where-is” condition subject, however, to the terms and conditions set forth in Article 2 below. Notwithstanding the foregoing, Landlord shall pay to Tenant an Improvement Allowance in accordance with the provisions of Exhibit D attached hereto and made a part hereof.
(m) “Security Deposit”: See, Section 8, below
(n) “Guarantor”: None
(o) “Parking Spaces”: One Hundred Twenty-One (121) parking spaces in the Building’s Parking Facility, which shall be allocated as follows:
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Type of Parking
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Number of Spaces
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Unreserved (covered)
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One Hundred Twenty-One (121)
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Reserved (covered)
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Tenant may convert up to ten (10) unreserved
parking spaces to reserved spaces
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Subject to the terms and conditions of Section 48, below: (i) for each reserved, covered Parking Space, Tenant shall pay to Landlord One Hundred Twenty-Five and 00/100 Dollars ($125.00) per space per month, plus applicable transaction privilege taxes; and (ii) for each unreserved Parking Space (covered or uncovered), Tenant shall pay to Landlord Seventy-Five and 00/100 Dollars ($75.00) per space per month, plus applicable transaction privilege taxes, which taxes are currently 2.3%. The monthly rental for all Parking Spaces shall be subject to periodic adjustments in accordance with Section 48, below. Provided that no Default, defined below, under any term, condition or obligation of this Lease exists at the time of the abatement provided below that leads to the Landlord either repossessing the Premises or terminating the Lease, Tenant’s monthly rental fees for the Parking Spaces shall be abated for the Abatement Period (the “Abated Parking Rental Fees”). The principal amount of the Abated Parking Rental Fees, together with interest thereon calculated at the rate of twelve percent (12%) per annum, compounded monthly, shall be amortized evenly over the Term. So long as no uncured Default, defined below, occurs under this Lease, then upon Landlord’s receipt of the final monthly installment of Rent, defined below, Tenant shall have no liability to Landlord for the repayment of any portion of the Abated Parking Rental Fees. In the event of an uncured Default, then in addition to all of Landlord’s other remedies available under the Lease, Tenant shall also become immediately liable to Landlord for the unamortized portion of the Abated Parking Rental Fees existing as of the date of such uncured Default, and interest shall accrue thereon at the Default Rate, defined below.
Tenant shall notify Landlord in writing prior to the Commencement Date as to how many Parking Spaces Tenant will initially take. Tenant’s failure to so notify Landlord prior to the Commencement Date will be conclusive evidence of Tenant’s intention to take one hundred twenty-one (121) parking spaces, of which ten (10) will be reserved. Thereafter,
Tenant has the right, to be exercised at any time during the first six (6) full calendar months of the Term, upon not less than thirty (30) days prior written notice to Landlord, to reduce or increase the number of Parking Spaces that it is licensed by Landlord to use, up to a maximum of one hundred twenty-one (121) Parking Spaces; provided, however, Tenant understands and agrees that any such Parking Space(s) that Tenant tries to re- license from Landlord after the first six (6) full calendar months following the Commencement Date, up to a maximum of one hundred twenty-one (121) Parking Spaces, will be subject to availability, as determined by Landlord in its sole and reasonable discretion. If available as determined by Landlord in its sole and reasonable discretion, Tenant shall have the right to lease additional Parking Spaces, beyond one hundred twenty-one (121) Parking Spaces, the cost for which shall be billed to Tenant at the then prevailing rate for such Parking Space(s) on a month-to-month basis with each party having the right to terminate the month-to-month license as to such Space(s) on no less than thirty (30) days prior written notice to the other party.
(p) “Tenant’s Broker” is: Cresa Phoenix (Mike Gordon), 2398 East Camelback Road, Suite 900, Phoenix, Arizona 85016; 602-648-7373.
(q) “Landlord’s Broker” is: CBRE (Bryan Taute), 2415 East Camelback Road, Phoenix, Arizona 85016; 602-735- 1710, and Cousins Realty Services, LLC, which is an affiliate of Landlord.
(r) “Laws” shall mean any and all laws, ordinances, rules, regulations and building and other codes of any governmental or quasi-governmental entity or authority (“Governmental Authority”) applicable to the subject matter hereof, including, without limitation, all Laws relating to disabilities, health, safety or the environment.
(s) “Project”: shall mean the Building, Land, any areas designated by Landlord from time to time for the common use of all tenants and occupants of the Building (“Common Areas”), including, but not limited to, the parking facility for the Building designated by Landlord from time to time (the “Parking Facility”), walkways, greenspace, plaza and common areas, and related equipment, fixtures and improvements.
(t) “Building Standard”: The quantity and quality of materials, finishes and workmanship from time to time specified by Landlord for use throughout the Building. “Above Standard” means all improvements, fixtures, materials, finishes and workmanship which exceed Building Standard in terms of quantity or quality (or both), including but not limited to Supplemental HVAC Equipment, defined below; water heaters, instant hot faucets, garbage disposals, dishwashers, stoves, microwaves, refrigerators, ice machines, coffee machines, washing machines, dryers or other appliances; and sinks, sink fixtures, sink drain lines, appliance drain lines, water source plumbing, ground fault interrupters, dedicated outlets or other similar plumbing and/or electrical fixtures or items.
(u) “Building Systems”: The mechanical, electrical, plumbing, sanitary, sprinkler, heating, ventilation and air conditioning (“HVAC”), security, life-safety, elevator and other service systems or facilities of the Building up to the point of connection of localized distribution to the Premises.
(v) “BOMA Standard”: The term “BOMA Standard” shall mean the American National Standard method of measuring floor area in office buildings of the Building Owners and Managers Association (ANSI BOMA Z65.1-1996)
2. Premises. Subject to and in accordance with the provisions hereof, Landlord leases to Tenant and Tenant leases from Landlord the Premises as designated on Exhibit A. Tenant agrees that no representations or warranties relating to the condition of the Project or the Premises and no promises to alter, repair or improve the Premises have been made by Landlord, except that the Building Systems (inclusive of all lighting and electrical outlets in the Premises) will be in good working order as of the Commencement Date. Tenant’s failure to advise Landlord, in writing and within sixty (60) days of the Commencement Date, of a breach of the warranty set forth in the preceding sentence will be indisputable evidence that Landlord has met its warranty obligation. Notwithstanding anything to the contrary set forth hereinabove, Landlord warrants and represents that as of the date of this Lease, Landlord has not received written notice of violation from a governmental authority that the Common Areas of the Building and/or the Premises are in violation of applicable laws, including ADA and laws relating to hazardous materials. In the event of a breach of the foregoing covenant, but specifically subject to and excluding any compliance work triggered by any alterations performed by Tenant (which tenant shall be paid for by Tenant at its sole cost and expense), Landlord, at its sole cost and expense (and not subject to reimbursement as an Operating Expense), shall promptly make such improvements, corrections or repairs as Landlord determines is appropriate to bring such condition into compliance. Except as otherwise expressly provided in this Lease or any Work Letter attached hereto, Tenant agrees to accept the Premises in their current “AS IS, WHERE IS” condition and acknowledges that EXCEPT AS PROVIDED HEREIN, LANDLORD MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY, HABITABILITY AND/OR FITNESS FOR A PARTICULAR PURPOSE, IN CONNECTION WITH THE PREMISES OR THE INITIAL IMPROVEMENTS. Upon Tenant’s taking possession for the purposes of conducting business, the Premises, including all Initial Improvements shall be deemed accepted by Tenant. Tenant shall also have the non-exclusive right, subject to the terms hereof, to use the Common Areas of the Project. Tenant acknowledges that the Project is or may become an integrated commercial real estate project including the Building, the Land and other buildings, Common Areas and land. Landlord reserves the right, in its sole discretion, at any time and from time to time, to include the Building within a project and/or to expand and/or reduce the amount of Land and/or improvements of which the Building, the Common Areas, or Project consists; to alter, relocate, reconfigure and/or reduce the Common Areas; and to temporarily suspend access to portions of the Common Areas, as long as the Premises remain reasonably accessible. Landlord agrees that during the Term of the Lease it will not make any changes to the Building or Common Areas that: a] knowingly and materially increase the Operating Expenses for which Tenant is responsible without increasing the Base Year’s Operating Expenses by an amount that reasonably takes into account what the Base Year’s Operating Expenses would have been if such change(s) had occurred during the Base Year; b] materially impair access to the Premises or Parking Facility, it being understood and acknowledged by Tenant that Landlord anticipates expanding the Parking Facility at one or more times during the Term, which expansion will in some way affect access to the Parking Facility provided, however, that there will be no change to the number of parking spaces available to Tenant, although said spaces can be made available to Tenant in an alternative parking location, which alternative parking location will be no more than a five (5) minute walk from the Building and, if it is more than a five (5) minute walk, then Landlord will provide (at no cost to Tenant) a shuttle service that will be scheduled to run no less than every ten (10) minutes between the hours of 8:00 a.m. to 6:00 p.m., Monday through Friday, with the exception of holidays; or, c] materially impair Tenant’s ability to use the Premises for the Authorized Use.
3. Authorized Use. Tenant shall use the Premises solely for general business office purposes, consistent with the uses of office buildings (the “Authorized Use”), and for no other purpose.
4. Term. This Lease shall constitute a legally binding and enforceable agreement between Landlord and Tenant as of the Effective Date. The Term of this Lease is stated in Section 1(f), and the Commencement Date shall be determined as provided in Section l(h). Landlord and Tenant shall confirm the Commencement Date and Expiration Date in writing within thirty (30) days after the actual Commencement Date pursuant to the form certificate attached as Exhibit E.
Landlord agrees that Tenant shall be allowed to enter the Premises at least ten (10) days prior to the Commencement Date, subject to all terms and conditions of this Lease except for the obligation to pay Rent or Parking Rental Fees, for the purpose of installing furniture, fixtures, equipment, telephone and computer cabling, security system and cameras.
5. Rental Payment. Commencing on the Commencement Date, Tenant agrees to pay Rent (defined below) in monthly installments on or before the first day of each calendar month during the Term, in lawful money of the United States of America to the following address or to such other address as Landlord may designate from time to time in writing: Cousins Fund II Phoenix III, LLC, P.O. Box 205937, Dallas, TX 75320-5937; provided, however, that the first full monthly installment of Base Rent due after the Abatement Period shall be paid in advance on the date of Tenant’s execution of this Lease and shall be applied to the first full monthly installment of Base Rent due hereunder after the expiration of the Abatement Period. Tenant agrees to timely pay all Base Rent, Additional Rent, defined below, and all other sums of money which become due and payable by Tenant to Landlord hereunder (collectively “Rent”), without abatement, demand, offset, deduction or counterclaim except as provided herein. If Tenant fails to pay part or all of the Rent within five (5) days after it is due, Tenant shall also pay (i) interest at the Default Rate, defined below or the maximum then allowed by law, whichever is less, on the unpaid Rent, plus (ii) a late charge equal to five percent (5%) of the unpaid Rent; provided, however, that Landlord is required to provide Tenant with written notice of such failure and a five (5) day period within which to cure such failure one (1) time during each calendar year of the Term before it can impose the late charge on Tenant. Landlord may assess a reasonable fee to Tenant for any checks made payable to Landlord that are returned unpaid by Tenant’s bank for any reason. If the Term does not begin on the first day of a calendar month, the installment of Rent for that partial month shall be prorated.
6. Rent. Tenant shall pay to Landlord the Base Rent for the Premises in the amounts set forth in Section 1. Base Rent includes a component attributable to Operating Expenses (defined below) for the Base Year as specified in Section 1 (“Base Operating Expenses”), and to Taxes (defined below) for the Base Year (“Base Taxes”). Prior to January 1 of each year in the Term (or as soon thereafter as it is reasonably able to do so), Landlord shall provide Tenant with an estimate of Operating Expenses and Taxes for the next calendar year in the Term (each, an “Operating Period”). If Operating Expenses during any Operating Period, as estimated by Landlord, exceed Base Operating Expenses, Tenant shall pay to Landlord for such Operating Period an amount equal to the product of (a) the difference between Operating Expenses for such Operating Period and the Base Operating Expenses, multiplied by (b) the Pro-rata Share; and if Taxes during any Operating Period, as estimated by Landlord, exceed Base Taxes, Tenant shall pay to Landlord for such Operating Period an amount equal to the product of (i) the difference between Taxes for such Operating Period and the Base Taxes, multiplied by (ii) the Pro-rata Share (the sum of such amounts being collectively referred to herein as “Additional Rent”); such Additional Rent shall be paid in monthly installments of one twelfth (1/12) of the Additional Rent owed from Tenant for such Operating Period, with such installments being due at the same time and in the same manner as Tenant’s monthly payments of Base Rent.
7. Operating Expenses and Taxes. (a) Definitions of Operating Expenses and Taxes. “Operating Expenses,” as used herein, shall mean all reasonable expenses, costs and disbursements of every kind and nature relating to or incurred or paid during any Operating Period in connection with the
ownership, operation, repair and maintenance of the Project, including, but not limited to, wages and salaries of all employees engaged in the operation, maintenance or security of the Project, whether billed directly or through a common or master association, including taxes, insurance and benefits relating thereto; the cost of all labor, supplies, equipment, materials and tools used in the operation and maintenance of the Project; management fees; the cost of all legal and accounting expenses incurred in connection with the management and operation of the Project; the cost of all utilities for the Project, including, but not limited to, the cost of HVAC, water, sewer, waste disposal, gas, and electricity; the cost of all maintenance and service agreements for the Project, including but not limited to, security service, window cleaning, elevator maintenance and janitorial service; the cost of all insurance relating to the Project and Landlord’s personal property used in connection therewith, plus the cost of all commercially reasonable deductible payments made by Landlord in connection therewith; the cost of all license and permit fees; the cost of repairs, replacements, refurbishing, restoration and general maintenance; a reasonable amortization charge on account of any capital expenditure incurred in an effort (i) to comply with any Laws enacted after the Commencement Date, or (ii) to reduce the Operating Expenses of the Project (limited to the anticipated savings to be derived from said capital expenditure); costs billed to the Building, Project or Landlord through a declaration or any cross-easement agreement which encumbers the Project, or any declaration of condominium or other like instrument that encumbers any or all of the improvements on the Project; costs or assessments required to be paid by Landlord in connection with any community improvement district; and, all other items constituting operating and maintenance costs in connection with the Project according to generally accepted accounting principles (“GAAP”); the cost of insurance endorsements in order to repair, replace and re-commission the Building for re-certification after any loss pursuant to the U.S. EPA’s ENERGY STAR® rating and/or Design to Earn ENERGY STAR, the Green Building Initiative’s Green Globes™ for Continual Improvement of Existing Buildings (Green Globes™-CIEB), the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system, or other applicable standard, or to support achieving energy and carbon reduction targets, and all costs of maintaining, managing, reporting, commissioning, and re- commissioning the Building or any part thereof that was designed and/or built to be sustainable and conform with the U.S. EPA’s ENERGY STAR® rating and/or Design to Earn ENERGY STAR, the Green Building Initiative’s Green Globes™ for Continual Improvement of Existing Buildings (Green Globes™-CIEB), the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system, or other applicable standard, provided however, the cost of such application, reporting and commissioning of the Building or any part thereof to seek certification shall be a cost capitalized and thereafter amortized as an Operating Expense under GAAP. Except as specifically provided in the immediately preceding sentence, Operating Expenses shall not include the following: (i) depreciation; (ii) leasing commissions; (iii) repairs and restorations paid for by the proceeds of any insurance policy; (iv) construction of improvements or repairs of a capital nature other than as described above; (v) income and franchise taxes other than that portion, if any, of income and franchise taxes which may hereafter be assessed and paid in lieu of or as a substitute in whole or in part for Taxes; (vi) costs of utilities directly charged to and reimbursed by Tenant or other tenants; (vii) management fees to the extent in excess of the greater of (A) four percent (4%) of the gross receipts collected for the Real Property, and (B) fees charged by a majority of the landlords of the Comparable Buildings for the management of the Comparable Buildings; (viii) wages, salaries and benefits paid to any persons above the grade of property manager or chief engineer (or employees with equivalent responsibilities regardless of job title) and their immediate supervisor; (ix) legal and accounting fees, costs, settlements, judgments or awards relating to (A) disputes with tenants, prospective tenants or other occupants of the Building, (B) disputes with purchasers, prospective purchasers, mortgagees or prospective mortgagees of the Building or the Real Property or any part of either, or (C) negotiations of leases, contracts of sale or mortgages; (x) costs in the nature of penalties or fines; (xi) except with respect to management fees (which are subject to (vii) above), costs for services, supplies or repairs paid to any related entity in excess of costs that would
be payable in an “arm’s length” or unrelated situation for comparable services, supplies or repairs on a competitive basis; (xii) costs of any cleanup, containment, abatement, removal or remediation of hazardous materials (except for hazardous materials as are commonly and legally used or stored as a consequence of using the Project as a predominantly office project, and only if the quantities thereof do not necessitate a “response action”, as that term is defined in CERCLA, or similar reporting requirement under applicable State law), to the extent such were either (i) introduced onto the Project by Landlord, or as a result of Landlord’s gross negligence; or (iii) covered by a validly issued insurance policy (and such insurer has acknowledged its obligation to cover such costs; provided, however, that any deductible shall be included); (xiii) any compensation paid to clerks, attendants or other persons in commercial concessions operated by or on behalf of the Landlord; (xiv) rent for any office space occupied by Building management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space occupied by management personnel of the Comparable Buildings in the vicinity of the Building, with adjustment where appropriate for the size of the applicable project; (xv) all assessments and premiums which are not specifically charged to Tenant because of what Tenant has done, which can be paid by Landlord in installments, shall be paid by Landlord in the maximum number of installments permitted by law (except to the extent inconsistent with the general practice of the Comparable Buildings) and shall be included as Operating Expenses in the year in which the assessment or premium installment is actually paid; (xvi) any reserves retained by Landlord. It is further understood that any amounts collected by Landlord from tenants of the building for excess HVAC and utility usage shall be deducted from Operating Expenses. In addition, if the costs of insurance increase because of changes to the deductibles, limits of coverage and types of coverage, any increases resulting from such changes shall also be added to the Base Year’s Operating Expenses. “Taxes,” as used herein, means all ad valorem taxes, personal property taxes, and all other taxes, assessments, and all other similar charges, if any, which are levied, assessed, or imposed upon or become due and payable in connection with, or a lien upon, the Project or any portion thereof or facilities used in connection therewith, and all taxes of whatsoever nature that are imposed in substitution for or in lieu of any of the taxes, assessments, or other charges included in this definition of Taxes, such as taxes paid through a private agreement with respect to the Property as a part of or in connection with an inducement resolution with a development authority and all costs, expenses and fees associated or incurred by Landlord in connection with that inducement resolution and transaction involving a development authority; but excluding, however, taxes and assessments attributable to the personal property of tenants and paid by such tenants as a separate charge. In the event Landlord shall retain any consultant to negotiate the amount of taxes, tax rate, assessed value or other factors influencing the amount of Taxes, then the aggregate of all such reasonable third-party fees (including, without limitation, reasonable attorneys’ and appraisers’ fees) and all disbursements, court costs and other items paid or incurred by Landlord during the applicable tax year with respect to such proceedings shall be included in Taxes. Tenant shall not institute any proceedings with respect to the assessed valuation of the Building, Project, or the Property or any part thereof for the purpose of seeking or securing a tax reduction. If a rental tax, gross receipts tax or sales tax on Rent is imposed on Landlord by any Governmental Authority, Tenant shall, as additional Rent, reimburse Landlord, at the same time as each monthly payment of Rent is due, an amount equal to all such taxes Landlord is required to pay by reason of the Rent paid hereunder. If less than one hundred percent (100%) of the Rentable Area of the Building is actually occupied during any Operating Period, Operating Expenses shall be the amount that such Operating Expenses would have been for such Operating Period had one hundred percent (100%) of the Rentable Area of the Building been occupied during all such Operating Period, as determined by Landlord.
(b) Additional Rent. Landlord shall, within one hundred twenty (120) days after the end of each Operating Period (or as soon thereafter as it is reasonably able to do so), furnish Tenant with a statement of the Operating Expenses and Taxes during such year and a computation of the Additional
Rent owed by Tenant for such Operating Period (“Expense Statement”). Failure of Landlord to provide such statement within such time period shall not be a waiver of Landlord’s right to collect any Additional Rent. If such statement shows that the actual amount Tenant owes for such Operating Period is more than the estimated Additional Rent paid by Tenant for such Operating Period, Tenant shall pay the difference within thirty (30) days after Tenant’s receipt of the Expense Statement. If the Expense Statement shows that Tenant paid more in estimated Additional Rent than the actual amount of Additional Rent owed by Tenant for such Operating Period, Tenant shall receive a credit therefor. The credit shall be applied to future monthly payments attributable to Rent, or if this Lease has expired, such amount shall be refunded to Tenant. Unless adjusted as a result of an audit by Tenant conducted pursuant to the express terms of this Lease, the Operating Expenses, Taxes and Additional Rent set forth in the Expense Statement shall be binding upon Tenant. Provided, however, that in the event that the Term of this Lease expires, or is terminated pursuant to the terms of this Lease, on a date other than December 31, then, at the option of Landlord, Landlord may, either prior to the date on which the Term expires, or within thirty (30) days thereafter, elect to provide Tenant with a revised estimate of the Operating Expenses and Taxes for the Operating Period in which such expiration or termination date occurs and the Additional Rent that will be due from Tenant for such Operating Period, which estimated Additional Rent shall be prorated to reflect the portion of such Operating Period that is contained within the Term of the Lease (the “Final Expense Estimate”). In the event that Landlord elects to deliver a Final Expense Estimate to Tenant, then (i) Tenant shall pay the prorated Additional Rent reflected in such statement within thirty (30) days after Tenant’s receipt of such estimate; (ii) the estimated amount of the Additional Rent for the final Operating Period shall be binding upon Landlord and Tenant; and (iii) Landlord shall not thereafter seek from Tenant any additional payment of Additional Rent if the actual Operating Expenses and Taxes for such Operating Period are greater than those reflected in the Final Expense Estimate, but Landlord shall refund to Tenant any excess funds paid by Tenant to Landlord should the actual Operating Expenses and Taxes for such Operating Period be less than those reflected in the Final Expense Estimate. In the event that Landlord elects not to provide Tenant with a Final Expense Estimate, then it shall be presumed that Landlord will provide Tenant with an Expense Statement within one hundred twenty (120) days after the end of the final Operating Period contained in the Term, as provided above, and the Additional Rent shown in such Expense Statement shall be due from Tenant to Landlord within thirty (30) days after Tenant’s receipt of such statement.
(c) Tenant’s Audit. Tenant shall have the right to have Landlord’s books and records pertaining to Operating Expenses and Taxes for each Operating Period reviewed, copied (provided Landlord is reimbursed for the cost of such copies) and audited (“Tenant’s Audit”), provided that: (a) such right shall not be exercised more than once during any calendar year; (b) if Tenant elects to conduct Tenant’s Audit, Tenant shall provide Landlord with written notice thereof (“Tenant’s Audit Notice”) no later than one hundred twenty (120) days following Tenant’s receipt of the Expense Statement or Final Expense Estimate for the year to which Tenant’s Audit will apply; (c) Tenant shall have no right to conduct Tenant’s Audit if an uncured Default by Tenant exists either at the time of Landlord’s receipt of Tenant’s Audit Notice or at any time during Tenant’s Audit; (d) no subtenant shall have any right to conduct an audit and no assignee shall conduct an audit for any period during which such assignee was not in possession of the Premises; (e) conducting Tenant’s Audit shall not relieve Tenant from the obligation to timely pay Base Rent or the Additional Rent, pending the outcome of such audit; (f) Tenant’s right to conduct such audit for any calendar year shall expire one hundred twenty (120) days following Tenant’s receipt of the Expense Statement or Final Expense Estimate for such year, and if Landlord has not received Tenant’s Audit Notice within such one hundred twenty (120) day period, Tenant shall have waived its right to conduct Tenant’s Audit for such calendar year; provided, however, that with respect to any audit of Operating Expenses and Taxes for the Base Year, Tenant’s right to conduct an audit for such year shall expire one hundred twenty (120) days following Tenant’s receipt of
the first Expense Statement forwarded by Landlord to Tenant for any Operating Period after the Base Year; (g) Tenant’s Audit shall be conducted by a Certified Public Accountant whose compensation is not contingent upon the results of Tenant’s Audit or the amount of any refund received by Tenant, and who is not employed by or otherwise affiliated with Tenant; (h) Tenant’s Audit shall be conducted at Landlord’s office in Phoenix, Arizona where the records of the year in question are maintained by Landlord, during Landlord’s normal business hours; (i) Tenant’s Audit shall be completed within thirty (30) days after the date of Tenant’s Audit Notice, and a complete copy of the results thereof shall be delivered to Landlord within sixty (60) days after the date of Tenant’s Audit Notice; and (j) Tenant’s Audit shall be conducted at Tenant’s sole cost and expense. If Tenant’s Audit is completed and submitted to Landlord in accordance with the requirements of this Section and such audit demonstrates to Landlord’s reasonable satisfaction that Landlord has overstated the Operating Expenses or Taxes for the year audited, then Landlord shall reimburse Tenant for any overpayment, and if such Operating Expenses or Taxes have been overstated by more than four percent (4%), then Landlord shall also reimburse Tenant for Tenant’s actual, reasonable cost incurred in conducting Tenant’s Audit (not to exceed $2,500.00), with such reimbursement(s) to be made within thirty (30) days after Landlord’s receipt of documentation reasonably acceptable to Landlord reflecting the amount of such overpayment and the cost of Tenant’s Audit.
(d) Confidentiality. Tenant hereby agrees to keep the results of Tenant’s Audit confidential and to require the auditor conducting Tenant’s Audit, including its employees and each of their respective attorneys and advisors, to keep the results of Tenant’s Audit in strictest confidence. In particular, but without limitation, Tenant agrees that: (a) Tenant shall not disclose the results of Tenant’s Audit to any past, current or prospective tenant of the Building; and (b) Tenant shall require that its auditors, attorneys and anyone associated with such parties shall not disclose the results of Tenant’s Audit to any past, current or prospective tenant of the Building; provided, however, that Landlord hereby agrees that nothing in items (a) or (b) of this subparagraph shall preclude Tenant from disclosing the results of Tenant’s Audit in any judicial or quasi-judicial proceeding, or pursuant to court order or discovery request, or to any current or prospective assignee or subtenant of Tenant, or to any agent, representative or employee of Landlord who or which request the same. If Tenant intends to disclose the results of Tenant’s Audit in any judicial or quasi-judicial proceeding, or if Tenant receives notice that it may be required in any such proceeding by either the order of any judicial, regulatory or other governmental entity presiding over such proceeding, or by a discovery request made in such proceeding, to disclose the results of Tenant’s Audit, then Tenant shall (i) provide Landlord with sufficient prior written notice of Tenant’s intent to make such disclosure, or such order or request for such disclosure, in order to permit Landlord to contest such intended disclosure, order or request; and (ii) cooperate with Landlord, at Landlord’s expense, in seeking a protective order or other remedy to limit the disclosure of such results to the extent reasonably required to adjudicate the matters at issue in such proceeding. If required by Landlord, Tenant shall execute and require Tenant’s auditor to execute Landlord’s then-current reasonable confidentiality agreement reflecting the terms of this Section as a condition precedent to Tenant’s right to conduct Tenant’s Audit.
(e) Cap on Controllable Operating Expenses. Notwithstanding anything to the contrary set forth in this Lease, Landlord agrees that Tenant’s obligation to pay increases in controllable Operating Expenses in any Operating Period shall not exceed five percent (5%) over the controllable Operating Expenses payable in the preceding Operating Period, determined on a cumulative basis throughout the Term. For the purposes of this Lease, “controllable” Operating Expenses include all Operating Expenses other than the cost of all utility services provided to the Project, insurance premiums and any taxes included in Operating Expenses. For purposes of clarity, there is no cap on the amount of Taxes payable by Tenant.
8. Security Deposit.
(a) Letter of Credit. Within five (5) business days following the mutual execution of this Lease, Tenant shall provide to Landlord, at Tenant’s sole cost and expense, an irrevocable standby letter of credit in the amount of Eight Hundred Ninety Thousand Three Hundred Sixty-Seven Thousand and 12/100 Dollars ($890,367.12) (including replacements thereof permitted hereunder, the “Letter of Credit”). The Letter of Credit and any cash proceeds thereof shall be held as security for the faithful performance by Tenant of all of the provisions of this Lease to be performed or observed by Tenant (the cash proceeds of the Letter of Credit, and any other funds held by Landlord in accordance with the terms of this Section 8, are referred to in this Lease as the “Security Deposit”).
(b) Form and Substance of Letter of Credit. The Letter of Credit shall be in form and substance reasonably satisfactory to Landlord and issued by a bank that is satisfactory to Landlord (with Landlord acknowledging that City National Bank is an approved bank), and that at all times during the Term maintains a branch office that can accept drafts for draws under the Letter of Credit located within Maricopa County, Arizona (or, alternatively, which accepts draw requests via facsimile or overnight mail). The non-satisfaction of any of the foregoing conditions which is not cured within the applicable cure period set forth in Section 32 below shall, at the election of Landlord, be deemed a non-monetary Default under this Lease. The Letter of Credit shall: (i) name Landlord as beneficiary; (ii) allow Landlord to make partial and multiple draws thereunder up to the face amount; (iii) require the issuing bank to pay to Landlord the amount of a draw upon receipt by such bank of a sight draft signed by Landlord and upon presentation to the issuing bank of nothing more than a written statement signed by Landlord that an event entitling Landlord to draw under the Letter of Credit has occurred under this Lease; (iv) provide that Landlord can freely transfer the Letter of Credit upon an assignment (absolute or as security) or other transfer of its interest in this Lease to the assignee or transferee, subject to compliance with the issuing bank’s transfer procedures; and (v) the initial term of the Letter of Credit shall be not less than one (1) year, and the Letter of Credit shall contain an “ever green” clause which provides that the Letter of Credit is automatically renewable by the issuer for successive periods of one (1) year each throughout the Original Term unless the issuer delivers a written notice of non-renewal to Lessor at least forty-five (45) days in advance of the then scheduled expiration date of the Letter of Credit (or Tenant otherwise delivers to Landlord a replacement Letter of Credit in compliance with the provisions of this Section 8 and reasonably acceptable to Lessor at least 45 days in advance of the then scheduled expiration date of the Letter of Credit), and Tenant must continually maintain the Letter of Credit (or replacement Letter of Credit satisfying the requirements of this Section 8) until an ultimate expiration date of not earlier than two (2) months beyond the scheduled expiration date of the Original Term; should the Original Term be extended or renewed, then Lessee must continually maintain the Letter of Credit to a date not earlier than sixty (60) days beyond the expiration of the Term, and the Letter of Credit must satisfy the requirements of this Section 8. Tenant shall pay any and all bank charges attributable to any such transfer by Landlord. Landlord shall be entitled to draw upon all or any part of the Letter of Credit (i) in accordance with this Section 8 at any time upon the occurrence of a Default by Tenant under this Lease, (ii) if Landlord receives a notice of nonrenewal of the Letter of Credit from the issuer, and Tenant fails to deliver to Landlord a replacement Letter of Credit meeting the requirements of this Section 8, and with an expiration date not less than twelve (12) months after the date of delivery at least forty-five (45) days prior to the expiration date of the Letter of Credit Landlord is then holding, (iii) an uncured failure by Tenant to perform one or more of its obligations under this Lease and the existence of circumstances in which Landlord is enjoined or otherwise prevented by operation of law from giving to Tenant a notice which would be necessary for such failure of performance to constitute a Default by Tenant under this Lease, or (iv) a reputable rating service (such as Standard & Poors, Fitch, Moody’s or other comparable rating service) downgrades the rating of the issuing bank’s vulnerability to risk or ability to avoid a
default under the issuing bank’s short or long term financial commitments or downgrades the rating of the issuing bank’s commercial paper. The Letter of Credit (or a replacement thereof satisfactory to Landlord) shall remain in effect during the entire term of this Lease, and for a period of sixty (60) days following the Expiration Date. Upon request by Landlord following a change in the name of Tenant or upon any assignment of this Lease by Tenant, Tenant (at its sole cost and expense) shall obtain and cause the issuing bank to provide to Landlord such confirmations as to the continued effectiveness of the Letter of Credit as may be reasonably requested by Landlord.
(c) Application of Letter of Credit Proceeds as Security Deposit. If Tenant fails to pay any Rent, or otherwise is in monetary Default hereunder beyond the giving of notice and the passage of any applicable grace period, Landlord may (but shall not be obligated to) draw on the Letter of Credit, and use, apply or retain all or any portion of the proceeds of a draw under the Letter of Credit (and said proceeds shall be deemed a Security Deposit) for the payment of any Rent in Default or for the payment of any other sum to which Landlord may become entitled by reason of Tenant’s monetary Default, or to compensate Landlord for any loss or damage which Landlord may suffer thereby, including any amounts Landlord is obligated or elects to spend in order to cure any such event(s) of Default or to mitigate its damages following a monetary Default or the termination of this Lease. Upon the occurrence of an event entitling Landlord to draw upon the Letter of Credit, Landlord shall be entitled to draw on the Letter of Credit, as necessary to cure said monetary Default, and apply the proceeds received to cure said monetary Default or hold any all or any portion of such draw as a Security Deposit under this Lease. If Landlord so uses or applies all or any portion of the Security Deposit or the proceeds of a draw under the Letter of Credit (and the Term of this Lease is still in effect), Tenant shall within ten (10) business days after demand therefor deposit cash with Landlord in an amount sufficient to restore the Security Deposit and/or replace the Letter of Credit, as requested by Landlord, to the full amount thereof stated hereinabove provided, however, that if Landlord has drawn upon the Letter of Credit such that Landlord is then holding any Security Deposit, upon Tenant’s reinstatement of the Letter of Credit in the required amount described herein, Landlord will immediately return to Tenant any Security Deposit then held by Landlord that was taken from the Letter of Credit. Landlord’s application of all or any portion of the Security Deposit and/or the proceeds under the Letter of Credit to any obligation of Tenant hereunder shall not limit Landlord’s damages or constitute a waiver by Landlord of any claims against or obligations of Tenant, other than the specific monetary obligations to which the Security Deposit is applied, and then only to the extent such obligations are thereby satisfied. Landlord shall not be required to keep the Security Deposit separate from its general funds, Tenant shall not be entitled to interest thereon, and Tenant waives the benefit of any Law to the contrary.
(d) Return of Security Deposit. The Security Deposit, or so much thereof as has not theretofore been applied by Landlord, without payment of interest or other increment for its use, and/or the Letter of Credit, as reduced by any draws thereunder made by Landlord pursuant to this Section 8, shall be returned to Tenant (or, at Landlord’s option, to the last assignee, if any, of Tenant’s interest hereunder) within thirty (30) days following the expiration of the Term and after Tenant has vacated the Premises. Landlord’s return of the Security Deposit and/or the Letter of Credit, as the case may be, shall not be construed as an admission that Tenant has performed all of its obligations under this Lease. No trust relationship is created herein between Landlord and Tenant with respect to the Security Deposit and/ or the Letter of Credit. If Landlord disposes of its interest in the Premises, Landlord shall deliver or credit the Security Deposit or the Letter of Credit to Landlord’s successor in interest in the Premises and give notice thereof to Tenant, and the transferring Landlord shall thereupon be relieved of further responsibility with respect to the Security Deposit, and Tenant shall look solely to the successor Landlord for any claims therefor. Upon request of Landlord, and as set forth hereinabove, Tenant shall cooperate
with Landlord, in causing the issuing bank of any Letter of Credit to acknowledge the transfer of the beneficiary’s rights thereunder to Landlord’s successor in interest.
(e) Reduction Letter of Credit Amount. Notwithstanding anything to the contrary contained in this Section 8, if, as of any anniversary of the Commencement Date, the Reduction Conditions (defined below) apply, then the face amount of the Letter of Credit shall be reduced (w) on April 1, 2018, to Seven Hundred Twelve Thousand Two Hundred Ninety-Three and 70/100 Dollars ($712,293.70), (x) on April 1, 2019, to Five Hundred Thirty-Four Thousand Two Hundred Twenty and 28/100 Dollars ($534,220.28), (y) on April 1, 2020, to Three Hundred Fifty-Six Thousand One Hundred Forty-Six and 86/100 Dollars ($356,146.86), and (z) on April 1, 2021 to One Hundred Seventy-Eight Thousand Seventy-Three and 44/100 Dollars ($178,073.44). Any such reduction shall be effected either, at Tenant’s option (i) by an amendment to the then-existing Letter of Credit reducing the face amount of the then-existing Letter of Credit (which amendment Landlord agrees to promptly execute and deliver to the issuing bank) or (ii) by Tenant’s delivery of a replacement Letter of Credit to Landlord in the applicable reduced face amount, in which event Landlord agrees to promptly return the Letter of Credit then being held by Landlord to Tenant and to execute such documentation as the issuing bank may reasonably require to effect the termination of such Letter of Credit.
As used herein, the “Reduction Conditions” shall mean that (i) Tenant is not then in monetary Default hereunder and (ii) Tenant has not been in monetary Default hereunder during the immediately preceding twelve (12) month period and (iii) there is no then-currently outstanding notice of Default which has been issued by Landlord to Tenant which has not been cured. Each of the applicable reduction dates described in clauses (v), (w), (x), (y) and (z) above is referred to herein as a “Reduction Date”; if, as of an applicable Reduction Date, the Reduction Conditions do not apply, then the reduction described above shall not occur; however, if, as of the next-succeeding Reduction Date (or, if the applicable Reduction Date is the fourth Reduction Date, then upon any anniversary of the fourth Reduction Date) the Reduction Conditions do apply, then the face amount of the Letter of Credit shall be reduced in accordance with the schedule described above as it would have been reduced on the applicable reduction date had the Reduction Conditions been in existence, with the remaining Reduction Date(s) being moved back to the next Reduction Date upon which the Reduction Conditions exist. For example, if the Reduction Conditions do not apply as of the first (1st) Reduction Date, but the Reduction Conditions do apply as the second (2nd) Reduction Date, then the face amount of the Letter of Credit will be reduced, as of the Second Reduction Date, in the manner described above in clause (w), with further reductions being possible on the 4th 5th, and 6th anniversaries of the Commencement Date, if the Reduction Conditions apply. To avoid any doubt, in no event will Tenant be entitled to take advantage of two (2) reductions (v) and (w), (w) and (x), (x) and (y) or (y) and (z) on any single Reduction Date.
9. Initial Improvements. Landlord shall have no obligation to improve or otherwise modify the Premises for Tenant’s occupancy.
10. Maintenance and Repair. Landlord shall make such improvements, repairs or replacements as may be necessary for normal maintenance of the Building Systems serving the Premises, the exterior and the structural portions of the Building and the Common Areas. Subject to the terms of Section 7, the maintenance and repairs to be performed by Landlord hereunder shall be at Landlord’s expense, unless the need for such maintenance or repairs was caused by the negligence or willful misconduct of Tenant, its employees, agents, contractors or invitees, in which event Tenant shall reimburse Landlord for the cost of such maintenance or repairs, plus a construction oversight fee for Landlord in an amount equal to five percent (5%) of the cost and expense of such maintenance or repairs (and Landlord agrees to use good faith efforts to require other tenants of the Building to so pay for maintenance or repairs cause by the negligence or willful misconduct of such other tenants and their
employees, agents, contractors or invitees, and the amounts so collected by Landlord shall be deducted from Operating Expenses); the construction oversight or management fee, if any, applicable to construction of the Initial Improvements shall be governed by the terms of the Work Letter and not by the provisions of this Section. Except to the extent that Landlord is obligated to restore and repair the Premises pursuant to Section 23, Tenant, at its sole cost, shall maintain and repair the Premises and otherwise keep the Premises in good order and repair, normal wear and tear excepted. Any repair or maintenance by Tenant shall be undertaken in accordance with the provisions and requirements of Section 16. Landlord is not responsible for replacing and/or repairing Tenant’s fixtures or any Above Standard improvements, or fixtures. Except as expressly provided in this Lease, Tenant shall accept the Premises including any existing appliances and Above Standard fixtures in their “AS IS, WHERE IS” condition as of the Effective Date. For purposes of this Lease, all Above Standard improvements and fixtures existing in the Premises as of the Effective Date shall be deemed to be Tenant’s property until the expiration or earlier termination of this Lease or Tenant’s right to possession of the Premises under this Lease, at which time such Above Standard improvements and fixtures shall become the property of Landlord and shall be surrendered to Landlord with the Premises.
11. Services. Landlord shall furnish Tenant during Tenant’s occupancy of the Premises the following services: (i) Cleaning and Janitorial Services (defined in Exhibit B), (ii) domestic water at those points of supply provided for general office use of tenants in the Building, (iii) electricity for normal, Building Standard office uses subject to Section 12, (iv) elevator service at the times and frequency reasonably required for normal business use of the Premises, (v) lamp and ballast replacement for Building Standard light fixtures, (vi) HVAC service between 7:00 o’clock a.m. and 6:00 o’clock p.m. on Monday through Friday, and between the hours of 8:00 o’clock a.m. and noon on Saturday (“Building Standard Hours”), except on New Year’s Day, Memorial Day, July 4, Labor Day, Thanksgiving Day, Christmas Day and other holidays observed by a majority of the tenants of the Building (“Holidays”). If any Holiday falls on a weekend, the Building may observe the Holiday on the preceding Friday or the succeeding Monday. Tenant may periodically request, and Landlord shall furnish HVAC service on days and at times other than those referred to above, provided Tenant requests such service in accordance with the Project Rules, defined below, then in effect, and agrees to reimburse Landlord for this service at the then existing rate being charged by Landlord, it being acknowledged that as of the date hereof the charge for after-hours HVAC service is Ten Dollars ($10.00) per hour, per zone. If Tenant utilizes services provided by Landlord hereunder in either quantity and/or quality exceeding the quantity and/or quality customarily utilized by normal office uses of comparable premises in the Building, then Landlord may separately meter or otherwise monitor Tenant’s use of such services, and charge Tenant a reasonable amount for such excess usage; such amount shall constitute additional Rent due hereunder within thirty (30) days of Tenant’s receipt of Landlord’s statement for such excess. Landlord shall not be liable for any damages directly or indirectly resulting from, nor shall any Rent be abated by reason of, the installation, use or interruption of use of any equipment in connection with furnishing any of the foregoing services, or failure to furnish or delay in furnishing any such service except when such failure or delay is caused by the negligence or willful misconduct of Landlord. The failure to furnish any such services shall not be construed as an eviction of Tenant or relieve Tenant from any of its obligations under this Lease. Tenant shall, at Tenant’s expense, be responsible for cleaning and maintaining any Above Standard improvements or fixtures, including Above Standard Tenant Work, defined below, and Above Standard Initial Improvements, in the Premises. In the event that Tenant is prevented from using, and does not use, the Premises or any portion thereof, as a result of (i) any repair, maintenance or alteration performed by Landlord, or which Landlord failed to perform, which substantially interferes with Tenant’s use of or ingress to or egress from the Building or Premises or access to parking; (ii) any failure to provide services, utilities or ingress to and egress from the Building or Premises if such failure is attributable to the act or omission of Landlord (or Landlord’s agents, employees or contractors) or to Landlord’s failure
to perform its maintenance obligations set forth herein; or (iii) the presence of hazardous materials due to the acts or omissions of Landlord or Landlord’s agents, employees or contractors which require cleanup, containment, abatement, removal or remediation of hazardous materials (any such set of circumstances as set forth in items (i) through (iii), above, to be known as an “Abatement Event”), then if such Abatement Event continues for four (4) consecutive business days after written notice thereof to Landlord (which notice may, for the purposes of this Section 11, be delivered by hand to Landlord’s property management office) (the “Eligibility Period”), then the Rent payable hereunder shall be abated or reduced, as the case may be, after expiration of the Eligibility Period for such time that Tenant continues to be so prevented from using, and does not use, the Premises, or any portion thereof, in the proportion that the Rentable Area of the portion of the Premises that Tenant is prevented from using, and does not use, bears to the total Rentable Area of the Premises. If an Abatement Event continues for two hundred seventy (270) days or longer, Tenant shall have the right to terminate this Lease at any time prior to the end of the Abatement Event.
12. Electrical Usage. Twenty-four (24) hours per day and seven (7) days per week, Landlord shall supply sufficient electrical capacity to a panel box located in the core of each floor for lighting and for Tenant’s office equipment to the extent that the total demand load at 100% capacity of such lighting and equipment does not exceed six (6) watts per RSF in the Premises (“Electrical Design Load”). Notwithstanding the fact that Landlord is obligated to provide the Electrical Design Load to the Premises as set forth in the preceding sentence, if Tenant utilizes any portion of the Premises on a regular basis beyond Building Standard Hours or in any manner in excess of the Electrical Design Load, Landlord shall have the right to separately meter such space and charge Tenant for all excess usage; additionally, Landlord shall have the right, at Tenant’s expense, to separately meter any Above Standard fixture(s) in the Premises, such as water heaters and vending machines, and to charge Tenant for the electricity consumed by such fixture(s). If separate metering is not practical, Landlord may reasonably estimate such excess usage and charge Tenant a reasonable hourly rate. Tenant shall pay to Landlord the cost of all electricity consumed in excess of six (6) watts per RSF in the Premises for the number of hours in the Building Standard Hours for the relevant period, plus any actual accounting expenses incurred by Landlord in connection with the metering or calculation thereof. Tenant shall pay the cost of installing, maintaining, repairing and replacing all such meters. In the event that the level of occupancy of the Premises, or any machinery or equipment located in the Premises, creates unusual demands on the HVAC system serving the Premises, then Tenant may install, and Landlord may require that Tenant install, its own supplemental HVAC unit(s) (“Supplemental HVAC Equipment”) in the Premises, and in either event the installation, maintenance and removal of the Supplemental HVAC Equipment shall be governed by the terms of Exhibit F attached hereto and incorporated herein by this reference. In the event that the Premises are separately metered for electricity, and electricity is provided to the Premises directly from the utility provider, then Tenant shall, at reasonable intervals specified by Landlord, submit to Landlord data regarding the consumption of electricity in the Premises in a format that is reasonably acceptable to Landlord.
13. Communication Lines. Subject to Building design limits and its existing, or then existing, capacity, Tenant may install, maintain, replace, remove or use communications or computer wires and cables which service the Premises (“Lines”), provided: (a) Tenant shall obtain Landlord’s prior written consent, and shall use contractors approved in writing by Landlord, (b) all such Lines shall be plenum rated and neatly bundled, labeled and attached to beams and not to suspended ceiling grids, (c) any such installation, maintenance, replacement, removal or use shall comply with all Laws applicable thereto, including, but not limited to the National Electric Code, and shall not interfere with any then existing Lines at the Building, and (d) Tenant shall pay all costs and expenses in connection therewith. Landlord reserves the right to require Tenant to remove any Lines located in or serving the Premises
which violate this Lease or represent a dangerous or potentially dangerous condition, within three (3) business days after written notice. Tenant shall remove all Lines installed by or on behalf of Tenant upon termination or expiration of this Lease, but it is understood and agreed that Tenant shall have no responsibility to remove Lines installed prior to the Commencement Date. Any Lines that Landlord expressly permits to remain at the expiration or termination of this Lease shall become the property of Landlord without payment of any type. Landlord shall notify Tenant within twenty (20) days of Tenant’s written request, which request must be made at least twenty-one (21) days prior to the Expiration Date, as to what Lines can stay in place. Under no circumstances shall any Line problems be deemed an actual or constructive eviction of Tenant, render Landlord liable to Tenant for abatement of Rent, or relieve Tenant from performance of Tenant’s obligations under this Lease.
14. Prohibited Use. Tenant shall not do or permit anything to be done within the Project nor bring, keep or permit anything to be brought or kept therein, which is prohibited by any Laws now in force or hereafter enacted or promulgated, or which is prohibited by any insurance policy or which may increase the existing rate or otherwise affect any insurance which Landlord carries on the Project. Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants, or injure or annoy them or use or allow the Premises to be used for any unlawful or objectionable purpose. Tenant shall not commit or suffer to be committed any waste to, in or about the Premises or Project.
15. Legal Requirements; Project Rules. Tenant shall comply with, and shall indemnify, defend (with counsel reasonably acceptable to Landlord) and hold Landlord and its directors, officers, partners, members, shareholders, employees and agents harmless from any and all obligations, claims, administrative proceedings, judgments, damages, fines, penalties, costs, and liabilities, including reasonable attorneys’ fees (collectively, “Costs”) incurred by Landlord as a result of the failure by Tenant, its employees, agents or contractors to comply with all Laws relating to the use, condition or occupancy of the Premises now or hereafter enacted, and the Project Rules, defined below. Notwithstanding the foregoing, Landlord shall be responsible for the cost of compliance with all Laws applicable to the Building and the Premises not arising from Tenant’s specific use of the Premises or Tenant Work, which costs are to be included in Operating Expenses, subject to the terms of Section 7. Tenant shall cause its employees, agents and contractors to comply with, and shall use reasonable efforts to cause its invitees to comply with, all Laws applicable to the Project. Tenant shall not cause or permit the use, generation, storage, release or disposal in violation of Laws in or about the Premises or the Project of any substances, materials or wastes subject to regulation under any Laws from time to time including, without limitation, flammable, explosive, hazardous, petroleum, toxic or radioactive materials, unless Tenant shall have received Landlord’s prior written consent, which consent Landlord may withhold or revoke at any time in its sole discretion. Tenant shall comply with, and cause its employees, agents and contractors to comply with, and shall use its reasonable efforts to cause its invitees to comply with, the reasonable rules and regulations of the Project adopted by Landlord from time to time for the safety, care and cleanliness of the Premises and the Project (“Project Rules”). In the event of any conflict between this Lease and the Project Rules, the provisions of this Lease shall control. Landlord shall not have any liability to Tenant for any failure of any other tenants to comply with the Project Rules, provided Landlord shall use commercially reasonable efforts to enforce the Project Rules on a consistent basis as to all tenants. The Project Rules in effect as of the Effective Date are attached hereto as Exhibit C. In the event that any Governmental Authority, ordinance or other Law applicable to the Project requires either Landlord or Tenant to establish and implement a transportation management plan designed to reduce the number of single-occupancy vehicles being used by employees and other permitted occupants of the Building for commuting to and from the Building, then Tenant shall cooperate with Landlord in establishing and implementing such plan. In the event that any Governmental Authority with
jurisdiction over the Project requires that modifications be made to the Common Areas as a result of Tenant’s particular use or occupancy of the Premises, then such modifications shall be made by Landlord, and Tenant shall reimburse Landlord, as additional Rent due under this Lease, for Landlord’s reasonable cost incurred in making such modifications, with such reimbursement to be made within thirty (30) days after Tenant’s receipt of Landlord’s statement for such cost.
16. Alterations, Additions and Improvements. After the Commencement Date, Tenant shall not permit, make or allow to be made any construction, alterations, physical additions or improvements in or to the Premises without obtaining the prior written consent of Landlord, which shall not be unreasonably withheld (“Tenant Work”), nor place any signs in the Premises which are visible from outside the Premises, without obtaining the prior written consent of Landlord, which may be withheld in Landlord’s sole discretion. Notwithstanding the foregoing, Landlord will not unreasonably withhold its consent to Tenant Work that: (i) is non-structural and does not adversely affect any Building Systems or improvements, (ii) is not visible from the exterior of the Premises, (iii) does not affect the exterior of the Building or any Common Areas, (iv) does not violate any provision of this Lease, (v) does not violate any Laws, and (vi) will not interfere with the use and occupancy of any other portion of the Project by any other tenant or occupant of the Project. Tenant’s plans and specifications and all contractors, subcontractors, vendors, architects and engineers (collectively, “Outside Contractors”) shall be subject to Landlord’s prior written approval, which shall not be unreasonably withheld, conditioned or delayed. If requested by Landlord, Tenant shall execute a reasonable work letter for any such Tenant Work substantially in the form then used by Landlord for construction performed by tenants of the Building. Tenant shall pay Landlord a construction oversight fee in an amount equal to five percent (5%) of the cost and expense of any Tenant Work whether undertaken by Landlord or Tenant; the construction oversight or management fee, if any, applicable to construction of the Initial Improvements shall be governed by the terms of the Work Letter and not by the provisions of this Section. [PLEASE NOTE THAT TENANT DOES NOT PRESENTLY INTEND TO PERFORM ANY INITIAL IMPROVEMENTS TO THE PREMISES, BUT IN THE EVENT TENANT CHANGES ITS INTENTIONS AND IN FACT PERFORMS INITIAL IMPROVEMENTS, TENANT WILL NOT PAY A CONSTRUCTION OVERSIGHT FEE IN CONNECTION THEREWITH] Landlord may hire outside consultants to review such documents and information furnished to Landlord, and Tenant shall reimburse Landlord for the reasonable cost thereof, including reasonable attorneys’ fees, upon demand. Neither review nor approval by Landlord of any plans or specifications shall constitute a representation or warranty by Landlord that such documents either (i) are complete or suitable for their intended purpose, or (ii) comply with applicable Laws, it being expressly agreed by Tenant that Landlord assumes no responsibility or liability whatsoever to Tenant or any other person or entity for such completeness, suitability or compliance. Tenant shall furnish any documents and information reasonably requested by Landlord, including “as-built” drawings if available (both in paper and in electronic format acceptable to Landlord) after completion of such Tenant Work. Landlord may impose such conditions on Tenant Work as are reasonably appropriate, including without limitation, compliance with any construction rules adopted by Landlord from time to time, requiring Tenant to furnish Landlord with security for the payment of all costs to be incurred in connection with such Tenant Work, insurance covering Landlord against liabilities which may arise out of such work, plans and specifications, and permits for such Tenant Work. All Building Standard Tenant Work shall become the property of Landlord upon completion and shall be surrendered to Landlord upon the expiration or earlier termination of this Lease or Tenant’s right to possession of the Premises under this Lease, unless Landlord, at the time it approves the Tenant Work, shall require removal or restoration of such Tenant Work by Tenant. All Tenant Work that is Above Standard shall be and remain the property of Tenant, and shall be maintained by Tenant in good condition and repair throughout the Term, until the expiration or earlier termination of this Lease or Tenant’s right to possession of the Premises under this Lease, at which time such Tenant
Work shall become the property of Landlord and shall be surrendered to Landlord with the Premises, unless Landlord specifies, at the time of the approval of the installation of such Above Standard Tenant Work, that Landlord will require Tenant to remove same upon the expiration or earlier termination of the Lease or Tenant’s right to possession of the Premises under the Lease. Any Tenant Work that Tenant is required to remove from the Premises upon the expiration or earlier termination of this Lease or Tenant’s right to possession of the Premises under this Lease shall be removed at Tenant’s sole expense, and Tenant shall, at Tenant’s expense, promptly repair any damage to the Premises or the Building caused by such removal. Tenant shall not allow any liens to be filed against the Premises or the Project in connection with any Tenant Work. If any liens are filed, Tenant shall cause the same to be released within fifteen (15) days after Tenant’s receipt of written notice of the filing of such lien by bonding or other method acceptable to Landlord. All Outside Contractors shall maintain insurance in amounts and types required by, and in compliance with, Section 20. An ACORD 25 (or its equivalent) certificates of insurance in the most recent edition available evidencing such coverage shall be provided to Landlord prior to commencement of any Tenant Work. All Outside Contractors shall perform all work in a good and workmanlike manner, in compliance with all Laws and all reasonable applicable Project Rules and Building construction rules. No Tenant Work shall be unreasonably disruptive to other tenants. Prior to final completion of any Tenant Work, Landlord shall prepare and submit to Tenant a punch list of items to be completed, and Tenant shall diligently complete all such punch list items.
17. Tenant’s Equipment. Except for personal computers, facsimile machines, copiers and other similar office equipment, Tenant shall not install within the Premises any fixtures, equipment or other improvements until the plans and location thereof have been approved by Landlord. The location, weight and supporting devices for any libraries, central filing areas, safes and other heavy equipment shall in all cases be approved by Landlord prior to initial installation or any relocation. Landlord may prohibit any article, equipment or any other item that exceeds the load capacity of the Building from being brought into the Building.
18. Taxes on Tenant’s Property. Tenant shall pay all ad valorem and similar taxes or assessments levied upon all equipment, fixtures, furniture and other property placed by Tenant in the Premises and all license and other fees or taxes imposed on Tenant’s business. If any improvements installed or placed in the Project by, or at the expense of, Tenant result in Landlord being required to pay higher Taxes with respect to the Project than would have been payable otherwise, Tenant shall pay to Landlord, within thirty (30) days after demand and receipt of appropriate documentation, the amount by which such excess Taxes are reasonably attributable to Tenant. Landlord agrees that higher Taxes resulting from improvements installed by other tenants of the Project shall be excluded from Operating Expenses.
19. Access. Landlord shall have the right to enter the Premises at all reasonable times in order to inspect the condition, show the Premises (during the last nine (9) months of the Term), determine if Tenant is performing its obligations hereunder, perform the services or make the repairs that Landlord is obligated or elects to perform hereunder, make repairs to adjoining space, cure any Defaults of Tenant hereunder that Landlord elects to cure, and remove from the Premises any improvements or property placed therein in violation of this Lease. Except in the case of an emergency or to perform routine services hereunder, Landlord shall use reasonable efforts to provide Tenant 24 hour prior notice of such access. Landlord shall use diligent efforts to ensure that any entry into the Premises, and any maintenance or repair shall be conducted in a manner which shall not unreasonably interfere with Tenant’s use of the Premises, and shall be done in such a manner as to reasonably minimize inconvenience or disruption of Tenant’s business.
20. Tenant’s Insurance. Commencing the date Tenant is required to provide Landlord with the certificate of insurance, as provided below, and continuing until the expiration or earlier termination of the Lease Term, Tenant shall carry and maintain at its expense the following insurance coverages with insurance companies reasonably acceptable to Landlord with a rating of A-, Class VII, or better by A.M. Best Company: (i) Commercial General Liability (CGL) Policy (written on an occurrence basis), with limits not less than One Million Dollars ($1,000,000) combined single limit per occurrence, Two Million Dollar ($2,000,000) annual aggregate covering liability arising from premises, operations, independent contractors, products-completed operations, and liability assumed under a contract; (ii) Property Damage Insurance on a Causes of Loss-Special Form basis covering on a replacement cost value all Above Standard improvements, fixtures, personal property and equipment located within the Premises; (iii) Business Interruption and Extra Expense insurance in such amounts as will reimburse Tenant for direct or indirect loss of earnings attributable to the perils insured against under this section; (iv) Workers’ Compensation insurance policy as required by the applicable state law, and Employers Liability insurance with limits of not less than One Million Dollars ($1,000,000.00); (v) Automobile Liability insurance with single limit coverage of at least $1,000,000 for all owned, leased/hired or non-owned vehicles; and (vi) Excess/Umbrella liability policy “following form” of not less than Four Million Dollars ($4,000,000), including a “drop down” feature in case the limits of the primary policy are exhausted. Landlord may also require all Outside Contractors to provide additional types of insurance coverages during the actual course of construction in amounts and types deemed necessary by Landlord, including, without limitation, construction All-Risk Builder’s risks, Owners and Contractors Protective (OCP) Liability insurance, Professional Errors and Omissions liability insurance, and insurance covering such contractor’s equipment and tools. Each Liability insurance policy required to be maintained hereunder by Tenant shall name the following entities as Additional Insureds: Landlord, Cousins Realty Services, LLC, and their direct and indirect parent companies and subsidiaries and any of their affiliated entities, successors and assigns, as well as their respective current or future directors, officers, employees, partners, members and agents. Tenant’s insurance shall be considered primary, not excess, and non-contributory with Landlord’s insurance policies. Insurance deductibles or retentions should be within reasonable and customary for policy holders in similar businesses and locations. An ACORD 25 certificate of such insurance in the most recent edition available and reasonably satisfactory to Landlord, before the earlier of the Commencement Date or ten (10) days after execution of the Lease, reflecting the limits and endorsements required herein, and renewal certificates shall be delivered to Landlord within a few days of renewal, provided there is no lapse in coverage. Tenant shall provide and/or forward to Landlord notice of nonrenewal from its insurance carrier and further inform Landlord of any significant policy changes allowing enough time for Landlord and/or Tenant to secure contingent or alternative coverage. Landlord agrees to cooperate with Tenant to the extent reasonably requested by Tenant to enable Tenant to obtain such insurance. Landlord shall have the right to require increased limits if, in Landlord’s reasonable judgment, such increase is necessary. Tenant shall pay all premiums and charges for all of said policies, and, if Tenant shall fail to make any such payment when due or carry any such policy, Landlord may, following five (5) days written notice from Landlord, but shall not be obligated to, make such payment or carry such policy, and the amount paid by Landlord, with interest thereon at the Default Rate, shall be repaid to Landlord by Tenant within ten (10) days following demand therefor, and all such amounts so repayable, together with such interest, shall be deemed to constitute additional Rent hereunder. Payment by Landlord of any such premium, or the carrying by Landlord of any such policy, shall not be deemed to waive or release Tenant from any remedy available to Landlord under this Lease.
21. Landlord’s Insurance. Landlord shall maintain, during the Term of this Lease, (i) a commercial general liability insurance policy of not less than One Million Dollars ($1,000,000) each occurrence/Two Million Dollars ($2,000,000) aggregate, and (ii) a property insurance policy on the “Special” Perils policy form, including theft coverage, written at full replacement cost value and with
replacement cost endorsement, covering the Project, including the Building and all Building Standard improvements and fixtures in the Premises, but specifically excluding any Above Standard improvements or fixtures until such time as such Above Standard improvements or fixtures shall become the property of Landlord as provided above, and all personal property, fixtures and improvements therein belonging to Landlord, and (iii) an excess liability policy “following form” of not less than Four Million Dollars ($4,000,000), including a “drop down” feature in case the limits of the primary policy are exhausted. Landlord shall not be obligated to insure any property of Tenant.
22. Waiver of Subrogation; Mutual Waiver of Liability. All policies of insurance required to be carried by either party hereunder shall include a waiver of subrogation endorsement, containing a waiver by the insurer of all right of subrogation against the other party in connection with any loss, injury or damage thereby insured against. The waiver of subrogation shall apply regardless of any deductible (or self-insured retention) or self-insurance carried by either party. Any additional premium for such waiver shall be paid by the primary insured. To the full extent permitted by law, Landlord and Tenant each waive all rights of recovery against the other (and any officers, directors, partners, employees, agents and representatives of the other), and agree to release the other from liability, for loss or damage to the extent such loss or damage is covered by valid and collectible insurance in effect covering the party seeking recovery at the time of such loss or damage or would be covered by the insurance required to be maintained under this Lease by the party seeking recovery. If the release of either party, as set forth above, should contravene any law with respect to exculpatory agreements, the liability of the party in question shall be deemed not released but shall be secondary to the liability of the other’s insurer.
23. Casualty. If the Premises or the Project is damaged or destroyed, in whole or in part, by fire or other casualty at any time during the Term and if, after such damage or destruction, Tenant is not able to use the portion of the Premises not damaged or destroyed to substantially the same extent and for the Authorized Use for which the Premises were leased to Tenant hereunder, and within sixty (60) days after Landlord’s receipt of written notice from Tenant describing such damage or destruction Landlord provides notice to Tenant that the Premises, as improved to the extent of the Building Standard improvements existing immediately prior to such destruction or casualty, cannot be repaired or rebuilt to the condition which existed immediately prior to such destruction or casualty within two hundred seventy (270) days following the date of such destruction or casualty, then either Landlord or Tenant may by written notice to the other within thirty (30) days following such notice by Landlord terminate this Lease. Unless such damage or destruction is the result of the negligence or willful misconduct of Tenant or its employees, agents, contractors or invitees, the Rent shall be abated for the period and proportionately to the extent that after such damage or destruction Tenant is not able to use the portion of the Premises damaged or destroyed for the Authorized Use and to substantially the same extent as Tenant used the Premises prior thereto. If this Lease is not terminated pursuant to the foregoing, then upon receiving the available insurance proceeds, Landlord shall restore or replace the damaged or destroyed portions of the Premises, as improved to the extent of the Building Standard improvements existing immediately prior to such destruction or casualty, or Project; Tenant shall restore or replace the improvements to the Premises required to be insured by Tenant hereunder; and this Lease shall continue in full force and effect in accordance with the terms hereof except for the abatement of Rent referred to above, if applicable,. Landlord shall restore or replace the damaged or destroyed portions of the Premises or Project that Landlord is required to restore or replace hereunder within a reasonable time, subject to Force Majeure Events and the availability of insurance proceeds. If either party elects to terminate this Lease as provided in this Section, this Lease shall terminate on the date which is thirty (30) days following the date of the notice of termination as if the Term hereof had been scheduled to expire on such date, and, except for obligations which are expressly stated herein to survive the expiration or earlier termination of this Lease, neither party shall have any liability to the other party as a result of such termination. Landlord shall not
be obligated to repair any damage to Above Standard improvements or fixtures, Tenant’s inventory, trade fixtures or other personal property. If the Premises are damaged or destroyed by fire or other casualty caused by the recklessness or willful misconduct of Tenant, its employees, agents, contractors, or invitees, then any repair or restoration of the Premises by Landlord pursuant to the terms of this Section shall be at Tenant’s sole cost and expense, except to the extent that Landlord is able to receive payment as a result of the insurance that it carries pursuant to the terms of this Lease. Notwithstanding anything in this Section to the contrary, Landlord shall have no obligation to repair or restore the Premises or the Project on account of damage resulting from any casualty which occurs during the last twelve (12) months of the Term, or if the estimated cost of such repair or restoration would exceed fifty percent (50%) of the reasonable value of the Building prior to the casualty. The abatement of Rent, if applicable hereunder, and termination of this Lease by Tenant, if applicable hereunder, are the sole remedies available to Tenant in the event the Premises or the Project is damaged or destroyed, in whole or in part, by fire or other casualty. Notwithstanding the foregoing, Landlord may not terminate this Lease unless Landlord also terminates the leases of all other similarly situated tenants of the Building.
24. Condemnation. If more than ten percent (10%) of the Premises or if a substantial portion of the Building is taken by the power of eminent domain, then either Landlord or Tenant shall have the right to terminate this Lease by written notice to the other within thirty (30) days after the date of taking; provided, however, that a condition to the exercise by Tenant of such right to terminate shall be that the portion of the Premises or Building taken shall be of such extent and nature as to substantially impair Tenant’s use of the Premises or the balance of the Premises remaining and Landlord is unwilling or unable to provide reasonable replacement space within the Project. In the event of any taking, Landlord shall be entitled to any and all compensation and awards with respect thereto, except for an award, if any, specified by the condemning authority for any claim made by Tenant for property that Tenant has the right to remove upon termination of this Lease. Tenant shall have no claim against Landlord for the value of any unexpired portion of the Term. In the event of a partial taking of the Premises which does not result in a termination of this Lease, the Rent shall be equitably reduced as to the square footage so taken. Notwithstanding the foregoing, Landlord may not terminate this Lease unless Landlord also terminates the leases of all other similarly situated tenants of the Building.
25. Waiver of Claims. Except for the willful misconduct or gross negligence of Landlord, its employees, agents or contractors, Landlord shall not be liable to Tenant for damage to person or property caused by defects in the HVAC, electrical, plumbing, elevator or other apparatus or systems, or by water discharged from sprinkler systems, if any, in the Building, nor shall Landlord be liable to Tenant for the theft or loss of or damage to any property of Tenant whether from the Premises or any part of the Building or Project, including the loss of trade secrets or other confidential information. Landlord agrees to make commercially reasonable efforts to protect Tenant from interference or disturbance by third persons, including other tenants; however, Landlord shall not be liable for any such interference, disturbance or breach, whether caused by another tenant or tenants or by Landlord or any other person, nor shall Tenant be relieved from any obligation under this Lease because of such interference, disturbance or breach. Landlord may comply with voluntary controls or guidelines promulgated by any governmental entity relating to the use or conservation of energy, water, gas, light or electricity or the reduction of automobile or other emissions without creating any liability of Landlord to Tenant under this Lease, provided that the Premises are not thereby rendered untenantable or Tenant’s use materially impaired. In no event shall Landlord, Cousins Realty Services, LLC, or their directors, officers, shareholders, partners, members, employees, or agents be liable in any manner for incidental, consequential or punitive damages, loss of profits, or business interruption. Except as provided in Section 34 below, in no event shall Tenant be liable to Landlord for incidental, consequential or punitive
damages, loss of profits, or business interruption. The waivers in this Section shall survive the expiration or earlier termination of this Lease.
26. Indemnity. Except for claims, rights of recovery and causes of action covered by the waiver of subrogation contained in Section 22 or waived in Section 25, Landlord shall indemnify and hold harmless Tenant and its agents, directors, officers, shareholders, partners, members, employees and invitees, from all claims, losses, costs, damages, or expenses (including reasonable attorneys’ fees) in connection with any injury to, including death of, any person or damage to any property arising, wholly or in part, out of any action, omission, or neglect of Landlord or its directors, officers, shareholders, members, partners, employees, agents, invitees, or guests, or any parties contracting with any such party, relating to the Premises, or arising, wholly or in part, out of any gross negligence or willful misconduct of Landlord, or its directors, officers, shareholders, members, partners, employees, or agents, or any parties contracting with any such party, relating to the Project exclusive of the Premises. If Tenant shall without fault on its part, be made a party to any action commenced by or against Landlord, for which Landlord is obligated to indemnify Tenant hereunder, then Landlord shall protect and hold Tenant harmless from, and shall pay all costs and expenses, including reasonable attorneys’ fees, of Tenant in connection therewith.
Except for claims, rights of recovery and causes of action covered by the waiver of subrogation, Tenant shall indemnify and hold harmless Landlord and its agents, directors, officers, shareholders, partners, members, employees and invitees, from all claims, losses, costs, damages, or expenses (including reasonable attorneys’ fees) in connection with any injury to, including death of, any person or damage to any property arising, wholly or in part, out of any prohibited use of the Premises or other action, omission, or neglect of Tenant or its Outside Contractors, directors, officers, shareholders, members, partners, employees, agents, invitees, subtenants or guests, or any parties contracting with such party relating to the Project. If Landlord shall without fault on its part, be made a party to any action commenced by or against Tenant, for which Tenant is obligated to indemnify Landlord hereunder, then Tenant shall protect and hold Landlord harmless from, and shall pay all costs, expenses, including reasonable attorneys’ fees, of Landlord in connection therewith.
Landlord’s and Tenant’s obligations under this Section shall not be limited by the amount or types of insurance maintained or required to be maintained under this Lease. The obligations under this Section shall survive the expiration or earlier termination of this Lease.
27. Non-Waiver. No consent or waiver, express or implied, by a party hereto to any breach by the other of any of its obligations under this Lease shall be construed as or constitute a consent or waiver to any other breach by such party. Neither the acceptance by Landlord of any Rent or other payment, whether or not any Default by Tenant is then known to Landlord, nor any custom or practice followed in connection with this Lease shall constitute a waiver of any of Tenant’s obligations under this Lease. Failure by a party hereto to complain of any act or omission by the other or to declare that a Default has occurred, irrespective of how long such failure may continue, shall not be deemed to be a waiver by such party of any of its rights hereunder. Time is of the essence with respect to the performance of every obligation of the parties in which time of performance is a factor. No payment by Tenant or receipt by Landlord of an amount less than the Rent due shall be deemed to be other than a partial payment of the Rent, nor shall any endorsement or statement of any check or any letter accompanying any check or payment as Rent be deemed an accord and satisfaction. Landlord may accept such check or payment without prejudice to its right to recover the balance of such Rent or pursue any other right or remedy. Except for the execution and delivery of a written agreement expressly accepting surrender of the Premises, no act taken or failed to be taken by Landlord shall be deemed an acceptance of surrender of the Premises.
28. Quiet Possession. Provided Tenant is not in Default, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term, subject to the provisions of this Lease.
29. Notices. Each notice required or permitted to be given hereunder shall be in writing and may be personally delivered, sent via nationally recognized overnight courier or placed in the United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed in each case at the address specified herein. A notice shall be deemed to have been received (a) upon the date of delivery or refusal thereof, if delivered personally or by overnight courier, or (b) if sent by registered or certified mail, (i) the date of delivery of such notice, as indicated on the duly completed United States Postal Service return receipt, if such receipt reflects delivery of such notice, (ii) on the date of refusal of such notice, if the refused notice reflects the date on which such notice is refused, or (iii) three (3) days after mailing of such notice, if the date of delivery of such notice cannot otherwise be established as provided above. Any notices to Tenant shall be addressed and given to Tenant at the following address:
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ZipRecruiter, Inc.
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401 Wilshire Boulevard
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11th Floor
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Santa Monica, California 90401
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Attn: Chief Business Officer
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Any notices to Landlord shall be addressed and given to Landlord at all of the following addresses:
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Cousins Realty Services, LLC
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Cousins Fund II Phoenix III, LLC
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Attn: Property Manager, Hayden Ferry
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Attn: Asset Manager, Arizona
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Lakeside III
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60 East Rio Salado Parkway, Suite 502
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60 East Rio Salado Parkway, Suite 502
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Tempe, Arizona 85281
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Tempe, Arizona 85281
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Cousins Realty Services, LLC
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191 Peachtree Street, Suite 500
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Atlanta, Georgia 30303
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Attn: Corporate Secretary
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CorporateSecretary@cousinsproperties.com
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30. Landlord’s Failure to Perform. If Landlord fails to perform any of its obligations hereunder, Landlord shall not be in default and Tenant shall not have any rights or remedies growing out of such failure unless Tenant gives Landlord written notice setting forth in reasonable detail the nature and extent of such failure and such failure is not cured within thirty (30) days following Landlord’s receipt of such notice or such longer period as may otherwise be provided herein. If such failure cannot reasonably be cured within thirty (30) days, the length for curing shall be extended as reasonably required. In no event shall Tenant’s remedies for an alleged or actual failure of Landlord to perform its obligations under this Lease include the termination of this Lease except in the case of a constructive eviction.
31. Tenant’s Failure to Perform. If Tenant fails to perform any of its obligations hereunder after notice and expiration of any cure period, in addition to the other rights of Landlord, Landlord shall have the right, but not the obligation, to perform all or any part of Tenant’s obligations. Upon receipt of a demand therefor, Tenant shall reimburse Landlord for the cost of performing such obligations, plus interest thereon at the Default Rate, defined below.
32. Default. “Default” means the occurrence of any one or more of the following: (i) failure of Tenant to pay when due any Rent or other amount required to be paid hereunder, if such failure continues for more than five (5) days after Tenant’s receipt of written notice thereof from Landlord; provided, however, that Landlord shall not be required to provide Tenant with notice of such failure and the five (5) day period within which to cure such failure more than two (2) times in any calendar year during the Term, and, at Landlord’s election, a subsequent failure to timely pay the Rent when due shall immediately constitute a Default hereunder; (ii) failure of Tenant, after fifteen (15) days written notice, or such other notice period specified in this Lease, to observe and fully perform all of Tenant’s obligations hereunder, other than payment of Rent which is covered above, except as otherwise provided below, provided if such failure cannot reasonably be cured within fifteen (15) days, the length for curing shall be extended as reasonably required but in no event to more than sixty (60) days after such written notice, which sixty (60) days period will be extended in the event of a Force Majeure Event (as said term is defined in Article 47); (iii) the adjudication of Tenant to be bankrupt; (iv) the filing by Tenant of a voluntary petition in bankruptcy or other similar proceedings; (v) the making by Tenant of a general assignment for the benefit of its creditors; (vi) the appointment of a receiver of Tenant’s interests in the Premises; (vii) any involuntary proceedings instituted against Tenant under any bankruptcy or similar laws, unless such is dismissed or stayed within sixty (60) days thereafter; (viii) if the Tenant is an individual or if the Tenant is controlled by a single individual, the death or incapacity of such individual; (ix) the filing of a voluntary petition in bankruptcy or other similar proceeding by any Guarantor of Tenant’s obligations hereunder, or if such Guarantor is an individual or controlled by a single individual, the death or incapacity of such individual; (x) the voluntary or involuntary dissolution of the Guarantor, or any transaction involving the Guarantor which, if done by Tenant would constitute an assignment by Tenant hereunder, without the written consent of Landlord; or (xi) vacancy of the Premises for more than sixty (60) consecutive days.
Upon the occurrence of a monetary Default, Landlord may, at its option and without waiving any other rights available herein, at law, or in equity, require Tenant to pay Rent by (a) wire transfer of funds to an account designated by Landlord or (b) direct draft from Tenant’s account through bank draft, ACH transfer, or other equivalent funds transfer to Landlord’s designated account. Tenant shall provide all necessary information and execute any additional documents requested by Landlord to facilitate payment of Rent by the method designated by Landlord. Tenant’s failure to provide such information or documents within fifteen (15) days after written notice by Landlord shall constitute a Default hereunder.
Upon the occurrence of a Default, Landlord may, at its option, without terminating this Lease, but with no less than twenty-four (24) hours prior written notice to Tenant, enter into and upon the Premises and, without being liable for any damages as a result thereof, maintain the Premises and repair or replace any damage to the Premises or do anything for which Tenant is responsible hereunder on Tenant’s behalf; and, in such event, Tenant shall reimburse Landlord immediately upon demand for any expenses which Landlord incurs in effecting Tenant’s compliance under this Lease. In such event, Landlord will care for Tenant’s personal property in accordance with Laws.
In addition, if a Default occurs, then or at any time thereafter while such Default continues, Landlord, at its option, may, without waiving any other rights available herein, at law, or in equity, either terminate this Lease or terminate Tenant’s right to possession without terminating this Lease. In either
event, Landlord may, without additional notice and without court proceedings, reenter and repossess the Premises, and remove all persons and property therefrom using such force as may be necessary, and Tenant hereby waives any claim arising by reason thereof or by reason of issuance of any distress warrant and agrees to hold Landlord harmless from any such claims. If Landlord elects to terminate this Lease, it may treat the Default as an entire breach of this Lease and Tenant immediately shall become liable to Landlord for damages for the entire breach in an amount equal to the total of (a) the worth at the time of award of any unpaid Rent which had been earned at the time of the termination, plus (b) the worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of Rent loss Tenant proves could have been reasonably avoided, plus (c) the worth at the time of award of the amount by which the unpaid Rent for the balance of the Lease Term after the time of award exceeds the amount of Rent loss that Tenant proves could be reasonably avoided. As used in subparagraphs (a) and (b) above, the “worth at the time of award” is computed by allowing interest at the Interest Rate. As used in subparagraph (c) above, the “worth at the time of award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award, plus five percent (5%). If Landlord elects to terminate Tenant’s right to possession of the Premises without terminating this Lease, Landlord may rent the Premises or any part thereof for the account of Tenant to any person for such rent and for such terms and other conditions as Landlord deems practical, and Tenant shall be liable to Landlord for the amount, if any, by which the total Rent and all other payments herein provided for the unexpired balance of the Term exceed the net amount, if any, received by Landlord from such re-renting, being the gross amount so received less the cost of repossession, re-renting, remodeling and other expenses relating thereto; Tenant shall be and remain liable for such net amount even after an eviction of Tenant from the Premises, should an eviction of Tenant from the Premises occur. Such sums shall be immediately due and payable by Tenant upon demand. In no event shall Tenant be entitled to any rents received by Landlord from reletting the Premises, even if Landlord relets the Premises for an amount exceeding the Rent due from Tenant for the remainder of the unexpired Term. If a Default occurs or in case of any holding over or possession by Tenant of the Premises after the expiration or termination of this Lease, Tenant shall reimburse Landlord on demand for all costs incurred by Landlord in connection therewith including, but not limited to, reasonable attorneys’ fees, court costs and related costs plus interest thereon at the Default Rate, defined below. Actions by Landlord to collect amounts due from Tenant as provided in this Section may be brought at any time, and from time to time, on one or more occasions, without the necessity of Landlord’s waiting until the termination of this Lease. The remedies expressed herein are cumulative and not exclusive, and the election by Landlord to terminate Tenant’s right to possession without terminating this Lease shall not deprive Landlord of the right, and Landlord shall have the continuing right, to terminate this Lease. Upon the occurrence of a Default, Landlord shall have the right to recover from Tenant all damages caused by Tenant’s Default and to pursue all rights and remedies available at law or in equity. Landlord shall use reasonable efforts to mitigate its damages by reletting the Premises.
33. Surrender. On the last day of the Term, or upon the earlier termination hereof, Tenant shall peaceably and quietly surrender the Premises to Landlord, in good order and repair, excepting only reasonable wear and tear resulting from normal use. The Premises shall be surrendered free of all items of Tenant’s personal property, and otherwise in the condition required by the terms of this Lease, and the Premises shall be free and clear of any and all liens or encumbrances of any type.
34. Holding Over. If Tenant does not surrender possession of the Premises at the end of the Term or upon earlier termination of this Lease, at the election of Landlord, Tenant shall be a tenant-at- sufferance from day to day and the Rent due during the period of such holdover shall be one and a half(1.5) times the amount which Tenant was obligated to pay for the immediately preceding month. If Landlord is unable to deliver possession of the Premises to a new tenant or to perform improvements to
the Premises for a new tenant in a timely fashion as a result of Tenant’s holdover, then Tenant shall be liable for all damages that Landlord suffers as a result of Tenant’s holding over in the Premises.
35. Removal of Tenant’s Property. Prior to the expiration or earlier termination of the Term, Tenant shall, at Tenant’s expense, remove all of Tenant’s removable trade fixtures and other items of personal property from the Premises. Tenant shall be responsible for any damage to the Premises or Project resulting from removal of any personal property, including Lines, of Tenant. If Tenant does not remove its property prior to termination, then, in addition to its other remedies at law or in equity, Landlord shall have the right to consider the property abandoned and such property may be removed by Landlord, at Tenant’s expense, or at Landlord’s option become its property, and Tenant shall have no further rights relating thereto or for reimbursement therefor.
36. Landlord’s Lien. Landlord has a statutory lien in and to all furniture, furnishings, fixtures, equipment, merchandise and other property of Tenant located in the Premises. At Tenant’s request but subject to Landlord’s reasonable approval of the terms and conditions set forth therein, Landlord agrees to execute an agreement confirming the subordination of its statutory lien in favor of Tenant’s lender or equipment lessor.
37. Interest. All amounts payable by Tenant to Landlord under this Lease, if not paid when due, shall bear interest from the date due until paid at a rate equal to the lesser often percent (10%) per annum, compounded monthly, or the then maximum lawful rate (“Default Rate”).
38. Assignment and Subletting. Landlord shall have the right to transfer and assign in whole or in part, by operation of law or otherwise, its rights and obligations hereunder whenever Landlord, in its sole judgment, deems it appropriate without any liability to Tenant, and Tenant shall attorn to any party to which Landlord transfers its rights and obligations hereunder or the Building. Any sale, conveyance or transfer of the Building or Project will operate to release Landlord from liability from and after the effective date of such sale, conveyance, transfer or assignment upon all of the covenants, terms and conditions of this Lease, express or implied, except for those liabilities that arose prior to the effective date of such sale, conveyance, transfer or assignment. After such effective date, Tenant will look solely to Landlord’s successor in interest in and to this Lease.
Tenant shall not assign, transfer, mortgage, pledge or otherwise encumber this Lease, or any interest herein, and shall not sublet the Premises or any part thereof, or any right or privilege appurtenant thereto, or permit any other party to occupy or use the Premises, or any portion thereof, without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed. The Landlord’s consent shall not be considered unreasonably withheld if: (i) the proposed subtenant’s or assignee’s financial responsibility or insurance does not meet the same criteria Landlord uses to select comparable Building tenants; (ii) the proposed subtenant’s or assignee’s business is not suitable for the Building considering the business of the other tenants and the Building’s prestige; (iii) the proposed use is inconsistent with the Authorized Use permitted by Section 3; or (iv) the proposed subtenant or assignee is an occupant of the Building, or if the proposed subtenant or assignee, whether or not an occupant of the Building, is in discussions with Landlord regarding the leasing of space within the Building, and there is comparable space within the Building for lease. Whether or not Landlord consents to any proposed assignment or subletting of any portion of the Premises, Tenant shall timely pay Landlord’s review and processing fee of $750.00 (“Sublease/Assignment Processing Fee”) in addition to any reasonable professional fees (including, without limitation, legal, architectural, engineering, and consulting fees) incurred by Landlord in connection with such proposed assignment or subletting (“Sublease/Assignment Professional Fees”). The Sublease/Assignment Processing Fee shall be paid by Tenant simultaneously with each request by Tenant to assign or sublease any portion of the Premises. The Sublease/Assignment
Professional Fees shall, at Landlord’s option, be paid by Tenant (a) prior to Landlord’s denial or execution of a consent to the proposed assignment or subletting or (b) within ten (10) days of Tenant’s receipt of an invoice from Landlord for such fees. Any subletting of the Premises or assignment of the Lease by Tenant in violation of the provisions of this Section 38 shall constitute a Default.
A “Change in Control” of Tenant shall be deemed for purposes of this Lease to constitute an assignment of this Lease by Tenant which shall require the consent of Landlord and entitle Landlord to exercise its options as provided hereunder. As used in this Section, a “Change in Control” shall be deemed to have occurred when: (x) any person, after the date hereof, acquires directly or indirectly the Beneficial Ownership (as defined in Section l 3(d) of the Securities Exchange Act of 1934, as amended) of any voting interests or equity interests of Tenant and immediately after such acquisition such person is, directly or indirectly, the Beneficial Owner of voting or equity interests representing 50% or more of the total voting interest or equity interest of all of the then-outstanding equity interests or voting interests of Tenant; (y) the stockholders, partners, members or other equity holders of Tenant shall approve a merger, consolidation, recapitalization, or reorganization of Tenant, or consummation of any such transaction if equity holder approval is not sought or obtained; or (z) the stockholders, partners, members or other equity holders of Tenant shall approve a plan of complete liquidation of Tenant or an agreement for the sale or disposition by Tenant of all or a substantial portion of such entity’s assets (i.e., 50% or more of the total assets of such entity).
If Tenant desires to assign this Lease or sublease the Premises, Tenant shall provide Landlord notice in writing at least thirty (30) days in advance of the date on which Tenant desires such assignment or sublease to take effect. Tenant’s notice shall include (A) the name and address of the proposed subtenant or assignee; (B) the nature of the proposed subtenant’s or assignee’s business it will operate in the Premises; (C) the terms of the proposed sublease or assignment; and (D) reasonable financial information so that Landlord can evaluate the proposed subtenant or assignee. Landlord shall, within twenty (20) days after receiving such information, give notice to the Tenant to (i) permit or deny the proposed sublease or assignment or (ii) if the term of the proposed assignment or sublease is for the remainder of the Term, terminate this Lease as to the space so affected as of the date specified in Tenant’s notice (and as to option (ii) only, Tenant will be relieved of all further obligations hereunder as to the terminated space). If Landlord does not give notice within the twenty (20) day period, then Landlord shall be deemed to have consented to the sublease or assignment upon the terms provided in Tenant’s notice.
Notwithstanding an assignment or subletting (i) subleases and assignments by Tenant shall be subject to the terms of this Lease; (ii) Tenant shall remain liable for all of the obligations of “Tenant” under this Lease; (iii) consent to one sublease or assignment does not waive the consent requirement for future assignments or subleases; and (iv) fifty percent (50%) of the consideration received by Tenant from an assignment or sublease that exceeds the amount Tenant must pay Landlord hereunder, excluding reasonable leasing commissions and legal and lease fees paid by Tenant, payments attributable to the amortization of the cost of improvements made to the Premises at Tenant’s cost for the assignee or sublessee, and other reasonable, out-of-pocket costs paid by Tenant directly related to Tenant’s obtaining an assignee or sublessee, shall also be paid to Landlord after Tenant first retains its reasonable out-of- pocket expenses incurred in connection with said assignment or subletting. Tenant shall pay such amount to Landlord at the beginning of each calendar month. Landlord shall have the right to audit Tenant’s books and records to verify the accuracy of the payments under this Section. If Tenant has sublet the Premises, and thereafter a monetary Default occurs hereunder, Landlord may proceed to collect any rent thereafter becoming due to Tenant under the sublease directly from the subtenant; in which event such collected rent shall be applied by Landlord to the Rent due from Tenant to Landlord hereunder; provided, however, that the collection of rent from Tenant’s subtenant shall not create a privity of contract between Landlord and such subtenant.
If the proposed sublessee or assignee is approved by Landlord and Tenant fails to enter into the sublease or assignment with the approved sublessee or assignee within ninety (90) days after the date Tenant submitted its proposal to Landlord, then Landlord’s approval shall expire, and Tenant must comply again with the conditions of this Section. Notwithstanding the giving by Landlord of its consent to any sublease or assignment with respect to the Premises, no sublessee or assignee (other than an Affiliate) may exercise any renewal options, expansion options, rights of first refusal or similar rights except in accordance with a separate written agreement entered into directly between the Landlord, Tenant and such sublessee or assignee provided Tenant continues to be liable for the performance of all obligations hereunder, as increased or otherwise affected by the exercise of such rights. Tenant may not exercise any renewal options, expansion options, rights of first refusal or similar rights under this Lease if Tenant has assigned all of its interest in this Lease to an entity that is not an Affiliate.
Notwithstanding anything in this Article to the contrary, Landlord’s prior written consent and payment of a Sublease/Assignment Processing Fee or excess consideration shall not be required for(but Landlord shall receive advance written notice of) any assignment of this Lease or sublease of the Premises to any of the following: (a) a successor entity related to Tenant by merger, consolidation, or non-bankruptcy reorganization, (b) a transferee of all or substantially all of Tenant’s assets or stock or (c) an Affiliate (as defined below) (collectively, “Permitted Affiliate Transfers”); provided, that the proposed assignee or sublessee will not have a net worth following consummation of such transaction, as reasonably determined by Landlord in accordance with GAAP that is at least equal to the greater of (A) the net worth of Tenant immediately prior to such transaction, and (B) the net worth of the originally named Tenant as of the Effective Date(the “Affiliate Net Worth”). In the event of a Permitted Affiliate Transfer, Tenant shall provide Landlord notice in writing at least thirty(30) days in advance of the date on which Tenant desires such assignment or sublease to take effect, which shall include: (A) the name and address of the proposed subtenant or assignee; and(B) reasonable financial information so that Landlord can confirm proposed assignee or sublessee has maintained the required Affiliate Net Worth over the prior twelve (12) month period. As used in this Lease, the term “Affiliate” shall mean an individual, partnership, corporation, unincorporated association or other entity controlling, controlled by or under common control with Tenant; and for purposes of the foregoing, “control” shall mean ownership of fifty percent (50%) or more of the legal and beneficial interests in such corporation or other entity, coupled with the power to direct the management and affairs thereof. Tenant shall provide written notice to Landlord with respect to the occurrence of any Permitted Affiliate Transfer and provide to Landlord such information as Landlord reasonably requests with respect to such Permitted Affiliate Transfer. Tenant shall provide Landlord reasonable evidence that any such Transfer qualifies as a Permitted Affiliate Transfer. Tenant will not be relieved or released of its obligations under this Lease as a result of any Permitted Affiliate Transfer.
39. Merger of Estates. The voluntary or other surrender of this Lease by Tenant or a mutual cancellation hereof, shall not work a merger, but shall, at the option of Landlord, terminate all or any existing subleases or subtenancies, or may, at the option of Landlord, operate as an assignment to Landlord of Tenant’s interest in such subleases or subtenancies.
40. Limitation of Liability. Notwithstanding anything herein to the contrary, Tenant’s sole and exclusive method of collecting on any judgment Tenant obtains against Landlord, or any other award made to Tenant in any judicial process requiring the payment of money by Landlord for the failure of Landlord to perform any of its obligations, shall be to proceed against the interests of Landlord in and to the Project. Therefore, Tenant hereby agrees that no personal or corporate liability of any kind or character whatsoever now attaches or at any time hereafter under any condition shall attach to Landlord for payment or performance of any obligations hereunder,
including, without limitation, any Landlord indemnity obligations under Section 26. The obligations under this Section shall survive the expiration or earlier termination of this Lease.
41. Subordination. The rights and interests of Tenant under this Lease and in and to the Premises shall be subject and subordinate to all easements and recorded restrictions, covenants, and agreements pertaining to the Project, or any part thereof, and to all deeds of trust, mortgages, and other security instruments and to all renewals, modifications, consolidations, replacements and extensions thereof (the “Security Documents”) heretofore or hereafter executed by Landlord covering the Premises, the Building or any part of the Project, to the same extent as if the Security Documents had been executed, delivered and recorded prior to the execution of this Lease. After Tenant’s receipt of a notice from Landlord that it has entered into one or more Security Documents, then, during the term of such Security Documents, Tenant shall deliver to the holder or holders of all Security Documents a copy of all notices to Landlord and shall grant to such holder or holders the right to cure all defaults, if any, of Landlord hereunder within the same time period provided in this Lease for curing such defaults by Landlord and, except with the prior written consent of the holder or holders of the Security Documents, shall not surrender or terminate this Lease except pursuant to a right to terminate expressly set forth in this Lease. Tenant shall attorn to any holder of any Security Documents or its successor in interest by foreclosure or otherwise. The provisions of this subsection shall be self-operative and shall not require further agreement by Tenant; however, at the request of Landlord, Tenant shall execute such further documents as may be required by the holder of any Security Documents. At any time and from time to time upon not less than ten (10) days’ prior notice by Landlord, Tenant shall execute, acknowledge and deliver to the Landlord a written estoppel certificate certifying: (i) the Rentable Area of the Premises, (ii) the Commencement Date and Expiration Date of this Lease, (iii) the Base Rent, Base Year and Additional Rent, (iv) that this Lease is unmodified and in full force and effect, or if there have been modifications, that the same is in full force and effect as modified and stating the modifications,(v) whether or not the Landlord is in default in the keeping, observance or performance of any covenant, agreement, term, provision or condition of this Lease and, if so, specifying each such default, (vi) that Tenant has unconditionally accepted and occupied the Premises, (vii) that all requirements of the Lease have been complied with and no charges, set-offs or other credits exist against any rentals, (viii) that Tenant has not assigned, pledged, sublet, or otherwise transferred any interest in this Lease; and (ix) such other matters as Landlord may reasonably request, it being intended that any such statement may be relied upon by Landlord, any prospective purchaser, mortgagee or assignee of any mortgage of the Building or the Project or of the Landlord’s interest therein. Notwithstanding any language hereinabove to the contrary, Landlord will use commercially reasonable efforts to obtain a mutually acceptable Subordination, Non- Disturbance and Attornment Agreement (“SNDA”) from its current lender within thirty (30) days of the Commencement Date and any subsequent lender.
42. Legal Interpretation. This Lease shall be interpreted and enforced in accordance with the laws of the state where the Project is located. The determination that any provision of this Lease is invalid, void, illegal, or unenforceable shall not affect or invalidate the remainder. All obligations of the parties requiring any performance after the expiration of the Term shall survive the expiration or earlier termination of this Lease and shall be fully enforceable in accordance with those provisions pertaining thereto. If Tenant consists of two or more parties, then all parties comprising the Tenant shall be jointly and severally liable for all obligations of Tenant hereunder. Should any provisions of this Lease require judicial interpretation, it is agreed that the court interpreting or construing the same shall not apply a presumption that the terms of any such provision shall be more strictly construed against one party or the other by reason of a rule of construction that a document is to be construed most strictly against the party who itself or through its agent prepared the same, it being agreed that the agents of both parties hereto have participated in the preparation of this Lease.
43. Use of Names and Signage. Tenant shall not have the right to use the name of the Project or Building except in connection with Tenant’s address, and then such terms cannot be emphasized or displayed with more prominence than the rest of such address. Landlord shall have the right to change the name of the Building or Project whenever Landlord in its sole judgment deems appropriate without any consent of or liability to Tenant. Any signage of Tenant that can be seen from outside the Premises is subject to the prior written approval of Landlord which shall not be unreasonably withheld, conditioned or delayed; provided in all cases, Tenant shall be solely responsible for ensuring that such signage complies with all applicable Laws and for all costs and expenses relating to any such signage, including, without limitation, design, installation, any operating costs, maintenance, cleaning, repair and removal. Tenant shall be obligated to pay the cost and expense of repairing any damage associated with the removal of any such signage. Tenant shall have no right to place any signage outside the Premises, on the exterior of the Building or elsewhere in the Project, except that Tenant will have the right to install one (I) eyebrow sign on the Building in a location to be chosen by Landlord, the design, manufacture, installation, repair, maintenance and removal of which will be at Tenant’s sole cost and expense. The eyebrow signage is subject to Landlord’s prior written approval as to all aspects thereof (including its size, design, materials, color and font), not to be unreasonably withheld. At Tenant’s sole cost and expense, such eyebrow signage must also be in compliance with all Laws.
44. Intentionally Omitted.
45. Brokerage Fees. Landlord’s Broker represents Landlord’s interests in connection with this transaction and shall be paid by Landlord for its services pursuant to a separate, written agreement fully executed by Landlord’s Broker and Landlord prior to full execution of this Lease. Landlord’s Broker does not represent Tenant in this transaction. If Tenant is represented by a broker in this transaction, as disclosed in Section l(p) of this Lease, then Tenant’s Broker represents Tenant’s interests in connection with this transaction and shall be paid by Landlord for its services pursuant to a separate, written agreement fully executed by Tenant’s Broker and Landlord prior to full execution of this Lease. Tenant warrants and represents that it has had no dealings with any broker in connection with the negotiation or execution of this Lease other than Landlord’s Broker and, if applicable, Tenant’s Broker. Except as expressly provided above, Landlord will not be responsible for, and Tenant will indemnify, defend, and hold Landlord harmless from and against, any brokerage or leasing commission or finder’s fee claimed by any party in connection with this Lease.
46. Successors and Assigns. This Lease shall be binding upon and inure to the benefit of Landlord and its successors and assigns, and Tenant and its permitted successors and assigns.
47. Force Majeure. Except for the payment of Rent or any other sum due hereunder, each party hereto shall be excused for the period of any delay and shall not be deemed in default with respect to the performance of any of its obligations when prevented from so doing by a cause beyond such party’s reasonable control, including, without limitation, labor disputes, government regulations, fire or casualty, acts of terrorism, inability to obtain any materials or services, or acts of God (collectively, “Force Majeure Events”).
48. Parking. While Tenant is occupying the Premises, Tenant shall have the right in common with other tenants to use the Parking Spaces in the Building’s Parking Facility indicated in Section 1, subject to any applicable parking fees and rules and regulations promulgated from time to time. If requested by Landlord, Tenant shall execute a separate parking license agreement detailing Landlord’s and Tenant’s rights and obligations with respect to the Parking Spaces. Tenant shall be entitled to use only the number of spaces allocated to Tenant by the Parking Ratio. Nothing herein contained shall be
construed to grant to Tenant any estate in real property nor the exclusive right to a particular parking space, but rather as a license only.
Tenant acknowledges that the parking facility located adjacent to the Project (the “Parking Garage”) is owned by a third party (the “Parking Facility Owner”). Landlord has a right to grant the use of certain parking places within the Parking Garage to tenants of the Project, including the right to grant Tenant the Parking Spaces set forth in Section l(o). The Parking Spaces provided to Tenant under this Lease are subject to the terms and conditions of Landlord’s rights with respect to such parking spaces. Tenant shall be entitled to use the Parking Spaces designated in this Lease unless and until Tenant’s right to possession of the Premises is terminated. If Tenant fails to pay the monthly rental for such Parking Spaces when due, such failure shall constitute a default under this Lease. Subject to other provisions in this Lease permitting Tenant to terminate this Lease for compromise of the number of parking spaces allocated to Tenant in Section 1(o) hereof, Tenant’s right to use the Parking Spaces is expressly subject to any casualty loss, which results in parking spaces being unavailable, reasonable limitations on parking hours and operations, parking access card systems or similar access control devices, including stickers or other identification system established by Landlord or the Parking Facility Owner. Tenant shall be responsible for compliance with all reasonable rules and regulations applicable to the Parking Garage, underground parking facilities and surface parking. Tenant acknowledges that limited surface parking is available within the Project and that Tenant’s invitees will be entitled to use of the same on a non- exclusive basis for loading and unloading of passengers and for short term parking for periods of time designated by Landlord, provided that (i) Landlord may grant or permit exclusive use of portions of such surface parking area for the benefit of other tenants or occupants within or adjacent to the Project, and may install or permit the installation of parking meters for some or all of the surface parking area so long as Tenant is provided the number and type of Parking Spaces set forth in Section l(o), and (ii) Tenant shall in any event cause its employees to park outside of the Project or in the adjacent Parking Garage. Parking areas shall be used only for parking of automobiles and small trucks but in no event shall recreational vehicles, boats or trailers be allowed while doing business at the Project or otherwise, and no parking beyond the time limits posted by Landlord with respect thereto shall be allowed. Tenant will not park, or permit its employees or contractors to park, in any areas designated by Landlord or the Parking Facility Owner for parking by visitors or for the exclusive use of other tenants or occupants of the Project or Hayden Ferry Lakeside, it being understood that the foregoing shall not reduce Tenant’s parking rights as provided herein. Landlord reserves the right to refuse parking rights to Tenant or any other person who fails to comply with the requirements set forth herein or in any separate Parking License Agreement or in any reasonable rules and regulations related to use of parking at the Project or in the Parking Garage; and any violation thereof shall subject the vehicle to be removed or immobilized at such person’s expense. Subject to the applicable notice and cure periods provided in this Lease, failure to observe the reasonable rules and regulations shall terminate an individual’s right to use the parking facilities and subject the vehicle in violation to removal and/or impoundment. Parking stickers or other forms of identification supplied by Landlord or the Parking Facility Owner shall remain the property of Landlord or the Parking Facility Owner and not the property of a tenant and are not transferable, except in connection with an assignment or sublease in accordance with Section 38 or as expressly permitted by Landlord. A reasonable fee may be charged for parking access cards, identification stickers or other parking control devices or replacements thereof. The owner of the vehicle or its driver assumes all risk and responsibility for damage, loss or theft to vehicles, personal property or persons while such vehicle is in the Project or the Parking Garage. Reserved parking in the Parking Garage will only be available during normal business hours. After such hours, holders of parking access cards will be allowed to us the Parking Garage, but will not be guaranteed the use of specific Parking Spaces in the Parking Garage. Tenant is advised that the Parking Garage will be available for public use both during and after normal business hours and that sporting events and other activities in the vicinity of Hayden Ferry Lakeside may create a
significant demand for spaces within the Project and Parking Garage, provided that the foregoing shall not negate Landlord’s obligation to provide the Parking Spaces as required herein.
Effective January I of each year, Landlord or other Parking Garage owner (or their respective managers) shall have the right to increase from time to time (but no more often than once in any twelve (12) month period, with the first such increase to occur no sooner than twelve (12) months after the end of the Abatement Period) the monthly rental for the Parking Spaces designated in Section l(n) at a rate not to exceed the monthly rates then being charged to other tenants of the Building or in office buildings located in the downtown Tempe business district.
49. Rooftop Antenna. Tenant shall have no right to place any microwave, satellite or other type of antenna on the roof or exterior of the Building without the prior written consent of Landlord, which consent will not be unreasonably withheld or conditioned. Any such installation and all related expenses shall be the sole and direct responsibility of Tenant, but Landlord will not charge any other fee with respect to such installation or usage.
50. Attorneys’ Fees. If Tenant fails to pay any Rent or other sum due under this Lease, or fails to perform an obligation of Tenant hereunder, and Landlord engages an attorney to collect such sum or enforce such obligation, then, in addition to such sums, Tenant shall also pay Landlord’s reasonable attorneys’ fees and other reasonable costs and expenses incurred in such engagement. If Landlord and Tenant litigate any provision of this Lease or the subject matter hereof, the unsuccessful party will pay to the successful party all costs and expenses, including reasonable attorneys’ fees and expenses and court costs, incurred by the successful party, including any cost incurred by the successful party on appeal; provided, however that a recovery of attorneys’ fees by Landlord under this sentence shall include, but shall not duplicate, the recovery by Landlord of its reasonable attorneys’ fees and other reasonable costs and expenses of collection permitted under the first sentence of this Section.
51. Tenant Certification. Tenant certifies that, as of the Effective Date hereof: (i) neither it nor its officers, directors, or controlling owners is listed as a “Specifically Designated National or Blocked Person” (“SDN”) on the SDN list maintained and updated from time to time on the United States Treasury Department’s website (the “SON List”), or is otherwise a banned or blocked person, entity, or nation pursuant to any law, order, rule or regulation that is enforced or administered by the Office of Foreign Assets Control (“OFAC”), or is otherwise named by any Executive Order, the United States Department of Justice, or the United States Treasury Department as a terrorist; (ii) neither it nor its officers, directors, or controlling owners, is acting, directly or indirectly, for or on behalf of any person, group, entity, or nation that is listed on the SON List or is otherwise named by any Executive Order, the United States Department of Justice, or the United States Treasury Department as a terrorist, SON or other banned or blocked person, entity, nation, or transaction pursuant to any law, order, rule or regulation that is enforced or administered by the OFAC; (iii) neither it nor its officers, directors, or controlling owners is engaged in this transaction, directly or indirectly on behalf of, or instigating or facilitating this transaction, directly or indirectly on behalf of, any such person, group, entity, or nation; (iv) neither it nor its officers, directors, or controlling owners is in violation of Presidential Executive Order 13224, the USA PATRIOT Act, the Bank Secrecy Act, the Money Laundering Control Act, or any regulations promulgated pursuant thereto (collectively, “Anti-Terrorism Laws”); and (v) neither it nor its officers, directors, or controlling owners is an entity with whom Landlord is prohibited from transacting business under any of the Anti-Terrorism Laws.
Tenant further certifies that, during the Term of this Lease (and any extensions thereof), Tenant will not violate any of the Anti-Terrorism Laws, and it will not knowingly do business with any entity that violates any of the Anti-Terrorism Laws. Upon the request of Landlord from time to time during the
Term (and any extensions thereof), Tenant shall execute and return to Landlord a certificate stating that Tenant is then in compliance with the provisions of this section of the Lease.
Tenant shall indemnify, defend (with counsel reasonably acceptable to Landlord), and hold Landlord and its directors, officers, partners, members, shareholders, employees, and agents harmless from any and all obligations, claims, administrative proceedings, judgments, damages, fines, penalties, costs, and liabilities, including reasonable attorneys’ fees and costs, incurred by Landlord or its directors, officers, partners, members, shareholders, employees, or agents as a result of the breach of the foregoing certification. Moreover, to the extent any provision of this section of the Lease is breached during the Term of this Lease (and any extensions thereof), Landlord may, at its sole option, immediately terminate this Lease without payment or obligation to Tenant.
52. Intentionally Omitted.
53. Memorandum of Lease. Except for a memorandum of lease to be recorded at Landlord’s request, neither this Lease, nor a memorandum of this Lease, shall be recorded in any public real estate records.
54. Financial Statements. Upon request, but not more than two (2) times in any calendar year, Landlord may require Tenant to provide Landlord with Tenant’s then existing current financial statements, it being understood that Tenant shall have no obligation to prepare any financial statement to satisfy the requirements of this Section 54. If such financial statements are not audited, they shall be certified as being true and correct by Tenant’s chief financial officer.
55. Waiver of Jury Trial. To the extent permitted by applicable law, in the event of any litigation between the parties hereto, to the extent that a trial by jury would be available as to any matters in such litigation, the parties hereby expressly waive the right to a trial by jury as to such matters, and hereby agree not to demand a jury trial as to any such matters in such litigation.
56. Airport Disclaimer. Tenant acknowledges that the Project is within the flight path for flights arriving at and departing from Sky Harbor International Airport (“Sky Harbor”), and agrees that Landlord shall not be liable to Tenant for, and Tenant hereby releases Landlord with respect to, any claims, liabilities, losses, causes of action, fees and expenses in any way relating thereto, including, without limitation, to noise or vibration caused by aircraft or other vehicles approaching or leaving Sky Harbor, or to any other adverse effects caused by or resulting from the location of the Building and the Premises in the flight path of Sky Harbor.
57. Option to Extend.
(a) Option to Extend. Landlord hereby grants Tenant one (1) option (the “Option to Extend”) to extend the Term for the entire Premises only, in accordance with the terms of this Article. The Option to Extend shall extend the Term for an additional five (5) consecutive years each (the “Extended Term”) commencing upon the day after the Expiration Date. If Tenant exercises the Option to Extend, all of the terms contained in this Lease shall continue in full force and effect during such Extended Term, except with respect to the following:
(i) Base Rent for the Extended Term shall be adjusted on the first day of the Extended Term to an amount equal to the then Fair Market Rental Value of the Premises, including escalations (the “Extended Term Rental”). The term “Fair Market Rental Value of the Premises” shall be one hundred percent (100%) of the then prevailing fair market rental rate for the Premises as of the commencement of the Extended Term, taking into consideration the location of the Building, the length of the Extended Term, the existing build-out, tenant improvement allowances being granted, tenant
credit-worthiness, cash inducements, rental concessions and abatements, and other comparable factors; and
(ii) Tenant will have no further right or option to extend the Term.
(b) Notice to Extend Term. The Option to Extend shall be exercised, if at all, only by written notice (“Notice to Extend Term”) delivered by Tenant to Landlord at least twelve (12) months, but not more than fifteen (15) months, prior to the Expiration Date. If Tenant does not deliver the Notice to Extend Term within the time period set forth herein, the Option to Extend shall lapse and Tenant shall have no right to extend the Term. Within ten (10) business days after Landlord’s receipt of the Notice to Extend Term, Landlord shall provide Tenant written notice setting forth the Extended Term Rental (“Extension Rental Notice”). Within ten (10) business days after the last date that Landlord could timely have responded to the Notice to Extend Term Tenant must, by written notice delivered to Landlord, either (a) accept the Extended Term Rental as stated in the Extension Rental Notice (“Notice of Acceptance”), (b) reject the Extended Term Rental as stated in the Extension Rental Notice (“Notice of Rejection”), or (c) provide Landlord with Tenant’s determination of the Extended Term Rental (“Request to Negotiate”). Tenant’s failure to provide any notice within the foregoing period shall be deemed a Request to Negotiate at the Base Rent amount then payable by Tenant.
(c) Determination of Rental. If Tenant provides the Request to Negotiate and the parties are unable to agree upon the Extended Term Rental within ten (10) days after Landlord’s receipt of said Request to Negotiate (the “Outside Agreement Date”), then each party shall make a separate determination of the Extended Term Rental within five (5) days, and such determinations shall be submitted to arbitration in accordance with subsections 1 through 7 below.
1. Landlord and Tenant shall each appoint one arbitrator who shall by profession be a real estate broker who shall have been active over the ten (10) year period ending on the date of such appointment in the leasing (or appraisal, as the case may be) of comparable commercial properties in the vicinity of the Project. Each such arbitrator shall be appointed within ten (10) days after the Outside Agreement Date.
2. The two arbitrators so appointed shall within five (5) business days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two arbitrators.
3. The three arbitrators shall within thirty (30) days of the appointment of the third arbitrator reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted Extended Term Rental and shall notify Landlord and Tenant thereof. The determination of the arbitrators shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Extended Term Rental is the closest to the actual Extended Term Rental as determined by the arbitrators, taking into account the requirements of subsection (a) above.
4. The decision of the majority of the three (3) arbitrators shall be binding upon Landlord and Tenant.
5. If either Landlord or Tenant fails to appoint an arbitrator within ten (10) days after the Outside Agreement Date, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator’s decision shall be binding upon Landlord and Tenant.
6. If the two arbitrators fail to agree upon and appoint a third arbitrator, or both parties fail to appoint an arbitrator, then the matter to be decided shall be forthwith submitted to arbitration under the
provisions of the American Arbitration Association, but subject to the instructions set forth in this Section 57.
7. Each party shall bear the cost of its appointed arbitrator, and the cost of the third arbitrator shall be paid by party whose submitted Extended Term Rental is not selected by the arbitrators.
(d) Effect. If Tenant delivers the Notice of Acceptance in the manner and within the time frame herein provided, this Lease shall be deemed extended at the Base Rent and upon the terms specified in this Article without the need for any further notice or documentation. If Tenant delivers the Notice of Rejection to Landlord within the said ten (10) business day period, then this Lease shall expire upon the Expiration Date of the then current Term, unless terminated earlier in accordance with the provisions of this Lease. If Tenant delivers the Request to Negotiate in the manner and within the time frame herein provided, the Extended Term Rental shall be determined as provided above in Section l(c), this Lease shall be deemed extended at said Extended Term Rental and otherwise upon the terms specified in this Article without the need for any further notice or documentation and neither party shall have the right to reject the decision or to undo the exercise of the Option to Extend. The Notice of Acceptance, Request to Negotiate or Notice of Rejection, as the case may be, shall be irrevocable, and shall be binding upon both Landlord and Tenant without the need for any further documentation.
(e) Amendment. Notwithstanding any language to the contrary set forth in this Article 1 if, within thirty (30) days after Landlord’s receipt of the Notice of Acceptance or completion of negotiation as set forth above, either party shall request that both parties enter into an amendment documenting the Extended Term and Base Rent during the Extended Term, then Landlord shall prepare an amendment to this Lease setting forth the Extended Term and Base Rent for the Extended Term pursuant to this Article (“Extended Term Amendment”). The Extended Term Amendment shall be submitted to Tenant for execution and Tenant shall have ten (10) days after receipt thereof from Landlord in which to execute and deliver the Extended Term Amendment to Landlord, and Landlord shall have ten (10) days after receipt of the same in which to execute the Extended Term Amendment and to deliver one (1) fully executed copy to Tenant. The failure of either or both Landlord or Tenant to execute the Extended Term Amendment shall not have the effect of nullifying the extension of the Term, and this Lease shall nevertheless be extended for the Extended Term as herein provided.
(f) Conditions. The Option to Extend shall be exercisable by Tenant on the express condition that at the time of the exercise of the Option to Extend, Tenant shall not be in Default under any of the provisions of this Lease beyond the expiration of any applicable notice and cure period, unless such restriction is expressly waived in writing by Landlord (which election shall be exercisable in Landlord’s sole discretion).
(g) Personal to Tenant. The Option to Extend is personal to the party executing this Lease as Tenant and to any assignee or sublessee that is in possession of the Premises due to a Permitted Affiliate Transfer (each, a “Permitted Assignee”, and collectively, the “Permitted Assignees”), but may not otherwise be assigned or transferred to or exercised by any assignee, sublessee or other transferee. If said Tenant or a Permitted Assignee assigns this Lease or sublets all or substantially all of the Premises in an assignment or subletting that requires Landlord’s prior consent under Article 38 of the Lease prior to the exercise of the Option to Extend, the Option to Extend shall lapse. If said Tenant or a Permitted Assignee assigns this Lease or sublets all or substantially all of the Premises in an assignment or subletting that requires Landlord’s prior consent under Article 38 of the Lease after the exercise of the Option to Extend, but prior to the commencement of the Extended Term, the Option to Extend shall lapse and this Lease shall expire as if the Option to Extend had not been exercised, unless such restriction is expressly waived in writing by Landlord (which election shall be in Landlord’s sole discretion).
58. [Intentionally Deleted]
59. [Intentionally Deleted]
60. Right of First Refusal. Tenant shall have the prior right to lease Suite 445, containing approximately 7,534 rentable square feet, located on the 4th floor of the Building (“ROFR Space”), in accordance with the following terms and conditions:
(a) Tenant acknowledges that Landlord is currently in negotiations with a AmeriFirst Financial, Inc., an Arizona corporation and/or its affiliates for the ROFR Space (“Anticipated 4th Floor Tenant”) and that Tenant’s right of first offer to the lease ROFR Space under this Section 60 will not become effective until the termination of the lease for the Anticipated 4th Floor Tenant (the “Suite 445 Lease”).
(b) Following the expiration of or earlier termination of the Suite 445 Lease, in the event Landlord shall receive a bona fide third party offer to lease the ROFR Space on terms which Landlord wishes to accept, or, in the event Landlord offers (subject to Tenant’s rights hereunder) to lease the ROFR Space on terms which a bona fide third party wishes to accept, then, in either such event, Landlord shall forthwith provide written notice thereof to Tenant, together with a true and correct copy of such offer. Tenant shall have the right, at Tenant’s option and within five (5) business days after receipt of such notice from Landlord, to exercise its right hereunder to lease the ROFR Space at the rent and upon the terms contained in such offer, in which event Landlord shall lease the ROFR Space to Tenant at said rent and upon said terms. Landlord covenants that it shall not accept any such offer nor lease the ROFR Space to any third party until it has complied with the terms hereof.
(c) If Tenant fails to exercise its right of first refusal hereunder within the five (5) business day notice period provided for in the preceding subparagraph (a), Landlord shall have thirty (30) days thereafter within which to lease the ROFR Space at the price and upon the terms of such offer without resubmitting such offer to Tenant in accordance herewith. However, Tenant’s election not to exercise its right hereunder to lease the ROFR Space shall not prejudice Tenant’s rights hereunder as to any further offer, and in the event the price and/or other terms of the offer are modified in any material manner (including, but not limited to, any reduction in the rent of more than four percent), then such modification shall be deemed to constitute a new offer and shall be subject to Tenant’s right of first refusal hereunder.
The foregoing notwithstanding, (a) Tenant shall have no rights under this Section during any period it is in default under this Lease beyond applicable cure periods, and (b) Tenant’s rights in this Section shall become null and void upon the first to occur of the following: (i) termination of this Lease (or Tenant’s right of possession) by reason of Tenant’s default, or the termination of this Lease pursuant to other provisions of this Lease providing for termination, or (ii) Tenant’s failure to exercise its right of first refusal hereunder in accordance with Section 60(b), above, then Tenant’s rights with respect to all of the ROFR Space shall terminate. Upon the occurrence of any of the foregoing events, Tenant shall be deemed to have forever waived its rights with respect to all of the ROFR Space, and Tenant’s rights hereunder shall thereafter automatically be deemed null and void and of no further force and effect. Notwithstanding anything to the contrary in this Section 60, Tenant acknowledges that in the event any other tenant of the Building or the Project with a prior right to lease the ROFR Space elects to exercise its right to lease the ROFR Space, Tenant’s rights set forth in this Section 60 shall be of no force or effect with respect to the ROFR. For the purposes of the foregoing sentence, a “prior right to lease” shall mean any tenant occupying its premises directly or as an assignee (but not as a subtenant, licensee, or concessionaire) under: (a) a lease that was executed prior to the Effective Date (a “Prior Lease”); or (b) a renewal or extension of a Prior Lease; or (c) the Suite 445 Lease (including any renewals or extensions).
61. Governing Law. This Lease shall be performed in the state where the Premises are located, and the terms of this Lease shall be governed by and construed in accordance with the laws of such state.
62. Entire Agreement. No oral statements or prior written material not specifically incorporated herein shall be of any force or effect. Tenant agrees that in entering into this Lease and accepting the Premises, it relies solely upon the representations and agreements contained in this Lease, the exhibits attached hereto and the written agreements, if any, executed contemporaneously herewith. This Lease, including the Exhibits which are attached hereto and a part hereof, constitutes the entire agreement of the parties and shall not be conditioned, modified or supplemented except by a written agreement executed by both parties.
63. Multiple Counterparts; Electronic Signatures. This Lease may be executed in multiple counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement. The counterparts of this Lease may be executed by electronic signatures and may be delivered electronically by any party to any other party and the receiving party may rely on the receipt of such document so executed and delivered by electronic means as if the original had been received.
[Signatures appear on next page]
WITNESS WHEREOF, this Lease is executed and, except as otherwise expressly provided herein, all provisions shall be effective, as of the Effective Date.
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Landlord:
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Tenant:
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COUSINS FUND II PHOENIX III, LLC, a Delaware limited liability company
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ZIPRECRUITER, INC.,
a Delaware corporation
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By:
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Cousins Properties Office Fund II, L.P.,
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By:
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/s/ David Feldman
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it sole member
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Name:
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David Feldman
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Its:
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Chief Business Officer
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By: PPOF II, L.L.C., its General Partner
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By:
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/s/ Matthew Mooney
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Matthew Mooney
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Senior Vice President & Managing Director
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EXHIBIT A
FLOOR PLAN
EXHIBIT B
CLEANING AND JANITORIAL SERVICES
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NIGHTLY
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1.
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Empty all waste receptacles, clean as necessary.
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CLEANING
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2.
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Vacuum all carpeted traffic areas and other areas as needed.
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3.
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Dust furniture, files, fixtures, etc.
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4.
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Damp wipe and polish all glass furniture tops.
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5.
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Remove finger marks and smudges from vertical surfaces.
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6.
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Clean all water coolers.
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7.
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Sweep all private stairways nightly, vacuum if carpeted.
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8.
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Damp mop spillage in office and public areas as required.
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WEEKLY
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1.
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Twice weekly, detail vacuum all rugs and carpeted areas.
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CLEANING
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2.
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Once weekly, dust all cleared surfaces of furniture, files, fixtures, etc.
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WASHROOMS
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1.
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Damp mop, rinse and dry floors nightly.
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(NIGHTLY)
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2.
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Scrub floors as necessary.
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3.
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Clean all mirrors, bright work and enameled surfaces nightly.
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4.
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Wash and disinfect all fixtures.
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5.
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Damp wipe and disinfect all partitions, tile walls, etc.
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6.
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Empty and sanitize all receptacles.
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7.
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Fill toilet tissue, soap, towel, and sanitary napkin dispensers.
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8.
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Clean flushometers and other metal work.
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9.
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Wash and polish all wall partitions, tile walls and enamel surfaces from trim to floor monthly.
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10.
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Vacuum all louvers, ventilating grilles and dust light fixtures monthly.
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FLOORS
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1.
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Ceramic tile, marble and terrazzo floors to be swept nightly and washed or scrubbed as necessary.
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2.
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Vinyl floors and bases to be swept nightly.
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3.
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Tile floors to be waxed and buffed monthly.
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4.
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All carpeted areas and rugs to be detailed vacuumed twice weekly and all carpeted traffic areas and other areas as needed to be vacuumed nightly.
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5.
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Carpet shampooing will be performed at Tenant's request and billed to Tenant.
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GLASS
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1.
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Clean inside of all perimeter windows as needed, but not more frequently than once every eighteen (18) months.
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2.
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Clean outside of all perimeter windows as needed, but not more frequently than once every eighteen (18) months.
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3.
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Clean glass entrance doors and adjacent glass panels nightly.
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HIGH DUSTING
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1.
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Dust and wipe clean all closet shelving when empty.
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(QUARTERLY)
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2.
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Dust all picture frames, charts, graphs, etc.
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3.
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Dust clean all vertical surfaces.
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4.
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Damp dust all ceiling air conditioning diffusers.
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5.
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Dust the exterior surfaces of lighting fixtures.
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DAY SERVICE
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1
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Check men's washrooms for toilet tissue replacement.
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2
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Check ladies' washrooms for toilet tissue and sanitary napkin replacements.
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3
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Supply toilet tissue, soap and towels in men's and ladies' washrooms.
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Neither Landlord nor the janitorial company will be responsible for removing items from surfaces in order to dust them. It is understood that while dusting is completed nightly in the common areas, it is only completed in the Premises once a week and on no particular day. In addition, neither Landlord nor the janitorial company will be responsible for moving, dusting or cleaning any computer, copier, printer or other office equipment. Notwithstanding anything herein to the contrary, it is understood that no services of the character provided for in this Exhibit shall be performed on Saturdays, Sundays or Holidays.
EXHIBIT C
RULES AND REGULATIONS OF BUILDING
1. No smoking shall be permitted within any portion of the Building or within twenty (20) feet of the Building’s exterior doors, including tenant spaces and common areas.
2. Landlord may provide and maintain a directory for all tenants of the Building. No signs, advertisements or notices visible to the general public shall be permitted within the Project without the prior written consent of Landlord. Landlord shall have the right to remove any such sign, placard, picture, advertisement, name or notice placed in violation of this rule without notice to and at the expense of the applicable tenant.
3. Sidewalks, doorways, vestibules, halls, stairways and other similar areas shall not be obstructed by tenants or used by any tenant for any purpose other than ingress and egress to and from the leased premises and for going from one to another part of the Building. At no time shall any tenant permit its employees, agents, contractors or invitees to loiter in common areas or elsewhere in or about the Building or Project.
4. Corridor doors, when not in use, shall be kept closed.
5. Plumbing fixtures and appliances shall be used only for the purposes for which designed, and no sweepings, rubbish, rags, food or other unsuitable material shall be thrown or placed therein. Every tenant shall be responsible for ensuring that its employees, agents, contractors and invitees utilize Common Area restrooms in accordance with generally accepted practices of health, cleanliness and decency.
6. Landlord shall provide all locks for doors into each tenant’s leased area, and no tenant shall place any additional lock or locks on any door in its leased area without Landlord’s prior written consent. Two keys for each lock on the doors in each tenant’s leased area shall be furnished by Landlord. Additional keys shall be made available to tenants at the cost of the tenant requesting such keys. No tenant shall have any duplicate keys made except by Landlord. All keys shall be returned to Landlord at the expiration or earlier termination of the applicable lease.
7. A tenant may use microwave ovens and coffee brewers in kitchen or break areas. Except as expressly authorized by Landlord in writing, no other appliances or other devices are permitted for cooking or heating of food or beverages in the Building. No portable heaters, space heaters or any other type of supplemental heating device or equipment shall be permitted in the Building. All tenants shall notify their employees that such heaters are not permitted.
8. All tenants will refer all contractors, subcontractors, contractors’ representatives and installation technicians who are to perform any work within the Building to Landlord before the performance of any work. This provision shall apply to all work performed in the Building including, but not limited to installation of telephone and communication equipment, medical type equipment, electrical devices and attachments, and any and all installations of every nature affecting floors, walls, woodwork, trim, windows, ceilings, equipment and any other physical portion of the Building.
9. Movement in or out of the Building of furniture or office equipment, or dispatch or receipt by a tenant of any heavy equipment, bulky material or merchandise which require the use of elevators, stairways, lobby areas or loading dock areas, shall be restricted to hours designated by Landlord. A tenant must seek Landlord’s prior approval by providing in writing a detailed listing of any such activity. If approved by Landlord, such activity shall be performed in the manner stated by Landlord.
10. All deliveries to or from the Building shall be made only at such times, in the manner and through the areas, entrances and exits designated by Landlord.
11. No portion of any tenant’s leased area shall at any time be used for sleeping or lodging quarters. No birds, animals or pets of any type, with the exception of guide dogs accompanying visually impaired persons, shall be brought into or kept in, on or about any tenant’s leased area.
12. No tenant shall make or permit any loud or improper noises in the Building or otherwise interfere in any way with other tenants or persons having business with them.
13. Each tenant shall endeavor to keep its leased. area neat and clean. Nothing shall be swept or thrown into the corridors, halls, elevator shafts, stairways or other common areas, nor shall tenants place any trash receptacles in these areas.
14. No tenant shall employ any person for the purpose of cleaning other than the authorized cleaning and maintenance personnel for the Building unless otherwise approved in writing by Landlord. The work of cleaning personnel shall not be hindered by a tenant after 5:30 PM local time, and such cleaning work may be done at any time when the offices are vacant. Exterior windows and common areas may be cleaned at any time.
15. To insure orderly operation of the Building, Landlord reserves the right to approve all concessionaires, vending machine operators or other distributors of cold drinks, coffee, food or other concessions, water, towels or newspapers. No tenant shall install a vending machine in the Building without obtaining Landlord’s prior written approval, which shall not be unreasonably withheld; provided, however, any vending machine installed in the Building shall not exceed the weight load capacity of the floor where such machine is to be installed; and, Landlord reserves the right to require that such vending machine be separately metered in accordance with this Lease, and that such vending machine be equipped with an automatic device that reduces the power consumption of such machine during non-peak hours of use of such machine.
16. Landlord shall not be responsible to tenants, their agents, contractors, employees or invitees for any loss of money, jewelry or other personal property from the leased premises or public areas or for any damages to any property therein from any cause whatsoever whether such loss or damage occurs when an area is locked against entry or not.
17. All tenants shall exercise reasonable precautions in protection of their personal property from loss or damage by keeping doors to unattended areas locked. Tenants shall also report any thefts or losses to the Building Manager and security personnel as soon as reasonably possible after discovery and shall also notify the Building Manager and security personnel of the presence of any persons whose conduct is suspicious or causes a disturbance. The tenant shall be responsible for notifying appropriate law enforcement agencies of any theft or loss of any property of tenant or its employees, agents, contractors, or invitees.
18. All tenants, their employees, agents, contractors and invitees may be called upon to show suitable identification and sign a building register when entering or leaving the Building at any and all times designated by Landlord form time to time, and all tenants shall cooperate fully with Building personnel in complying with such requirements.
19. No tenant shall solicit from or circulate advertising material among other tenants of the Building except through the regular use of the U.S. Postal Service. A tenant shall notify the Building Manager or the Building personnel promptly if it comes to its attention that any unauthorized persons are soliciting from or causing annoyance to tenants, their employees, guests or invitees.
20. Landlord reserves the right to deny entrance to the Building or remove any person or persons from the Building in any case where the conduct of such person or persons involves a hazard or nuisance to any tenant of the Building or to the public or in the event or other emergency, riot, civil commotion or similar disturbance involving risk to the Building, tenants or the general public.
21. Unless expressly authorized by Landlord in writing, no tenant shall tamper with or attempt to adjust temperature control thermostats in the Building. Upon request, Landlord shall adjust thermostats as required to maintain the Building Standard temperature.
22. All requests for overtime air conditioning or heating must be submitted in writing to the Building management office by noon on the day desired for weekday requests, by noon Friday for weekend requests, and by noon on the preceding business day for Holiday requests.
23. Tenants shall only utilize the termite and pest extermination service provided, designated or approved by Landlord.
24. No tenant shall install, operate or maintain in its leased premises or in any other area of the Building, any electrical equipment which does not bear the U/L (Underwriters Laboratories) seal of approval, or which would overload the electrical system or any part thereof beyond its capacity for proper, efficient and safe operation as determined by Landlord, taking into consideration the overall electrical system and the present and future requirements therefor in the Building.
25. Parking in the Parking Facility shall be in compliance with all parking rules and regulations including any sticker or other identification system established by Landlord. Failure to observe the rules and regulations shall terminate an individual’s right to use the Parking Facility and subject the vehicle in violation to removal and/or impoundment. Parking stickers or other forms of identification supplied by Landlord shall remain the property of Landlord and not the property of a tenant and are not transferable. The owner of the vehicle or its driver assumes all risk and responsibility for damage, loss or theft to vehicles, personal property or persons while such vehicle is in the Parking Facility.
26. Each tenant shall observe Landlord’s reasonable rules with respect to maintaining standard window coverings at all windows in its leased premises so that the Building presents a uniform exterior appearance. Each tenant shall ensure that to the extent reasonably practical, window coverings are closed on all windows in its leased premises while they are exposed to the direct rays of the sun.
27.Bicycles and other vehicles are not permitted inside or on the walkways outside the Building, except in those areas specifically designated by Landlord for such purposes and except as may be needed or used by a physically handicapped person.
28. Landlord reserves the right to rescind any of these rules and regulations and to make such other and further rules and regulations as in its judgment shall from time to time be needful for the safety, protection, care and cleanliness of the Building, the operation thereof, the preservation of good order therein and the protection and comfort of the tenants and their agents, employees and invitees, which rules and regulations, when made and written notice thereof is given to a tenant, shall be binding upon it in like manner as if originally herein prescribed.
EXHIBIT D TO LEASE
(Improvement Allowance)
This Work Letter supplements the Lease to which this Exhibit D is attached and, together with the Lease, governs the payment of an Improvement Allowance in connection with the Tenant’s initial occupancy of the Premises. All capitalized terms appearing in this Work Letter shall have the same meaning as those appearing in the Lease, except as expressly modified herein.
1. Improvement Allowance
a. “Improvement Allowance” shall mean an allowance of $5.00 per square foot of Rentable Area of Premises (i.e., not to exceed $135,675.00), to be provided by Landlord as set forth below.
b. Landlord shall reimburse Tenant for Tenant’s out-of-pocket costs incurred in connection with the purchase of furniture, fixtures and equipment placed in the Premises (the “Improvement Costs”) up to, but not exceeding, the amount of the Improvement Allowance, in accordance with the terms of this Improvement Allowance Section. The Improvement Allowance shall remain available to be used by Tenant through October 31, 2017 (the “Allowance Expiration Date”). Any portion of the Improvement Allowance remaining unused after the Allowance Expiration Date shall be applied to the payment of Base Rent. In the event the Improvement Costs exceed the amount of the Improvement Allowance, Tenant shall be responsible for timely payment of the entire overage. In no event shall Landlord be obligated to expend more than the Improvement Allowance.
c. No later than ten (10) days after all documents required under this paragraph, Landlord shall reimburse Tenant for the Improvement Costs, in an amount up to but not exceeding the Improvement Allowance. Unless waived by Landlord in writing, no final reimbursement of Tenant’s Costs will be made until the following documents have been received by Landlord:
i. copies of invoices detailing the Improvement Costs and evidence of payment thereof.
d. After the Improvement Allowance has been expended by Landlord, the principal amount of the Improvement Allowance, together with interest thereon calculated at the rate of twelve percent (12%) per annum, compounded monthly, shall be amortized evenly over the Term, and so long as Tenant does not default in its monetary obligations under the Lease, and fail to cure such default within the applicable period of cure, if any, provided under this Lease, then the balance of the Improvement Allowance shall be reduced each month by the principal amount amortized each month, and upon Landlord’s receipt of the final payment of Rent due during the initial Term of this Lease, Tenant shall have no liability to Landlord for the repayment of any portion of the Improvement Allowance or the interest that accrued and was amortized over the initial Term of this Lease. In the event of an uncured Default by Tenant under this Lease, then in addition to all of Landlord’s other remedies available under this Lease, Tenant shall also be liable to Landlord for the entire unreduced principal balance of the Improvement Allowance remaining as of the date of default, and interest shall accrue at the Default Rate. Provided, however, that if Landlord elects to exercise its rights under Section 32 of this Lease to accelerate the entire amount of all rent and other charges due from Tenant for the balance of the Term (in accordance with the terms of such Section), and Landlord obtains a
judgment for, or is paid by Tenant, the entire amount of such accelerated sum, then such judgment for or payment of such accelerated sum shall preclude a separate recovery by Landlord under the foregoing terms of this Section of the unreduced balance of the Improvement Allowance and any interest thereon.
EXHIBIT E
CERTIFICATE CONFIRMING LEASE DATES & BASE RENT
This Certificate Confirming Lease Dates and Base Rent is attached to and made a part of the Lease dated ______________________, by and between COUSINS FUND II PHOENIX III, LLC, a Delaware limited liability company, as Landlord, and ZIPRECRUITER, INC., a Delaware corporation, as Tenant.
The undersigned hereby agree and confirm that the Commencement Date, Expiration Date, and Base Rent schedule are revised as stated below:
The Commencement Date as defined in Section l(h) of the Lease is _______________, and the Expiration Date as defined in Section l(i) of the Lease is ____________________.
The Base Rent schedule as defined in Section l(j) of the Lease is as follows:
Entire Second Floor
27,135 RSF
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Lease Year or Period
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Base Rent per RSF
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Monthly Amount
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Periodic Amount
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$40.00
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$90,450.00
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$1,085,400.00#
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$40.75
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$92,145.93
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$1,105,751.20
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$41.50
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$93,841.88
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$1,126,102.50
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$42.25
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$95,537.81
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$1,146,453.70
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$43.00
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$97,233.75
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$1,166,805.00
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$43.75
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$98,929.68
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$593,578.08
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#Subject to the Abated Rent provision set forth below.
Provided that no Default, defined below, exists at the time of the abatement provided below, Tenant’s monthly installment of Base Rent shall be abated for the first full six (6) calendar months of the Term of this Lease (the “Abatement Period”), in the amount of Ninety Thousand Four Hundred Fifty and 00/100 Dollars ($90,450.00) per month, for a total abatement of Base Rent in the amount of Five Hundred Forty- Two Thousand Seven Hundred and 00/100 Dollars ($542,700.00) (the “Abated Rent”). The principal amount of the Abated Rent, together with interest thereon calculated at the Default Rate, defined below, shall be amortized evenly over the Term. So long as no uncured Default, defined below, occurs under this Lease that leads to the Landlord either repossessing the Premises or terminating the Lease, then upon Landlord’s receipt of the final monthly installment of Rent, defined below, Tenant shall have no liability to Landlord for the repayment of any portion of the Abated Rent. In the event of an uncured Default, then in addition to all of Landlord’s other remedies available under the Lease, Tenant shall also become immediately liable to Landlord for the unamortized portion of the Abated Rent existing as of the date of such uncured Default, and interest shall accrue thereon at the Default Rate. Provided, however, that if Landlord elects to exercise its rights under Section 32 of this Lease to accelerate the entire amount of all Rent and other charges due from Tenant for the balance of the Term (in accordance with the terms of such Section), and Landlord obtains a judgment for, or is paid by Tenant, the entire amount of such accelerated sum, then such judgment for or payment of such accelerated sum shall preclude a separate recovery by Landlord under the foregoing terms of this Section of such unamortized portion of the Abated Rent and any interest thereon.
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Landlord:
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Tenant:
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COUSINS FUND II PHOENIX III, LLC,
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ZIPRECRUITER, INC.,
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a Delaware limited liability company
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a Delaware corporation
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By:
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Cousins Properties Office Fund II, L.P.,
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By:
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it sole member
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Name:
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Its:
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By: PPOF II, L.L.C., its General Partner
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By:
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Matthew Mooney
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Senior Vice President & Managing Director
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EXHIBIT F
SUPPLEMENTAL HVAC EQUIPMENT
The provision of this Exhibit shall govern the installation, maintenance and removal of all Supplemental HVAC Equipment installed in the Premises. The installation of Supplemental HVAC Equipment in the Premises shall be at Tenant’s sole expense, and shall include the installation of a submeter to monitor the electricity used by the Supplemental HVAC Equipment. Prior to installing any Supplemental HVAC Equipment in the Premises, Tenant shall provide Landlord with plans and specifications for same and obtain Landlord’s written approval, which shall not be unreasonably withheld or delayed. Upon receiving such approval, Tenant shall install the Supplemental HVAC Equipment in compliance with Laws, including all building, electrical, and safety codes, applicable to the Project. Prior to installing the Supplemental HVAC Equipment, Tenant shall obtain any permits or licenses that may be required in order to install and operate such equipment, and Tenant shall timely deliver copies of same to Landlord. In no event shall Tenant’s installation of the Supplemental HVAC Equipment damage the Premises or the Building, or interfere with the maintenance of the Building, or any system currently serving the Building, and Tenant shall pay to Landlord upon demand the cost of repairing any damage to the Building caused by such installation. Tenant shall notify Landlord upon completion of the installation of the Supplemental HVAC Equipment, and Landlord shall have five (5) business days after installation of the Supplemental HVAC Equipment during which to inspect its installation. Tenant shall not commence operation of the Supplemental HVAC Equipment until Landlord has approved its installation. Tenant shall be solely liable for any damages or injury arising out of the installation of the Supplemental HVAC Equipment, and Tenant’s indemnity of Landlord contained in Section 26 shall specifically apply to the installation, operation, maintenance and removal of the Supplemental HVAC Equipment. During the Term of this Lease, as the same may be extended from time to time, Tenant shall be solely responsible for maintaining the Supplemental HVAC Equipment in good working order at Tenant’s sole expense, and Tenant shall reimburse Landlord for all electricity consumed by the Supplemental HVAC Equipment, as additional Rent due hereunder, within fifteen (15) days after Tenant’s receipt of Landlord’s invoice for same. Upon the expiration or earlier termination of this Lease, Tenant shall remove the Supplemental HVAC Equipment from the Premises, and repair all damage to the Premises or the Building caused by the installation or removal of such equipment.
FIRST AMENDMENT TO COMMERCIAL LEASE
(Hayden Ferry Lakeside Phase III)
THIS FIRST AMENDMENT TO COMMERCIAL LEASE (the “First Amendment”), dated for reference purposes as of August 31, 2017, is entered into by and between COUSINS FUND II PHOENIX III, LLC, a Delaware limited liability company (“Landlord”), and ZIPRECRUITER, INC., a Delaware corporation (“Tenant”).
R E C I T A L S
WHEREAS, Landlord and Tenant are parties to that certain Commercial Lease dated November 8, 2016 (the “Original Lease”), whereby Landlord leased to Tenant, and Tenant leased from Landlord, certain premises consisting of approximately 27,135 rentable square feet located on the second (2nd), floor in the Building (the “Original Premises”), having an address of 40 East Rio Salado, Tempe, Arizona 85281, and located in the Project commonly known as Hayden Ferry Lakeside- Phase III; and
WHEREAS, Tenant now desires to lease additional space in the Building from Landlord and Landlord desires to lease additional space in the Building to Tenant; and
WHEREAS, Landlord and Tenant desire to enter into this First Amendment to, among other things, set forth the terms and conditions upon which Tenant will lease from Landlord all of the space located on the 8th Floor of the Building.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, Landlord and Tenant agree as follows:
1. Incorporation of Recitals; Defined Terms; Effective Date. The Recitals set forth above are deemed to be true and accurate in all respects and are hereby incorporated into this First Amendment by this reference. Capitalized terms used in this First Amendment shall have the same meanings as ascribed to them in the Lease unless otherwise expressly defined in this First Amendment. In the event of any conflict between the terms of the Lease and the terms of this First Amendment, the terms of this First Amendment shall govern and control. This First Amendment shall be effective on that date when Landlord has delivered to Tenant a fully executed copy of this First Amendment (the “Effective Date”).
2. Expansion of Premises. Landlord and Tenant have agreed that Tenant will expand its occupancy to include the entire 8th floor of the Building (the “Expansion Premises”), consisting of 27,135 square feet of Rentable Area. The Expansion Premises and the Original Premises (which consists of 27,135 RSF) are hereafter referred to as the “Premises” and together consist of 54,270 RSF. Within three (3) business days of Landlord’s execution of this First Amendment (the “Delivery Date”), Landlord will deliver the Expansion Premises to Tenant broom-clean and with all of the prior occupant’s furniture, fixtures and equipment left therein, subject, however, to the terms and conditions set forth in Article 2 of the Original Lease (the “Delivery Condition”). Tenant has the right to occupy the Expansion Premises as of the Delivery Date, subject to all of the terms and conditions of the Original Lease except for the obligation to
pay Base Rent and Operating Expenses until the Expansion Premises Commencement Date (defined below), for the purpose of installing its equipment, furniture, fixtures and all related cabling.
3. Expansion Premises Commencement Date; Term. The Term of the Lease applicable to the Expansion Premises will commence on September 15, 2017 (the “Expansion Premises Commencement Date” or “EPCD”). Notwithstanding the Expansion Premises Commencement Date, Tenant will be permitted access to the Expansion Premises one (1) business day after the Effective Date. Such early access to the Expansion Premises shall be subject to the terms and conditions of this Lease, except that Tenant shall not be required to pay Base Rental and Tenant’s Additional Rent for any days of such early access; provided however, Tenant shall pay for the cost of any other Building services requested by Tenant.
As of the Effective Date, any reference in this First Amendment or the Original Lease to the “Premises” shall mean and include the Original Premises and the Expansion Premises. The Term of the Lease applicable to the entire Premises expires on January 15, 2023, unless sooner terminated as otherwise provided in the Lease.
4. Condition of Expansion Premises/Tenant’s Work. Tenant acknowledges that Landlord is leasing the Expansion Premises to Tenant in its current “AS IS, WHERE IS” condition, without any obligation to alter, remodel, improve, repair or decorate any part of the Expansion Premises, except to the extent that the Lease requires Landlord to perform maintenance or repair obligations (or reconstruction obligations following casualty or condemnation). Neither Landlord nor any of its agents, employees or contractors has made any warranty or representation to Tenant regarding the condition of the Expansion Premises or its suitability for Tenant’s intended purposes.
Landlord acknowledges that Tenant intends to perform certain construction, data and electrical work (collectively, the “Tenant’s Work”) at the Expansion Premises, inclusive of the following:
•Add power and data for leader board TVs.
•Provide power, cable and new desks for area that was not built near kitchen.
•Run riser cables for access badge readers and internet from 2nd floor Premises.
•Pull city permit and fire inspection for “Method B” on secondary doors in elevator lobby.
•Add replacement desks for the area where they were removed; add power and wire up for data.
•Purchase and setup network switches in network rooms.
•Build reception area if Tenant decides to have one on 8th floor.
•Build walls with doors and badge readers on each side of reception area.
Tenant may need access to the 7th floor in order to complete some of Tenant’s Work, which access Landlord agrees to provide, subject to such commercially reasonable restrictions and conditions as Landlord, in its good faith opinion, deems necessary or appropriate, provided
such restrictions and conditions do not unreasonably delay or hinder the performance of Tenant’s Work or materially increase the costs thereof.
5. Base Rent for the Original Premises. Through June 30, 2022, the Base Rent for the Original Premises will remain as set forth in the Lease. Beginning July 1, 2022, the Base Rent for the Original Premises will be as set forth in the following chart:
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Lease Months
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Per Sq. Ft.*
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Period
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Per Month*
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7/1/22 – 1/15/23
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$44.50
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$654,066.53
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$100.625.62
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* plus applicable sales and transaction privilege taxes on Rent pursuant to Section 7(a) of the Original Lease and on Parking Rental Fees pursuant to Sections 1(o) and 7(a) of the Original Lease.
6. Base Rent for the Expansion Premises. The Base Rent due for the Expansion Premises is as set forth in the chart below:
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Lease Months
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Per Sq. Ft.*
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Period
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Per Month*
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9/15/17 – 11/30/18
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$43.00
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$1,361,272.50,
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$97,233.75
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12/1/18 – 11/30/19
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$43.75
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$1,187,156.28
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$98,929.69
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12/1/19 – 11/30/20
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$44.50
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$1,207,507.56
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$100,625.63
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12/1/20 – 11/30/21
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$45.25
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$1,227,858.72
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$102,321.56
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12/1/21 – 1/30/22
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$46.00
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$1,248,210.00
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$104,017.50
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12/1/22 – 1/15/23
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$46.75
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$1,268,561.28
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$105,713.44
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* plus applicable sales and transaction privilege taxes on Rent pursuant to Section 7(a) of the Original Lease and on Parking Rental Fees pursuant to Sections 1(o) and 7(a) of the Original Lease.
Provided that no Default exists at the time of the abatement provided below, Tenant’s monthly installment of Base Rent shall be abated: a] for the months of November and December, 2017 (the “Abatement Period”), in the amount of Ninety-Seven Thousand Two Hundred Thirty-Three and 75/100 Dollars ($97,233.75) per month, for a total abatement of Base Rent in the amount of One Hundred Ninety-Four Thousand Four Hundred Sixty-Seven and 50/100 Dollars ($194,467.50); and b] beginning with the month of January, 2018, until an amount equal to the amount of base rent paid to an affiliate of Landlord by Tenant for its occupancy, through September 14, 2017, of Suite 115 in the building located at 80 E. Rio Salado Parkway, Tempe, Arizona has been credited to Tenant’s account (collectively, the “Abated Rent”). The principal amount of the Abated Rent, together with interest thereon calculated at the Default Rate shall be amortized evenly over the period from September 15, 2017 through January 15, 2023. So long as no uncured Default occurs under the Lease that leads to the Landlord either repossessing the Premises or terminating the Lease, then upon Landlord’s receipt of the final monthly installment of Rent, Tenant shall have no liability to Landlord for the repayment of any portion of the Abated Rent. In the event of an uncured Default, then in addition to all of Landlord’s other
remedies available under the Lease, Tenant shall also become immediately liable to Landlord for the unamortized portion of the Abated Rent existing as of the date of such uncured Default, and interest shall accrue thereon at the Default Rate. Provided, however, that if Landlord elects to exercise its rights under Section 32 of the Original Lease to accelerate the entire amount of all Rent and other charges due from Tenant for the balance of the Term (in accordance with the terms of such Section), and Landlord obtains a judgment for, or is paid by Tenant, the entire amount of such accelerated sum, then such judgment for or payment of such accelerated sum shall preclude a separate recovery by Landlord under the foregoing terms of this Section of such unamortized portion of the Abated Rent and any interest thereon.
If Landlord is able to provide Tenant with the right to install signage on the top of the Building in approximately the same size as currently exists for signage for “Zenefits” and in a comparable location (“Building Top Signage”), Landlord will deliver written notice thereof to Tenant (the “Signage Notice”). Beginning on the earlier of (a) the sixty-first (61st) day after Tenant’s receipt of the Signage Notice, or (b) the date of completion of installation of Tenant’s sign, the amount of Base Rent for the Expansion Premises will, for the balance of the Term of the Lease, increase by Two and 00/100 Dollars ($2.00) per year, per rentable square foot of the Expansion Premises. For example, if the increase in Base Rent becomes due in the 15th month of the Term applicable to the Expansion Premises, then Tenant would owe $45.75/RSF/year for months 15-26, $46.50/RSF/year for months 27-38, and so on.
7. Option to Extend. The terms and conditions set forth in Section 57 of the Lease, Option to Extend, remains in full force and effect as to the entire Premises, inclusive of the 8th floor if its lease of the 8th floor has not been terminated as a result Landlord’s exercise of the Termination Option set forth (and defined) in Section 8 below.
8. Landlord’s Option to Terminate. In the event Landlord enters into a lease with Amazon.com Inc., or an affiliate thereof for the Expansion Premises, Landlord may at its option terminate this Lease as to the Expansion Premises only (the “Termination Option”) effective on a date (the “Early Termination Date”) set forth in a written notice to Tenant of Landlord’s intent to terminate this Lease as to the Expansion Premises (the “Termination Notice”), which date may be any date from (and including) March 31, 2020 through March 31, 2021, provided the Termination Notice is received by Tenant no later than nine (9) full calendar months prior to the Early Termination Date. By way of example, if Landlord desires that the Early Termination Date be March 31, 2020, then to be effective the Termination Notice must be received by Tenant prior to July 1, 2019. If Landlord fails to timely deliver a Termination Notice by June 30, 2020, Landlord will be deemed to have waived the Termination Option. If Landlord properly exercises its Termination Option, this Lease shall terminate as of the Early Termination Date as to the Expansion Premises, but shall continue in full force and effect as to the remainder of the Premises.
9. Right of First Refusal. In addition to the right of first refusal as set forth in Paragraph 60 of Original Lease (which right shall remain in full force and effect and shall be independent of the rights granted to Tenant under this Section 9), Tenant is hereby granted the prior right to lease the space currently available on the ground floor of the Building, containing
approximately 18,267 rentable square feet, (“ROFR Ground Floor Space”), in accordance with the following terms and conditions:
(i) In the event Landlord shall receive a bona fide third party offer to lease the ROFR Ground Floor Space on terms which Landlord wishes to accept, or, in the event Landlord offers (subject to Tenant’s rights hereunder) to lease the ROFR Ground Floor Space on terms which a bona fide third party wishes to accept, then, in either such event, Landlord shall forthwith provide written notice thereof to Tenant, together with a true and correct copy of such offer. Tenant shall have the right, at Tenant’s option and within five (5) business days after receipt of such notice from Landlord, to exercise its right hereunder to lease the ROFR Ground Floor Space at the rent and upon the terms contained in such offer, in which event Landlord shall lease the ROFR Ground Floor Space to Tenant at said rent and upon said terms. Landlord covenants that it shall not accept any such offer nor lease the ROFR Ground Floor Space to any third party until it has complied with the terms hereof.
(ii) If Tenant fails to exercise its right of first refusal hereunder within the five (5) business day notice period provided for in the preceding subparagraph (a), Landlord shall have one hundred fifty (150) days thereafter within which to lease the ROFR Ground Floor Space at the price and upon the terms of such offer without resubmitting such offer to Tenant in accordance herewith. However, Tenant’s election not to exercise its right hereunder to lease the ROFR Ground Floor Space shall not prejudice Tenant’s rights hereunder as to any further offer, and in the event the price and/or other terms of the offer are modified in any material manner (including, but not limited to, any reduction in the rent of more than four percent [4%]), then such modification shall be deemed to constitute a new offer and shall be subject to Tenant’s right of first refusal hereunder.
(iii) The foregoing notwithstanding, (a) Tenant shall have no rights under this Section during any period it is in default under this Lease beyond applicable cure periods, and (b) Tenant’s rights in this Section shall become null and void, and Tenant’s rights with respect to all of the ROFR Ground Floor Space shall terminate, upon the first to occur of the following termination of this Lease (or Tenant’s right of possession of the Premises) by reason of Tenant’s default, or the termination of this Lease pursuant to other provisions of this Lease providing for termination (except that Landlord’s termination of this Lease as to the Expansion Premises as provided in Section 8 above shall not impact Tenant’s rights under this Section 9). Upon the occurrence of any of the foregoing events, Tenant shall be deemed to have forever waived its rights with respect to all of the ROFR Ground Floor Space, and Tenant’s rights hereunder shall thereafter automatically be deemed null and void and of no further force and effect. Notwithstanding anything to the contrary in this Section 9, Tenant acknowledges that in the event any other tenant of the Building or the Project with a prior right to lease the ROFR Ground Floor Space elects to exercise its right to lease the ROFR Ground Floor Space, Tenant’s rights set forth in this Section 9 shall be of no force or effect with respect to the ROFR Ground Floor Space. For the purposes of the foregoing sentence, a “prior right to lease” shall mean any tenant occupying its premises directly or as an assignee (but not as a subtenant, licensee, or concessionaire) under: (a) a lease that was executed prior to the Effective Date (a “Prior Lease”); or (b) a renewal or extension of a Prior Lease.
(iv) The rights granted to Tenant in this Section 9 are personal to the party executing this First Amendment as Tenant and to any Permitted Assignee, but may not otherwise be assigned or transferred to or exercised by any other assignee, sublessee or other transferee. If Tenant or a Permitted Assignee assigns the Lease or sublets all or substantially all of the Premises in an assignment or subletting that requires Landlord’s prior consent under Article 38 of the Lease prior to the exercise of the rights granted to Tenant in this Section 9, then the rights granted to Tenant in this Section 9 shall lapse and therefore be of no further force or effect.
10. Parking. In connection with Tenant’s lease of the Expansion Premises, and in addition to the Parking Spaces described in Section 1(o) of the Original Lease, as of the Expansion Premises Commencement Date Tenant hereby licenses from Landlord and Landlord hereby licenses to Tenant, One Hundred Eleven (111) unreserved (covered or uncovered) Parking Spaces and ten (10) executive reserved Parking Spaces for a total of one hundred and twenty-one (121) Parking Spaces. The executive reserved Parking Spaces are located in the parking garage that is below the Building. If available as determined by Landlord in its sole and reasonable discretion, Tenant shall have the right to license the use of additional Parking Spaces, the cost for which shall be billed to Tenant at the then prevailing rate for such Parking Space(s) on a month-to-month basis with each party having the right to terminate the month-to-month license as to such additional Parking Space(s) only on no less than thirty (30) days prior written notice to the other party.
Subject to the terms and conditions of Section 48 of the Original Lease: (i) for each executive reserved Parking Space, Tenant shall pay to Landlord One Hundred Twenty-Five and 00/100 Dollars ($125.00) per space per month, plus applicable transaction privilege taxes; and (ii) for each unreserved (covered or uncovered) Parking Space, Tenant shall pay to Landlord Seventy-Five and 00/100 Dollars ($75.00) per space per month, plus applicable transaction privilege taxes, which taxes are currently 2.3%. The monthly rental for all Parking Spaces shall be subject to periodic adjustments in accordance with Section 48 of the Original Lease. Provided that no Default under any term, condition or obligation of the Lease exists at the time of the abatement provided below that leads to the Landlord either repossessing the Premises or terminating the Lease, Tenant’s monthly rental fees for the Parking Spaces shall be abated for the Abatement Period (the “Abated Parking Rental Fees”). The principal amount of the Abated Parking Rental Fees, together with interest thereon calculated at the rate of twelve percent (12%) per annum, compounded monthly, shall be amortized evenly over the Term. So long as no uncured Default occurs under the Lease, then upon Landlord’s receipt of the final monthly installment of Rent applicable to the Expansion Premises, Tenant shall have no liability to Landlord for the repayment of any portion of the Abated Parking Rental Fees. In the event of an uncured Default, then in addition to all of Landlord’s other remedies available under the Lease, Tenant shall also become immediately liable to Landlord for the unamortized portion of the Abated Parking Rental Fees existing as of the date of such uncured Default, and interest shall accrue thereon at the Default Rate.
The reference in Section 1(o) of the Original Lease to “Reserved (covered)” Parking Spaces is hereby changed to be a reference to “executive reserved” Parking Spaces, which Spaces are to be located in the parking garage that is below the Building. Furthermore, the
second paragraph of Section 1(o) of the Original Lease, beginning with the phrase “Tenant shall notify Landlord in writing...”, is no longer applicable and therefore, to avoid confusion, is acknowledged by the parties to have been deleted from the Original Lease. As a result of the foregoing, as of the Expansion Premises Commencement Date Tenant will be licensing from Landlord and Landlord will be licensing to Tenant, Two Hundred Twenty-Two (222) unreserved (covered or uncovered) Parking Spaces and twenty (20) executive reserved Parking Spaces.
11. Furniture, Fixtures and Equipment. Landlord hereby sells, assigns, conveys and transfers to Tenant any and all of its right, title and interest in and to the furniture, fixtures, inventory, personal property, materials, supplies, apparatus, machines, tools, appliances, and equipment of the prior occupant of the expansion Premises that is located therein as of the Effective Date, plus the delivery to the Expansion Premises by the Expansion Premises Commencement Date of eighteen (18) pedestals/cubes/chairs previously located therein (the “FF&E”). Landlord warrants and represents that it is the lawful owner of the FF&E and that the FF&E is free from all liens, security interests and encumbrances. Landlord represents it has the legal right to sell the FF&E and that it will warrant and defend that right on behalf of Tenant and against the claims and demands of any and all person or entities. The conveyance contained herein is absolute. Tenant shall have all of the rights of Landlord in and to the FF&E. As a result of its ownership of the FF&E, from and after the Effective Date it is Tenant’s responsibility to insure the FF&E and to pay any personal property taxes due thereon.
12. Base Year. For purposes of computing Tenant’s obligation to pay Common Area Expenses and Taxes applicable to the Expansion Premises, the Base Year applicable to the Expansion Premises is the calendar year 2018. Tenant’s obligation to pay Common Area Expenses and Taxes applicable to the Expansion Premises will be in accordance with the terms of the Original Lease.
13. Building Top Signage. if Tenant has received the Signage Notice, and as long as Tenant or a Permitted Assignee has not caused an uncured Event of Default to occur under the Lease and is occupying at least two (2) full floors of the Building (provided that if Landlord exercises its right to terminate this Lease as to the Expansion Premises as provided in Section 8 above, Tenant shall retain its right to the Building Top Signage), Tenant shall have the right to install the Building Top Signage. The Building Top Signage may include Tenant’s name and logo (as the same may be changed from time to time), including, without limitation, the name “ZipRecruiter” or any reasonable variation thereof. All costs of the Building Top Signage, including permitting, design, installation, repairs, maintenance and removal upon the expiration or earlier termination of the Lease, shall be at Tenant’s sole cost and expense, but (other than the increase in Base Rent detailed in Section 6 above of this First Amendment), Tenant shall not be required to pay a rental charge or fee for the placement thereof. Tenant shall obtain Landlord’s prior written consent to its proposed Building Top Signage, with such consent not to be unreasonably withheld, conditioned or delayed. The Building Top Signage must comply with all applicable governmental laws, rules and regulations. Notwithstanding any language hereinabove to the contrary, Tenant will no longer have the right to install Building Top Signage (and will remove its Building Top Signage if it was previously installed): a] if installation of the Building Top Signage is not complete within one hundred eighty (180) days after Tenant’s receipt of the
Signage Notice; or, b] once installed, should Tenant’s Building Top Signage not be in place for any period of sixty (60) or more consecutive days during the Term of the Lease (as the same may be extended from time to time). Should Tenant at any time during the Term of the Lease occupy less than two (2) full floors of the Building, unless Tenant is occupying less than two (2) full floors of the Building as a result of Landlord’s exercise of its Termination Option under Section 8 above, Tenant’s right to Building Top Signage will be voidable in Landlord’s sole and absolute discretion. In connection with the foregoing, Tenant agrees (at its sole cost and expense) to remove its Building Top Signage and repair any damage to the Building fascia within sixty (60) days of its receipt of written notice from Landlord that Tenant no longer has the right to Building Top Signage. Furthermore, if Tenant or a Permitted Assignee assigns the Lease or sublets all or substantially all of the Premises in an assignment or subletting that requires Landlord’s prior consent under Article 38 of the Lease, then the rights granted to Tenant in this Section 13 shall lapse and therefore be of no further force or effect, with Tenant agreeing (at its sole cost and expense) to remove its Building Top Signage and repair any damage to the Building fascia within sixty (60) days of its receipt of written notice from Landlord to do so.
14. Letter of Credit. Within five (5) business days following the mutual execution of this First Amendment, Tenant shall provide to Landlord, at Tenant’s sole cost and expense and in addition to the irrevocable standby letter of credit that it provided Landlord in accordance with Section 8 of the Original Lease, a second irrevocable standby letter of credit in the amount of Eight Hundred Ninety Thousand Three Hundred Sixty-Seven Thousand and 12/100 Dollars ($890,367.12) (including replacements thereof permitted hereunder, the “Expansion Letter of Credit”). The Expansion Letter of Credit and any cash proceeds thereof shall be held as security for the faithful performance by Tenant of all of the provisions of the Lease to be performed or observed by Tenant (the cash proceeds of the Expansion Letter of Credit, and any other funds held by Landlord in accordance with the terms of Section 8 of the Original Lease, are part of what is referred to in the Lease as the Security Deposit. The Expansion Letter of Credit is subject to all of the same terms and conditions of the Lease as are applicable to the original Letter of Credit, with the exception that reductions in the amount of the Expansion Letter of Credit are not governed by the first paragraph of subsection 8(e), Reduction of Letter of Credit Amount, of the Original Lease but, instead, are governed by the following (with the second paragraph of said subsection 8(e), Reduction of Letter of Credit Amount, of the Original Lease governing both the original Letter of Credit and the Expansion Letter of Credit:
“Notwithstanding anything to the contrary contained in the Section 8, if, as of any anniversary of the Expansion Premises Commencement Date, the Reduction Conditions (defined below) apply, then the face amount of the Letter of Credit shall be reduced (w) on April 1, 2018, to Seven Hundred Twelve Thousand Two Hundred Ninety-Three and 70/100 Dollars ($712,293.70), (x) on April 1, 2019, to Five Hundred Thirty-Four Thousand Two Hundred Twenty and 28/100 Dollars ($534,220.28), (y) on April 1, 2020, to Three Hundred Fifty-Six Thousand One Hundred Forty-Six and 86/100 Dollars ($356,146.86), and (z) on April 1, 2021 to One Hundred Seventy-Eight Thousand Seventy-Three and 44/100 Dollars ($178,073.44). Any such reduction shall be effected either, at Tenant’s option (i) by an amendment to the then-existing Letter of Credit reducing the face amount of the then-existing Letter of Credit (which amendment
Landlord agrees to promptly execute and deliver to the issuing bank) or (ii) by Tenant’s delivery of a replacement Letter of Credit to Landlord in the applicable reduced face amount, in which event Landlord agrees to promptly return the Letter of Credit then being held by Landlord to Tenant and to execute such documentation as the issuing bank may reasonably require to effect the termination of such Letter of Credit.”
15. Brokers. In connection with this First Amendment, Landlord’s broker is Cousins Realty Services, LLC (Matthew Mooney) and Tenant’s broker is Cresa (Mike Gordon). Landlord and Tenant represent that they have only dealt with the brokers referenced in the foregoing sentence in connection with this First Amendment, whose commission shall be paid by Landlord pursuant to a separate written agreement. TENANT AND LANDLORD SHALL EACH INDEMNIFY THE OTHER AGAINST ALL COSTS, EXPENSES, ATTORNEYS’ FEES, LIENS AND OTHER LIABILITY FOR COMMISSIONS OR OTHER COMPENSATION CLAIMED BY ANY BROKER OR AGENT CLAIMING THE SAME BY, THROUGH OR UNDER THE INDEMNIFYING PARTY, OTHER THAN THE BROKER(S) SPECIFICALLY IDENTIFIED ABOVE.
16. Existing Claims. Landlord and Tenant each acknowledge that there are no existing monetary claims or causes of action against the other arising out of the Lease, either currently or which would exist with the giving of notice or with the passage of time, nor are there any existing defenses which either party has against the enforcement of the Lease by the other.
17. Notice Addresses for Landlord. Section 29 of the Lease is hereby amended to reflect that any notices to Landlord shall be addressed and given to Landlord at all of the following addresses:
Cousins Fund II Phoenix III, LLC
60 East Rio Salado Parkway, Suite 502
Tempe, Arizona 85281
Attn: Senior Property Manager
Cousins Realty Services, LLC
3344 Peachtree Road NE, Suite 1800
Atlanta, Georgia 30326
Attn: Corporate Secretary
CorporateSecretary@cousinsproperties.com
18. Incorporation of Prior Agreements; Modification. This First Amendment contains the entire understanding of the parties hereto with respect to the subject matter hereof, and no prior or other written or oral agreement or undertaking pertaining to any such matter shall be effective for any purpose. This First Amendment may not be amended or modified, nor may any right or obligation hereunder be waived orally, and no such amendment or modification shall be effective for any purpose unless it is in writing and signed by the party against whom enforcement thereof is sought.
19. Interpretation. This First Amendment shall be construed reasonably to carry out its intent without presumption against or in favor of either party. The parties acknowledge that both parties have caused this First Amendment to be reviewed by legal counsel of their choice. No negotiations concerning or modifications made to prior drafts of this First Amendment shall be construed in any manner to limit, reduce or impair the rights, remedies or obligations of the parties under this First Amendment or to restrict or expand the meaning of any provisions of this First Amendment. If any provision hereof shall be declared invalid by any court or in any administrative proceedings, then the provisions of this First Amendment shall be construed in such manner so as to preserve the validity hereof and the substance of the transactions herein contemplated to the extent possible. The Section headings are provided for purposes of convenience of reference only and are not intended to limit, define the scope of or aid in interpretation of any of the provisions hereof.
20. Full Force and Effect; Counterparts. The Lease shall remain in full force and effect in accordance with its original terms and provisions, except as expressly modified by the terms of this First Amendment. This First Amendment shall be governed by Arizona law and shall be binding on the parties hereto and their respective successors and assigns. This First Amendment may be executed by the parties hereto in one or more counterparts. All counterparts shall be valid and binding on the party or parties executing them and all counterparts shall constitute one and the same document for all purposes. If this First Amendment is executed by Landlord or Tenant and delivered to the other party in pdf, facsimile or similar electronic format, the same shall be binding on the party delivering the executed First Amendment with the same force and effect as the delivery of a printed copy of this First Amendment with an original ink signature. At any time upon Landlord’s or Tenant’s written request, the other party shall provide the requesting party with a printed copy of this First Amendment with an original ink signature of such other party. Each signatory to this First Amendment represents and warrants to the other party that this First Amendment has been duly authorized, executed and delivered by or on behalf of the party for which it is signing.
BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the parties have executed this First Amendment to Commercial Lease to be effective as of the date described in Section 1 above.
LANDLORD:
COUSINS FUND II PHOENIX III, LLC,
a Delaware limited liability company
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By:
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/s/ Matthew Mooney
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Matthew Mooney
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Senior Vice President & Managing Director
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TENANT:
ZIPRECRUITER, INC.,
a Delaware corporation
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By:
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/s/ David Feldman
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Print Name:
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David Feldman
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Its:
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Chief Business Officer
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[Signature Page to First Amendment to Commercial Lease]
Sublease Agreement
Made and entered into on 31 of January, 2018
Between:
SwitchUp Ltd., Co. No. 515676583
of 10 Hasharon Street, Tel Aviv
c/o its authorized signatory: Mr. Tom Kadosh, Identity No. intentionally omitted and Mr. Yoni Porat Identity No. intentionally omitted __________________ (hereinafter, the “Landlord”) ________________of the first part; And:
ZIPRECRUITER ISRAEL Ltd. Co. No. 515247740
At Shenhav and co., Advocates & Notary, of 4 Ha’nechoshet St., Ramat Ha’hayal, Tel Aviv
c/o its authorized signatory: Mr. David Feldman, intentionally omitted.
of, up to delivery of possession in the Tenancy and, thereafter, at the Tenancy, as defined hereunder.
(hereinafter, the “Tenant”) _________________________ of the second part;
Whereas: the Landlord is leasing out the Tenancy on an area of around 1207 sq.m. on land known as part of Bloc 7101 Parcel 19 (previously part of Parcel 1 Bloc 7101 and part of Parcel 32 Block 7459) in the town of Tel-Aviv-Jaffa, whose address is 18th floor of 32 Ha’arbah, Hagag Towers (hereinafter, the “Land” and the “Head Tenancy” respectively), in accordance with an unprotected tenancy agreement that was entered into on, between it and the owner of the Tenancy (hereinafter, the “Owner”, the “Head Tenancy Agreement”) attached hereto as Annex A; and
Whereas: under the Head Tenancy Agreement between the Landlord and the Owner, the Landlord is permitted to lease out the Head Tenancy on a fixed-term, unprotected sub-tenancy, to a tenant, all in accordance with the terms of this Tenancy Agreement and subject to the conditions of the Head Tenancy Agreement; and
Whereas: the Tenant wishes to lease the Tenancy from the Landlord, on an unprotected sub-tenancy (as set forth in Section 2.1 below), after the Landlord’s Renovate the Tenancy so it will come to a fully furnished and designed office space (in a standard at least as presented to the Tenant at 10 Ha’sharon street Tel-Aviv) and including the equipment and furniture detailed in the attached list marked as Annex “D” to this Agreement (hereinafter, jointly, the “Tenancy”), for office purposes only, after having checked the building in which the Tenancy is located and the Tenancy and after having been provided with all the information required, to its full satisfaction, to enter into this contractual arrangement, all subject to and in accordance with, all the provisions of this Agreement; and
Whereas: The Landlord agrees to lease the Tenancy to the Tenant on an unprotected sub-tenancy, all subject to and in accordance with all provisions of this Agreement and of the Head Tenancy Agreement; and
Whereas: the parties wish to define, settle and set forth in writing, the framework of their rights and obligations regarding the leasing of this Tenancy, all as set out hereunder in this Agreement;
Now therefore, it is declared, agreed and stipulated between the parties, as follows:
1. General
1.1 The preamble and annexes to this Agreement constitute an integral part hereof.
1.2 Section headings in the Agreement are for the purpose of orientation only and are not part of the Agreement and will not be used for its interpretation.
1.3 Annexes:
- Annex “A” –Head Tenancy Agreement blackened in parts
- Annex “B” – Blueprint of the Tenancy
- Annex “B1” - Basic Specification Plan -
- Annex “C” –Insurance Annex- Deleted.
- Annex “D” – List of equipment, furniture and chattels that are the Landlord’s property and are being provided for the Tenant’s use at the Tenancy in the context of this Agreement as an integral part of the Tenancy.
- Annex “E” – The management agreement and/or articles (if there are any relating to the building in which the Tenancy is located).
- Annex “F” – Text of the bank guarantee.
- Annex “G” – Special directives for using the Tenancy’s system and/or working with heat (if there are any such directives regarding the building in which the Tenancy is located).
- Annex “H” – intentionally omitted.
2. Nature of this Agreement and non-applicability of the Tenancy Protection laws
2.1 It is agreed between the parties that the provisions of the Tenant Protection Law (Consolidated Version) 5732-1972, will not apply in any form, and that this Law and/or the amendments thereto and regulations enacted or to be enacted by virtue thereof, do not and will not apply to the lease under this Agreement or to the Tenant and/or the Tenancy and/or this Agreement.
2.2 The Landlord hereby undertakes to lease to the Tenant and the Tenant hereby leases from the Landlord, the Tenancy as set forth in the terms of this Sublease Agreement. It is agreed by the parties that this Agreement will be subject to the provisions of the Head Tenancy Agreement, mutatis mutandis, while the Landlord will have all rights vis a vis the Tenant as are imparted to the Owner under the Head Tenancy Agreement. It is agreed that Sections 7, 8, 9, 19 of the Head Tenancy Agreement will not apply to Tenant, and Section 10, shall apply, mutatis mutandis, on renovation work during the rental period (not the Adjustment Works, (as defined in the Head Tenancy Agreement) performed by the Landlord). Section 15 (insurance) of the Head Tenancy Agreement will apply to Tenant except for the obligations with respect to renovation works insurance regarding the Renovations to be performed by the Landlord in accordance with Section 3.4 below.
2.3 For the avoidance of doubt, it is clarified that any act and/or omission by the Tenant that contravenes the provisions of the Head Tenancy Agreement and/or that causes the Landlord to be in breach of the Head Tenancy Agreement will be deemed, essentially, as a breach of this Agreement, except for Sections 7, 8, 9, and 19 of the Head Tenancy Agreement, and except for the obligations set forth in Sections 10 and 15 of the Head Tenancy Agreement with respect to Renovations (as described in Section 3.4) and Adjustment Works performed by the Landlord in the Tenancy before the Tenant occupies the Tenancy, and insurance associated therewith, such provisions inapplicable to the Tenant.
2.4 The Tenant indemnification and liability obligations toward the Landlord shall be as set forth in Section 14 of the Head Tenancy Agreement, which shall apply towards the Landlord under this Agreement, mutatis mutandis, including an act and/or omission that contravenes the non-blackened provisions of the Head Tenancy Agreement and/or that causes the Landlord to be in breach of the Head Tenancy Agreement.
3. The Tenant’s declarations
3.1 The Tenant declares that it has read the relevant parts of the Head Tenancy Agreement, which is attached as Annex “A” to this Agreement, has understood all the terms and directives in Annex “A” and agrees unreservedly to everything stated therein and to do everything relating to this Agreement with everything entailed therein, and without derogating from the generality of the aforesaid, understands all the provisions that apply to the lease that is the subject of this Agreement, and all subject to that stated herein, except for the blackened parts, and subject to the provisions of sections 2.2 and 2.3 of this agreement (“the Exclusions”).
3.2 The Tenant specifically declares and undertakes towards the Landlord that it will comply with all the Landlord’s obligations in the Head Tenancy Agreement and the Management Agreement and that by signing this Agreement it takes upon itself all of the Landlord’s obligations under the Head Tenancy Agreement and the Management Agreement “BACK TO BACK,” to the extent that they apply to the Tenancy and/or have not been specifically changed in the context of this Agreement, other than with regard to the question of monetary payments in the Head Tenancy Agreement only, as will be set forth hereunder in this Agreement all subject to the exclusion of the Tenant obligation under the Head Tenancy agreement as detailed in sections 2.2 and 2.3 of this agreement. The Tenant hereby undertakes towards the Landlord, to refrain from any act or omission that contravenes the provisions of the Head Tenancy Agreement and/or that causes the Landlord to be in breach of the Head Tenancy Agreement.
3.3 The Tenant declares that it has checked the Tenancy, the plan, the urban building plan and the physical and planning status with the planning authority and with any other entity prior to signing this Agreement and has found it suitable for its needs and requirements and it has not, nor will it have, any demands and/or claims and/or actions against the Landlord and/or any third party, in any matter relating to the Tenancy and his making use thereof and declare all as stated in section 4.1 and 4.2 of the Head Tenancy Agreement.
The Tenant declares that the Tenancy is being leased thereto in its condition, after the completion of the Landlord’s renovation of the Tenancy in accordance with the
specifications listed in Annex “B1” and Annex “D” to this Agreement, accomplishment of which shall be evidenced by a delivery protocol to be approved by the Tenant from time to time in accordance with the renovation completion schedule, so it will qualify as a fully furnished and designed office space, in a standard comparable at a minimum to the property presented to Tenant at 10th Ha’sharon street Tel-Aviv (the “Renovations”). Subject to Landlord’s fulfillment of the aforesaid, the Tenant hereby waives any claim of defect, flaw and/or unsuitability (except for hidden defects), including any claim in connection with the design of the Tenancy and/or the execution of additional adaptations to the Tenancy for its needs and/or any other claim. In the event of a dispute with respect to the delivery protocol, the Parties shall act in good faith to resolve such dispute, including without limitation, approaching a professional and impartial third party who shall compare the Tenancy condition after the Renovations with the original specifications according to Annex “B1” and Annex “D”, and determine whether the obligations have been accomplished by the Landlord (the “Renovation Completion Approval Mechanism”).
3.4 The Tenant declares that it is aware that in the event that a new urban building plan is approved and/or an urban building plan that is in force upon the signing of this Agreement is amended, following which construction rights are added for the Land, the additions, whether or not added in the Building, are not part of the Tenancy or the Tenant’s rights in the Tenancy, and they and/or the use thereof and/or their lease will not derogate from the Tenant’s obligation to fulfill all of its obligations in accordance with this Agreement. In this context, the Tenant undertakes not to intervene in, object to, or interfere with the planning of the Land and/or Building in any manner. The Tenant also undertakes to refrain from making any claim vis-a-vis the Landlord and/or a party on its behalf and/or any third party in connection with the same, except for a breach of the Head Tenancy Agreement, for a reason dependent on the Landlord only and/or its behalf.
3.5 The Tenant declares that it is knowledgeable about the business that it intends to conduct in the Tenancy, and undertakes to obtain all of the licenses and/or permits and/or approvals required for the operation and/or management of its business in the Tenancy, from any municipal and/or local and/or governmental and/or other authority. The Tenant declares that the Landlord is not responsible for obtaining any such license and/or permit and/or approval, except for any necessary permits for the construction and renovations to be made prior to the Transfer of Possession Date (as defined below) which the Landlord shall provide the Tenant with, including all inspection requirements. The Tenant declares that it is aware that in the event that the Tenant is unable to receive a permit for the operation of its business as stated above, the same will not constitute grounds against the Landlord, and the Tenant will not have any claim and/or demand against the Landlord for the same. Without derogating from the generality of the aforesaid, the Tenant hereby declares and confirms that it is not aware of any impediment to obtaining any permit and/or license that is required for the operation of its business in the Tenancy. Without derogating from the aforesaid, the Landlord will cooperate with the Tenant and sign any document customarily required for the aforesaid, provided that the same does not impose a financial and/or other obligation on it and/or a party on its behalf which they had not undertaken in accordance with the provisions of the Head Tenancy Agreement and/or this Agreement.
3.6 The Tenant undertakes to comply with and fulfill all of the laws, bylaws, regulations, and the like, of any competent authority, that will apply to the Tenant’s use of the Tenancy and the business operated thereby in the Tenancy.
3.7 In any case in which any claim is filed against the Landlord and/or a party on its behalf in connection with the Tenant’s use of the Tenancy that is not compliant with the law and/or deviates from the provisions of the law and/or the license, the Tenant will compensate and indemnify the Landlord and/or a party on its behalf for any expenses and/or damage and/or loss incurred thereby as a result of the same, immediately upon its first request.
3.8 The Tenant declares and confirms that there is no legal and/or other impediment to its engagement in this Agreement under its terms, and that all of the resolutions in connection with its engagement in this Agreement have been duly passed by its competent organs.
3.9 The Tenant undertakes to ensure that its business in the Tenancy will be conducted only in the interior part of the Tenancy, and that during the entire term of the lease, it will not store and/or keep materials and/or equipment outside of the area of the Tenancy.
3.10 The Tenant undertakes to keep the equipment, furniture and property listed in Annex D, which are located in the Tenancy, in good and working condition subject to reasonable wear and tear, during the entire term of the lease and to return them to the Landlord in good and working condition subject to reasonable wear and tear at the end of the term of the lease, after repairing any damage caused to them, subject to reasonable wear and tear. The Landlord shall provide the Tenant with proper documentation, including, without limitation, warranties (if any exist) and maintenance contracts (if any exist), in connection with the equipment, furniture and property listed in Annex D.
3.11 The Tenant undertakes not to install any signs and/or stickers and/or other means of advertisement on the exterior and/or interior walls of the Tenancy without the license required under law, and subject to the prior written consent of the Landlord regarding the form, placement, and manner of installation of the sign and subject to the terms of the Head Tenancy Agreement regarding signs. The Landlord may refuse to provide consent at its sole reasonable discretion. For the avoidance of any doubt, the Tenant will bear the costs of licensing, installation, maintenance, and removal of any signage that is permitted to be installed in the Tenancy as stated. Upon the conclusion of the term of the lease, the Tenant will remove the signs installed thereby, if installed, in accordance with the provisions of this Agreement, at its expense.
3.12 Landlord will take efforts to facilitate Tenant’s obtaining of Owner’s approval to install signage on the building – e.g., on the top or side of the building or on a “monument” in front of the building. Notwithstanding the foregoing, it is agreed that Tenant will be listed in the building directories, subject to consent from the Owner and the management company.
3.13 The Tenant undertakes to comply with the instructions of the Landlord and/or management company as stated in the Head Tenancy Agreement and the Management Agreement attached hereto as Annex E.
3.14 A breach by the Tenant of one or more of the provisions of this section or its subsections will constitute a fundamental breach of this Agreement, except sections 3.7 and 3.11 that will be considered as a regular breach.
4. Purpose of the Tenancy
4.1 The Tenant is leasing the Tenancy for all office use only, all subject to the provisions of the plan applicable to the Land and/or the Tenancy and as stated at the Head Tenancy Agreement (hereinafter: the “Purpose of the Sublease”).
4.2 The Tenant hereby undertakes not to use or permit use of the Tenancy or any part thereof and/or item located therein, for any other purpose.
4.3 Without derogating from the generality of the aforesaid, the Tenant acknowledges that it is aware that the operation of the Tenancy in a manner that alters or deviates from the Purpose of the Sublease, other than constituting a fundamental breach of this Agreement, may result in a breach of the Main Tenancy Agreement between the Landlord and the Owners of the Building and/or a breach of other tenancy agreements of other tenants in the Building. Therefore, the Landlord may, without prejudice to its right to any other remedy or relief, in any case of use of the Tenancy in deviation from the Purpose of the Sublease, use any reasonable means that it sees fit against the same activity.
4.4 A breach by the Tenant of one or more of the provisions of this section or its subsections will constitute a fundamental breach of this Agreement.
5. Transfer of Possession
5.1 The Landlord will transfer to the Tenant the legal possession of the Tenancy on the 1st of May, 2018 (hereinabove and hereinafter: the “Transfer of Possession Date”), in its condition as is on that date according to Annexes B, B1 and D, subject to the receipt of confirmation of occupancy (“Tofes 4”) at Tenancy and subject to suitability for a reasonable use of the Tenant, according to the Purpose of the Sublease and the specifications of Annexes B, B1 and D, including without limitation, the completion of substantially all of the construction works, with fixed toilet rooms, minimum functional electricity including the air-conditioning, computer stations ready for use for at least 50 employees of the Tenant, and full internet infrastructure.
5.2 In the event that the Transfer of Possession Date is delayed after the 1st of May, 2018, the Landlord will pay to the Tenant an amount equal to NIS 6,233 for each day of delay after the 1st of May, 2018.
5.3 As of the signing date of this Agreement and until the Transfer of Possession Date, the tenant shall have reasonable visitation rights subject to a prior coordination with the Landlord. The Tenant undertakes not to interfere with the execution of the work.
5.4 The Landlord shall ensure that as of the 15th of June, 2018, the Tenancy is fully complete and ready in accordance with all the specifications set forth in Annexes B, B1 and D, subject to constraints that are not dependent on the Landlord and/or not under his control. It is hereby acknowledged that the Landlord assumes full responsibly over any acts and/or omissions of any of its suppliers, vendors or subcontractors (“Landlord Partners”) in
connection with this Section 5.4, and shall not claim that any failure of the Landlord Partners to comply with the same, is or was not dependent on the Landlord or in his control (“the Limitations”).
5.5 In the event that the completion of the Renovation works, as set forth in Section 3.4, is delayed after the 15th of June, 2018 (subject to the Limitations), the Landlord will pay to the Tenant an amount equal to NIS 2,500 for each day of delay after the 15th of June, 2018. In order to avoid all doubt, if the Transfer of Possession Date has not yet occurred, the Landlord shall pay to Tenant only the fee of NIS 6,233 for each day of delay until the Transfer of Possession Date, in accordance with Section 5.2 above (In other words, in the case that the Transfer of possession occurred, the Landlord will pay a reduced fine of 2,500 NIS).
5.6 Without derogating of all other remedies according to the law, in the event that aforesaid in Section 5.4 has not occurred by October 1st, 2018 and there will be a material gaps between (i) the Tenancy condition after the Renovations, and (ii) the original specifications according to Annex “B1” and Annex “D” (according to the determination of the third party to be nominated by the parties according to section 3.4 above), the Tenant shall have the right in its sole discretion to terminate this Agreement with a written notice, and claim for restitution for any payments the Tenant made pursuant to this Agreement with respect to periods in which the Tenant had not occupied the Tenancy, all subject to a determination pursuant to the Renovation Completion Approval Mechanism detailed in Section 3.4 above, in case of dispute. For the avoidance of any doubt, in case that according to the third party’s determination according to section 3.4 above, there will be no material gaps, without derogating of all other remedies available to the Tenant, the Tenant shall have no right to terminate the Agreement according to this section 5.6.
5.7 A breach of one or more of the provisions of this section or its subsections will constitute a fundamental breach of this Agreement.
6. Term of the Sublease
6.1 It is hereby agreed that the Tenant hereby leases the Tenancy from the Landlord, as of the Transfer of Possession Date and for a period of forty-eight (48) months thereafter until the 30th of April, 2022 (hereinafter: the “Term of the Lease”).
6.2 Notwithstanding the provisions of this section, it is hereby agreed by the parties that the Tenant will be given the option(s) to extend twice the Term of the Sublease in the Tenancy by an additional term of 24 months each time (subject to the remaining term of the lease under the Head Tenancy Agreement), which will commence on 1st of May, 2022, and on the 1st of May, 2024, as the case might be, and end on 30th of April, 2014 or 30th of April, 2026, respectively (hereinafter: the “Additional Sublease Term(s)”), all subject to the terms set forth below:
6.2.1 The Landlord will continue to lease the Tenancy as stated in the Head Tenancy Agreement.
6.2.2 The Tenant has fulfilled all of its obligations in this Agreement, in full and on time.
6.2.3 The Tenant will notify the Landlord in an unconditional and unqualified, irrevocable written notice that will be provided to and received by the Landlord 120 days or more before the end of the Term of the Sublease of the Tenant’s desire to extend the Term of the Sublease. If no notice is received up to 120 days before, the tenant will be deemed to have requested to terminate the contract during the original Term of the Sublease period.
6.2.4 The Tenant has provided the Landlord with certification of the extension of the insurance policy, by and as a condition for the commencement of the Additional Term, in accordance with the specifications given by the Landlord’s insurance counsel (but, in order to avoid all doubt, intended to be substantially equivalent to the insurance requirements of the Head Tenancy agreement or the Management company Agreement), as well as certification of the validity of the bank guarantee in the form attached as Annex F.
6.2.5 All of the provisions of this Agreement, except as expressly changed, will apply during the Additional Term, if applicable, mutatis mutandis.
6.3 The duration of the Term of the Sublease is one of the main principles of this Agreement. The Tenant may not shorten the Term of the Sublease and/or vacate the Tenancy before the end of the Term of the Sublease. The aforesaid will not derogate from the rights of the Landlord under this Agreement and/or under law to instruct the Tenant to vacate the Tenancy at the end of the Term of the Sublease and/or the date on which the Head Tenancy Agreement expires. If, notwithstanding the aforesaid, the Tenant vacates the Tenancy without the Landlord’s consent before the end of the Term of the Sublease, or terminates its use of the Tenancy, the Tenant will be required to bear all of the payments applicable thereto under this Agreement, all up to the end of the Term of the Sublease.
6.4 Notwithstanding the foregoing, upon provision of a minimum of 120 days’ written irrevocable notice, Tenant may unilaterally terminate this agreement sooner than the end of the Term of the Sublease but only after October 1st, 2021 and upon paying compensation to the Landlord equal to 561,000 NIS + VAT fee (“Termination Fee”). The Landlord and the Tenant shall make best commercial efforts to lease the Tenancy to a proper substitute tenant (with sufficient economic means, and other reasonable terms that will be determined at the exclusive discretion of the Landlord) as soon as possible. In a case that such substitute tenant was found, signed a proper contract, started paying and entered the Tenancy, before the end of the 120 notice days, the Termination Fee will be reduced to the difference between the rent under this agreement and the rent paid by the substitute tenant.
6.5 Notwithstanding the provisions of Section 6.1 above, it is hereby expressly agreed that in any case in which the term of the lease with regard to the Head Tenancy expires, as defined in the Head Tenancy Agreement, and/or in any case in which the Head Tenancy Agreement is terminated for a reason other than breach by the Landlord of its obligations toward the Owner (for a reason depends only on Landlords or its behalf), or in any case in which the Head Tenancy Agreement is terminated under circumstances under which it may be terminated, the Term of the Lease under this Agreement will be concluded, and this Agreement will be terminated with prior notice identical to the notice given to the Landlord by the Owners. In such a case, the Tenant will vacate the Tenancy and return
possession thereof to the Landlord, when free of any person and item belonging to the Tenant, when clean and fit for use, subject to normal wear and tear, in accordance with the provisions of this Agreement. In such a case, the Tenant will not have any claim and/or demand and/or complaint against the Landlord and/or a party on its behalf and/or anyone in their stead with regard to the termination of the lease and/or lease that is the subject of this Agreement, as the case may be except for claims arising out of a breach of the Head Tenancy agreement by the Landlord (except for a breach resulting from a breach by the Tenant of this Agreement).
6.6 All the above without derogating from the Parties rights under this Agreement and/or the law.
6.7 The Tenant expressly and irrevocably declares and agrees that in any case in which the Owner is entitled to demand and/or file suit under law and/or the provisions of the Head Tenancy Agreement to vacate the Landlord, the Landlord will be entitled to demand and/or file suit for the immediate evacuation of the Tenant from the area of the Tenancy. The Tenant undertakes to comply with any such demand in a manner that will not cause a breach of any kind of the Head Tenancy Agreement and/or any part thereof.
6.8 A breach of any of the provisions of this section and its subsections will constitute a fundamental breach of this Agreement.
7. Rent
The Tenant undertakes to pay the Landlord, during the entire Term of the Sublease and/or Additional Lease Term, if exercised, monthly rent for the Tenancy, as set forth below:
7.1 During the Term of the Sublease:
The Tenant undertakes to pay the Landlord, during the entire Term of the Sublease, monthly rent for the Tenancy, in the amount of NIS 187,000 (One Hundred and Eighty-Seven Thousand New Israeli Shekels) with the addition of lawful VAT.
7.2 During the Additional Lease Term:
7.2.1 In respect of each month of lease during the Additional Lease Term, the Tenant will pay the Landlord rent as paid during the last month of the Term of the Sublease that is ending, under the provisions of this Agreement, with the addition of 4%.
The rent during the Term of the Sublease and the rent during the Additional Lease Term will be hereinafter jointly: the “Rent.”
7.3 The Rent will be linked to the increase in the Consumer Price Index, as follows:
If it becomes clear that the effective index has increased compared to the base index known on the date of signing this Agreement, the Rent will increase accordingly, at the rate at which the effective index increased compared to the base index.
For the avoidance of doubt, it is hereby clarified and agreed by the parties that in the event that the effective index decreased compared to the base index, the Rent will not change.
7.4 The Rent will be paid on a quarterly basis on the first day of every quarter, by the provision of checks or Direct Debit or wire transfer made payable the Landlord.
7.5 The Rent will be paid as follows:
7.5.1 Upon signing this agreement (prior to Transfer of Possession Date), Tenant will pay three (3) months’ Rent to Landlord for the period of the first 3-month rent (“First payment”).
7.5.2 On the 1st of March, 2018, (also prior to Transfer of Possession Date) Tenant will pay another three (3) months’ Rent to Landlord for the period of the 4th month rent through the 6th month rent. (“Second payment”). The Second payment is subject to completion of the following work: the division of an internal space in plaster walls, the laying of electric channels and the preparation of an infrastructure for electrical outlets. In case of non- completion of the above, the Second payment will be postponed accordingly.
7.5.3 Such six (6) months of rent payments shall be applied against rent due during the initial six (6) months of the lease, such that no additional rent payment shall be due by Tenant until the beginning of the 7th month of the lease. Beginning on the 7th month and thereafter, and for each subsequent quarter of the Term of the lease, Tenant shall pay rent to Landlord according to Section 7.4.
7.6 In the event that the parties mutually decide to replace the checks with a standing order, an appropriate standing order will be provided.
7.7 In the event that a payment is made by check, the linkage differentials will be paid by the Tenant to the Landlord every six months during the Term of the Sublease and the Additional Lease Term, if exercised, no later than the 20th day of the month for the previous six-month period.
7.8 The Tenant will pay the Landlord Value Added Tax for the same, in addition to payment of the Rent, at the legal rate on the date of each actual payment.
7.9 In the event that a change occurs to the Value Added Tax rate and any difference is required to be paid as a result of the same, the Tenant will pay the Landlord this difference on the earlier of the following dates: within Ten days from receipt of the Landlord’s request for payment, or the date set forth by law for the same payment.
7.10 For the avoidance of doubt, it is clarified that only full and final payment of each check or transfer will be deemed to be payment.
7.11 A breach of any of the provisions of this section and its subsections will constitute a fundamental breach of this Agreement.
8. Additional payments
8.1 The Tenant undertakes that as of the Transfer of Possession Date, the Tenant will bear payment of the municipal and governmental taxes and charges applicable to a lessor of premises/tenant, including fees, municipal property tax (Arnona), signage taxes, municipal taxes, charges, and other payments imposed on a lessor/holder/tenant of an asset, and its use of the infrastructures, electricity, and water, during the Term of the Sublease and the Additional Lease Term, if exercised, directly and on the lawful date on which the same must be paid to the various authorities for the lease of the Tenancy. For the avoidance of any doubt, it is hereby clarified that the Tenant will bear any charge applicable to the Tenancy, even if the same does not apply to a holder/tenant of an asset, which arises from its business and/or the Purpose of the Lease of the Tenancy. Any taxes and charges (היטלים) that are by their nature imposed on an owner of asset will apply to the Landlord.
8.2 The Tenant undertakes to transfer the municipal property tax bill to its name before the commencement of the Term of the Sublease. In the event that the municipal property tax bill cannot be transferred to the name of the Tenant; the Tenant will pay the Landlord its proportionate share of the municipal property tax payments within seven (7) days before the payment due date by the Landlord.
8.3 The Tenant undertakes to present the Landlord of the Tenancy, from time to time, at the request of the Landlord of the Tenancy, with copies of all of the receipts and/or certifications attesting to the Tenant’s payment of the amounts that it is required to pay under this Agreement. The Landlord undertakes to provide the Tenant with receipts and copies of payments that were paid thereby for the Head Tenancy at the Tenant’s request, provided that the same payments also include the Tenant’s payments as stated in Section 8.2 above.
8.4 In the event that the Landlord makes any payment which, under this Agreement, is required to be paid by the Tenant, after informing the Tenant of its intention to do so in writing 14 days in advance, and the Tenant does not make the aforesaid payment on its own, the Tenant will be required to reimburse the Landlord for any amount paid thereby in addition to lawful Value Added Tax, immediately upon the first written request of the Landlord, as established invoice, together with index linkage differentials, lawful Value Added Tax, and arrears interest at the rate determined in Section 9 below, as of the date on which the Tenant was required to make the payment on its own, and until their actual payment by the Landlord.
8.5 Without derogating from the generality of the aforesaid, as soon as practicable after the Transfer of Possession Date, the Tenant will transfer the utility bills to its name, including electricity, gas, water, communications etc., at Tenant’s expense, and Tenant shall be liable towards any such utility suppliers to pay all bills and expenses when due. The Tenant will present to the Landlord, upon demand, receipts for payments of the above bills. It is Tenant’s sole liability to hold any necessary approvals or permissions to connect any utilities as mentioned above as well as to keep Landlord indemnified against any and all expenses, caused by non-obtaining of any of such approvals and/or permissions by Tenant. If any demand for payment is issued on behalf of the Landlord, the Tenant undertakes to make the aforesaid payments to the Landlord within seven days from the receipt of a written request.
8.6 In the event that the Tenant decides to install communications and/or gas and/or a telephone lines in the Tenancy, the Tenant will be required to receive the Landlord’s and Owner’s prior written consent, not to be unreasonably withheld. The Tenant will bear any cost and expense in connection with the same, including in respect of the installation, ongoing payments, etc.
8.7 The Tenant will bear all of the expenses, of any type or kind, involved in the use of the Tenancy, including, without derogating from the generality of the aforesaid, for management fees and/or housing committee fees (בית ועד מיסי ) that are applicable to the Tenancy in the Building in which the Tenancy is located (including additional payments and/or deposits and/or collateral required by virtue of the Management Agreement), interior cleaning of the Tenancy, ongoing maintenance of the Tenancy, which are applicable thereto under the provisions of the Head Tenancy Agreement and the Management Agreement (if any), and this Agreement. For the avoidance of doubt, the Tenant will bear all of the aforesaid as of the actual Transfer of Possession Date, regardless of the actual use made of the Tenancy. Management fees will be according to the customary fees paid to the management Company of the Hagag Tower (as of the signature date NIS 15/sqm/mo + VAT). Notwithstanding the forgoing, the parties agree that any fees associated with the Adjustment Works/Renovations (including without limitation, removal of renovation waste, and cleaning in connection with the renovation) will apply to the Landlord.
8.8 Any other new tax on property that will be imposed after the signing of this Agreement, and that will apply to the Tenancy, will be paid in the following manner: if it is applied to the owners pursuant to the provisions of the law based on which the same tax is applied, the tax will apply to and be paid by the Landlord. However, if under the provisions of the same law, the same is applied to holders, the tax will apply to and be paid by the Tenant.
8.9 The Tenant undertakes to transfer the electricity and water and municipal property tax (Arnona), accounts into its name prior to starting the Lease Period.
8.10 A breach of any of the provisions of this section and its subsections will constitute a fundamental breach of this Agreement.
9. Arrears interest
9.1 Any amount that is owed by the Tenant to the Landlord under this Agreement and that is not paid on time will also bear, in addition to the linkage differentials, arrears interest at the maximum rate permitted under law, and if no such limitation exists – at the overdraft interest rate of Bank Ha’poalim le-Israel Ltd. (hereinafter: “Arrears Interest”), as of the payment date set forth in this Agreement regarding the amount in arrears and until actual payment of the same amount.
9.2 Arrears in the payment of Rent as stated above for a period exceeding ten business days will be deemed to be a fundamental breach of this Agreement by the Tenant, without derogating from the Landlord’s right to Arrears Interest, as set forth above.
9.3 None of the above will be interpreted as granting the Tenant any right to delay any payment of Rent under this Agreement.
10. Changes in the Tenancy
10.1 The Tenant may not make any change or addition to the Tenancy without the Landlord’s prior written consent, which will only be provided at the sole and reasonable discretion of the Landlord, (e.g., construction and design considerations of the Landlord, subject to Planning feasibility, and owner consent if needed, etc.). It is hereby agreed that minor changes in the Tenancy shall not be considered prohibited changes under this section.
10.2 In the event that the Landlord gives consent to make the changes and/or additions in the Tenancy as stated, the Tenant will be responsible for obtaining, at its expense and responsibility, any permit and/or license required for the performance of the additions and/or changes as stated, including insurance, and will bear any tax and/or charge and/or permit or consent fees required for the execution of the additions and/or changes as stated. It is agreed by the parties that the Landlord shall be entitled (but not obligated) to perform these changes or additions to the Tenancy and the Tenant will pay the Landlord cost + 20%, if the Tenant is able to find a lower quote for such agreed changes and/or additions or the Landlord does not wish to conduct such changes and/or additions, the Tenant shall be allowed to perform such agreed changes and/or additions through another licensed contractor on his behalf, provided however, that such changes and/or additions shall be subject to a plan approved by the Landlord (such approval shall not be unreasonably withheld or delayed).
10.3 In the event that a change and/or addition was made to the Tenancy that did not exist on the Transfer of Possession Date, without obtaining a license, the Tenant will be solely responsible for any expense and/or damage and/or loss, of any type or kind, caused to the Landlord and/or any party on its behalf and/or the Tenancy and/or Land and/or any third party, following the aforesaid, including legal expenses and/or financial charges that the Landlord and/or a party on its behalf is charged or fined by a court. Any amount that is paid as stated by the Landlord and/or a party on its behalf will be reimbursed by the Tenant to the paying party within seven days from the date of its written request to do so.
11. Maintenance of the Tenancy
In addition to the Tenant’s obligations to comply with all of the provisions of the Head Tenancy Agreement (except as specifically excluded in this Agreement), including regarding maintenance of the Tenancy, the Tenant hereby undertakes and declares that:
11.1 It will use the Tenancy in a proper and reasonable manner, and will strive to protect the Tenancy and systems of the Tenancy (including the air-conditioning system installed in the Tenancy) and any equipment and property, and keep them in working order during the entire Term of the Lease and/or Additional Lease Term, and repair, on its own and at its expense, any defect, damage, or harm to the Tenancy and its systems caused thereby and/or by a party on the Tenants behalf, including its employees, guests, and visitors (welcome or not), except for such defects caused by normal wear and tear or inherent defects (i.e., including, for example, furniture wear and tear and electrical products under guarantee) which shall be fixed by the Landlord all subject to the parties consent at Annex “G.” The Tenant further undertakes to return possession of the Tenancy to the Landlord at the end of the Term of the Sublease and/or Additional Lease Term, or after termination of the Agreement or its termination by the Landlord, when the Tenancy is
free from any person and item belonging to the Tenant, and in good and working condition, as provided to the Tenant, when clean and fit for use, and to perform at its expense any repair that is required for the fulfillment of its obligations as stated, except for any defects, caused by normal wear and tear or inherent defects which shall be fixed by the Landlord, by no later than the date on which the Landlord is entitled to the return the Tenancy as stated.
The Tenant will maintain the Tenancy on its own and at its expense – including any insurance and maintenance of all of the systems installed in the Tenancy, including any operation, removal of trash, cleaning, security, all of the electricity consumption costs, maintenance of the air conditioning system, water, and the like. The Tenant undertakes to return the Tenancy at the end of the Term of the Sublease when all of its systems are in working order and operational, in the condition as received.
11.2 The Tenant undertakes not to perform any changes and/or additions in the Tenancy that relate to structural / construction changes and/or that pertain, directly or indirectly, to the various systems and/or infrastructures installed in the Tenancy, without the Landlord’s prior written consent, subject to receipt of a lawful license and permit, if such a license/permit is required.
11.3 Without derogating from the Tenant’s rights under this section, the Tenant will be required, immediately upon receipt of the Landlord’s request for the same, to clear, at its expense, any additions or changes made by the Tenant without the Landlord’s consent as stated above, and the Landlord will have the right to do so at the Tenant’s expense, if the Tenant fails to do so.
11.4 To ensure, that no illegal use is made of, and/or no illegal action occurs in, the Tenancy and/or adjacent thereto and/or which the Landlord believes to be incautious, improper, unfair, disruptive, disturbing, harmful to the value of the Tenancy and/or the facilities and other services in the environs of the Tenancy, and/or that directly or indirectly impact the risks that are the subject of the various insurance policies and/or rates of premiums of the aforesaid insurance policies, in connection with the Tenancy and all of its fixtures, services and/or contents.
12. Liability and insurance
12.1 The Tenant will be liable for any loss or damage of any kind that is caused to the Tenant and/or Landlord and/or Owners and/or any third party following the use of the Tenancy by the Tenant and/or a party on its behalf and/or due to an action of the Tenant in the Tenancy and/or following any action and/or omission of the Tenant and/or its employees and/or any parties acting on its behalf and/or employed thereby and/or by a party on its behalf (but excluding the act of the management company of the building), without derogating from any provision under law regarding liability.
12.2 The Tenant will be liable for the working and proper operation of the fixtures of the Tenancy with regard to their direct use, excluding any fixtures of the Tenancy that were constructed or installed by or on behalf of the Landlord subject to the parties consent at Annex “G.” The Tenant undertakes to indemnify the Landlord and/or a party on its behalf, immediately upon its first request, for any charge and/or expense (including
defense costs and/or attorney fees) that is imposed on any of them following a demand and/or claim arising from damage and/or an action and/or omission for which the Tenant is liable as stated. The Landlord will notify the Tenant of the existence of a demand and/or claim as stated immediately upon receipt thereof, and will allow the Tenant to defend itself against the same.
12.3 The Tenant undertakes to ensure that it will hold insurance policies that are valid for the entire Term of the Sublease and/or Additional Lease Term, if any, as follows: employer liability insurance in connection with its activity in the Tenancy, and third-party liability insurance in connection with its activity in the Tenancy with appropriate and suitable limitations. For the avoidance of doubt, the issuance of the insurance policies as stated in this section will not reduce and/or derogate from the Tenant’s liability under this Agreement. Tenant will transfer certifications regarding the valid insurance policies to the Landlord on the Transfer of Possession Date. The wording of the certifications of insurance policies will be subject to Landlord’s reasonable approval.
12.4 It is agreed by the parties that the provisions of Articles 14 and 15 of the Head Tenancy Agreement shall apply to this agreement as an integral part. In order to avoid all doubt, liability associated with the Renovations and Adjustment Works performed by the Landlord in the Tenancy shall be borne by the Landlord, and Landlord shall secure appropriate insurance. The Tenant undertakes to obtain all the insurance stated in Articles 14 and 15 of the Head Tenancy Agreement and to provide appropriate insurance certificates. The Tenant declares to take full responsibility for all of the foregoing toward the Owner, the management company and all third parties at its own risk and expense (and not that of the Landlord), except in connection with the Renovations and Adjustment Works as described above).
13. Vacating the Tenancy
13.1 At the end of the Term of the Lease or the Additional Lease Term, if any, or the conclusion or termination in any case set that is forth in this Agreement, the Tenant will vacate the Tenancy and return it to the Landlord when empty of any person and item that does not belong to the Landlord, in a condition that is fit for use, as received upon the commencement of the Term of the Lease, excluding reasonable wear and tear following ordinary and regular use. The Tenant undertakes to repair any damage caused to the Tenancy and equipment and property therein before the vacating date as stated.
13.2 In the event that the Tenant does not vacate the Tenancy on the date set forth in this Agreement, the Tenant will pay the Landlord liquidated damages, in addition to and without derogating from any other remedy to which the Landlord is entitled under the provisions of any law and/or contract (hereinafter: the “Damages”) for each day of delay, in the amount of NIS 6,233 in addition to Value Added Tax for each day of delay as stated.
13.3 The termination of this Agreement in accordance with the provisions of this Agreement and/or its termination for any reason by any party will not derogate from the obligations of the Tenant under the terms of this section above.
14. Breaches and remedies
14.1 The occurrence of any of the following will be deemed to be a fundamental breach of the Agreement:
14.1.1 If the Tenant does not pay the Lease Fees within ten days from the date set forth in this Agreement for the payment thereof, after having received a warning of ten days from the Landlord for payment of the same, and has failed to make the payment.
14.1.2 If the Tenant does not make another payment applicable thereto under this Agreement, even after warning of 14 days from the Landlord for payment thereof, and has failed to make the payment.
14.1.3 A breach by any party hereto of its obligations under Sections 2, 3, 4, 5, 6, 7, 8, 9, 11, 12, 13, 14, 15 and 16 or any other fundamental breach mention in this agreement.
14.1.4 If a party breaches or does not fulfill any of its other obligations under this Agreement and does not remedy the breach within 14 days from the date on which it was given written warning to do so.
14.2 Upon the occurrence of one of the cases listed in this section above, the Landlord may, but is not required to, notify the Tenant of the termination of its lease right, in which case the Tenant will be required to vacate the Tenancy upon receipt of the aforesaid notice.
14.3 In the event of a fundamental breach of the Head Tenancy Agreement, by the Landlord only (for a reason dependent only on the Landlord or his behalf and in no way connected with a breach of the Tenant under this agreement), and which was not amended as required, it is hereby agreed that in such a case, the Tenant will be entitled to fulfill the Landlord’s obligations directly to the Owner (according to section 21.7 in the Head Tenancy agreement), and under such circumstances, the Head Tenancy Agreement and this Agreement will remain in force without the parties having any claims and/or demands against each other; provided that the Tenant shall pay the Rent only according to this Agreement, such that the Owner shall receive the rent according to the Head Tenancy Agreement and the balance will be paid to the Landlord.
14.4 It is hereby agreed that any lien, encumbrance or any other legal restriction on usability, that is imposed on the Tenant or the Landlord with respect to the Tenancy, the fixtures, equipment or furniture, that is not removed within 45 days by the encumbered party, shall constitute a fundamental breach of this agreement, and shall entitle the non-breaching party all rights and remedies available to it under this Agreement, including without limitation, termination of this Agreement. The aforesaid shall apply to any bankruptcy, insolvency, liquidation, dissolution or winding up mutatis mutandis.
15. Security
15.1 As security for the fulfillment of all of its obligations under this Sublease Agreement, the Tenant will provide the Landlord, within 14 days as of the Signature Date, with all of the securities set forth below:
Bank Guarantees
15.1.1 An autonomous bank guarantee in the form specified in Annex F (hereinafter: the “Bank Guarantee”).
15.1.2 Without derogating from the contents of Annex F as stated, the Bank Guarantee will be subject to all of the following provisions:
The Bank Guarantee will be autonomous, unconditional, transferable, drawn up in favor of the Landlord as a beneficiary, exercisable in installments, and shall remain valid or constantly extended by the Tenant own expense and responsibility for the entire term of the Agreement, up to 60 days following the conclusion of the Term of the Sublease. The Bank Guarantee will be in the amount of 1,122,000 in addition to Value Added Tax. During the last year of the Sublease, the Bank Guarantee will be reduce and will be in the amount of 748,000 in addition to Value Added Tax. The guarantee amount as stated will be linked to the index as of the base index and until the index known on the actual payment date. It is clarified that the Lessee will bear any fee and/or expense and/or payment for the Bank Guarantee at its sole expense.
15.1.3 In the event that the validity of the Agreement is extended for the Additional Lease Term, the Tenant will provide the Landlord with the Bank Guarantee for the Additional Lease Term in the same form and under the same terms as the Bank Guarantee that was provided in connection with the Term of the Sublease. The rate of the guarantee during the Additional Lease Term will be updated such that it will amount to the higher of four (4) months of rent in addition to Value Added Tax, in the rate in force on the Additional Lease Term.
15.1.4 In the event that the Tenant materially breaches any of the provisions of the Agreement, including, but not only, in a case in which the Landlord is owed any payment from the Tenant that was not paid on time (including and without derogating from the generality of the aforesaid, amounts for undertakings to indemnify the Landlord and/or Owners), the Landlord may, subject to providing prior written notice ten (10) days in advance, redeem the Bank Guarantee for payment, in whole or in part (as it chooses), without derogating from any remedy and/or relief and/or right granted to the Landlord under the Agreement and/or under any law.
15.1.5 It is clarified that in a case in which the Landlord uses the Bank Guarantee as stated above, the Tenant will be required to provide the Landlord with a new Bank Guarantee under the same terms and in the same amount (linked to the index), within 15 days from the date on which the Landlord redeemed the Bank Guarantee for payment as stated.
15.2 The Tenant will be entitled, at its discretion, to replace the Bank Guarantees and provide the Landlord, within 14 days as of the Signature Date with cash deposits and the following provisions will apply thereto:
15.2.1 The Tenant will deposit with the Landlord a cash deposit equal in value to 6 (six) months lease – plus VAT. Said payment will be deposited with and held on
deposit by the Landlord, in order to guarantee the Tenant’s undertakings and will replace the Bank Guarantees.
15.2.2 For the avoidance of doubt, it is clarified that nothing above stated will derogate from the Tenant’s obligation to settle its obligations in full, in accordance with all the provisions of this Agreement.
15.2.3 If the Tenant breaches any of this Agreement’s provisions, including but not limited to an event in which any late payment whatsoever reaches the Landlord from the Tenant (including and without derogating from the generality of the aforesaid, amounts in respect of undertakings to indemnify the Landlord and/or the Owner), the Landlord will be entitled, subject to giving 7 days prior written notice, to be repaid out of the deposit which it holds, in whole or in part (and at its discretion) and to do so without detracting from any relief and/or remedy and/or right granted to the Landlord under the Agreement and/or under any law.
15.2.4 It is clarified that in the event where the Landlord exercises the cash deposit as stated above, the Tenant will be required to lodge a new deposit on the same terms and in the same amount, and to do so within 15 days from the date on which the Landlord was repaid from that deposit.
15.2.5 The provisions of section 15.1.3 above will apply respectively, mutatis mutandis, to the cash deposit.
15.2.6 For the avoidance of doubt, it is clarified that at the end of the Lease Period, only the principal of the deposit (in its nominal amount) will be refunded and the Landlord does not undertake to invest the amount of the deposit in any investment whatsoever. And so, the deposit to be returned will not be subject to interest differentials and/or linkage and/or returns of any kind.
15.2.7 It is agreed that the Tenant will be entitled, at its discretion and at any time Subject to prior notice and written consent of the Landlord, to replace the cash deposits with Bank Guarantees in the form specified in Annex F and section 5.1.1- 5.1.5 will apply.
16. Non-transfer of rights
16.1 The Tenant may not lease and/or transfer and/or assign and/or pledge or encumber in any manner, to any third party, any of its rights under this Agreement without the prior written consent of the Landlord.
16.2 Notwithstanding the above, it is hereby agreed that the Tenant will be entitled to sublease only part of the Tenancy (up to 70% of the Tenancy), subject to the following cumulative conditions:
16.2.1 The Tenant gave a written notice to the Landlord at a reasonable time in advance.
16.2.2 The Landlord gave his consent to the sublease identity (the sublease identity does not have a criminal record etc.), such consent shall not to be unreasonably withheld or delayed.
16.2.3 The sublessee will sign a commitment in which he undertakes to comply with all the terms of this Agreement, with the required changes.
16.2.4 There will be no change in the terms of this agreement and without derogating from the aforesaid, there will be no change in the purpose of the Sublease as defined in this agreement.
16.2.5 It is clarified that there will be no legal relationship between the sublessee and the Landlord (also the sublessee will not be able to make any claim to Landlord) and any transfer made contrary to all the above will not be valid.
16.3 After completion of the Renovations and Adjustment Works, the Landlord is entitled to transfer its rights and/or obligations under this agreement to any other party and/or entity whatsoever and/or to encumber them without the consent of the Tenant, provided that the Tenant’s rights under this agreement shall not be prejudiced in any way. Regardless of the completion of the Renovations and Adjustment Works, the Tenant will sign a financing Bank appendix in a form attached to this agreement as Annex “H”, or any other form required by the bank. It is hereby clarified that the bank account to which the Tenant undertakes to transfer the Rent according to Annex “H”, will be a bank account which belongs to the Landlord.
16.4 Notwithstanding anything to the contrary in this Section 16, Tenant may assign this Agreement or sublet the Tenancy, or any part thereof, to any entity controlling Tenant, controlled by Tenant or under common control with Tenant, or the surviving entity following a merger, consolidation or other reorganization of Tenant, or to an entity acquiring all or substantially all of the stock or assets of Tenant, without the prior written consent of Landlord; provided, however, that the Landlord’s rights under this Agreement shall not be prejudiced in any way.
17. General, addresses, and notices
17.1 The Tenant may not make use of any offset right vis-a-vis the Landlord.
17.2 No change and/or waiver and/or deviation from the provisions of this Agreement will have any force unless made in writing and signed by the parties to the Agreement.
17.3 The consent on behalf of any of the parties to a deviation from the terms of this Agreement in a given case will not constitute a precedent and will not serve as an inference for any other case. In the event that a party does not use a right granted thereto under this Agreement in a certain case, the same will not be considered a waiver of the same right in the same case and/or another similar case or one that is not similar, and no waiver of any right of the same party will be inferred from the same. A waiver made in one matter will not be used as in inference for another matter.
17.4 This Agreement will not create a partnership and/or agency relationship between the parties and will not grant rights to any third party that is not mentioned in the Agreement, and this Agreement will not derogate from or harm any right or obligation of any third party.
17.5 For the avoidance of doubt, it is clarified that the rights granted to the Tenant under this Agreement, if granted thereto, are granted to the Tenant solely with respect to the Tenancy, and the Tenant does not and will not have any right in connection with existing or additional construction rights and/or existing or additional construction areas that are approved and built by the Landlord or any third party and/or in connection with the use of any of them in the Building, whether they currently exist or will exist in the future, which is not within the Tenancy, including roofs, passageways, and the like. The Tenant provides its consent in advance to any action and/or use as stated and may not oppose any of them in any manner. It is further clarified for the avoidance of doubt that the Tenant may, at any time, register a cautionary note on behalf of its rights under this Agreement.
17.6 The addresses of the parties for the purpose of this Agreement are as set forth in the preamble.
17.7 Any notice sent by one party to another in accordance with the Agreement will be sent by registered mail or delivered by hand and will be deemed to have been delivered within three days of the date of being sent or the date of delivery thereof by hand.
In witness whereof, the parties have affixed their signatures:
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/s/ Tom Kadosh
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/s/ David Feldman
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SwitchUp Ltd.
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Ziprecruiter Israel Ltd.
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By: Tom Kadosh
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By: David Feldman
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Title:
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Title: Director
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Attorney Certification
I, the undersigned, Adv. Guy Libzon, of 4 Ha’nechoshet Street Ramat Ha’hayal, Tel Aviv, hereby certify that Mr. David Feldman (American Passport No. 488040256), is authorized to sign this Agreement on behalf of the Tenant such that his signature binds the Tenant for the purposes of this Agreement.
In witness whereof, I affix my signature:
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/s/ Guy Libzon, Adv.
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Adv. Guy Libzon
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Annex A – Head Tenancy Agreement – Attached
Annex B - Plan – Attached
Annex C - Insurance Appendix of Head Tenancy Agreement – Deleted.
Annex D - List of Equipment - Attached
Annex E – Management Agreement and/or Articles of the Head Tenancy Agreement (if any)
Annex F – Wording of the Bank Guarantee
Bank
Branch
To
__________Ltd.
To Whom It May Concern,
Re: Bank Guarantee No. _________
1. At the request of ____________ (hereinafter: the “Applicant”), we hereby guarantee to you, with an absolute and unconditional guarantee under any terms, payment of any amount up to an amount of NIS _________(_____________ New Israeli Shekels) (hereinafter: the “Guarantee Amount”) that you will demand from the Applicant.
The Guarantee Amount will be linked to the Consumer Price Index, under the following linkage terms:
a. Price Index - will mean the Consumer Price Index published each month by the Central Bureau of Statistics.
b. If it becomes clear upon payment of the Guarantee Amount and/or part thereof that the Price Index known on the aforesaid payment date (hereinafter: the “New Index”) is higher than the Price Index for the month of ___________that is published on ________________ (hereinafter: the “Original Index”), the Guarantee amount will increase by the ratio between the New Index and the Original Index.
The Guarantee Amount, in addition to the linkage differentials to the Price Index as stated, will be referred to as the Increased Guarantee Amount.
2. Upon your first written request, we will pay you, no later than seven days from the date on which we receive your demand at our address as set forth below, any amount set forth in the demand, provided that it does not exceed the Increased Guarantee Amount, without requiring you to prove your demand and without you being required to demand the payment from the Applicant first.
3. You may exercise this Guarantee at once or in parts, at your sole discretion, provided that we will not pay for the Guarantee, in any case, a total amount that exceeds the Guarantee Amount in addition to linkage differentials.
4. This Guarantee will remain in force until the day of (inclusive) only, and will be null and void after the aforesaid date.
5. This Guarantee may not be transferred and/or assigned.
Annex G – Directives for Using the Tenancy and its Systems – Attached
Annex H – intentionally omitted
OFFICE LEASE
By and Between
DARED 89 LLC, an Arizona limited liability company,
as Landlord
and
ZipRecruiter, Inc., a Delaware corporation
as Tenant
ARTICLE ONE: BASIC TERMS/DEFINITIONS
This Article One contains the Basic Terms and Definitions of this Lease between the Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the Lease referred to in this Article One explain and define the Basic Terms and are to be read in conjunction with the Basic Terms.
Section 1.1 Effective Date. March 2, 2020.
Section 1.2 Landlord (include legal entity). DARED 89 LLC, an Arizona limited liability company.
Address of Landlord: 11452 El Camino Real, Suite 200
San Diego, California 92130
Phone: (858) 793-0202
Fax: (858) 793-5363
Section 1.3 Tenant (include legal entity). ZipRecruiter, Inc., a Delaware corporation
Address of Tenant prior to the Commencement Date:
604 Arizona Avenue
Santa Monica, California 90401
Attention: Business & Legal Affairs
And
At Premises
Attention: Facilities Manager
With a copy to:
legal@ziprecruiter.com
Section 1.4 Premises. The Premises is approximately 90,599 rentable square feet (“RSF”) located on the entire first and second floors (the “Premises”) of the office building located at 4039 East Raymond Street, Phoenix AZ 85040 as shown on the site plan attached hereto as Exhibit A-1 (the “Building”). The Initial Premises consists of the approximate 19,037 RSF of space located of the first floor and 46,151 RSF located on the second floor of the Premises for a total of 65,188 RSF (the “Initial Premises”) depicted on Exhibit A-2. The Partial Premises consists of the approximate 25,411 RSF of space located on the first floor of the Premises depicted on Exhibit A-2 attached hereto (the “Partial Premises”). For purposes of this Lease, “rentable square feet” of the Premises and Building have been agreed and stipulated by Landlord and Tenant and shall not be subject to remeasurement or modification. The foregoing determination of the rentable and usable square footages of such premises shall be conclusive and binding upon the parties. The real property described on Exhibit A-3 hereto and all
improvements thereon, including without limitation the Building and Common Areas (detailed below), are hereinafter collectively referred to as the “Project.” In addition to the Premises, Tenant shall have the exclusive use of the Common Areas (defined below) subject to the terms of this Lease, applicable covenants, conditions and restrictions and the rules and regulations; provided, however, if Tenant exercises the Partial Premises Termination Right or Lease Termination Right as to only a portion of the Premises or an Option to Extend as to only a portion of the Premises, following the effective date of such termination, Tenant shall have the non-exclusive use of the Common Areas.
Section 1.5 Lease Term. One hundred and twenty-eight (128) months beginning one hundred and eighty days after the Effective Date, subject to extension of such one hundred eighty (180) day period on a day for day basis for Landlord Delays and Force Majeure Delays (the “Commencement Date”), and ending on the last day of the month following a full one hundred and twenty-eight (128) months thereafter (“Expiration Date”). Landlord and Tenant shall execute an amendment to this Lease in the form attached hereto as Exhibit D confirming the Commencement Date and the Expiration Date of the original Lease Term. Failure to execute such Exhibit shall not affect the validity or enforceability of this Lease.)
Section 1.6 Permitted Uses. (See Article Five) Tenant may use and occupy the Premises for executive and general office purposes and any other legally permitted uses consistent with a first-class office building and uses incidental thereto, including employee assembly area for company meetings, cafeteria, lunch rooms, data center, training rooms, executive briefing rooms, library, conference rooms, team meeting areas and kitchen areas, all in accordance with the terms of this Lease and consistent with the character of the Project as a first-class office building project as long as Tenant’s primary use of the Premises is for general office purposes, and no other use of the Premises shall be permitted without the express written consent of Landlord. Tenant’s use of the Premises shall be subject to any restrictions of record of which Landlord has provided Tenant with prior written notice.
Section 1.7 Tenant’s Guarantor. (If none, so state) None.
Section 1.8 Brokers. (See Article Fourteen) (If none, so state)
Landlord’s Broker: CB Richard Ellis
Brad Anderson
Mike Strittmatter
2415 E. Camelback Road
Phoenix, Arizona 85016
Phone: (602) 735-5670
Fax: (602) 735-5105
Tenant’s Broker: Cresa
David Toomey
Brian Davies
Eric Walker
2398 E. Camelback Road, Suite 900
Phoenix, AZ 85016
Phone: (602) 648-7373
Section 1.9 Initial Security Deposit. (See Section 3.2) None. See Letter of Credit requirements in Section 3.2.
Section 1.10 Vehicle Parking Spaces Allocated to Tenant. (See Section 5.14) Six hundred (600) uncovered and unreserved total spaces. Tenant may elect to have Landlord provide covered and reserved parking spaces under the terms set forth below which covered and reserved parking spaces shall be included within the total parking spaces provided to Tenant. Tenant may elect to have Landlord provide up to, at Tenant’s sole election as to the amount, twenty-five (25) covered and reserved parking spaces for an additional charge of Forty-Five Dollars ($45.00) per covered parking space per month (“Initial Covered Parking Rent”) for the Lease Term and any Extended Term. No covered spaces will be located at the front of the Building. Any additional covered and reserved parking spaces above the twenty-five (25) spaces shall be provided at an additional monthly charge equal to the cost to construct the additional covered parking canopies amortized over the then remaining Lease Term using a six percent (6%) annual interest rate (“Additional Covered Parking Rent”). The Initial Covered Parking Rent and Additional Covered Parking Rent are hereinafter collected referred to as the “Covered Parking Rent”. Tenant shall notify Landlord of its one-time election to have covered parking by written notice to Landlord to be given within twelve (12) months after the Effective Date (the “Covered Parking Notice”). Landlord shall construct the covered parking canopies within a reasonable time after receipt of the Covered Parking Notice, but in no event shall it take Landlord longer than one hundred eighty (180) days to construct, in such locations as reasonably agreed upon between Landlord and Tenant subject to all required governmental approvals (no covered parking for Tenant will be located at the front North side of Building). Subject to Tenant’s compliance with all applicable statutes, ordinances, rules, regulations, easements, covenants, restrictions, orders and requirements regulating Project, Tenant shall be permitted to restripe the parking lot to increase the number of uncovered and unreserved parking spaces. In the event Tenant exercises the Partial Premises Termination Right (as defined below), the Lease Termination Right (as defined below) as to only a portion of the Premises or an Option to Extend (as defined below) as to only a portion of the Premises, the vehicle parking spaces allocated to Tenant shall be amended to seven (7) spaces per 1,000 square feet of rentable space of the Initial Premises which shall include all of Tenant’s previously elected covered and reserved parking spaces and Tenant shall be entitled to designate up to fifty (50) reserved parking spaces out of Tenant’s parking allowance in reasonable proximity to the front and rear entrances to the Premises (not more than fifteen (15) such reserved parking spaces shall be located in the front of the Building if Tenant leases less than the entire Building) as reasonably determined by Landlord and Tenant knowing that the Building is then a multi-tenant building. Further, in any of such events, Tenant shall no longer have the right to restripe the parking lot and, at Landlord’s election, Tenant shall cause the parking lot to be restriped to its original condition. Landlord agrees to use commercially reasonable efforts, at Tenant’s sole cost and expense, to acquire additional parking for Tenant at Tenant’s request. Tenant shall be entitled to add as many EV charging stations as desired by Tenant, at Tenant’s sole cost and expense subject to reimbursement from the Tenant Allowance, within the parking spaces allotted to Tenant herein.
Section 1.11 Rent and Other Charges Payable by Tenant.
(a) BASE RENT: The “Base Rent” for the Lease Term commencing on the Commencement Date is as follows:
INITIAL PREMISES BASE RENT
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Term
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Base Rent Per Rentable Square Foot Per Year
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Base Rent Per Year
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Base Rent Per Month
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Months 1-8
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$ 0.00
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$0.00
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$0.00
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Months 09-20*
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$16.50
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$1,075,602.00
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$89,633.50
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Months 21-32
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$17.00
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$1,108,196.00
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$92,349.67
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Months 33-44
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$17.50
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$1,140,790.00
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$95,065.83
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Months 45-56
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$18.00
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$1,173,384.00
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$97,782.00
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Months 57-68
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$18.50
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$1,205,978.00
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$100,498.17
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Months 69-80
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$19.00
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$1,238,572.00
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$103,214.33
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Months 81-92
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$19.50
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$1,271,166.00
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$105,930.50
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Months 93-104
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$20.00
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$1,303,760.00
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$108,646.67
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Months 105-116
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$20.50
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$1,336,354.00
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$111,362.83
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Months 117-128
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$21.00
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$1,368,948.00
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$114,079.00
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PARTIAL PREMISES BASE RENT (to be paid in addition to the Initial Premises Base Rent unless Tenant exercises its Partial Premises Termination Right as set forth in Section 2.6 below)
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Term
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Base Rent Per Rentable Square Foot Per Year
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Base Rent Per Year
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Base Rent Per Month
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Months 1-12
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$0.00
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$0.00
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$0.00
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Months 13-24*
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$18.50
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$470,104.00
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$39,175.33
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Months 25-36
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$19.00
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$482,809.00
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$40,234.08
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Months 37-48
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$19.50
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$495,515.00
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$41,292.92
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Months 49-60
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$20.00
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$508,220.00
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$42,351.67
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Months 61-72
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$20.50
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$520,926.00
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$43,410.50
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Months 73-84
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$21.00
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$533,631.00
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$44,469.25
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Months 85-96
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$21.50
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$546,337.00
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$45,528.08
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Months 97-108
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$22.00
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$559,042.00
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$46,586.83
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Months 109-120
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$22.50
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$571,748.00
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$47,645.67
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Months 121-128
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$23.00
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$389,635.00**
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$48,704.38
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*including any fractional month at the beginning of the Lease Term should the Commencement Date fall on a day other than the first day of a calendar month. In addition, Tenant shall pay all applicable rental and privilege taxes on Base Rent and
Additional Rent during the entire Lease Term and shall be responsible for the payment of Additional Rent on the entire Premises during any time period of free or abated Base Rent.
** This amount is not the Base Rent Per Year – it is the Base Rent for the final eight months of the Term.
(b) Additional Rent (“Additional Rent”): (i) Tenant’s Pro-Rata Share of Operating Expenses (See Section 4.2); (ii) Utilities (See Section 4.3); (iii) Insurance Premiums (See Section 4.4); (iv) Maintenance, Repairs and Alterations (See Article Six); and (v) Covered Parking Rent (See Section 1.10); including all applicable rental and privilege taxes on said Additional Rent. All charges payable by Tenant to Landlord other than Base Rent are called “Additional Rent.” Unless this Lease provides otherwise, Tenant shall pay all Additional Rent then due with the applicable monthly installment of Base Rent; provided, however, in the event of any changes in the amounts of Additional Rent, such amounts shall be due within the next monthly installment of Base Rent which is due at least thirty (30) days after Tenant’s receipt of an invoice therefore. The terms “rent” or “Rent” shall mean Base Rent and Additional Rent.
Section 1.12 Tenant’s Pro-Rata Share of Operating Expenses. (See Section 4.1(a)) 100%
Section 1.13 Intentionally Omitted.
Section 1.14 Landlord’s Share of Profit on Assignment or Sublease. (See Section 9.05) Fifty Percent (50%) of the Profit (the “Landlord’s Share”).
Section 1.15 Rentable Square Feet/Footage. If Tenant exercises the Lease Termination Right as to only a portion of the Premises or an Option to Extend as to only a portion of the Premises, the remaining rentable square footage of the Premises shall be established using the Building Owners and Managers Association International, ANSI/BOMA Z65.1-2010. BOMA is incorporated herein by reference for such purposes.
Section 1.16 Common Areas. All areas within the Project which are available for the common use of tenants of the Project and which are not leased or held for the exclusive use of Tenant or other tenants, including, but not limited to, parking areas, driveways, sidewalks, loading areas, access roads, corridors, monument signage, landscaping, planted areas, lobbies, corridors, hallways, elevator foyers, restrooms, mail rooms, mechanical and electrical rooms, janitorial closets, and other similar facilities used by tenants or for the benefit of tenants on a non-exclusive basis. Except as otherwise provided in this Lease, the manner in which the Common Areas are maintained and operated shall be at the reasonable discretion of Landlord, provided that Landlord shall maintain and operate the same in a first class manner substantially consistent with the Comparable Buildings and the use thereof shall be subject to such reasonable, non-discriminatory rules, regulations and restrictions as Landlord may make from time to time, which rules and regulations shall not be unreasonably or discriminatorily modified or enforced in a manner which shall materially interfere with the conduct of Tenant’s permitted use from the Premises or Tenant’s use of or access to the Premises or the Project or the parking areas
servicing the same. So long as Landlord provides Tenant with prior written notice (provided that such notice shall not be required in the event of an emergency), Landlord, in Landlord’s reasonable discretion, reserves the right to close temporarily, make alterations or additions to, or change the location of elements of the Project and the Common Areas, so long as such changes do not change the nature of the Project to something other than a first class office building project or materially affect Tenant’s use of the Premises for the permitted use, or Tenant’s ingress to or egress from the Project, Building or the Premises or the parking areas servicing the same.
Section 1.17 Exhibits. The following exhibits are attached to and made a part of this Lease:
Exhibit A-1 – Premises and Building
Exhibit A-2 – Initial Premises and Partial Premises
Exhibit A-3 – Project Legal Description
Exhibit B – Work Letter Agreement
Exhibit C – Rules and Regulations
Exhibit D – Commencement Notice
Exhibit E – Irrevocable Letter of Credit
Exhibit F – SNDA
ARTICLE TWO: LEASE TERM
Section 2.1 Lease of Premises For Lease Term. Landlord leases the Premises to Tenant and Tenant leases the Premises from Landlord for the Lease Term. The Lease Term is for the period stated in Section 1.5 above and shall begin and end on the dates specified in Section 1.5 above, unless the beginning or end of the Lease Term is changed under any provision of this Lease. The Commencement Date shall be the date specified in Section 1.5 above for the beginning of the Lease Term, unless advanced or delayed under any provision of this Lease. Subject to Landlord’s reasonable regulations, restrictions and guidelines and applicable laws, Tenant may also use the internal stairwells in the Building between the floors of the Premises, the electrical and telephone rooms and the area below the concrete ceiling of the Premises and below the concrete floor of the Premises and behind the walls of the Premises, including the right, subject to Landlord’s reasonable approval with respect to location and specifications and Landlord’s reasonable rules and regulations, to core drill between the floors of the Premises to install and service wire, conduit and cable that serve Tenant’s equipment in the Premises in accordance with, and subject to, the other terms and provisions of this Lease and Landlord’s rights hereunder with respect to such areas. Except when and where Tenant’s right of access is specifically excluded as the result of (i) an emergency, (ii) a requirement by applicable laws, or (iii) a specific provision set forth in this Lease, Tenant shall have the right of access to the Premises, the Building, and the Project twenty-four (24) hours per day, seven (7) days per week during the Lease Term.
Section 2.2 Delay in Commencement. Landlord shall grant Tenant access to the Premises to Tenant for purposes of Tenant commencing its Tenant Improvements on the Effective Date (“Delivery Date”). If Landlord is unable to grant Tenant access to the Building by
the Delivery Date for purposes of Tenant commencing its Tenant Improvements for any reason whatsoever, Landlord shall not be liable to Tenant for any damages or losses resulting therefrom and this Lease shall continue in full force and effect, except for the anticipated Commencement Date hereof and Tenant’s obligation to pay Base Rent and/or other rental pursuant hereto shall be extended one day for each day beyond the Delivery Date that Landlord fails to grant Tenant access to the Building for purposes of Tenant commencing its Tenant Improvements (regardless of whether Tenant actually accesses the Building on that date) and the Expiration Date shall be extended for a period equal to the delay in delivery of access to the Premises to Tenant, plus the number of days necessary to end the Lease Term on the last day of a month, and Rent shall be prorated for any partial month accordingly. Except for Tenant’s rights to object as set forth in this Lease, Landlord has met the requirements to cause the Delivery Date to occur upon the date of the execution and delivery of this Lease. In the event that Landlord has not delivered access to the Premises to Tenant to commence its Tenant Improvements within two (2) business days following the date of the execution and delivery of this Lease and Tenant’s proof of insurance as required herein, Tenant may terminate this Lease by delivering written notice of such termination to Landlord on or prior to the date Landlord delivers such access to Tenant.
Section 2.3 Holding Over. Tenant shall vacate the Premises upon the expiration or earlier termination of this Lease. Following the first sixty (60) days of holdover, Tenant shall reimburse Landlord for and indemnify Landlord against all damages which Landlord incurs from Tenant’s delay in vacating the Premises. If Tenant does not vacate the Premises upon the expiration or earlier termination of the Lease and Landlord thereafter accepts Rent from Tenant, Tenant’s occupancy of the Premises shall be a “month-to-month” tenancy, subject to all of the terms of this Lease and any governmental statutes which are applicable to a month-to-month tenancy, subject to termination by either party on thirty (30) days prior written notice, but do not conflict with any provision contained in this Lease, except that the Base Rent then in effect shall be increased to one hundred twenty-five percent (125%) of the Base Rent that was payable during the final month of the Lease Term for the first sixty (60) days of any holdover and thereafter shall be increased to one hundred fifty percent (150%) of the Base Rent that was payable during the final month of the Lease Term. Landlord’s right to collect such rent shall be in addition to and shall not preclude concurrent, alternative or successive exercise of any other rights or remedies available to Landlord.
Section 2.4 Early Occupancy. If Tenant occupies any portion of the Premises prior to the Commencement Date for business purposes, Tenant’s occupancy of the Premises shall be subject to all of the provisions of this Lease. Early occupancy of any portion of the Premises for business purposes shall not advance the Expiration Date of this Lease. Tenant shall not be required to pay Base Rent, Additional Rent or any other charges specified in this Lease during the early occupancy period, but Tenant shall be responsible for interior janitorial expenses and shall be obligated to provide the insurance required pursuant to Section 4.4, during such early occupancy.
Section 2.5 Option to Extend Lease Term. At the expiration of the original Lease Term, Tenant may extend this Lease as to the entire Premises or a portion of the Premises for two (2) extended terms of five (5) years each (each an “Extended Term”) by giving Landlord
written notice (the “Option Notice”) of its intention to do so not later than twelve (12) months prior to the expiration of the original Lease Term, and thereafter twelve (12) months prior to the expiration of the applicable Extended Term; provided, however, that Tenant is not in material default beyond any applicable notice and cure period under the Lease on the date of giving such notice or on the date of commencement of such Extended Term. The Option Notice shall set forth Tenant’s election to extend the Lease for all or a portion of the Premises. If Tenant elects to extend the Lease for only a portion of the Premises, the portion of the Premises for which Tenant elects not to extend the Lease shall be: (i) either located entirely on one floor of the Premises or located on one entire floor and a portion of the other floor; (ii) a minimum of 15,000 RSF; (iii) adjacent to a window line and easily accessible; and (iv) shall be in a readily marketable and leasable location. Landlord shall be responsible for any and all costs to separate the portion of the Premises for which Tenant elects not to extend the Lease from the remainder of the Premises such that the space is a separate easily accessible and readily marketable space promptly following the commencement of the applicable Extended Term. Any termination of the entire Lease shall result in automatic termination of this option. Tenant’s right to extend the Lease Term provided herein is personal to Tenant and may not be assigned or otherwise transferred except in connection with a permitted assignment of this Lease, including to a Tenant’s Affiliate. The Extended Term shall be upon all of the terms and conditions of this Lease, except that the following rights of Tenant during the original Lease Term shall not apply during such Extended Term unless granted as part of the Fair Market Rental: (a) any right to rent-free possession; (b) any right to further extension of the Lease Term beyond the Extended Terms set forth herein above; (c) any right to continue to pay the same Base Rent; (d) any right to additional Tenant Allowance; (e) any right to terminate the Extended Term early; (f) any right to continue to exclude HVAC Capital Expenditures; (g) cost of security for the Building; and (h) the right to the continuation of any cap on Controllable Operating Expenses from the previous year (it being understood that the Operating Expenses for the first twelve (12) months of each new Extended Term shall be the actual Operating Expenses without any cap and thereafter the cap set forth in Section 4.2(e) shall apply). Landlord and Tenant hereby acknowledge and agree that the Base Rent during each Extended Term shall be equal to ninety-five (95%) of the Base Rent component of the “Fair Market Rental” and one hundred percent (100%) of the economic concessions, including without limitation, free rent, improvement allowance, base year and other monetary concessions, component of the Fair Market Rental for the Premises, as determined by as follows:
(a) Concurrent with Tenant’s delivery of each Option Notice, Tenant shall provide Landlord with written notice of its determination of Fair Market Rental for the Premises (“Tenant’s Determination of FMR”). Within thirty (30) days after Landlord’s receipt of Tenant’s Determination of FMR, Landlord shall, by written notice delivered to Tenant, either (a) accept Tenant’s Determination of FMR (“Notice of Acceptance”), or (b) reject Tenant’s Determination of FMR (“Notice of Rejection”). If Landlord does not deliver either the Notice of Acceptance or the Notice of Rejection within said thirty (30) day period, Landlord shall be deemed to have accepted Tenant’s Determination of FMR. If Landlord delivers a Notice of Rejection, Landlord shall also concurrently deliver to Tenant Landlord’s determination of Fair Market Rental for the Premises (“Landlord’s Determination of FMR”). If Landlord delivers the Notice of Rejection within said thirty (30) day period, the parties shall negotiate in good faith in
an effort to agree upon the Fair Market Rental within thirty (30) days after Landlord delivers the Notice of Rejection (“Negotiation Period”).
(b) If the parties fail to agree on the Fair Market Rental for such Extended Term during the Negotiation Period, then the Fair Market Rental shall be established as set forth below. Within fifteen (15) days following expiration of the Negotiation Period, Landlord and Tenant shall mutually agree upon a broker to determine the Fair Market Rental and shall concurrently deliver their final Tenant’s Determination of FMR and final Landlord’s Determination of FMR to use for the arbitration procedure set forth below; provided however, that if the difference between the final Landlord’s Determination of FMR and the final Tenant’s Determination of FMR is five percent (5%) or less, then a broker shall not be designated and the Fair Market Rental shall equal the average of the two (2) determinations. If Landlord and Tenant cannot agree upon a broker, then either party hereunder may request that the Presiding Judge of the Maricopa County Superior Court appoint such broker. Within ten (10) business days after the selection of the broker, such broker shall select either the final Landlord’s Determination of FMR or the final Tenant’s Determination of FMR in its entirety, without averaging or otherwise adjusting such value in any manner, and shall notify the parties of his or her decision. The broker’s decision concerning the Fair Market Rental shall be binding upon the parties, shall not be subject to any right of appeal and shall constitute the Rent payable by Tenant during the Extended Term.
(c) Landlord and Tenant intend that the “Fair Market Rental” shall be deemed to be the rent per square foot of rentable area of space that is then being charged for space located in buildings in the vicinity of the Building that are comparable in quality, age and size and offer similar amenities to the Building (“Comparable Buildings”) and involving non-renewing leases (i.e. leases where the tenant is not already occupying the leased premises) with similar terms and conditions, and involving the use of the premises for similar purposes allowed under the Lease for tenants of similar size, credit quality and stature and include current market concessions including tenant improvement allowances, abatement, downtime to secure a new tenant and build out space, brokerage commissions, a new base year (if given in comparable deals) and/or the anticipated budget for Additional Rent, inducements and other economic considerations for the lease of space comparable to the Premises then being offered in similar buildings in the Southeast Valley Submarket. The spaces used for comparison shall be comparable in size, age, quality and design to the Premises, and such spaces used for comparison shall be comparable to the Premises with respect to their location within such buildings, the quality and quantity of tenant improvements installed at each landlord’s expense, the services provided by each landlord to such tenant, and the financial strength of tenant.
(d) The parties shall share equally in the cost of the broker. No person shall be appointed or designated a broker unless he or she is a real estate broker licensed in the State of Arizona, who specializes in the field of commercial office space leasing in the Southeast Valley market, has at least ten (10) years’ experience in leasing of commercial office space in the Southwest Valley market and is recognized within the field as being reputable and ethical. The broker shall not have ever been employed (full-time or part-time or on a consulting basis) by Landlord or Tenant.
(e) In the event that the Fair Market Rental is not established before the commencement of the Extended Term, Tenant shall continue to pay the Base Rent in effect as of the end of the prior term; when the Fair Market Rental has been established, the new Base Rent and concessions granted pursuant to the Fair Market Rental shall be retroactively effective as of the beginning of the Extended Term, and Tenant shall pay Landlord any deficiency or Tenant shall receive a credit, as applicable, with in thirty (30) days after the establishment of the new Fair Market Rental.
Section 2.6 Partial Premises Termination Right. Provided Tenant is not in monetary default of any provisions of this Lease beyond applicable notice and cure periods, Tenant shall have a one (1) time right to terminate this Lease as to the Partial Premises (“Partial Premises Termination Right”). Tenant’s right to terminate this Lease as to the Partial Premises shall occur on the last day of the twelfth (12th) month of the Lease Term (the “Partial Premises Termination Date”). In the event Tenant elects to exercise the Partial Premises Termination Right, such termination shall be upon the following terms and conditions:
(a) Tenant shall give written notice of its election to terminate (the “Partial Premises Termination Notice”) in accordance with the Notice provisions herein to Landlord at least ninety (90) days prior to the Partial Premises Termination Date.
(b) At least thirty (30) days prior to the Partial Premises Termination Date, Tenant shall pay Landlord the sum of Three Hundred Sixty Thousand and NO/100 Dollars ($360,000) (the “Partial Premises Termination Payment”). The Partial Premises Termination Payment shall be wire transferred to Landlord or otherwise paid to Landlord in immediately available funds.
(c) Following receipt of the Partial Premises Termination Notice and the Partial Premises Termination Payment, the Lease with respect to the entire Premises shall continue in full force and effect until the Partial Premises Termination Date at which time the Lease shall be deemed terminated as to the Partial Premises. During said time, Tenant shall continue to be obligated to fully perform under the Lease and pay the Base Rent, Additional Rent, and other applicable charges (the Partial Premises Termination Payment shall not be applied to Base Rent, Additional Rent, or other applicable charges applicable to time periods prior to the Partial Premises Termination Date). In the event Tenant fails to timely give the required Partial Premises Termination Notice followed by the Partial Premises Termination Payment, the right to terminate the Partial Premises pursuant to this Section 2.6 shall be deemed null and void.
(d) In the event of the termination of this Lease as to the Partial Premises, Landlord and Tenant shall execute an amendment to this Lease confirming the termination and such other terms as are set forth herein or otherwise agreed to between Landlord and Tenant. Notwithstanding the foregoing, failure to execute such an amendment shall not affect the validity or enforceability of this Lease as to the remainder of the Premises or the termination of this Lease with respect to the Partial Premises.
(e) If Tenant does not timely exercise the Partial Premises Termination Right or such right is deemed null and void in accordance herewith, Tenant shall be entitled to an additional Initial Tenant Allowance for the Partial Premises at the same per RSF as the Initial Tenant Allowance set forth in the Work Letter for the Initial Premises which Initial Tenant Allowance must be utilized by Tenant within eighteen (18) months following the Effective Date and may be utilized for costs previously incurred by Tenant to improve the Partial Premises as well as costs incurred after the Partial Premises Termination Right has lapsed.
Section 2.7 Lease Termination Right. Provided Tenant is not in material default of any provisions of this Lease beyond applicable notice and cure periods, Tenant shall have a one (1) time right to terminate this Lease as to the entire Premises or the entire space then being leased on either of the floors of the Premises (the “Lease Termination Right”). Tenant’s right to terminate this Lease shall occur on the last day of the eightieth (80th) month of the Lease Term (the “Lease Termination Date”). In the event Tenant desires to terminate this Lease on the Lease Termination Date, such termination shall be upon the following terms and conditions:
(a) Tenant shall give written notice of its election to terminate (the “Termination Notice”) in accordance with the Notice provisions herein to Landlord at least nine (9) months prior to the Lease Termination Date. The Termination Notice shall set forth Tenant’s election to either terminate the Lease for the entire Premises or the entire space then being leased on either of the floors of the Premises. Following the Termination Notice, Tenant shall cause removal of signage in accordance with the provisions of Section 5.5 below, which shall be completed on or before the Lease Termination Date. Following such Lease Termination Date, Tenant shall be entitled to only Tenant’s Pro-Rata Share of the utilities provided to the Building and the parking allocation as stated in Section 1.10.
(b) On or prior to the date which is thirty (30) days prior to the Lease Termination Date, Tenant shall pay Landlord a termination payment equal to the amount of the unamortized Initial Tenant Allowance on the portion of the Premises for which Tenant has elected to terminate this Lease, the amount of the unamortized Additional Tenant Allowance (if applicable) on the portion of the Premises for which Tenant has elected to terminate this Lease and the amount of the unamortized Broker’s commissions paid by Landlord on the portion of the Premises for which Tenant has elected to terminate this Lease, all based upon a ten-year straight-line amortization and an interest rate of six percent (6%) per annum (the “Termination Payment”). At any time prior to the Lease Termination Date, Tenant may request a calculation of the Termination Payment amount from Landlord in writing. The Termination Payment shall be in the form of a wire transfer to Landlord or otherwise paid to Landlord in immediately available funds.
(c) Following receipt of the Termination Notice and the Termination Payment, the Lease with respect to the portion of the Premises being termination shall continue in full force and effect until the Lease Termination Date at which time the Lease shall be deemed terminated as to the portion of the Premises for which Tenant has elected to terminate this Lease. During said time, Tenant shall continue to be obligated to fully perform under the Lease and pay the Base Rent, Additional Rent, and other applicable charges (the Termination Fee shall not be
applied to Base Rent, Additional Rent, or other applicable charges applicable to time periods prior to the Lease Termination Date). In the event Tenant fails to timely give the required Termination Notice followed by the Termination Payment, the right to terminate pursuant to this Section 2.7 shall be deemed null and void.
(d) In the event of the termination of this Lease as to only a portion of the Premises, Landlord and Tenant shall execute an amendment to this Lease confirming the termination and such other terms as are set forth herein or otherwise agreed to between Landlord and Tenant. Notwithstanding the foregoing, failure to execute such an amendment shall not affect the validity or enforceability of this Lease as to the remainder of the Premises or the termination of this Lease with respect to the portion terminated pursuant to this Section 2.7.
ARTICLE THREE: BASE RENT
Section 3.1 Time and Manner of Payment. Upon execution of this Lease, Tenant shall pay Landlord the Base Rent in the amount stated for the ninth (9th) full month of the Lease Term in Section 1.11(a) (not including any Base Rent due for the Partial Premises) above (“Initial Payment Upon Execution”). The Initial Payment Upon Execution shall be held by Landlord and applied to Base Rent due for the ninth (9th) full calendar month of the Lease Term. If the Commencement Date falls on a day other than the first day of the month, Tenant shall pay Landlord the Base Rent and Additional Rent due for the resulting first partial month within thirty (30) days of receipt of Landlord’s invoice. Any such first partial month Base Rent and Additional Rent shall be calculated on a prorated basis by multiplying the Base Rent and Additional Rent amounts applicable for the ninth (9th) month of the Lease Term by a fraction, the numerator of which shall be the actual number of days from the Commencement Date to the end of month and the denominator of which shall be the total number of days in the month. On the first day of the tenth (10th) full month of the Lease Term and each month thereafter, Tenant shall pay Landlord the Base Rent and Additional Rent, in advance, without offset, deduction or prior demand, except as otherwise provided herein. The Base Rent and Additional Rent shall be payable at Landlord’s address or at such other place as Landlord may designate in writing. Any payments of Base Rent and Additional Rent for any fractional calendar month shall be prorated based on actual days.
Section 3.2 Letter of Credit/Security Deposit. Within ten (10) business days following Landlord’s and Tenant’s execution and delivery of this Lease, Tenant shall deliver to Landlord a standby, unconditional, irrevocable letter of credit in the substantially the same form as attached hereto as Exhibit E (the “Letter of Credit”) in the amount of Three Million Five Hundred Thousand Dollars ($3,500,000.00), naming Landlord as beneficiary, issued by a national banking association reasonably approved by Landlord within five (5) business days, permitting draws thereon, as security for the full performance by Tenant of its obligations hereunder. Silicon Valley Bank is hereby approved by Landlord if selected by Tenant as the issuing bank. The term of such Letter of Credit, or any extension thereof or any replacement letter of credit, shall be for a period of not less than one year and shall be renewed annually. If the Letter of Credit is not renewed within thirty (30) days prior to its expiration date and a replacement Letter of Credit has not been provided to Landlord by such date, the Landlord may
draw entire the Letter of Credit and hold the proceeds thereof as a cash security deposit (the “Security Deposit”) pursuant to the terms and provisions of this Lease. In the event Landlord transfers or assigns this Lease, Tenant shall cause the Letter of Credit to be reissued in the name of Landlord’s transferee or assignee and Tenant shall pay the first transfer fee in connection with any such assignment and Landlord shall pay all subsequent transfer fees.
In the event of default by Tenant under the Lease and after the expiration of any applicable notice and cure period, if any, Landlord, at its option and in addition to any other rights or remedies Landlord may have, may immediately draw all or a portion of the amount of the Letter of Credit. The sums obtained by Landlord from the Letter of Credit may be used by the Landlord to: (i) cure the default by Tenant including, but not limited to, for the payment of Base Rent, Additional Rent, late fees, interest, fees and expenses; (ii) to reimburse Landlord for the costs and expenses incurred by Landlord in connection with this Lease, including but not limited to, broker commissions and fees and the Tenant Allowance in the Work Letter; and (iii) reimburse Landlord for the reasonable direct costs of Landlord in drawing any amount under any Letter of Credit. In no event may Tenant require Landlord to draw and apply such Letter of Credit or any portion thereof for Base Rent, Additional Rent or other charges past due or to accrue under the Lease. The balance of the sums obtained from the Letter of Credit after curing of Tenant’s default, if any, shall be held by Landlord as a Security Deposit until Tenant provides a replacement Letter of Credit, in which event the monies held by Landlord shall be returned to Tenant within thirty (30) days.
Notwithstanding the foregoing, if Tenant is not then in default under the provisions of this Lease beyond applicable notice and cure periods (or as soon thereafter as all such defaults are cured), on the last day of the first (1st) year of the Lease and each year thereafter, the Letter of Credit shall be reduced by ten percent (10%) per year. If Tenant exercises the Partial Premises Termination Right, the Lease Termination Right as to only a portion of the Premises or an Option to Extend as to only a portion of the Premises, the amount of the Letter of Credit shall be reduced proportionately. In the event that Tenant complies with terms and conditions set forth in this Section 3.2, then effective as of the date of the applicable date of reduction, Tenant shall have the right to reduce the Letter of Credit amount as set forth above via the delivery to Landlord of either (x) an amendment to the existing Letter of Credit (in form and content reasonably acceptable to Landlord in accordance with this Section 3.2) modifying the Letter of Credit amount to the amount then required under this Section 3.2, or (y) an entirely new Letter of Credit (in the form and content otherwise required in this Section 3.2) in the total Letter of Credit amount then required under this Section 3.2. Any reduction in the Letter of Credit amount shall be accomplished by Tenant providing Landlord, at Tenant’s expense, with a substitute Letter of Credit or an amendment to the existing Letter of Credit in the reduced amount and otherwise in accordance with the terms and conditions of this Section 3.2. Landlord agrees to execute any documents reasonably requested by the issuer of the Letter of Credit (provided such documents are factually accurate and provided further that the subject reduction is permitted under the terms of this Section 3.02) within ten (10) business days after receipt of written request from Tenant or such issuer in order to accomplish such reductions and Landlord’s failure to timely execute and deliver such documents shall be a default under this Lease upon the expiration of five (5) business days’ notice from Tenant that Landlord has failed to perform such obligation (the “L-C
Return Default”). Upon any such L-C Return Default, Landlord shall be liable to Tenant for a late delivery fee equal to $250 per day that such L-C Return Default continues.
In the event Landlord holds a Security Deposit as a result of the drawing on the Letter of Credit, such Security Deposit shall be security for the full performance by Tenant of its obligations hereunder. If Tenant defaults under any provision hereof beyond applicable notice and cure periods, Landlord shall be entitled, at its option, to apply or retain all or any part of the Security Deposit for the payment of any Base Rent, Additional Rent, other sum owing by Tenant to Landlord, or any amount which Landlord may become obligated to spend because of Tenant’s default, or to compensate Landlord for any loss or damage which Landlord may suffer because of Tenant’s default. If any portion of the Security Deposit is so used or applied, Tenant shall, within ten (10) business days after written demand therefor, deposit cash with Landlord in an amount sufficient to restore the Security Deposit to its full amount. Tenant’s failure to do so shall be a material default under this Lease. Landlord shall not be required to keep the Security Deposit separate from its other accounts and no trust relationship is created with respect to the Security Deposit. Tenant shall not be entitled to interest on the Security Deposit. If Tenant fully performs every provision of this Lease to be performed by it, the Letter of Credit and Security Deposit or any balance thereof shall be returned to Tenant within thirty (30) days following the expiration of the term of this Lease or any period of holding over. Landlord’s rights with respect to the Security Deposit and Letter of Credit shall be in addition to and shall not preclude concurrent, alternative or successive exercises of any other rights or remedies available to Landlord.
Section 3.3 Termination; Advance Payments. Upon termination of this Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any other termination not resulting from Tenant’s default, and after Tenant has vacated the Premises in the manner required by this Lease, Landlord shall refund or credit to Tenant (or Tenant’s successor) within thirty (30) days the unused portion of the Security Deposit, any advance rent or other advance payments made by Tenant to Landlord, and any amounts paid for real property taxes and other reserves which apply to any time periods after termination of the Lease.
Section 3.4 Rental/Privilege Taxes. Tenant shall pay Landlord any and all privilege, commercial rental tax, transactional, excise or other taxes (not including Landlord’s income taxes) imposed or levied by any taxing authority against Landlord for, or on Landlord’s right to receive or the receipt by Landlord of, Base Rent, Additional Rent and any other charges or sums payable by Tenant under this Lease, said taxes to be paid and due at the time provided for payment of said Base Rent, Additional Rent or other sums or charges by Tenant.
ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT
Section 4.1 Definitions. For purposes of this Article 4 and the Lease:
(a) “Tenant’s Pro-Rata Share” means the ratio, expressed as a percentage, of the rentable square feet in the Premises, to the entire rentable square footage in the Building. Tenant’s Pro-Rata Share as of the date of this Lease is as set forth in Section 1.12 above. The numerator of Tenant’s Pro-Rata Share is subject to adjustment if the rentable square
footage of the Premises changes pursuant to the provisions of this Lease because of an actual increase or decrease in the size of the Premises.
(b) “Calendar Year” shall mean the 12-month period beginning January 1 and ending December 31 and each 12-month period thereafter.
(c) “Real Estate Taxes” shall mean all taxes, assessments, levies, and other charges, improvement lien assessments including, but not limited to, general and special, ordinary and extraordinary, foreseen and unforeseen, of any kind and nature whatsoever, which shall or may be during the Lease Term assessed, levied, charged, confirmed, or imposed upon or become payable out of or become a lien on the Project or any portion thereof (including personal property taxes on equipment, fixtures and other property of Landlord located on the Project and used in connection with the operation thereof), but shall not include any estate, succession, inheritance, or transfer taxes, excess profits taxes, franchise taxes, gift taxes, capital stock taxes, excise taxes, tax penalties, interest or late charges, or any income, profits, or revenue tax imposed upon the rent received as such by Landlord under this Lease; provided, however, that if at any time during the Lease Term, the present method of real estate taxation or assessment shall be so changed that there shall be substituted for the whole or any part of such taxes, assessments, levies, impositions, or charges now or hereafter levied, assessed, or imposed on real estate and improvements, a capital tax or other tax imposed on the rents or income received by Landlord from the Project or the rents or income reserved herein, or any part thereof, then all such capital taxes or other taxes shall, to the extent that they are so substituted, be deemed to be included within the term “Real Estate Taxes.” Tenant shall pay all taxes charged against trade fixtures, furnishings, equipment or any other personal property belonging to Tenant. Tenant shall use Tenant’s commercially reasonable efforts to have personal property taxed separately from the Premises. If any of Tenant’s personal property is taxed with the Premises, Tenant shall pay Landlord the taxes for the personal property within thirty (30) days after Tenant receives a written statement from Landlord for such personal property taxes. At such times as Tenant is leasing the entire Building, commencing after the calendar year 2021, Tenant, at its sole cost and expense, shall have the right to apply for a reduction in the Real Estate Taxes assessed against the Project. At such times as Tenant is not leasing the entire Building, then upon Tenant’s request, Landlord shall apply for a reduction in Real Estate Taxes (the cost of which shall be included in Real Estate Taxes) and if Landlord opts not to so apply, Tenant may apply for such a reduction with a tax consultant reasonably approved by Landlord. Refunds of Real Estate Taxes shall be credited against Real Estate Taxes and refunded to Tenant regardless of when received, based on the Calendar Year to which the refund is applicable. All special assessments which may be paid in installments shall be paid by Landlord in the maximum number of installments permitted by law and not included in Real Estate Taxes except in the year in which the assessment is actually paid. If Real Estate Taxes for any period during the Lease Term or any extension thereof are increased or decreased after payment thereof for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities, Tenant shall pay Landlord, within thirty (30) days following written demand by Landlord, Tenant’s Share of any such increased Real Estate Taxes included by Landlord as Real Estate Taxes pursuant to the terms of this Lease, or Landlord shall provide Tenant with a credit against Rent next coming due under the Lease in the amount of Tenant's Pro-Rata Share of any such
decreased Real Estate Taxes included by Landlord as Real Estate Taxes pursuant to the terms of the Lease (until such amount has been fully credited to Tenant), as the case may be.
(d) “Operating Expenses” means for the purposes hereof all costs, expenses, and fees incurred by Landlord in owning, managing, maintaining, repairing, replacing and operating the Premises, Building and surrounding parking lots, entryways and Common Area within the Project (whether or not now customary or in the contemplation of the parties) during any Calendar Year or portion thereof, all as determined in accordance with sound real estate management practices consistently applied, including, but not limited to, the following: (a) Real Estate Taxes; (b) property management and building superintendent fees (which may include market rate fees for such services payable to Landlord or its related entities who perform such services) not to exceed three percent (%) of gross revenues from the Project; the cost of security personnel, facility engineers and services of independent contractors; and wages, charges, taxes, fringe benefits or other labor costs; (c) equipment, supplies and materials (new or replacement); the cost of water, sewer service, gas, electricity and other utilities and services (except telephone, cable and internet service for the Tenant, which shall be the obligation of each Tenant, and any utilities for which a separate meter has been installed for the Premises, which shall be paid directly to the supplier by Tenant; utilities paid directly to the supplier by other tenants pursuant to the terms of their leases shall also be excluded from Operating Expenses); the cost of refuse, garbage and trash removal, collection and disposal and the cost of pest control; (d) the cost of janitorial service (if provided by Landlord); (e) the cost of upkeep, repair and maintenance of the Premises and Building, including but not limited to, the roof and structural elements thereof and any elevators, plumbing, electrical, heating and air conditioning systems and the cost of service maintenance and replacement contracts relating thereto; the cost of upkeep and maintenance of any parking areas (including any covered parking canopies), sidewalks, hallways, stairways, toilets and other common facilities and the cost of service maintenance and replacement contracts relating thereto; the cost of landscaping, landscape maintenance and replacement; reclaimed water usage for landscaping; the cost of cleaning and other care of the Project, the Building, the Premises and the improvements comprising the same; (f) insurance premiums and other costs for fire and extended coverage insurance, comprehensive public liability insurance and other insurance paid by Landlord in such amounts as Landlord may reasonably determine in accordance with Sections 4.4(a) and 4.4(b) and consistent with coverages carried by landlords of Comparable Buildings; any deductible amount under Landlord’s insurance maintained pursuant to Section 4.04 and consistent with coverages carried by landlords of Comparable Buildings; (g) expenditures for such capital improvement items except as excluded below, provided, however, the cost of any such capital expenditures shall be amortized in accordance with generally accepted accounting principles over the reasonably anticipated useful life of such capital improvements; and (h) the expenses incurred by or payable by Landlord for the operation, maintenance and repair of the Common Area of the Project and the expenses payable by Landlord under any document recorded against or for the benefit of the Project. Notwithstanding the foregoing, for purposes of this Lease, Operating Expenses shall not, however, include any of the following unless such expenses are caused by Tenant, its employees, guests or invitees:
(1) Wages, salaries, fees, and fringe benefits paid to executive personnel or officers or partners of Landlord, or any other personnel located at Landlord’s corporate office (except for facility engineers that utilize office space of Landlord), or to anyone above the level of Project manager;
(2) Any charge for depreciation or amortization of the Building or equipment and any interest or other financing charge (except that interest and amortization shall be included with respect to permitted capital expenditures as provided herein);
(3) All costs relating to activities for the marketing, solicitation and execution or renewal of leases of space in the Project, including, without limitation, advertising, printing costs and brochures, space planning, tenant allowances, leasehold improvements and other tenant concessions;
(4) Costs associated with the sale or refinancing of the Project, including, without limitation, consulting or brokerage commissions, origination fees or points, and interest cost or charges;
(5) Cost of decorating, redecorating, or tenant installations incurred in connection with preparing space for a new tenant (or retaining a tenant);
(6) All costs for which Tenant or any other tenant in the Project is being charged other than pursuant to the operating expense clauses;
(7) The cost of correcting defects in the construction of the Project or in the Project equipment;
(8) The cost of any capital repair made by Landlord because of the total or partial damage or destruction of the Project or the condemnation of a portion of the Project exclusive of commercially reasonable insurance deductibles consistent with Comparable Buildings;
(9) Any increase in insurance premium to the extent that such increase is caused or attributable to the particular use, occupancy or act of another tenant or Landlord;
(10) The cost of any items for which Landlord is reimbursed by insurance or otherwise compensated by parties other than tenants of the Project pursuant to clauses similar to this paragraph;
(11) The cost of any repairs, alterations, additions, changes, replacements, and other items related to HVAC systems, which under sound real estate accounting principles are properly classified as capital expenditures (the foregoing exclusion shall be applicable during the original Lease Term, but shall not apply to any extended Term hereunder) and all other capital expenditures and improvement items shall be excluded from Operating Expenses except for capital expenditures which are reasonably necessary for repairs
and replacements to maintain the Building and Project in good operating order and condition so long as the cost of any such capital expenditures shall be amortized in accordance with generally accepted accounting principles over the reasonably anticipated useful life of such capital expenditure;
(12) The cost of structural repairs or replacement, including roof, exterior walls and glass and subsurface/foundation work;
(13) Any operating expense representing any amount paid to a related corporation, entity, or person which is in excess of the amount which would be paid to a qualified first class unaffiliated third party on a competitive basis;
(14) The cost of any work or service performed for or facilities furnished to any tenant of the Project, without charge, to a greater extent or in a manner more favorable to such tenant than that performed for or furnished to Tenant;
(15) Costs arising from the negligence or fault of Landlord;
(16) Costs incurred to comply with laws relating to the removal of Hazardous Materials (as defined under applicable law) which located on the Project;
(17) Penalties and interest charges as a result of not paying bills when due or within any grace period;
(18) Ground rent or similar payments to a ground lessor;
(19) Costs related to Landlord’s charitable or political contributions;
(20) Costs including attorney’s fees arising from claims, potential disputes or disputes between Landlord and tenants of the Project;
(21) Any profit related to the excess collection of Operating Expenses or collection of Operating Expenses in excess of 100% of the actual Operating Expenses;
(22) Accounting and legal fees related to construction, leasing, sale or litigation with respect to the Project;
(23) Penalties and fines of any kind including non-compliance with any applicable building or fire code;
(24) Any reserves;
(25) Principal payments on mortgages and other debt costs, if any;
(26) Any bad debt loss, rent loss, or reserves for bad debts or rent loss;
(27) Costs associated with the operation of the business of the partnership or entity which constitutes the Landlord, as the same are distinguished from the costs of operation of the Project, including partnership accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions of the Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of the Landlord’s interest in the Project, and costs incurred in connection with any disputes between Landlord and its employees, between Landlord and Project management, or between Landlord and other tenants or occupants;
(28) The wages and benefits of any employee who does not devote substantially all of his or her employed time to the Project unless such wages and benefits are reasonably prorated to the Project; provided, that in no event shall Operating Expenses for purposes of this Lease include wages and/or benefits attributable to personnel above the level of Project manager;
(29) Rent for any office space occupied by Project management personnel to the extent the size or rental rate of such office space exceeds the size or fair market rental value of office space occupied by management personnel of the Comparable Buildings, with adjustment where appropriate for the size of the applicable project, and if used for the management of other projects as well, such rent shall be appropriately pro-rated;
(30) Insurance deductibles in excess of customary deductible amounts carried by landlords of the Comparable Buildings; provided, however, that in connection with any insurance deductible amounts included in Operating Expenses as a result of an earthquake which are for items otherwise classified as capital items, such amounts shall be amortized into Operating Expenses at the cost and over the term as if a capital expenditure;
(31) Costs reimbursed to Landlord under any warranty carried by Landlord for the Building and/or the Project, which warranties Landlord shall use commercially reasonable efforts to enforce. Landlord shall (i) not make a profit by charging items to Operating Expenses that are otherwise also charged separately to others, and (ii) Landlord shall not collect Operating Expenses from Tenant and all other tenants/occupants in the Building in an amount in excess of what Landlord incurred for the items included in Operating Expenses; and
(32) Cost of interior janitorial services if Tenant provides its own janitorial services.
Any refunds or discounts actually received by Landlord for any category of Operating Expenses shall reduce Operating Expenses in the applicable Calendar Year (pertaining to such category of Operating Expenses). In the event any facilities, services or utilities used in connection with the Project are provided from another building owned or operated by Landlord or vice versa, the costs incurred by Landlord in connection therewith shall be allocated to
Operating Expenses by Landlord on a reasonably equitable basis. In addition, all assessments and premiums which are not specifically charged to Tenant because of what Tenant has done, which can be paid by Landlord in installments, shall be paid by Landlord in the maximum number of installments permitted by law (except to the extent inconsistent with the general practice of the Comparable Buildings in the vicinity of the Building or if such installment payments result in additional fees and costs) and shall be included as Operating Expenses in the year in which the assessment or premium installment is actually paid.
Section 4.2 Operating Expenses; Late Charges; Interest.
(a) Operating Expense Payment. In addition to the Base Rent, for each Calendar Year during the Term, Tenant shall pay Landlord Tenant’s Pro-Rata Share of the Operating Expenses (calculated on a per rentable square foot per annum basis) (the “Operating Expense Payment”). The Operating Expense Payment shall be made by Tenant to Landlord in accordance with the terms of this Section 4.2 and shall be subject to adjustment as provided for in this Section 4.2.
(b) Monthly Payment of Estimated Amount. For each Calendar Year, Tenant shall pay, at the time of payment of each monthly installment of Base Rent, an amount equal to one-twelfth (1/12) of Landlord’s reasonable estimate of the sum of the Operating Expense Payment to be due for the then current Calendar Year, if any, which statement shall be in reasonable detail by major general categories of expenses. Said monthly payments shall be an estimate of the Operating Expense Payment for the then current Calendar Year and shall be subject to adjustment based upon the final calculation of the Operating Expense Payment as provided for in this Section 4.2. Tenant shall begin paying the latest estimate thirty (30) days after receipt thereof.
(i) Within ninety (90) days after the end of each Calendar Year, Landlord shall furnish to Tenant a written statement setting forth the Operating Expenses for the most recently completed Calendar Year and Tenant’s Operating Expense Payment, which statement shall be in reasonable detail by major general categories of expenses. Landlord’s failure to render a statement with respect to increases in Operating Expenses for any Calendar Year shall not prejudice Landlord’s right to thereafter render a statement with respect thereto or with respect to any other Calendar Year. Notwithstanding the immediately preceding sentence, Tenant shall not be responsible for Tenant’s Share of any Operating Expenses attributable to any Calendar Year which are first billed to Tenant more than two (2) calendar years after the earlier of the expiration of the applicable Calendar Year or the Expiration Date, provided that in any event Tenant shall be responsible for Tenant’s Pro-Rata Share of Operating Expenses levied by any governmental authority or by any public utility companies at any time following the Expiration Date which are attributable to any Calendar Year (provided that Landlord delivers Tenant a bill (a “Supplemental Statement”) for such amounts within two (2) years following Landlord’s receipt of the bill therefor).
(ii) After the end of each Calendar Year, including after this Lease has terminated or expired, Tenant shall make or receive for any Calendar Year, a payment or a credit equal to any excess or deficiency between the actual Operating Expense Payment, if
any, owed by Tenant for the most recent Calendar Year and the amounts paid by Tenant as an estimate of the Operating Expense Payment. Tenant shall pay such Operating Expense Payment or receive such credit against future payments within thirty (30) days following receipt of notice thereof and receipt of the statement described herein.
(iii) Tenant’s obligation with respect to the Operating Expense Payment shall survive the expiration or early termination of the Lease, and all such payments shall be prorated to reflect the actual term of this Lease.
(iv) Landlord agrees that upon written request of Tenant made within twelve (12) months of receiving the annual statement of Tenant’s Pro-Rata Share, Landlord shall make the books and records for said prior year available for audit at its offices in the greater Phoenix area or the greater San Diego area during normal business hours. Except as set forth below, any audit shall be conducted by a regional or national accounting firm, a reputable firm which regularly provides such services or a professional brokerage firm that specializes in such audits and such services shall not, in any manner, be provided on a contingency basis. Landlord agrees to pay one-half of the reasonable costs and expenses of an audit on an annual basis. If the audit confirms that the actual Operating Expenses charged to Tenant during the prior Calendar Year have been overstated by Landlord by more than five percent (5%), Landlord shall refund the entire excess within thirty (30) days. If the audit confirms that the Operating Expenses charged to Tenant during the prior Calendar Year have been undercharged by Landlord by more than five percent (5%), Tenant shall pay the entire amount understated within thirty (30) days. The annual statement of Tenant’s Pro-Rata Share shall be deemed binding and conclusive unless Tenant timely provides an audit notice to Landlord, thereafter audits the books and records within ninety (90) days of the notice date and the date Landlord makes all of its books and records reasonably related to such statement available to Tenant and said audits confirms an over or understated amount. If Landlord disagrees with the results of Tenant’s audit and the parties cannot otherwise agree, then Landlord and Tenant’s auditor shall together select a neutral auditor of similar qualifications to conduct a review of such books and records (if such neutral auditor’s review reveals that Operating Expenses were overstated by Landlord by more than five percent (5%), Landlord shall bear all fees of such neutral auditor and if such neutral auditor’s review reveals less than a 5% over statement, Tenant shall bear all such costs), and the determination of Operating Expenses reached by such neutral auditor shall be final and conclusive.
(c) Late Charges. Tenant’s failure to pay Rent promptly may cause Landlord to incur unanticipated costs. The exact amount of such costs is impractical or extremely difficult to ascertain. Such costs may include, but are not limited to, processing and accounting charges and late charges which may be imposed on Landlord by any ground lease, mortgage or trust deed encumbering the Premises. Therefore, if Landlord does not receive any rent payment within five (5) business days after written notice that such amount is past due, Tenant shall pay Landlord a late charge equal to five percent (5%) of the overdue amount. The parties agree that such late charge represents a fair and reasonable estimate of the costs Landlord will incur by reason of such late payment.
(d) Interest on Past Due Obligations. Any amount owed by Tenant to Landlord which is not paid when due shall bear interest at the rate of equal to the floating commercial loan rate announced from time to time by Bank of America, a national banking association, or its successor, as its prime rate, plus 2% per annum (the “Interest Rate”) from the due date of such amount. However, interest shall not be payable on late charges to be paid by Tenant under this Lease. The payment of interest on such amounts shall not excuse or cure any default by Tenant under this Lease. If the interest rate specified in this Lease is higher than the rate permitted by law, the interest rate is hereby decreased to the maximum legal interest rate permitted by law.
(e) Controllable Operating Expenses. Landlord hereby agrees that any increases in the Controllable Operating Expenses (as hereinafter defined) shall not exceed five percent (5%) cumulatively from the previous years’ Controllable Operating Expenses as to Tenant’s Pro-Rata Share (it is recognized that that Tenant holds a Partial Premises Termination Right and Lease Termination Right and that extra expenses incurred by Landlord based upon Tenant’s election to lease less than the entire Premises, shall be permitted to be charged as Operating Expenses and not excluded because they have increased Operating Expenses beyond the foregoing limit, if such costs and expenses were not payable by Landlord while Tenant leased the entire Building). “Controllable Operating Expenses” shall mean all Operating Expenses and expenses excluding insurance premiums, Real Estate Taxes, utilities for the Common Areas, costs of security, damages not covered by insurance resulting from acts of god, damages not covered by insurance caused by Tenant, its employees, guests or invitees and additional costs incurred while Tenant no longer leases the entire Premises, owner’s association fees or costs and expenses paid under the applicable covenants, conditions and restrictions, applicable easements, or any document recorded against or for the benefit of the Project, fees for required licenses and permits for the Building, the costs of any unionized labor or government mandated wage or benefit increases associated with services provided to the Building, and similar costs and expenses where the rates are set by third party providers.
Section 4.3 Utilities and Services to the Premises. Tenant shall contract directly with the appropriate supplier and shall pay all the cost of all electrical power, telephone, cable, internet, and such other utilities and services supplied directly to the Premises. All natural gas, sewer service, water and refuse disposal or other such services for the Premises are jointly metered with other tenants or Common Areas of the Building or other property, such services shall be provided by Landlord. Tenant shall enter into an HVAC maintenance agreement reasonably acceptable to Landlord and Tenant shall have 100% control of the HVAC systems serving the Premises, provided that any capital expenditures shall be allocated between Landlord and Tenant as provided in Section 4.1 above. All utilities and services provided by Landlord to the Premises, Building and Common Areas shall be included within Operating Expenses as set forth in more detail in Sections 4.01 and 4.02. Tenant shall not make connection to the utilities except by or through then existing outlets and shall not install or use machinery or equipment in or about the Premises that causes extra burden upon the utilities or services, including but not limited to security services, if any. Landlord shall require Tenant to reimburse Landlord for any excess expenses or costs incurred by Landlord that may arise out Tenant’s use of the Premises which causes an extra burden upon the utilities or services beyond Tenant’s Pro-Rata Share of
such utilities or services. Except as otherwise provided herein, Landlord shall not be liable for, nor shall Tenant be entitled to, any abatement or reduction of rental or other sums due hereunder by reason of Landlord’s failure to furnish any services or utilities when such failure is caused by the acts of Tenant or by any cause beyond the reasonable control of Landlord, including but not limited to accidents, weather, utility outages, breakage, remodeling, improvements, material shortage, shipping and delivery delays, repairs, strikes, lockouts or other labor disturbances or labor disputes of any character, or by any other cause, similar or dissimilar. Except as otherwise provided herein, it is expressly understood that Landlord shall not be liable under any circumstances for loss or damage, however occurring, incurred in connection with or incidental to the failure to furnish any of the foregoing. In addition, it is expressly understood that Landlord shall not be liable under any circumstances for consequential, speculative or punitive damages. Landlord shall provide Tenant with appropriate contact information that Tenant may contact in the event of an emergency at the Premises or Building twenty-four (24) hours per day, seven (7) days per week. Tenant, at its sole expense, may, as part of Tenant Improvements or any subsequent alternative, install a supplemental HVAC systems for use in the “server room” and other specific portions of the Premises (the “Tenant HVAC System”). In the event that the Tenant HVAC System is not installed as a “Tenant Improvement,” as that term is defined in the Work Letter, in accordance with the terms of the Work Letter, the Tenant HVAC System shall be installed, if at all, by Tenant in accordance with the terms of Section 6.5, below. In the event that the Tenant HVAC System is installed, Tenant acknowledges that Tenant shall not be entitled to remove the Tenant HVAC System and that the Tenant HVAC System shall become a part of the realty and belong to Landlord and shall be surrendered with the Premises upon the expiration or earlier termination of this Lease. Subject to Tenant’s compliance with all applicable laws, Tenant shall be permitted, at its sole cost and expense, to contract with telecommunications and internet providers of its choice to provide telecommunications and internet service to the Premises (each, a “Communications Provider”). Landlord agrees that, if Tenant contracts with Communications Providers as voice/internet providers, Landlord will enter into such reasonable contracts with such Communications Provider to provide access at Tenant’s sole cost and expense. Any risers, wiring or infrastructure reasonably required to meet Tenant’s excess electrical requirements shall, upon Tenant’s written request, be installed by Landlord, at Tenant’s sole cost, if, in Landlord’s reasonable judgment, the same shall not (i) adversely affect the Project, the Building or the Premises, (ii) cause or create a dangerous or hazardous condition, (iii) entail excessive or unreasonable alterations, repairs or expenses, or (iv) interfere with or disturb other tenants or occupants of the Building. Tenant shall be obligated to pay Landlord a construction management fee of five percent (5%) of the costs and expenses of such installations.
In the event Tenant terminates this Lease as to any portion of the Premises, Landlord may elect to have electrical power or other utilities to the Premises be provided by Landlord utilizing a submeter system or by installing separate meters. If Landlord elects to utilize a submeter system, Landlord will separately state the cost of Tenant’s share of the electrical power on the Monthly Rent Invoice and Tenant will pay the amount to Landlord as Additional Rent. Landlord will include a copy of the monthly report from the submeter system with the Monthly Rent Invoice and will report Tenant’s kilowatt usage for the period billed. Landlord may, in its reasonable discretion and at Tenant’s sole cost and expense, install supplemental equipment and/or separate metering applicable to Tenant’s excess usage or loading. Tenant shall pay Landlord
for such excess usage as Additional Rent. Notwithstanding the foregoing, Tenant, at no charge to Tenant, shall have from time to time (i) the right to use existing Building’s risers and/or install additional risers for Tenant’s cabling (provided such use does not interrupt or interfere with the rights of other tenants and quiet enjoyment of other tenants in the Building), and (ii) unrestricted access to all areas within the Premises and Building, including the Building’s MPO (main point of entry), to install the required infrastructure to service Tenant’s IT and telecommunications requirements.
Section 4.4 Insurance Policies.
(a) Liability Insurance. From the Effective Date through the Expiration Date, Tenant shall maintain a policy of commercial general liability insurance (sometimes known as broad form commercial general liability insurance) insuring Tenant against liability for bodily injury, property damage (including loss of use of property) and personal injury arising out of the operation, use or occupancy of the Premises and Project. Tenant shall name Landlord and upon notification by Landlord to Tenant, Landlord’s boards, directors, officers, employees, agents and subagents, and such other related parties as Landlord may request, individually and collectively, as additional insureds under such policy. Tenant shall also name any lender whose loan is secured by the Project. The initial amount of such insurance shall be Five Million Dollars ($5,000,000) per occurrence and shall be subject to commercially reasonable periodic increase based upon increases consistent with the increases required of other landlords of similar buildings, similar premises and similar tenants in the Southeast Valley Submarket. The liability insurance obtained by Tenant under this Section 4.4(a) shall (i) be primary and non-contributing; (ii) contain cross-liability clauses; and (iii) insure Landlord against Tenant’s performance under Section 5.8, if the matters giving rise to the indemnity under Section 5.08 result from the negligence or other acts or failure to act where a duty to act exists on the part of Tenant and are covered by a standard CGL policy. The amount and coverage of such insurance shall not limit Tenant’s liability nor relieve Tenant of any other obligation under this Lease. Tenant shall be liable for payment of any deductible amount under Tenant’s insurance policies maintained pursuant to this Section 4.4. Landlord may also obtain commercial public liability insurance in an amount and with coverage determined by Landlord insuring Landlord against liability arising out of ownership, operation, use or occupancy of the Project but not in excess of policy limits or deductibles carried by landlords of Comparable Buildings. The policy obtained by Landlord shall not be contributory and shall not provide primary insurance. Tenant shall also obtain such other insurance and in such amounts as may from time to time be reasonably required by Landlord against other insurable hazards which at the time are customarily insured against in the case of premises similarly situated in Maricopa County, Arizona, with due consideration for the height and type of building, its construction, use and occupancy.
(b) Property and Rental Income Insurance. During the Lease Term, Landlord shall maintain policies of insurance covering loss of or damage to the Building in the full amount of its replacement value consistent with policies carried by landlords of Comparable Buildings. Such policy shall contain an Inflation Guard Endorsement and shall provide protection against all perils included within the classification of fire, extended coverage,
vandalism, malicious mischief, special extended perils (all-risk), sprinkler leakage and any other perils which Landlord deems reasonably necessary. Landlord shall have the right to obtain flood and earthquake insurance if required by any lender holding a security interest in the Building but not in excess of policy limits or deductibles carried by landlords of Comparable Buildings. Landlord shall not obtain insurance for Tenant’s fixtures, furnishings, equipment, other personal property, or building improvements installed by or for Tenant on the Premises except fixtures and building improvements Landlord elects to insure in Landlord’s sole discretion. Tenant shall maintain policies of insurance coverage loss or damage to Tenant’s fixtures, furnishings, equipment, other personal property and building improvements installed by or for Tenant on the Premises in the full amount of their replacement value. During the Lease Term, Landlord shall also maintain (i) a rental income insurance policy, with loss payable to Landlord, in an amount equal to one year’s Base Rent, plus, to the extent available and deemed appropriate by Landlord, the Additional Rent, including without limitation estimated real property taxes and insurance premiums and (ii) such other insurance coverage as is customarily carried by landlords of Comparable Buildings. In no event shall Tenant be required to carry earthquake or sprinkler leakage coverage. Tenant or Tenant’s insurance shall be liable for the payment of Tenant’s Pro-Rata Share of any deductible amount under Landlord’s insurance covering damage to the Building or Tenant’s insurance policies maintained pursuant to this Section 4.4, in an amount not to exceed Fifty Thousand Dollars ($50,000). Tenant shall not do or permit to be done anything which invalidates any such insurance policies.
(c) Automobile Insurance. If Tenant utilizes vehicles in connection with the operation of its business at the Premises, Tenant shall keep and maintain commercial automobile liability insurance insuring all owned, non-owned and hired vehicles used in the conduct of Tenant’s business and operated upon or parked upon the Premises and Project with limits of liability not less than One Million and 00/100 Dollars ($1,000,000.00) combined single limit for both bodily injury and property damage. Tenant shall increase the foregoing limits if Landlord deems such increase desirable to protect Tenant and/or Landlord and is consistent with requirements of landlords of Comparable Buildings. Tenant shall name Landlord, Landlord’s property management company and any lender whose loan is secured by the Project as additional insureds under such policy.
(d) Tenant’s Worker’s Compensation Insurance. Tenant shall keep and maintain a standard form worker’s compensation and employer’s liability insurance covering all Tenant’s employees for injury or illness suffered in the course of or arising out of their employment, providing statutory worker’s compensation benefits and employer’s liability limits of not less than One Million and 00/100 Dollars ($1,000,000.00).
(e) Tenant Activities. Tenant shall not engage in or permit any activity which will cause the cancellation or increase the existing premium rate of fire, liability, or other insurance on or relating to the Premises, the Building or the Project. In the event Tenant engages in or permits any activity that causes an increase in the existing premium rate of any such insurance, in addition to any other remedies available to Landlord under the terms of this Lease, Landlord shall have the right to demand and receive from Tenant an amount equal to the increase in the existing premium rate. Tenant shall not sell or permit to remain in or about the
Premises any article that may be prohibited by commercially reasonable special form, fire, and extended coverage insurance policies. Tenant shall comply with all commercially reasonable requirements pertaining to the use of the Premises necessary for maintenance of such fire and public liability insurance as Landlord may from time to time obtain for the Premises, the Building, or the Project.
(f) Payment of Premiums. Tenant shall timely pay all premiums for the insurance policies obtained by Tenant and described in this Section 4.4 prior to the date due (“Premium Statement”). For any insurance policies maintained by Tenant hereunder, Tenant shall provide Landlord with written evidence of payment of the premiums thereunder prior to the expiration date of such insurance policy. Premiums for insurance policies obtained by Landlord and described in Sections 4.4(a) and 4.4(b) shall be paid by Landlord and included within Operating Expenses as set forth in more detail in Section 4.1(d).
(g) Intentionally deleted.
(h) General Insurance Provisions.
(i) Before the Effective Date, Tenant shall deliver to Landlord a copy of any policy of insurance which Tenant is required to maintain under this Section 4.04. Prior to the expiration of any such policy, Tenant shall deliver to Landlord a renewal of such policy. As an alternative to providing a policy of insurance, Tenant shall have the right to provide Landlord a certificate of insurance from the insurance company showing that the insurance which Tenant is required to maintain under this Section 4.4 is in full force and effect and containing such other information which Landlord reasonably requires.
(ii) Any insurance which Tenant is required to maintain under this Lease shall include a provision which requires the insurance carrier to give Landlord not less than thirty (30) days’ written notice prior to any cancellation or modification of such coverage. If the insurer is unable or unwilling to provide such notice to Landlord, Tenant shall be required to provide notice to Landlord not less than twenty (20) days prior to any cancellation or modification of such coverage.
(iii) If Tenant fails to deliver any policy, certificate or renewal to Landlord required under this Lease within the prescribed time period or if any such policy is cancelled or coverage is reduced below what is required hereunder during the Lease Term without Landlord’s consent, Landlord may obtain such insurance, in which case Tenant shall reimburse Landlord for the cost of such insurance within thirty (30) days after receipt of a statement that indicates the cost of such insurance.
(iv) Tenant shall maintain all insurance required under this Lease with companies holding an “A.M. Best’s Financial Strength Rating” of A- or better and a Best’s Financial Size Category of VII or better as set forth in the most current issue of “A.M. Best’s Credit Rating” as set forth in the most current issue of “A.M Best’s Credit Rating” and that are authorized to do business in Arizona. Coverage must be written on an occurrence basis and shall be maintained without interruption from the date of the commencement of this Lease
until the date of termination of this Lease. Landlord and Tenant acknowledge the insurance markets are rapidly changing and that insurance in the form and amounts described in this Section 4.04 may not be available in the future. Tenant acknowledges that the insurance described in this Section 4.04 is for the primary benefit of Landlord. If at any time during the Lease Term, Tenant is unable to maintain the insurance required under the Lease, Tenant shall nevertheless maintain insurance coverage which is customary and commercially reasonable in the insurance industry for Tenant’s type of business, as that coverage may change from time to time. Landlord makes no representation as to the adequacy of such insurance to protect Landlord’s or Tenant’s interests. Landlord and Tenant acknowledge that Tenant shall have the right to cover its insurance requirements set forth in this Section 4.04 with a combination of general liability, umbrella insurance and blanket coverages, provided that the amounts (based upon the general liability policy and the specific allocations of the umbrella policy to the Premises) and other conditions required to be satisfied by the terms of this Section 4.04 are satisfied by such coverages.
(v) Landlord and Tenant each hereby waive any and all rights of recovery against the other, and against the officers, employees, agents or representatives of the other, for loss of or damage to the Premises, the Building, the Project, its property or the property of others under its control, if such loss or damage is covered by any insurance policy in force (whether or not described in this Lease) at the time of such loss or damage (or would have been covered had the insurance required by this Lease been carried). Upon obtaining the required policies of insurance, Landlord and Tenant shall give notice to the insurance carriers of this mutual waiver of subrogation. Each policy of property insurance obtained by Landlord and Tenant pursuant to the provisions of this Lease shall include a waiver of the insurer’s right of subrogation against Landlord or Tenant (as the case may be), and shall contain an endorsement to the effect that any loss payable under such policy shall be payable notwithstanding any act or negligence of Landlord or Tenant (as the case may be), or any agent, contractor, employee or invitee of Landlord or Tenant (as the case may be), which might, absent such agreement, result in the forfeiture of payment for such loss. If a party either does not insure for full replacement value or fails to obtain the insurance required hereunder, same shall not affect this waiver. If either party fails to carry the amounts and types of insurance required to be carried by it pursuant to this Section 4.4, in addition to any remedies the other party may have under this Lease, such failure shall be deemed to be a covenant and agreement by such party to self-insure with respect to the type and amount of insurance which such party so failed to carry, with full waiver of subrogation with respect thereto (provided that nothing contained herein shall be construed as granting Landlord or Tenant the right to self-insure the obligations set forth in this Section 4.4).
(vi) None of the requirements contained herein as to the types, limits, or Landlord’s approval of insurance coverage to be maintained by Tenant are intended to and shall not in any manner, limit, qualify, or quantify the liabilities and obligations assumed by Tenant under this Lease or any other agreement with the Landlord, or otherwise provided by law.
(vii) Failure of Tenant to provide insurance as herein required or failure of Landlord to require evidence of insurance or to notify Tenant of any breach by Tenant of the requirements of this Section 4.4 shall not be deemed to be a waiver of any of the terms of
this Lease, nor shall they be deemed to be a waiver of the obligation of the Tenant to defend, indemnify, and hold harmless the indemnified parties as required in this Lease. The obligation to procure and maintain any insurance required is a separate responsibility of Tenant and independent of the duty to furnish a copy or certificate of such insurance policies.
ARTICLE FIVE: USE OF PROPERTY
Section 5.1 Permitted Uses. Tenant may use the Premises only for the Permitted Uses set forth in Section 1.06 above. Such use by Tenant shall be on a non-exclusive basis with other tenants of the Project entitled to such non-exclusive use.
Section 5.2 Manner of Use/Compliance with Laws. Tenant shall not cause or permit the Premises to be used in any way which constitutes a violation of any law, ordinance (including but not limited to zoning ordinance), or governmental regulation or order, or which unreasonably interferes with the rights of tenants of the Project, or which constitutes a nuisance or waste. Tenant shall be responsible for ensuring that its use of the Premises is permitted by all applicable zoning and land use regulations and restrictions of record. Tenant shall obtain and pay for all permits, including a Certificate of Occupancy, required for Tenant’s occupancy of the Premises and, subject to the cost of complying being subject to Section 4.1 above and this Section 5. 2 below, shall promptly take all actions necessary to comply with all applicable statutes, ordinances, rules, regulations, easements, covenants, restrictions, orders and requirements regulating Tenant’s operations and the use by Tenant of the Premises, Building or Project, including the Occupational Safety and Health Act. Tenant shall further be responsible to comply with all laws, rules, statutes, regulations or ordinances of any governmental agency or body having jurisdiction, including the ADA (as defined below), as to all Tenant Improvements and subsequent improvements installed or constructed by Tenant and Tenant’s personal property. At its sole cost and expense, Tenant shall, except as otherwise expressly provided in this Lease or in the Work Letter, promptly comply with all such applicable laws and make all alterations to (A) the Premises, which alterations relate to (i) Tenant’s use of the Premises for other than general office purposes or (ii) the Tenant Improvements or other improvements installed by Tenant and located in the Premises or any alterations thereof, and (B) the base Building, but as to the base Building, only to the extent such alterations are triggered by Tenant Improvements, other improvements or alterations made by Tenant to the Premises, or Tenant’s use of the Premises for a non-general office use. Landlord shall comply with all applicable laws relating to the Project and base Building, provided that compliance with such applicable laws is not the responsibility of Tenant under this Lease, would unreasonably and materially affect the safety of Tenant’s parties or create a significant health hazard for Tenant’s parties or otherwise materially adversely interfere with or materially adversely affect Tenant’s Permitted Use and enjoyment of the Premises, or the parking. Landlord shall be permitted to include in Operating Expenses any costs or expenses incurred by Landlord under this Section 5.2 to the extent consistent with, and amortized to the extent required by, the provisions of this Lease.
Section 5.3 Waste, Nuisance, Etc. Tenant shall not commit or permit any waste on the Premises or in any manner deface or injure the Premises, the Building, or the Project, and shall not use the Premises for the production or distribution of pornographic materials or other
unlawful purposes, or commit or permit on the Premises or any part of the Project any offensive, noisy or dangerous activity or other nuisance or other activity or thing which may disturb the quiet enjoyment or peaceable possession of any other tenant in the Project. Tenant shall not overload the floor of the Premises beyond the limit reasonably established by Landlord. Tenant shall not employ any sound emitting device in or about the Premises that is audible outside the Premises, except fire and burglar alarms.
Section 5.4 Trash. Tenant shall place all refuse or trash in receptacles provided by Landlord in the Common Areas.
Section 5.5 Signs, Exterior, Etc. Tenant may, at Tenant’s sole cost and expense, install maximum signage on the Building (including a sign on the Building roof visible from above the Building) and the Building monument sign in a manner consistent with the Landlord reasonably approved building standards and subject to approval by all governing authorities. If Tenant exercises the Lease Termination Right as to only a portion of the Premises or an Option to Extend as to only a portion of the Premises, Tenant’s signage rights shall be reduced proportionately but Tenant shall be entitled to Tenant’s Pro-Rata Share of allowed Building signage and roof signage; provided, however, so long as Tenant leases at least one (1) full floor of the Building, Tenant shall have first pick of the side for Tenant’s Building-top signage (which shall be exclusive for such side) and Tenant shall be entitled to the top slot on the Building monument sign. Tenant’s signage shall be in compliance with Landlord’s existing sign criteria at the Premises and all applicable easements, covenants, conditions and restrictions and applicable laws, statues and ordinances. Tenant shall be responsible for the payment of any review fee imposed by the owner’s association for such approval and said fee shall be submitted by Tenant directly to the owner’s association concurrently with any signage approval request. Tenant shall not place any additional signs on the exterior of the Premises without Landlord’s prior written consent, which consent shall not be unreasonably withheld or delayed. Tenant shall not display or exhibit any products, goods, wares or merchandise and shall not distribute advertising materials within the Project. Tenant shall not erect or place on or about the exterior of the Building wherein the Premises are located or the Project, or on any windows, glass partitions or doors thereof, any signs or other written information unless approved in writing by Landlord. Tenant shall not conduct or permit any auctions or sheriff’s sales at the Premises. In the event the Building is occupied by multiple Tenants, Landlord shall provide and maintain in the lobby of the main entrance level of the Building a directory listing all tenants in the Building. The directory shall list each tenant’s name and its location in the Building designated by floor or by such designation as the Landlord may deem reasonably appropriate. Tenant shall not store products, containers or merchandise outside of the Premises or inside of the Premises which are visible from the Common Areas. In addition to installation of a sign and subject to Landlord’s reasonable approval as to the sign and location of such equipment, Tenant shall the right to utilize a portion of the roof for installation of additional heat and air conditioning units, a vent, antennas and/or satellite dishes. Any and all roof penetrations shall be performed by the contractor that provides Landlord with its roof warranty as long as such contractor is competitively priced, and the cost associated therewith shall be paid by Tenant. Tenant shall be solely responsible to fully obtain all consents and to comply with all obligations under any roof warranty as to the installation, maintenance, repair and removal of such equipment, shall utilize
such contractors as required under the roof warranty as long as such contractor is reasonably priced, and shall be solely responsible, at its sole cost and expense, to fix any damage, leaks or wear and tear on the roof relative to the same. Any such roof penetration or alteration by Tenant shall be done in a manner which will not interfere with the maintenance of the Building by Landlord in an attractive, first class and fully operative condition, shall not void the roof warranty, and shall be installed in such manner that shall not damage the structure of the Building. Failure to comply with this Section 5.05 shall be a material breach of the Lease.
Section 5.6 Rules and Regulations. Tenant, its employees, agents, contractors, customers and invitees, shall comply with the Rules and Regulations of the Project attached to the Lease as Exhibit C and made a part hereof by reference, and with such modifications thereto as Landlord, in its reasonable discretion, may hereafter make for the Project; provided, however, that such Rules and Regulations shall not contradict or abrogate any right or privilege herein expressly granted to Tenant or the Permitted Uses. Tenant agrees to faithfully observe and comply with the Rules and Regulations and all modifications thereto from time to time in effect, and any violation of such Rules and Regulations by Tenant, its employees, agents, contractors, customers or invitees shall constitute a breach of this Lease, subject to applicable notice and cure periods. Landlord shall not be responsible to Tenant for the non-performance by any other tenant or occupant of the Project of the Rules and Regulations or any modifications thereof; provided, however, that Landlord shall use commercially reasonable efforts (but not including the institution of legal proceedings) to enforce such non-performance against the other occupants and tenants of the Project, to the extent such non-performance has a material adverse effect on Tenant’s use of or access to the Premises.
Section 5.7 Hazardous Materials. As used in this Lease, the term “Hazardous Material” means any flammable items, explosives, radioactive materials, hazardous or toxic substances, material or waste or related materials, including any substance defined as or included in the definition of “hazardous substances”, “hazardous wastes”, “hazardous materials” or “toxic substances” now or subsequently regulated under any applicable federal, state or local laws or regulations, including without limitation petroleum-based products, paints, solvents, lead, cyanide, DDT, printing inks, acids, pesticides, ammonia compounds and other chemical products, asbestos, PCBs and similar compounds, and including any different products and materials which are subsequently found to have adverse effects on the environment or the health and safety of persons. Tenant shall not cause or permit any Hazardous Material to be generated, produced, brought upon, used, stored, treated or disposed of in or about the Premises by Tenant, its agents, employees, contractors, sublessees or invitees without the prior written consent of Landlord; provided, however, Tenant shall be allowed to store and use nominal amounts of commercially available cleaning and standard office products without the consent of Landlord. For other than such products, Tenant shall provide Landlord with ten (10) days advance written notice, setting forth an itemization of all such Hazardous Materials, with a detailed description thereof, and the intended volume, location and use of such Materials at the Premises, prior to the use or allowance of any other products, materials or substances which are Hazardous Materials as defined above or which have or may have adverse effects on the environment or the health and safety of persons. Landlord shall be entitled to take into account such other factors or facts as Landlord reasonably deems to be relevant in determining whether to grant or withhold consent to
Tenant’s proposed activity with respect to Hazardous Material. In no event, however, shall Landlord be required to consent to the installation or use of any storage tanks in or on the Premises. Tenant shall have no obligation to investigate or remediate any Hazardous Materials located in or as part of the base building as of the Commencement Date or in any areas of the Project located outside the Premises that were not placed thereon or therein, or damaged, exacerbated (but only to the extent exacerbated) or disturbed by Tenant or any of Tenant’s agents, contractors, employees, licensees or invitees. Landlord covenants that during the Lease Term, Landlord shall not cause any Hazardous Materials to be introduced in, on or under the Project by Landlord, its agents, employees or contractors in violation of applicable laws in effect at the time of such introduction and Landlord shall comply with all applicable laws with respect to Hazardous Materials in accordance with, and as required by, the terms of this Lease. In addition, Operating Expenses shall not include the cost of remediation of any Hazardous Materials to the extent (A) existing on those portions of the Project owned by Landlord as of the date of execution of this Lease in violation of applicable laws at such time (including asbestos), (B) resulting from asbestos, and/or (C) not caused by Tenant or its agents, contractors, employees, licensees or invitees. For purposes hereof, “costs of remediation” shall mean the costs associated with the investigation, testing, monitoring, containment, removal, remediation, cleanup and/or abatement of any release of any such Hazardous Materials described in the immediately preceding sentence as necessary to comply with any applicable laws. Landlord represents and warrants to Tenant, to the best of Landlord’s knowledge, that the Premises and Project are not in violation of any applicable laws relating to the presence of Hazardous Materials.
Section 5.8 Indemnity. Tenant shall indemnify Landlord against and hold Landlord harmless from any and all costs, claims or liability (“Claims”) arising from: (a) Tenant’s use of the Premises; (b) the conduct of Tenant’s business in the Premises or anything else done or permitted by Tenant to be done in or about the Premises, including any contamination of the Premises or any other property resulting from the presence or use of Hazardous Material caused or permitted by Tenant; (c) any breach or default in the performance of Tenant’s obligations under this Lease; (d) any misrepresentation or breach of warranty by Tenant under this Lease; or (e) other negligent or willful acts or omissions of Tenant. Tenant shall defend Landlord against any such cost, claim or liability at Tenant’s expense with counsel reasonably acceptable to Landlord. As a material part of the consideration to Landlord, Tenant assumes all risk of damage to property or injury to persons in or about the Premises arising from any cause, and Tenant hereby waives all Claims in respect thereof against Landlord, except for any Claim arising out of Landlord’s or any Landlord parties’ negligence or willful misconduct. As used in this Section, the term “Tenant” shall include Tenant’s employees, agents, contractors, invitees and guests, if applicable. Landlord hereby indemnifies, defends, protects and holds Tenant harmless from any claim to any property to the extent such claim is covered by such insurance (or would have been covered if Landlord had carried the insurance required hereunder), even if resulting from the negligent acts, omissions, or willful misconduct of the Tenant and for a breach of this Lease by Landlord. Notwithstanding anything in this Lease to the contrary, nothing in this Lease shall impose any obligations upon Landlord or Tenant to be responsible or liable for, and each hereby releases the other from all liability for, consequential damages, other than those consequential damages incurred by Landlord in connection with (i) a holdover of the Premises by Tenant after
the expiration or earlier termination of this Lease, and (ii) any repair, physical construction or improvement work performed by or on behalf of Tenant in the Project.
Section 5.9 Landlord’s Access. Landlord or its agents may enter the Premises at all reasonable times upon forty-eight (48) hours prior written notice to Tenant (except in the event of emergency) (a) during the last year of the Lease Term to show the Premises to potential buyers, investors, tenants or other parties, (b) to do any other act or to inspect and conduct tests in order to monitor Tenant’s compliance with all applicable environmental laws and all laws governing the presence and use of Hazardous Material, or (c) or for any other purpose Landlord deems reasonably necessary. Landlord may make any such entries without the abatement of Rent, except as otherwise provided in this Lease, and may take such reasonable steps as required to accomplish the stated purposes; provided, however, except for emergencies, any such entry shall be performed in an expeditious manner so as not to unreasonably interfere with Tenant’s use of the Premises. Landlord use commercially reasonable efforts to schedule entries into the Premises with so that Tenant, at Tenant’s option, may provide a representative to accompany Landlord. Landlord agrees to take no photographs of any active work areas in the Premises without Tenant’s prior consent and agrees that any information obtained by any entry into the Premises by Landlord or its employees, agents or contractors shall be kept strictly confidential. Even in an emergency situation, Landlord shall use commercially reasonable efforts to minimize any disruption to Tenant’s business operations. Notwithstanding anything to the contrary set forth herein, Tenant may designate certain areas of the Premises as “Secured Areas” should Tenant require such areas for the purpose of securing certain valuable property or confidential information. In connection with the foregoing, Landlord shall not enter such Secured Areas except in the event of an emergency or in connection with alterations to the premises of another tenant of the Building subject to Landlord’s compliance with the terms of this Section 5.9. Landlord shall not clean any area designated by Tenant as a Secured Area and shall only maintain or repair such secured areas to the extent (i) such repair or maintenance is required in order to maintain and repair the building structure and/or the building systems; (ii) as required by applicable laws, or (iii) in response to specific requests by Tenant and in accordance with a schedule reasonably designated by Tenant, subject to Landlord’s reasonable approval. Landlord may place customary “For Sale” or “For Lease” signs on the Premises, the Building and/or Project, as applicable.
Section 5.10 Quiet Possession. If Tenant pays the rent and complies with all other terms of this Lease within applicable notice and cure periods, Tenant may occupy and enjoy the Premises for the full Lease Term, subject to the provisions of this Lease.
Section 5.11 Tenant ADA Obligations. Landlord represents and warrants that upon the Delivery Date the shell Building (including all restrooms existing as of the Effective Date) and the Common Areas existing as of the Effective Date shall comply with the requirements of Title III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12181, et seq., the Provisions Governing Public Accommodations and Services Operated by Private Entities), and all regulations promulgated thereunder and all local or state laws, codes and regulations (the “ADA”) and shall promptly remedy any violation at Landlord’s sole cost and expense. At all times during the term of this Lease, Tenant, at Tenant’s sole cost and expense, shall cause all
alterations and improvements in the Premises (excluding the Building shell, restrooms and the Common Areas existing as of the Effective Date), but including those improvements installed by Tenant or Landlord as Tenant Improvements or otherwise installed by Tenant as an alteration, addition or improvement to the Premises), and Tenant’s use and occupancy of the Premises, and Tenant’s performance of its obligations under this Lease, to comply with the ADA, and all amendments, revisions or modifications thereto now or hereafter adopted or in effect in connection therewith and to take such actions and make such alterations and improvements as are necessary for such compliance; provided, however, that Tenant shall not make any such alterations or improvements except upon Landlord’s prior written reasonable consent pursuant to the terms and conditions of this Lease. If Tenant fails to diligently take such actions or make such alterations or improvements as are necessary for such compliance, Landlord may, but shall not be obligated to, take such actions and make such alterations and improvements and may recover all of the costs and expenses of such actions, alterations and improvements from Tenant as Additional Rent. Notwithstanding anything in this Lease to the contrary, no act or omission of Landlord, including any approval, consent or acceptance by Landlord or Landlord’s agents, employees or other representatives, shall be deemed an agreement, acknowledgment, warranty or other representation by Landlord that Tenant has complied with the ADA or that any action, alteration or improvement by Tenant complies or will comply with the ADA or constitutes a waiver by Landlord of Tenant’s obligations to comply with the ADA under this Lease or otherwise.
Section 5.12 Use of Common Areas. Tenant shall have the nonexclusive right (in common with other tenants, if any, to whom Landlord has granted or may grant such rights) to use the Common Areas for the purposes intended, subject to such reasonable non-discriminatory rules and regulations as Landlord may establish from time to time, including but not limited to, charges for violations of such rules and regulations. Tenant shall abide by such rules and regulations and shall use its commercially reasonable effort to cause others who use the Common Areas with Tenant’s express or implied permission to abide by Landlord’s rules and regulations. At any time, Landlord may temporarily close any Common Areas to perform any acts in the Common Areas as, in Landlord’s reasonable judgment, are desirable to improve the Project and such improvements do not unreasonably interfere with Tenant’s access to the Premises or its parking rights. Tenant shall not interfere with the rights of Landlord, other tenants or any other person entitled to use the Common Areas. Tenant shall pay all costs, expenses, fines, penalties or damages that Landlord may incur by reason of Tenant’s failure to comply with the provisions of this Section 5.12 and, at Tenant’s sole cost and expense, Tenant shall indemnify, defend and hold Landlord harmless for, from and against all losses and liabilities arising from such non-compliance, utilizing counsel reasonably satisfactory to Landlord.
Access to certain Common Areas may be temporarily restricted from time to time by Landlord for repair, maintenance, construction, and changes in the Land and Buildings comprising the Project. Such activities and changes are permitted if they do not materially affect Tenant’s use of the Premises or its parking rights. Landlord shall maintain the Common Areas in good order, condition and repair unless such maintenance is assumed by another individual or entity pursuant to any applicable covenants, conditions, restrictions or easements.
In the event Landlord determines that Tenant’s use of the Common Areas is disproportionate to the use by other tenants in the Project, Landlord reserves the right: (i) to charge Tenant extra for said increased usage which charge shall reflect the increased cost of Landlord’s maintenance of the Common Areas due to Tenant’s usage; (ii) to provide separate trash receptacles for Tenant which cost shall be the sole responsibility of Tenant and shall be paid by Tenant as Additional Rent; and/or (iii) to require Tenant to arrange for its own separate trash receptacles and collection at Tenant’s sole cost and expense using a contractor satisfactory to Landlord.
Section 5.13 Intentionally Omitted.
Section 5.14 Specific Provision re: Vehicle Parking. Tenant shall be entitled to use only the number of vehicle parking spaces in the Project allocated to Tenant in Section 1.10 of the Lease without paying any Additional Rent with respect to the uncovered and unreserved spaces and uncovered reserved spaces. Tenant shall be allowed to use the parking areas serving the Project as Tenant sees fit, including restriping and/or valet, so long as Tenant occupies the entire Building and complies with applicable laws. Tenant acknowledges and agrees that Landlord may assign parking spaces at a later date on a non-discriminatory basis subject to Tenant’s reasonable approval. Tenant’s parking shall not be reserved (except as provided in Section 1.10) and Tenant’s parking shall be limited to vehicles no larger than standard size automobiles or pickup utility vehicles. Notwithstanding the foregoing, in the event Tenant is granted reserved parking pursuant to this Lease, Landlord shall use commercially reasonable efforts to enforce the same, and the costs and expenses associated with such enforcement requested by Tenant shall be included within the Operating Expenses as a direct expense to Tenant (but the cost of any signage or other control mechanisms employed by Landlord to control parking shall be included within Operating Expenses not as a direct expense to Tenant), whether or not Tenant is leasing the entire Building, and such costs and expenses shall be excluded from Controllable Operating Expenses. Landlord shall be entitled to grant reserved parking spaces to other tenants of the Project in its reasonable non-discriminatory discretion, provided Tenant continues to have access to the required number of parking spaces as provided in Section 1.10 above and any reserved spaces are equitably allocated throughout the Project. Tenant shall not cause or allow any large trucks or other large vehicles to be parked within the Project other than for unloading purposes. Temporary parking of large delivery vehicles in the Project may be permitted by the rules and regulations reasonably established by Landlord. Vehicles shall be parked only in striped parking spaces and not in driveways, loading areas or other locations not specifically designated for parking. Handicapped spaces shall only be used by those legally permitted to use them. Tenant shall not permit any equipment, structure or other object to be placed in any areas designated for vehicle parking or the Common Areas. In the event Landlord does permit any equipment, structure or other object in any areas designated for vehicle parking, any parking spaces used by Tenant for such purposes shall correspondingly reduce the total number of parking spaces allotted Tenant pursuant to this Lease. If Tenant parks more vehicles in the parking area than the number set forth in Section 1.10 of this Lease and Tenant does not lease the entire Building, such conduct shall be a material breach of this Lease if Tenant fails to rectify such matter within five (5) business days following written notice from Landlord of such conduct, or provided more than two (2) such notices have been given within
any consecutive twelve (12) month period, in addition to Landlord’s other remedies under the Lease, Tenant shall pay a daily charge equal to $2.50 for each such additional vehicle.
Section 5.15 Exterior Improvements. Tenant shall not be permitted to make any improvements outside of Tenant’s Premises unless approved by Landlord in its reasonable discretion. Any such improvements approved by Landlord shall be at Tenant’s sole cost and expense or subject to the Tenant Allowance provided for in the Work Letter attached hereto. In the event the improvements by Tenant reduce the parking available at the Building, the parking spaces allocated to Tenant in Section 1.10 shall be reduced accordingly.
ARTICLE SIX: ARTICLE SIX: CONDITION OF PREMISES; MAINTENANCE, REPAIRS AND ALTERATIONS
Section 6.1 Tenant’s Acknowledgement; Landlord’s Warranties. Tenant acknowledges, represents, warrants and agrees to the following, except as otherwise provided herein: (i) Tenant shall be responsible for making its own inspection and investigation of the Premises, the Building wherein the Premises are located, and the Project, (ii) Tenant shall be responsible for investigating and establishing the suitability of the Premises for Tenant’s intended use thereof, and all zoning and regulatory matters pertinent thereto, and (iii) Tenant is leasing the Premises “AS IS” based on its own inspection, inquiry and investigation regarding the condition of the Premises, Building and Project and not in reliance on any statement, representation, inducement or agreement of Landlord or any Broker except as expressly set forth herein. Except as otherwise provided herein, by taking possession of the Premises, Tenant shall be deemed to have accepted the Premises as being in satisfactory condition and completed in accordance with any requirements of Landlord set forth herein, exclusive of latent defects not reasonably discoverable by inspection prior to the Effective Date. Except as otherwise provided herein, Tenant accepts the Premises in its condition as of the Effective Date of the Lease, other than latent defects, subject to all recorded matters, laws, ordinances, and governmental regulations and orders of which Landlord has provided Tenant written notice. Except as provided herein, Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation as to the condition of the Premises or the suitability of the Premises for Tenant’s intended use. Landlord hereby represents and warrants that upon the Delivery Date the shell Building, restrooms and Common Areas shall comply with all applicable building codes then in effect and, to the best of Landlord’s knowledge, the Premises and Project is not in violation of any federal, state or local law, ordinance or regulation relating to Hazardous Materials. Tenant shall notify Landlord within one hundred eighty (180) days following the Delivery Date of any violation of the foregoing warranty whereupon Landlord shall, as its sole cost and expense, correct such deficiency. Notwithstanding anything to the contrary contained in this Lease, if Tenant exercises the Partial Premises Termination Right, Landlord agrees to be responsible, at its sole cost and expense, for the cost to improve the corridor common area (i.e., flooring, ceiling, lighting, etc.) but the cost of the demising wall construction and required tenant exit door(s) shall be a Tenant expense, subject to reimbursement from the Tenant Allowance. In addition, in the event Tenant exercises the Partial Premises Termination Right, at Tenant’s request, Landlord agrees to create new entry/exit doors to the west area of the Building directly into the Partial Premises, and Tenant agrees to reimburse (which can be paid out of the Tenant Allowance)
Landlord for such costs and expenses up to $100,000.00 (which work shall include the doors, sidewalk and concrete entries, new building overhang, lighting, relocations of plumbing and sprinklers, etc.). In the event Tenant elects to have Landlord create new entry/exit doors to the west area of the Building directly into the Partial Premises, the corridor common area at the south entrance to the Building shall be for the exclusive use of Tenant, its employees and visitors.
Section 6.2 Exemption of Landlord from Liability. Landlord shall not be liable for any damage or injury to the person, business (or any loss of income therefrom), goods, wares, merchandise or other property of Tenant, Tenant’s employees, invitees, customers or any other person in or about the Premises, whether such damage or injury is caused by or results from: (a) fire, steam, electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures or any other cause; (c) conditions arising in or about the Premises or upon other portions of the Project wherein the Premises is located, or from other sources or places; or (d) any act or omission of any other tenant of the Project wherein the Premises is located. Landlord shall not be liable for any such damage or injury even though the cause of or the means of repairing such damage or injury are not accessible to Tenant. The provisions of this Section 6.2 shall not, however, exempt Landlord from liability for Landlord’s negligence or willful misconduct.
Section 6.3 Landlord’s Obligations.
(a) Except as provided in Article Seven (Damage or Destruction) and Article Eight (Condemnation) and unless such maintenance or repairs are required because of any negligent or intentional act or omission of Tenant or its agents, employees, contractors, customers or invitees, Landlord shall keep the following in good order, condition and repair, reasonable wear and tear excluded: the foundations, slabs, elevators, stairs, restrooms existing as of the Effective Date, exterior walls and roof of the Premises (including painting the exterior surface of the exterior walls of the Premises not more often than once every five (5) years, if necessary); the heating and air conditioning systems servicing the Premises (“HVAC System”) to the extent not covered by the preventive maintenance contract to be maintained by Tenant in Section 6.4(b) below; parking lot surfaces; and all components of electrical, mechanical, sprinkler, fire life safety and plumbing and other building systems and equipment not constructed by Tenant and improvements located outside the interior of the Premises. However, Landlord shall not be obligated to maintain or repair interior windows, doors, plate glass, the interior surfaces of exterior walls or other interior improvements in the Building or Premises, or to provide janitorial services to the Premises or interior Common Areas during the time period that Tenant is leasing the entire Building (and, if the Building is multi-tenant, at Tenant’s request, Landlord shall provide janitorial services as part of Operating Expenses for Common Areas during such time as Tenant is not leasing the entire Building). Landlord shall make repairs under this Section 6.3 within a reasonable time after receipt of written notice from Tenant of the need for such repairs. Notwithstanding any of the terms and conditions set forth in this Lease to the contrary, if Tenant provides notice (or oral notice in the event of an “emergency,” as that term is defined, below) to Landlord of an event or circumstance which requires the action of Landlord with respect to repair and/or maintenance required on any floor of the Building containing space
leased by Tenant, including repairs to the Building structure and/or Building system located on such floors (and including the Building structure or Building systems not located on floor(s) of the Building leased by Tenant but which service any portion of the Premises), which event or circumstance with respect to the Building structure or Building system materially or adversely affects the conduct of Tenant’s business from the Premises, and Landlord fails to commence corrective action within a reasonable period of time, given the circumstances, after the receipt of such notice, but in any event not later than thirty (30) days after receipt of such notice, then Tenant may proceed to take the required action upon delivery of an additional ten (10) business days’ notice to Landlord specifying that Tenant is taking such required action (provided, however, that the initial thirty (30) day notice and the subsequent ten (10) day notice shall not be required in the event of an emergency) and if such action was required under this Lease to be taken by Landlord and was not commenced by Landlord within such ten (10) business day period and thereafter diligently pursued to completion, then Tenant shall be entitled to take such action and receive prompt reimbursement by Landlord of Tenant’s reasonable costs and expenses in taking such action plus interest thereon at the Interest Rate. In the event Tenant takes such action, Tenant shall use only those contractors used by Landlord in the Building for work unless such contractors are unwilling or unable to perform, or timely perform, such work, in which event Tenant may utilize the services of any other qualified contractor which normally and regularly performs similar work in Comparable Buildings. Promptly following completion of any work taken by Tenant pursuant to the terms and conditions of this Section 6.3(a), Tenant shall deliver a detailed invoice of the work completed, the materials used and the costs relating thereto. If Landlord does not deliver a detailed written objection to Tenant within thirty (30) days after receipt of an invoice from Tenant, then Tenant shall be entitled to deduct from Rent payable by Tenant under this Lease, the amount set forth in such invoice. If, however, Landlord delivers to Tenant, within thirty (30) days after receipt of Tenant’s invoice, a written objection to the payment of such invoice, setting forth with reasonable particularity Landlord’s reasons for its claim that such action did not have to be taken by Landlord pursuant to the terms and conditions of this Lease or that the charges are excessive (in which case Landlord shall pay the amount it contends would not have been excessive), then Tenant shall not then be entitled to such deduction from Rent. If Landlord objects to any deduction from Rent, Tenant may proceed to claim a default by Landlord and file an applicable action. If Tenant prevails in the action, the amount of the judgement (which shall include interest at the Interest Rate from the time of each expenditure by Tenant until the date Tenant receives such amount by payment or offset and attorneys’ fees and related costs) may be deducted by Tenant from the Rent next due and owing under this Lease. For purposes of this Section 6.3(a), an “emergency” shall mean an event threatening immediate and material danger to people located in the Building or immediate, material damage to the Building, Building systems, Building structure, tenant improvements, or alterations, or creates a realistic possibility of an immediate and material interference with, or immediate and material interruption of a material aspect of Tenant’s business operations.
(b) Tenant shall pay or reimburse Landlord for all costs Landlord incurs under Section 6.3(a) above (excluding costs to correct latent or patent defects in the initial construction of the shell Building or Common Areas which shall be paid by Landlord, at its sole cost and expense) as Operating Expenses to the extent set forth in Section 4.2 of the Lease. Except as otherwise set forth herein, in no event shall Tenant be entitled to undertake any such
maintenance or repairs, whether at the expense of Tenant or Landlord, and Tenant hereby waives the benefit of any statute or law in effect now or in the future which might give Tenant the right to make repairs at Landlord’s expense or to terminate this Lease due to Landlord’s failure to keep the Premises in good order, condition and repair.
Section 6.4 Tenant’s Obligations.
(a) Except as provided in Section 6.3, Article Seven (Damage or Destruction) and Article Eight (Condemnation), Tenant shall keep all interior non-structural portions of the Premises, including interior structural elements included as part of the Tenant Improvements and all other improvements and alterations made by Tenant to the Premises, and all alterations, additions or improvements to the Premises by Tenant and any special systems installed in the Building by Tenant or at Tenant’s request, in good order, condition and repair (including janitorial, interior repainting and refinishing, as needed and regular cleaning of interior glass). If any portion of the Premises or any system or equipment in the Premises which Tenant is obligated to repair cannot be fully repaired or restored, Tenant shall promptly replace such portion of the Premises or system or equipment in the Premises, regardless of whether the benefit of such replacement extends beyond the Lease Term; but if the benefit or useful life of such replacement extends beyond the Lease Term (as such term may be extended by exercise of any options), Landlord shall pay for the same and the useful life of such replacement shall be prorated over the remaining portion of the Lease Term (as extended), and Tenant shall be liable only for that portion of the cost which is applicable to the Lease Term (as extended). Subject to Section 4.4(h)(v), if any part of the Premises, Building or the Project is damaged by any act or omission of Tenant, its agents, employees, contractors, customers or invitees, Tenant shall pay Landlord the cost of repairing or replacing such damaged property, whether or not Landlord would otherwise be obligated to pay the cost of maintaining or repairing such property. It is the intention of Landlord and Tenant that at all times Tenant shall maintain the portions of the Premises which Tenant is obligated to maintain in an attractive, first-class and fully operative condition.
(b) So long as Tenant leases the entire Building, Tenant shall maintain a preventive maintenance contract providing for the regular inspection and maintenance of the HVAC System by a licensed heating and air conditioning contractor, and shall provide Landlord with a copy of said contract within ten (10) days of the Commencement Date and thereafter within ten (10) business days of Landlord’s written request. At such time as Tenant leases less than the entire Building, Tenant’s obligation to maintain the preventive maintenance contract shall apply to only the portion of the HVAC system servicing such Premises.
(c) The amps of electric capacity provided at the Premises shall be pursuant to existing capacity, such service to be made available at the electrical riser room in the Building wherein the Premises is located, and Landlord shall provide any necessary maintenance or replacement thereof when required. Tenant shall be responsible to obtain electrical service from the power provider of its choice, and, except as otherwise provided herein, Landlord shall not be responsible for interruptions in such service. Tenant shall be responsible for and provide distribution of the power and electrical service from the electrical riser room in the Building to
the areas required for use thereof by Tenant, and Tenant shall be responsible for all repairs, maintenance and replacement of such electrical service and related equipment from the electrical riser room in the Building during the Lease Term. Subject to Section 4.1, the foregoing responsibilities of Tenant shall include payment for the cost and expense of installation and any repairs, replacements, or upgrades, of such power and electrical service from said electrical riser room to the remainder of the building used or occupied by Tenant and all costs related to installing and causing service to commence, including payment of any security deposits required by any utility company serving the Premises and tap, meter and similar fees related to such services.
(d) Tenant shall fulfill all of Tenant’s obligations under this Section 6.04 at Tenant’s sole expense, except as otherwise provided herein. If Tenant fails to maintain, repair or replace the Premises as required by this Section 6.04, Landlord may, upon thirty (30) days prior notice to Tenant (except that no notice shall be required in the case of an emergency), perform such maintenance or repair (including replacement, as needed) on behalf of Tenant. In such case, Tenant shall reimburse Landlord for all reasonable costs incurred in performing such maintenance or repair within thirty (30) days of demand.
(e) Prior to installing any specialized flooring, Tenant shall, at Tenant’s sole cost and expense, make such tests and investigation as recommended by the manufacturer of such flooring prior to execution of this Lease, to determine and satisfy Tenant as to the condition of the floor of the Premises for installation of such specialized flooring or the condition of any flooring existing at the Premises. If Tenant installs any specialized flooring, such flooring shall be installed in accordance with all specifications and recommendations of the manufacturer of such flooring and all costs associated therewith shall be deducted from the Tenant Allowance (as defined in the Work Letter). Tenant hereby waives and relinquishes any claims against or liability of Landlord as to such specialized flooring, or any damages or losses occurring by reason of any defect in, or inadequacy of, such specialized flooring, including, without limitation, any right or claim against Landlord for repair, maintenance or replacement thereof during the Lease Term.
Section 6.5 Alterations, Additions, and Improvements.
(a) Tenant shall not make any alterations, additions or improvements to the Premises without Landlord’s prior written consent, which consent shall not be unreasonably withheld and shall be granted or denied within ten (10) business days, except for non-structural alterations, additions or improvements and which are not visible from the outside of the Building of which the Premises is part. Landlord may require Tenant to provide demolition and/or lien and completion bonds in form and amount reasonably satisfactory to Landlord and consistent with landlords of Comparable Buildings. Tenant shall promptly remove any alterations, additions, or improvements constructed in violation of this Section 6.5(a) upon Landlord’s written request. All alterations, additions, and improvements shall be done in a good and workmanlike manner, in accordance with plans, specifications and drawings reasonably approved in writing by Landlord, and in conformity with all applicable rules, laws and regulations, and by a licensed contractor reasonably approved by Landlord which consent shall
not be unreasonably withheld or conditioned by Landlord unless a Design Problem exists and shall be granted or denied within ten (10) business days. A “Design Problem” is defined as, and will be deemed to exist if such alteration will (i) adversely affect the exterior appearance of the Building; (ii) adversely affect the Building structure; (iii) adversely affect the Building systems in a non-de minimus manner; (iv) unreasonably interfere with any other occupant’s normal and customary office operation or rights under their lease(s); or (v) fail to comply with applicable laws; provided, however, notwithstanding that the following improvements might otherwise constitute a Design Problem (rolling file rooms, file rooms, libraries, interconnecting stairs and UPS unit(s)), Landlord shall not unreasonably withhold its consent to such improvements or alterations. Upon completion of any such work, Tenant shall provide Landlord with “as built” plans, copies of all construction contracts, a certificate of completion by the architect who supervised the construction and proof of payment for all labor and materials including appropriate lien releases. Except for Landlord’s negligence or willful misconduct, Landlord shall have no responsibility or liability for any death or injury to persons, including but not limited to Tenant, Tenant’s officers, directors, members, employees, personnel, contractors, invitees and/or any third persons in or upon the real property of Landlord, or for damage to property caused by alterations, additions or improvements made to the Premises by Tenant, whether or not made pursuant to Landlord’s prior written consent as required herein, and Tenant hereby indemnifies Landlord against any such liability, obligation, cost or expense arising therefrom.
(b) Tenant shall pay when due all claims for labor and material furnished to the Premises. Tenant shall give Landlord at least ten (10) business days prior written notice of the commencement of any work on the Premises, regardless of whether Landlord’s consent to such work is required. Landlord may elect to record and post notices of non-responsibility on the Premises. Tenant shall keep the Premises, the Building and the Project free and clear of any liens arising out of any work performed, materials furnished, or obligations incurred by or on behalf of Tenant. If any such lien is filed against the Premises, the Building or the Project, Tenant shall, within ten (10) business days thereafter, cause the lien to be fully discharged by either paying the obligation secured thereby or obtaining and recording a payment bond in accordance with the provisions of Section 33-1004, Arizona Revised Statutes. Tenant shall indemnify and hold Landlord harmless from any claims for lien waivers. Tenant is not authorized to act for on behalf of Landlord as its agent, or otherwise, for the purpose of constructing any improvements to the Premises, and neither Landlord nor Landlord’s interest in the Premises shall be subject to any obligations incurred by Tenant. Landlord shall be entitled to post on the Premises during the course of any construction by Tenant such notices of non-responsibility as Landlord deems appropriate for the protection of Landlord and its interest in the Premises. If Tenant fails to fully discharge any such lien within a 10-business day period, Landlord may (but shall not be so obligated) pay the claim secured by such lien, and the amount so paid, together with any costs and reasonable attorneys’ fees incurred in connection therewith, shall be immediately due and owing from Tenant to Landlord, and Tenant shall pay the same to Landlord with interest at the rate provided in Section 4.01(c) from the dates of Landlord’s payments. Should any claims of lien be filed against the Premises or any action affecting the title to such property be commenced, the party receiving notice of such lien or action shall forthwith give the other party written notice thereof.
(c) Unless Landlord requires the removal thereof upon the termination of this Lease at the time Landlord consents thereto and only to the extent causing a Design Problem, Tenant shall not be required to restore any of the Tenant Improvements, or any subsequent alterations, additions or improvements to the Premises by Tenant if approved by Landlord in writing (except movable furniture, equipment and trade fixtures), and such items shall become a part of the Premises and the property of Landlord immediately upon installation thereof. Any alteration, addition or improvement which Tenant is required or permitted to remove hereunder, together with any movable furniture, equipment and trade fixtures, shall be removed at Tenant’s expense upon the termination of this Lease, and Tenant shall promptly repair any damage to the Premises caused by such removal. In no event, however, shall Tenant remove any of the following materials or equipment (which shall be deemed Landlord’s property) without Landlord’s prior written consent: any power wiring or power panels; lighting or lighting fixtures; wall coverings; drapes, blinds or other window coverings; carpets or other floor coverings; heaters, air conditioners or any other heating or air conditioning equipment; fencing or security gates; or other similar building operating equipment and decorations.
Section 6.6 Condition upon Termination or Expiration. Upon the termination or expiration of the Lease, Tenant shall surrender the Premises and all alterations, additions and improvements to Landlord, broom clean and in the same condition as received except for ordinary wear and tear which Tenant was not otherwise obligated to remedy, repair or replace under any provision of this Lease; provided, however, Tenant shall be responsible for and obligated to, at the cost of Tenant, remedy any bubbling, blistering, leakage and separation occurring with respect to any flooring and any sealcoating so as to deliver and surrender the Premises upon termination of the Lease to Landlord in good repair and condition. However, Tenant shall not be obligated to repair any damage which Landlord is required to repair under Article Seven (Damage or Destruction). In addition, Landlord may require Tenant to remove any non-customary alterations, additions or improvements (whether or not made with Landlord’s consent but excluding any Tenant Improvements made pursuant to the Work Letter) which create a Design Problem prior to the expiration of the Lease and to restore the Premises to its prior condition, all at Tenant’s expense; provided, however, Landlord notifies Tenant of the requirement to remove such non-customary alterations, additions and improvements which create a Design Problem at the time of Landlord’s consent to such alterations, additions and improvements. Notwithstanding anything to the contrary contained herein, Tenant shall have no obligation to remove any of the initial Tenant Improvements, inclusive of cabling, at the end of the Lease Term.
Section 6.7 Services. Subject to the Rules and Regulations attached to this Lease, Landlord agrees to furnish to the Premises elevator service suitable for the intended use of the Premises. Tenant shall be responsible for providing for its own janitorial services unless the Building is multi-tenant and Tenant requests that the Landlord provide the same. If Tenant is not the sole occupant of the Building, Landlord may provide a security guard at the Project and may provide different security systems from time to time for the Building and/or Project in its reasonable discretion, provided that the cost of such systems does not exceed that of security systems in similar buildings in the vicinity of the Premises. Landlord, from time to time and in Landlord’s reasonable discretion, may alter, remove, replace or discontinue the security services
provided at the Project in a manner consistent with Comparable Buildings, but Tenant shall have the right to maintain a manned security guard at Tenant’s expense for Tenant’s benefit at any time desired by Tenant.
Section 6.8 Prohibitions. Tenant will not, without the written consent of Landlord, (i) use any apparatus or device in the Premises which will increase the amount of electricity, water or other utilities otherwise furnished or supplied for use of the Premises as general office space above Tenant’s Pro-Rata Share of the Building capacity; (ii) install any 220 volt outlets in the Premises, except those to be initially installed, if any, pursuant to the plans and specifications referred to in Exhibit B attached hereto or any later approved alterations; nor (iii) connect into the electric current or the water supply except through then existing electrical outlets or existing water taps in the Premises. If Tenant shall require water, electric current or other utilities in excess of that which would otherwise be furnished or supplied for use of the Premises, Tenant shall first procure the written consent of Landlord (which shall not be unreasonably withheld) to the use thereof, and if Tenant is not the sole occupant of the Building, Landlord may cause a water meter, electric meter or other utility measuring device to be installed in the Premises for the purpose of measuring the amount of water, electric current or other utilities consumed for any such purpose. The cost of any such meters and the installation, maintenance and repair thereof shall be paid for by Tenant and Tenant agrees to pay Landlord within thirty (30) days of demand for the cost of all water, electric current or other utilities consumed as shown by said meters, at the rates charged for such services by the suppliers thereof. In the event separate meters cannot be installed, Landlord shall have the right to reasonably estimate the additional cost of the utilities utilized by Tenant and charge the same directly to Tenant, who agrees to promptly pay the same.
ARTICLE SEVEN: DAMAGE OR DESTRUCTION
Section 7.1 Partial Damage to Property.
(a) Tenant shall notify Landlord in writing immediately upon the occurrence of any damage to the Premises. If the Premises is only partially damaged (meaning, less than fifty percent (50%) of the Premises is untenantable as a result of such damage or less than fifty percent (50%) of Tenant’s operations are materially impaired) and if the proceeds received by Landlord from the insurance policies described in Section 4.4 are sufficient to pay for the necessary repairs, this Lease shall remain in effect and Landlord shall repair the damage as soon as reasonably possible. Landlord may elect (but is not required) in its Section 7.1(b) notice to repair any damage to Tenant’s fixtures, equipment, or improvements.
(b) If the insurance proceeds received by Landlord are not sufficient to pay the entire cost of repair, or if the cause of the damage is not covered by the insurance policies which Landlord maintains under Section 4.04, Landlord may elect either to (i) repair the damage as soon as reasonably possible, in which case this Lease shall remain in full force and effect, or (ii) terminate this Lease as of the date the damage occurred. Landlord shall notify Tenant within thirty (30) days after receipt of notice of the occurrence of the damage whether Landlord elects to repair the damage or terminate the Lease. If Landlord elects to repair the damage, Tenant shall pay Landlord the “deductible amount” (if any) under Landlord’s insurance
policies. If Landlord elects to terminate the Lease, Tenant may elect to continue this Lease in full force and effect, in which case Tenant shall repair any damage to the Premises to the condition that existed prior to such damage. Tenant shall pay the cost of such repairs, except that upon satisfactory completion of such repairs, Landlord shall deliver to Tenant any insurance proceeds received by Landlord for the damage repaired by Tenant. Tenant shall give Landlord written notice of such election within ten (10) business days after receiving Landlord’s termination notice.
(c) If the damage to the Premises occurs during the last six (6) months of the Lease Term and such damage will require more than thirty (30) days to repair, either Landlord or Tenant may elect to terminate this Lease as of the date the damage occurred, regardless of the sufficiency of any insurance proceeds. The party electing to terminate this Lease shall give written notification to the other party of such election within thirty (30) days after Tenant’s notice to Landlord of the occurrence of the damage.
(d) Notwithstanding anything to the contrary contained herein, if Landlord does not elect to terminate this Lease pursuant to Landlord’s termination right as provided above, and the repairs cannot, in the reasonable opinion of a licensed architect or contractor reasonably selected by Landlord, be completed within two hundred seventy (270) days after the damage or destruction is discovered (which period shall be subject to extension for up to sixty (60) days as a result of an event of force majeure), Tenant may, within thirty (30) days following Landlord’s election to rebuild and/or restore the Premises, Building and/or Project, elect to terminate this Lease by written notice to Landlord effective as of the date specified in the notice, which date shall not be less than thirty (30) days nor more than ninety (90) days after the date such notice is given by Tenant. Furthermore, if neither Landlord nor Tenant has terminated this Lease, and the repairs are not actually completed within three hundred (300) days following the date of discovery of the damage, Tenant shall have the right to terminate this Lease during the first five (5) business days of each calendar month following the end of such period until such time as the repairs are complete, by notice to Landlord (the “Damage Termination Notice”), effective as of a date set forth in the Damage Termination Notice (the “Damage Termination Date”), which Damage Termination Date shall not be less than ten (10) business days nor more than ninety (90) days following the end of each such month. At any time, from time to time, after the date occurring sixty (60) days after the date the damage is discovered, Tenant may request that Landlord provide Tenant with a certificate from the architect or contractor described above setting forth such architect’s or contractor’s reasonable opinion of the date of completion of the repairs and Landlord shall respond to such request within five (5) business days.
Section 7.2 Substantial or Total Destruction. If the Premises is substantially or totally destroyed by any cause whatsoever (meaning, the damage to the Premises is greater than partial damage as described in Section 7.01), and regardless of whether Landlord receives any insurance proceeds, this Lease shall terminate as of the date the destruction occurred. Notwithstanding the preceding sentence, if the Premises can be rebuilt within six (6) months after the date of destruction, Landlord may elect to rebuild the Premises at Landlord’s own expense, in which case this Lease shall remain in full force and effect. Landlord shall notify Tenant of such election within thirty (30) days after Tenant’s notice of the occurrence of total or
substantial destruction. If Landlord so elects, Landlord shall rebuild the Premises at Landlord’s sole expense.
Section 7.3 Temporary Reduction of Rent. If the Premises is destroyed or damaged and Landlord or Tenant repairs or restores the Premises pursuant to the provisions of this Article Seven, any rent payable during the period of such damage, repair and/or restoration (including the time for Tenant to restore any tenant improvements, but such time shall be the actual time taken by Tenant to restore any tenant improvements using reasonable due diligence not exceed an additional 180 days after Landlord completes its restoration) shall be reduced according to the degree, if any, to which Tenant’s use of the Premises is impaired. Except for such possible reduction in Base Rent, Additional Rent, insurance premiums and Real Estate Taxes, Tenant shall not be entitled to any compensation, reduction, or reimbursement from Landlord as a result of any damage, destruction, repair, or restoration of or to the Premises.
Section 7.4 Waiver. Tenant waives the protection of any statute, code or judicial decision which grants a tenant the right to terminate a lease in the event of the substantial or total destruction of the leased property, including the provisions of Arizona Revised Statutes Section 33¬343. Tenant agrees that the provisions of Section 7.2 above shall govern the rights and obligations of Landlord and Tenant in the event of any substantial or total destruction to the Premises.
ARTICLE EIGHT: CONDEMNATION
If all or any portion of the Premises or Project is taken under the power of eminent domain or sold under the threat of that power (all of which are called “Condemnation”), this Lease shall terminate as to the part taken or sold on the date the condemning authority takes title or possession, whichever occurs first. If more than twenty percent (20%) of the floor area of the Premises or more than ten percent (10%) of Tenant’s parking is taken by Condemnation, then either party hereto shall be entitled to terminate this Lease as of the date the condemning authority takes title or possession, by delivering written notice to the other party within ten (10) business days after receipt of written notice of such taking (or in the absence of such notice, within ten (10) business days after the condemning authority takes title or possession). If more than twenty-five percent (25%) of the floor area of the Building and/or more than twenty-five percent (25%) of the land area of the entire Project is taken by Condemnation, then Landlord shall be entitled to terminate this Lease as of the date of the date the condemning authority takes title or possession, by delivering written notice to Tenant within ten (10) days after receipt of written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority takes title or possession). If neither Landlord nor Tenant terminates this Lease, this Lease shall remain in effect as to the portion of the Premises not taken, except that the Base Rent shall be reduced in proportion to the reduction in the rentable square footage of the Premises, and Additional Rent shall be reduced in proportion to the reduction in Tenant’s Pro-Rata Share of the total Rental Square Footage available at the Project. Any Condemnation award or payment shall be distributed in the following order: (a) first, to any ground lessor, mortgagee or beneficiary under a deed of trust encumbering the Premises, the amount of its interest in the Premises; (b) second, to Tenant, only the amount of any award specifically designated for loss of
or damage to Tenant’s trade fixtures or removable personal property; and (c) third, to Landlord, the remainder of such award, whether as compensation for reduction in the value of the leasehold, the taking of the fee, or otherwise. If this Lease is not terminated, Landlord shall repair any damage to the Premises caused by the Condemnation, except that Landlord shall not be obligated to repair any damage for which Tenant has been reimbursed by the condemning authority. If the severance damages received by Landlord are not sufficient to pay for such repair, Landlord shall have the right to either terminate this Lease or make such repair at Landlord’s expense.
ARTICLE NINE: ARTICLE NINE: ASSIGNMENT AND SUBLETTING
Section 9.1 Landlord’s Consent Required. No portion of the Premises or of Tenant’s interest in this Lease may be acquired by any other person or entity, whether by sale, assignment, license, mortgage, sublease, transfer, operation of law, or act of Tenant, without Landlord’s prior written consent, except as provided in Section 9.2 below. Landlord has the right to grant or withhold its consent as provided in Section 9.5 below. Any attempted transfer without consent shall be void and shall constitute a non-curable breach of this Lease. Except as provided in Section 9.2, if Tenant is a partnership or limited liability company, any cumulative transfer of more than fifty percent (50%) of the interests shall require Landlord’s consent. Except in connection with a transaction described in Subsections (a) or (b) of Section 9.2 or a public offering of Tenant’s stock, if Tenant is a corporation, any change in the ownership of more than fifty percent (50%) of the voting stock of the corporation shall require Landlord’s consent.
Section 9.2 Tenant Affiliate. Notwithstanding the foregoing, Tenant may assign this Lease or sublease all or any portion of the Premises, without Landlord’s consent, to (a) any entity resulting from a merger, reorganization or consolidation with Tenant; (b) any entity succeeding to all or substantially all of the stock, interests or assets and business of Tenant; and (c) any corporation which controls, is controlled by or is under common control with Tenant (each entity listed in subsections (a), (b) and (c) are hereinafter referred to as a, “Tenant’s Affiliate”); provided, however, in the case of an assignment of the Lease, Tenant’s Affiliate has a net worth equal to or greater than Tenant (Tenant’s net worth being calculated immediately prior to the assignment) and provides reasonable evidence of such net worth within five (5) days after such assignment along with copies of all documents relating to such assignment or sublease. In the event Tenant’s Affiliate does not have a greater net worth than Tenant, such assignment or sublease is subject to Landlord’s prior consent, as provided herein. In such case, any Tenant’s Affiliate shall assume in writing all of Tenant’s obligations under this Lease prior to the date of such assignment and shall provide Landlord a copy of such assumption within five (5) days after execution. Further, Tenant shall be entitled to sublease individual offices and workstations within the Premises without Landlord’s consent so long as such office and workstations are not separately demised and do not exceed, in total, 15,000 RSF of the Premises.
Section 9.3 No Release of Tenant. No transfer permitted by this Article Nine, whether with or without Landlord’s consent, shall release Tenant or change Tenant’s primary liability to pay the Rent and to perform all other obligations of Tenant under this Lease. Landlord’s acceptance of Rent from any other person is not a waiver of any provision of this
Article Nine. Consent to one transfer is not a consent to any subsequent transfer. If Tenant’s transferee defaults under this Lease, Landlord may proceed directly against Tenant without pursuing remedies against the transferee. Landlord may consent to subsequent assignments or modifications of this Lease by Tenant’s transferee, without notifying Tenant or obtaining its consent. Such action shall not relieve Tenant’s liability under this Lease.
Section 9.4 Offer to Terminate. If Tenant desires to assign the Lease or sublease the Premises, Tenant shall have the right, but not the obligation, to offer, in writing, to terminate the Lease as of a date specified in the offer. If Landlord elects in writing to accept the offer to terminate within twenty (20) days after notice of the offer, the Lease shall terminate as of the date specified and all the terms and provisions of the Lease governing termination shall apply. If Landlord does not so elect, the Lease shall continue in effect until otherwise terminated and the provision of Section 9.05 with respect to any proposed transfer shall continue to apply.
Section 9.5 Landlord’s Consent.
(a) Tenant’s request for consent to any transfer described in Section 9.01 shall set forth in writing the details of the proposed transfer, including the name, business and financial condition of the prospective transferee, financial details of the proposed transfer (e.g., the term of and the rent and security deposit payable under any proposed assignment or sublease), and any other information Landlord reasonably deems relevant. Landlord shall have the right to withhold consent, if reasonable, or to grant consent, based on the following factors: (i) the business of the proposed assignee or subtenant and the proposed use of the Premises being consistent with the nature of the Building and tenants of Comparable Buildings; (ii) the net worth and financial reputation of the proposed assignee or subtenant has to be sufficient in light of the obligations under such transfer; and (iii) Tenant’s compliance with all of its obligations under the Lease within applicable notice and cure periods. Landlord shall respond to Tenant’s request for consent to transfer within ten (10) days following Landlord’s receipt of all required information. If Landlord fails to timely respond, Tenant shall provide Landlord with written notice of Landlord’s failure whereupon Landlord shall have any additional five (5) days to respond. If Landlord fails to respond with such 5 additional day period, Landlord shall be deemed to have approved the transfer.
(b) If Tenant assigns or subleases, the following shall apply:
(i) Immediately following any approved assignment or sublease, Tenant shall deliver to Landlord an assumption agreement reasonably acceptable to Landlord executed by Tenant and the transferee, together with a certificate of insurance evidencing the transferee’s compliance with the insurance requirements of Tenant under this Lease. Tenant agrees to reimburse Landlord for reasonable administrative and attorneys’ fees in connection with the processing and documentation of any transfer for which Landlord’s consent is requested not to exceed $1,500 in the aggregate.
(ii) Except upon assignment to a Tenant’s Affiliate, Tenant shall pay to Landlord as Additional Rent under the Lease the Landlord’s Share (stated in Section 1.14) of the Profit (defined below) on such transaction as and when received by Tenant. The
“Profit” means (A) all amounts paid to Tenant for such assignment or sublease, including “key” money, monthly rent in excess of the monthly rent payable under the Lease, and all fees and other consideration paid for the assignment or sublease, including fees under any collateral agreements, less (B) costs and expenses directly incurred by Tenant in connection with the execution and performance of such assignment or sublease for free rent, real estate broker’s commissions, landlord’s fee, attorneys’ fees and costs, economic concessions granted, advertising and marketing costs, unamortized improvement costs and costs of renovation or construction of tenant improvements (or allowance granted) required under such assignment or sublease. Tenant is entitled to recover such costs and expenses before Tenant is obligated to pay the Landlord’s Share to Landlord. The Profit in the case of a sublease of less than all the Premises is the rent allocable to the subleased space as a percentage on a square footage basis.
(iii) Tenant shall provide Landlord a written statement certifying all amounts to be paid from any assignment or sublease of the Premises within thirty (30) days after the transaction documentation is signed, and Landlord may inspect Tenant’s books and records to verify the accuracy of such statement. On written request, Tenant shall promptly furnish to Landlord copies of all the transaction documentation, all of which shall be certified by Tenant to be complete, true and correct. Landlord’s receipt of Landlord’s Share shall not be a consent to any further assignment or subletting. The breach of Tenant’s obligation under this Section 9.05(b) shall be a material default of the Lease.
Section 9.6 No Merger. No merger shall result from Tenant’s sublease of the Premises under this Article Nine, Tenant’s surrender of this Lease or the termination of this Lease in any other manner. In any such event, Landlord may terminate any or all subtenancies or succeed to the interest of Tenant as sublandlord under any or all subtenancies.
ARTICLE TEN: DEFAULTS; REMEDIES
Section 10.1 Covenants and Conditions. Tenant’s performance of each of Tenant’s obligations under this Lease is a condition as well as a covenant. Tenant’s right to continue in possession of the Premises is conditioned upon such performance within applicable notice and cure periods. Time is of the essence in the performance of all covenants and conditions.
Section 10.2 Defaults. Tenant shall be in material default under this Lease:
(a) If Tenant fails to pay Rent or any other charge within five (5) business days after notice that such amount is past due;
(b) If Tenant fails to perform any of Tenant’s non-monetary obligations under this Lease for a period of thirty (30) days after written notice from Landlord; provided that if more than thirty (30) days are required to complete such performance, Tenant shall not be in default if Tenant commences such performance within the thirty (30) day period and thereafter diligently pursues its completion. However, Landlord shall not be required to give such notice if Tenant’s failure to perform constitutes a non-curable breach of this Lease. The notice required by this Section 10.02(c) is intended to satisfy any and all notice requirements imposed by law on Landlord and is not in addition to any such requirement.
(c) (i) if Tenant makes a general assignment or general arrangement for the benefit of creditors; (ii) if a petition for adjudication of bankruptcy or for reorganization or rearrangement is filed by or against Tenant and is not dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed to take possession of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in n this Lease and possession is not restored to Tenant within thirty (30) days; or (iv) if substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease is subjected to attachment, execution or other judicial seizure which is not discharged within thirty (30) days. If a court of competent jurisdiction determines that any of the acts described in this subparagraph (d) are not a default under this Lease, and a trustee is appointed to take possession (or if Tenant remains a debtor in possession) and such trustee or Tenant transfers Tenant’s interest hereunder, then Landlord shall receive, as Additional Rent, the excess, if any, of the rent (or any other consideration) paid in connection with such assignment or sublease over the rent payable by Tenant under this Lease.
Section 10.3 Remedies. On the occurrence of any material default by Tenant after applicable notice and cure period, Landlord may, at any time thereafter, with or without any additional notice or demand and without limiting Landlord in the exercise of any right or remedy which Landlord may have:
(a) Terminate Tenant’s right to possession of the Premises by any lawful means, in which case Tenant shall immediately surrender possession of the Premises to Landlord. In such event, Landlord shall be entitled to recover from Tenant all damages incurred by Landlord by reason of Tenant’s default, including (i) the unpaid Base Rent, Additional Rent and other charges and interest due at the time of termination; (ii) the amount by which unpaid Base Rent, Additional Rent and other charges and interest due after termination until the time of the award exceeds the amount of such rental loss that Tenant proves Landlord could have reasonably avoided; (iii) the worth at the time of the award of the amount by which the unpaid Base Rent, Additional Rent and other charges which Tenant would have paid from the time of the award through the balance of the Lease Term exceeds the amount of such rental loss that Tenant proves Landlord could have reasonably avoided; (iv) intentionally deleted; (v) continuing interest on the amounts set forth in subparagraphs (i), (ii) and (iii) above at the Interest Rate; and (vi) any other amount reasonably necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under the Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, any costs or expenses Landlord incurs in maintaining or preserving the Premises after such default, the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation or alteration of the Premises, Landlord’s reasonable attorneys’ fees incurred in connection therewith, and any real estate commission paid or payable. As used in subpart (iii) above, the “worth at the time of the award” is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1%). If Tenant has abandoned the Premises, Landlord shall have the option of (i) retaking possession of the Premises and recovering from Tenant the amount specified in this Section 10.3(a), or (ii) proceeding under Section 10.3(b);
(b) Maintain Tenant’s right to possession, in which case this Lease shall continue in effect whether or not Tenant has abandoned the Premises. In such event, Landlord shall be entitled to enforce all of Landlord’s rights and remedies under this Lease, including the right to recover the rent as it becomes due;
(c) Pursue any other remedy now or hereafter available to Landlord under the laws or judicial decisions of the state in which the Premises is located. No remedy herein conferred upon Landlord shall be considered exclusive of any other remedy, and the same shall be cumulative and shall be in addition to every other remedy given hereunder, or now or hereafter existing at law or in equity or by statute, including, but not limited to, the right to maintain an action to recover all amounts due hereunder. Landlord may exercise its rights and remedies at any time, in any order, to any extent, and as often as Landlord deems advisable. No delay or omission of Landlord to exercise any right or power arising from any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein. No waiver of a default shall be effective unless it is in writing.
Section 10.4 Intentionally Deleted.
Section 10.5 No Acceptance of Surrender. No act or conduct of Landlord, whether consisting of the acceptance of the keys to the Premises, or otherwise, shall be deemed to be or constitute an acceptance by Landlord of the surrender of the Premises by Tenant prior to the expiration of the Term hereof, and such acceptance by Landlord of surrender by Tenant shall only flow from, and must be evidenced by, written acknowledgement of acceptance of surrender signed by Landlord.
Section 10.6 Termination. Notwithstanding any other term or provision hereof to the contrary, the Lease shall only terminate upon the occurrence of an act by Landlord which affirms the Landlord’s intent to terminate the Lease. On such termination, Landlord’s damages for default shall include all costs and fees, including reasonable attorneys’ fees that Landlord incurs in connection with the filing, commencement, pursuing and/or defending of any action in any bankruptcy court or other court with respect to the Lease; the obtaining of relief from any stay in bankruptcy restraining any action to evict Tenant; or the pursuing of any action with respect to Landlord’s right to possession of the Premises. All such damages suffered (apart from Base Rent, Additional Rent and other charges payable hereunder) shall constitute pecuniary damages which must be reimbursed to Landlord prior to assumption of the Lease by Tenant or any successor to Tenant in any bankruptcy or other proceeding.
Section 10.7 No Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the rent or other sum provided to be paid shall be deemed to be other than on account of the earliest rent or any other sum due and payable under this Lease, nor shall any endorsement or statement or any check or any letter accompanying any check or payment as rent or other sum due and payable be deemed an accord and satisfaction, unless expressly agreed to, in writing, by Landlord. Landlord may accept any such check or payment without prejudice to Landlord’s right to recover the balance of such rents or pursue any other remedy provided in this Lease.
ARTICLE ELEVEN: PROTECTION OF LENDERS
Section 11.1 Subordination. Subject to Tenant’s receipt of a commercially reasonable SNDA, This Lease and Tenant’s interest in the Premises shall be subject and subordinate to all ground and underlying leases and all mortgages, deeds of trusts or other security agreements (each, a “Security Instrument”) which now or hereafter affect the Premises and to any and all advancements to be made thereunder and to all renewals, modifications, consolidations, replacements, and extensions thereof, whenever made or recorded. Notwithstanding the foregoing, Landlord shall obtain, (a) within sixty (60) days after the mutual execution and delivery of this Lease with respect to any existing Security Instrument and (b) within sixty (60) days following the date of any new Security Instrument, a commercially reasonable subordination, non-disturbance and attornment agreement (“SNDA”). The form of SNDA attached hereto as Exhibit F and the provisions thereof are hereby deemed acceptable to Landlord and Tenant. If Landlord fails to obtain an SNDA in accordance with the immediately preceding sentence, Tenant may terminate this Lease upon notice to Landlord prior to receiving the SNDA. Tenant shall reasonably cooperate with Landlord and any lender which is acquiring a security interest in the Premises or the Lease. Tenant shall execute such further commercially reasonable documents and assurances as such lender may require, provided that Tenant’s obligations under this Lease shall not be increased in any material way (the performance of ministerial acts shall not be deemed material), and Tenant shall not be deprived of its rights under this Lease. Tenant’s right to quiet possession of the Premises during the Lease Term shall not be disturbed if Tenant pays the rent and performs all of Tenant’s obligations under this Lease and is not otherwise in default beyond applicable notice and cure periods. If any ground lessor, beneficiary or mortgagee elects to have this Lease superior to the lien of its ground lease, deed of trust or mortgage and gives written notice thereof to Tenant, subject to Tenant’s receipt of a SNDA, this Lease shall be deemed superior to such ground lease, or mortgage whether this Lease is dated prior or subsequent to the date of said ground lease, deed of trust or mortgage or the date of recording thereof.
Section 11.2 Attornment. If Landlord’s interest in the Premises is acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or purchaser at a foreclosure sale, subject to Tenant’s receipt of a SNDA, Tenant shall attorn to the transferee of or successor to Landlord’s interest in the Premises and recognize such transferee or successor as Landlord under this Lease. Tenant waives the protection of any statute or rule of law which gives or purports to give Tenant any right to terminate this Lease or surrender possession of the Premises upon the transfer of Landlord’s interest.
Section 11.3 Signing of Documents. Within ten (10) business days after written request, Tenant shall sign and deliver any commercially reasonable instrument or documents necessary or appropriate to evidence any such attornment or subordination or agreement to do so.
Section 11.4 Estoppel Certificates.
(a) Upon Landlord’s written request, Tenant shall execute, acknowledge and deliver to Landlord a written statement certifying: (i) that none of the terms or provisions of this Lease have been changed (or if they have been changed, stating how they have
been changed); (ii) that this Lease has not been cancelled or terminated; (iii) the last date of payment of the Base Rent and other charges and the time period covered by such payment; (iv) to Tenant’s actual knowledge, that Landlord is not in default under this Lease (or, if Landlord is claimed to be in default, stating why); and (v) such other representations or information with respect to Tenant or the Lease as Landlord may reasonably request or which any prospective purchaser or encumbrancer of the Premises may require. Tenant shall execute and deliver such statement to Landlord within ten (10) business days after Landlord’s request. Landlord may give any such statement by Tenant to any prospective purchaser or encumbrancer of the Premises. Such purchaser or encumbrancer may rely conclusively upon such statement as true and correct.
(b) If Tenant does not deliver such statement to Landlord within such ten (10) business day period, Landlord, and any prospective purchaser or encumbrancer, may conclusively presume and rely upon the following facts: (i) that the terms and provisions of this Lease have not been changed except as otherwise represented by Landlord; (ii) that this Lease has not been cancelled or terminated except as otherwise represented by Landlord; (iii) that not more than one month’s Base Rent or other charges have been paid in advance; and (iv) that Landlord is not in default under the Lease. In such event, Tenant shall be estopped from denying the truth of such facts.
(c) Section 11.5 Tenant’s Financial Condition. Within ten (10) business days after written request from Landlord in connection with a sale or refinance and only twice in any twelve (12) month time period, Tenant shall deliver to Landlord such financial statements (not in excess of two (2) years) as Landlord reasonably requires as are prepared in the ordinary course of business from Tenant or any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall deliver to any lender designated by Landlord any financial statements (not in excess of two (2) years) as are prepared in the ordinary course of business reasonably required by such lender to facilitate the financing or refinancing of the Premises. Notwithstanding anything to the contrary contained herein, as a condition precedent to Tenant’s delivery, Landlord or the Landlord Party requesting such information shall execute a commercially reasonable form of confidentiality agreement with respect thereto. Such statements shall be as prepared in Tenant’s ordinary course of business and certified as true and correct by Tenant’s chief financial officer. Tenant represents and warrants to Landlord that each such financial statement is a true and accurate statement as of the date of such statement. All financial statements shall be confidential and shall be used only for the purposes set forth in this Lease.
ARTICLE TWELVE: LEGAL COSTS
Section 12.1 Legal Proceedings. If Tenant or Landlord shall be in breach or default under this Lease, such party (the “Defaulting Party”) shall reimburse the other party (the “Nondefaulting Party”) upon demand for any costs or expenses that the Nondefaulting Party incurs in connection with any breach or default of the Defaulting Party under this Lease, whether or not suit is commenced or judgment entered. Such costs shall include reasonable legal fees and costs incurred for the negotiation of a settlement, enforcement of rights or otherwise. Furthermore, if any action for breach of or to enforce the provisions of this Lease is commenced, the court in such action shall award to the party in whose favor a judgment is entered, a
reasonable sum as attorneys’ fees and costs. The losing party in such action shall pay such attorneys’ fees and costs. Except as excluded in Section 5.08 above, Tenant shall also indemnify Landlord against and hold Landlord harmless from all Claims Landlord may incur if Landlord becomes or is made a party to any claim or action (a) instituted by Tenant against any third party, or by any third party against Tenant, or by or against any person holding any interest under or using the Premises by license of or agreement with Tenant; (b) for foreclosure of any lien for labor or material furnished to or for Tenant or such other person; or (c) necessary to protect Landlord’s interest under this Lease in a bankruptcy proceeding, or other proceeding under Title 11 of the United States Code, as amended. Tenant shall defend Landlord against any such claim or action at Tenant’s expense with counsel reasonably acceptable to Landlord.
ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS
Section 13.1 Non-Discrimination. Tenant promises, and it is a condition to the continuance of this Lease, that there will be no discrimination against, or segregation of, any person or group of persons on the basis of race, color, sex, creed, national origin or ancestry in the leasing, subleasing, transferring, occupancy, tenure or use of the Premises or any portion thereof.
Section 13.2 Landlord’s Liability; Certain Duties.
(a) As used in this Lease, the term “Landlord” means only the current owner or owners of the fee title to the Premises or Project or the leasehold estate under a ground lease of the Premises or Project at the time in question. Each Landlord is obligated to perform the obligations of Landlord under this Lease only during the time such Landlord owns such interest or title. Any Landlord who transfers its title or interest is relieved of all liability with respect to the obligations of Landlord under this Lease to be performed on or after the date of transfer, so long as assumed by the transferee. However, each Landlord shall deliver to its transferee all funds and the Letter of Credit that Tenant previously paid if such funds have not yet been applied under the terms of this Lease.
(b) Tenant shall give written notice of any failure by Landlord to perform any of its obligations under this Lease to Landlord and to any ground lessor, mortgagee or beneficiary under any deed of trust encumbering the Premises whose name and address have been furnished to Tenant in writing. Landlord shall not be in default under this Lease unless Landlord (or such ground lessor, mortgagee or beneficiary) fails to cure such non-performance within thirty (30) days (except in the event of emergency) after receipt of Tenant’s notice to Landlord specifying the nature of such default. However, if such non-performance reasonably requires more than thirty (30) days to cure, Landlord shall not be in default if such cure is commenced within such thirty (30) day period and thereafter diligently pursued to completion. In the event of a default by Landlord under the Lease, Tenant shall use reasonable efforts to mitigate its damages and losses arising from any such default.
(c) In the event that Tenant is prevented from using, and does not use, the Premises or any portion thereof, as a result of (i) any repair, maintenance or alteration performed by Landlord (including repairs, maintenance and alterations required or permitted by
Landlord hereunder), or which Landlord failed to perform, after the Commencement Date and required by this Lease, which substantially interferes with Tenant’s use of or ingress to or egress from the Building, Project, Premises, or the parking; (ii) any failure to provide services, utilities or ingress to and egress from the Building, Project, Premises, or the parking as required by this Lease; or (iii) the presence of Hazardous Materials (not brought on the Premises by Tenant or Tenant Parties) in violation of applicable laws which poses a material health risk to the environment or the Premises (any such set of circumstances as set forth in items (i) through (iii), above, to be known as an “Abatement Event”), then Tenant shall give Landlord notice of such Abatement Event, and if such Abatement Event continues for seven (7) consecutive business days after Landlord’s receipt of any such notice, or occurs for twenty (20) non-consecutive business days in a twelve (12) month period (in either of such events, the “Eligibility Period”), then the Base Rent and Tenant’s Pro-Rata Share of Operating Expenses and Tenant’s parking charges shall be abated or reduced, as the case may be, after expiration of the Eligibility Period for such time that Tenant continues to be so prevented from using, and does not use, the Premises, or a portion thereof, in the proportion that the rentable area of the portion of the Premises that Tenant is prevented from using, and does not use (“Unusable Area”), bears to the total rentable area of the Premises; provided, however, in the event that Tenant is prevented from using, and does not use, the Unusable Area for a period of time in excess of the Eligibility Period and the remaining portion of the Premises is not sufficient to allow Tenant to effectively conduct its business therein, and if Tenant does not conduct its business from such remaining portion, then for such time after expiration of the Eligibility Period during which Tenant is so prevented from effectively conducting its business therein, the Base Rent and Tenant’s Pro-Rata Share of Operating Expenses and Tenant’s parking charges for the entire Premises shall be abated for such time as Tenant continues to be so prevented from using, and does not use, the Premises. If, however, Tenant reoccupies any portion of the Premises during such period, the Rent allocable to such reoccupied portion, based on the proportion that the rentable area of such reoccupied portion of the Premises bears to the total rentable area of the Premises, shall be payable by Tenant from the date Tenant reoccupies such portion of the Premises. Such right to abate Base Rent, Tenant’s Pro-Rata Share of Operating Expenses and Tenant’s parking charges shall be Tenant’s sole and exclusive remedy at law or in equity for an Abatement Event. If Tenant’s right to abatement occurs because of an eminent domain taking, condemnation and/or because of damage or destruction to the Premises, the parking, and/or the Project, Tenant’s abatement period shall continue until Tenant has been given sufficient time, and sufficient ingress to, and egress from the Premises, to rebuild such portion it is required to rebuild, to install its property, furniture, fixtures, and equipment to the extent the same shall have been removed as a result of such damage or destruction or temporary taking and to move in over a weekend. To the extent Tenant is entitled to abatement because of an event covered by Articles 7 or 8 of this Lease, then the Eligibility Period shall not be applicable. In the event the Eligibility Period occurs during the Base Rent abatement period, the Eligibility Period shall be extended on a day for day basis for any overlap period.
(d) Notwithstanding any term or provision herein to the contrary, the liability of Landlord for the performance of its duties and obligations under this Lease is limited to Landlord’s interest in the Premises and the Project and shall not include any consequential,
speculative or punitive damages of any kind or nature, and neither the Landlord nor its partners, shareholders, officers or other principals shall have any personal liability under this Lease.
Section 13.3 Severability. A determination by a court of competent jurisdiction that any provision of this Lease or any part thereof is illegal or unenforceable shall not cancel or invalidate the remainder of such provision or this Lease, which shall remain in full force and effect.
Section 13.4 Interpretation. The captions of the Articles or Sections of this Lease are to assist the parties in reading this Lease and are not a part of the terms or provisions of this Lease. Whenever required by the context of this Lease, the singular shall include the plural and the plural shall include the singular. The masculine, feminine and neuter genders shall each include each of the others. In any provision relating to the conduct, acts or omissions of Tenant, the term “Tenant” shall include Tenant’s agents, employees, contractors, invitees, successors or others using the Premises with Tenant’s expressed or implied permission. This Lease is the result of negotiations between Landlord and Tenant, and therefore the language contained in this Lease shall be construed as a whole according to its fair meaning and not strictly for or against either Landlord or Tenant.
Section 13.5 Incorporation of Prior Agreements; Modifications. This Lease is the only agreement between the parties pertaining to the lease of the Premises and no other agreements are effective. All amendments to this Lease shall be in writing and signed by all parties. Any other attempted amendment shall be void. All prior and contemporaneous agreements, representations and understandings of the parties, oral or written, pertaining to the subject matter hereof, are hereby superseded and merged herein.
Section 13.6 Notices. All notices required or permitted under this Lease or otherwise given between Landlord and Tenant shall be in writing and shall be personally delivered or sent by certified mail, return receipt requested, postage prepaid or nationally recognized overnight delivery service. Notices to Tenant shall be delivered to the address specified in Section 1.03 above. Notices to Landlord shall be delivered to the address specified in Section 1.02 above, with a copy to Landlord’s counsel, Dean J. Formanek, at Warner Angle Hallam Jackson & Formanek PLC, 2555 East Camelback Road, Suite 800, Phoenix, Arizona, 85016. All notices shall be deemed effective upon delivery or forty-eight (48) hours after deposit in the mail as hereinabove provided. Except as provided above for notice to Tenant at the Premises, either party may change its notice address upon written notice to the other party.
Section 13.7 Waivers. All waivers must be in writing and signed by the waiving party. Landlord’s failure to enforce any provision of this Lease or its acceptance of rent shall not be a waiver and shall not prevent Landlord from enforcing that provision or any other provision of this Lease in the future. No statement on a payment check from Tenant or in a letter accompanying a payment check shall be binding on Landlord. Landlord may, with or without notice to Tenant, negotiate such check without being bound to the conditions of such statement.
Section 13.8 No Recordation. Tenant shall not record this Lease without prior written consent from Landlord. However, either Landlord or Tenant may require that a “Short Form”
memorandum of this Lease executed by both parties be recorded. The party requiring such recording shall pay all transfer taxes and recording fees.
Section 13.9 Binding Effect; Choice of Law. This Lease binds any party who legally acquires any rights or interest in this Lease from Landlord or Tenant. However, Landlord shall have no obligation to Tenant’s successor unless the rights or interests of Tenant’s successor are acquired in accordance with the terms of this Lease. The laws of the state in which the Premises is located shall govern this Lease. The exclusive jurisdiction and venue for any action or proceeding brought by either party shall be the Superior Courts of Maricopa County, Arizona.
Section 13.10 Entity Authority. If Tenant is a corporation, partnership or limited liability company, each person signing this Lease on behalf of Tenant represents and warrants that he has full authority to do so and that this Lease binds the corporation, partnership or limited liability company. If requested by Landlord, Tenant shall deliver to Landlord a certified copy of a resolution of Tenant’s Board of Directors, partners, manager(s) or member(s), as applicable, authorizing the execution of this Lease or other evidence of such authority reasonably acceptable to Landlord.
Section 13.11 Joint and Several Liability. All parties signing this Lease as Tenant shall be jointly and severally liable for all obligations of Tenant.
Section 13.12 Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, acts of war, terrorist acts, inability to obtain services, labor, or materials or reasonable substitutes therefor, governmental actions, civil commotions, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, except with respect to the obligations imposed upon Tenant with regard to Rent and other charges to be paid by Tenant or Landlord pursuant to this Lease (collectively, a “Force Majeure”), notwithstanding anything to the contrary contained in this Lease, shall excuse the performance of such party for a period equal to any such prevention, delay or stoppage and, therefore, if this Lease specifies a time period for performance of an obligation of either party, that time period shall be extended by the period of any delay in such party’s performance caused by a Force Majeure.
Section 13.13 Execution of Lease. This Lease may be executed in one or more counterparts, each of which shall be deemed original, and all of which together shall constitute one and the same instrument. Landlord and Tenant agree that facsimile and electronic signatures may be used in place of original signatures on this Lease or any document delivered pursuant hereto. All parties to this Lease intend to be bound by the signatures on the faxed or e-mailed document, are aware that the other party or parties will rely on the faxed or e-mailed signatures, and hereby waive any defenses to the enforcement of the terms of this Lease based on the form of signature.
Section 13.14 Survival. All representations and warranties of Landlord and Tenant shall survive the termination of this Lease.
Section 13.15 Time is of the Essence. Time is of the essence for all provisions of this Lease.
Section 13.16 No Third Party Rights/Partnership. Except as expressly provided herein, no term or provision of this Lease is intended to or shall be for the benefit of any person not a party hereto, and no such other person shall have any right or cause or action hereunder. Nothing contained in this Lease shall create any partnership, joint venture, or other arrangement between Landlord and Tenant.
Section 13.17 OFAC. Each of Landlord and Tenant, each as to itself, hereby represents its compliance with all applicable anti-money laundering laws, including, without limitation, the USA Patriot Act, and the laws administered by the United States Treasury Department’s Office of Foreign Assets Control, including, without limitation, Executive Order 13224 (“Executive Order”). Each of Landlord and Tenant further represents (i) that it is not, and it is not owned or controlled directly or indirectly by any person or entity, on the SDN List published by the United States Treasury Department’s Office of Foreign Assets Control and (ii) that it is not a person otherwise identified by government or legal authority as a person with whom a U.S. Person is prohibited from transacting business. As of the date hereof, a list of such designations and the text of the Executive Order are published under the internet website address www.ustreas.gov/offices/enforcement/ofac.
Section 13.18 Good Faith. Except (i) for matters for which there is a standard of consent or discretion specifically set forth in this Lease; (ii) matters which could have an adverse effect on the Building structure or the Building systems, or which could affect the exterior appearance of the Building, or (iii) matters covered by Section 4.1 (Additional Rent), Section 4.4 (Insurance), or Article 10 (Defaults; Remedies) of this Lease (collectively, the “Excepted Matters”), any time the consent of Landlord or Tenant is required under this Lease, such consent shall not be unreasonably withheld or delayed, and, except with regard to the Excepted Matters, whenever this Lease grants Landlord or Tenant the right to take action, exercise discretion, establish rules and regulations or make an allocation or other determination, Landlord and Tenant shall act reasonably and in good faith.
Section 13.19 Permitted Dogs. Provided Tenant is leasing the entire Building, Tenant and its employees shall be permitted to bring into the Premises and the Common Areas of the Project fully-domesticated dogs owned by Tenant's employees (“Permitted Dogs”), subject to the terms and conditions of this Section 13.19. If Tenant is not leasing the entire Building, the following breeds will be excluded from the Project: Pit Bulls (aka American Staffordshire Terriers, Staffordshire Bull Terriers, or American Pit Bull Terriers), Bull Terriers, Bull Mastiffs, German Shepherds, Huskies, Malamutes, Doberman Pinscher, Rottweiler, Chow Chows, and any wolf, coyote, or other wild dog breed mix. Landlord shall be entitled to charge Tenant $200.00 for each time there is a violation of the previous sentence on any given day and if there are more than five (5) violations of the previous sentence within a twelve (12) month period, Tenant’s ability to bring dogs into the Premises while they are not leasing the entire Building may, in Landlord’s sole discretion, be terminated. All Permitted Dogs shall be strictly controlled at all times and shall not be permitted to foul, damage or otherwise mar any part of the Premises or the
Project, or bark excessively or otherwise create a nuisance at the Project. The Permitted Dogs shall be taken off the Project for their walks and shall not be permitted to excrete waste within the Premises, Building or the Common Areas. Tenant shall be responsible for any additional cleaning costs and all other costs which may arise from the presence of the Permitted Dogs in or on the Project in excess of the costs that would have been incurred had the Permitted Dogs not been allowed in or on the Project with such costs and expenses not being included within Controllable Operating Expenses; and Tenant shall immediately remove any waste and excrement of any Permitted Dogs from the Project and properly clean the affected area. Notwithstanding any other limitation set forth in this Lease, Tenant shall be responsible for, and shall indemnify, defend, protect and hold Landlord and the Landlord Parties harmless from any and all Claims arising from, resulting from or connected with the acts or presence of the Permitted Dogs in the Premises or the Project (including, without limitation, bodily injury to persons in the Premises or the Property or property damage to the property of Landlord or any other tenant, subtenant, occupant, licensee or invitee of the Project).
ARTICLE FOURTEEN: BROKERS
Section 14.1 Broker’s Fee. When this Lease is signed by and delivered to both Landlord and Tenant, Landlord shall pay a real estate commission to Landlord’s Broker (if any) named in Section 1.07 above, in accordance with the separate agreement between Landlord and such Broker for services rendered to Landlord by Landlord’s Broker in this transaction; provided, however, Landlord shall not be required to pay any commission on the Partial Premises until Tenant fails to timely elect to terminate the Lease as to the Partial Premises or such right is deemed null and void in accordance herewith. If a Tenant’s Broker is named in Section 1.7 above, Landlord’s Broker shall pay an appropriate portion of its commission to Tenant’s Broker if so provided in any agreement between Landlord’s Broker and Tenant’s Broker and Tenant shall have no obligation to pay any commissions. Nothing contained in this Lease shall impose any obligation on (i) Landlord to pay a commission or fee to any party other than Landlord’s Broker or (ii) Landlord’s lender to pay any commissions hereunder.
Section 14.2 Protection of Broker. If Landlord sells the Premises, or assigns Landlord’s interest in this Lease, the buyer or assignee (excluding Landlord’s lender, if applicable) shall, by accepting such conveyance of the Premises or assignment of the Lease, be conclusively deemed to have agreed to make any commission payments to Landlord’s Broker if required of Landlord under this Article Fourteen, to the extent same has not been previously paid. If Landlord’s Broker shall bring a legal action to enforce or declare rights under this provision, the prevailing party in such action shall be entitled to reasonable attorneys’ fees to be paid by the losing party. Such attorneys’ fees shall be fixed by the court in such action.
Section 14.3 Agency Disclosure; No Other Brokers. Landlord and Tenant each warrant that they have dealt with no other real estate broker(s) in connection with this transaction except those brokers set forth in Section 1.07. Landlord and Tenant each indemnify the other against any claims arising or occurring by reason of a breach of the foregoing warranty by such party. In the event Landlord’s Broker represents both Landlord and Tenant, Landlord and Tenant hereby confirm that they were timely advised of the dual representation and that they consent to
the same, and that they do not expect said broker to disclose to either of them the confidential information of the other party. Landlord discloses that David Allred, a principal of Landlord, is a licensed real estate broker in the state of Arizona.
ARTICLE FIFTEEN: COMPLIANCE
The parties hereto agree to comply with all applicable federal, state and local laws, regulations, codes, ordinances and administrative orders having jurisdiction over the parties, property or the subject matter of this Agreement, including, but not limited to, the 1964 Civil Rights Act and all amendments thereto, the Foreign Investment In Real Property Tax Act, the Comprehensive Environmental Response Compensation and Liability Act, and The Americans With Disabilities Act.
ADDITIONAL PROVISIONS MAY BE SET FORTH IN EXHIBITS ATTACHED HERETO OR IN THE BLANK SPACE BELOW.
[signature page follows]
Landlord and Tenant have signed this Lease at the place and on the dates specified adjacent to their signatures below and have signed or initialed, where applicable, all Exhibits which are attached to or incorporated by reference in this Lease.
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“LANDLORD”
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DARED 89 LLC, an Arizona limited liability company
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By:
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Douglas Allred Company, a California Corporation
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Its:
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Co-Manager
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By:
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/s/ Bryan D. Putnam
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Name:
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Bryan D. Putnam
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Its:
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Chief Financial Officer
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By:
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Jammer I LLC,
an Arizona limited liability company
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Its:
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Co-Manager
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By:
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/s/ Bryan D. Putnam
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Name:
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Bryan D. Putnam
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Its:
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Chief Financial Officer
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“TENANT”
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ZipRecruiter, Inc., a Delaware corporation
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By:
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/s/ David Feldman
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Name:
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David Feldman
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Its:
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Chief Business Officer
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IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH A PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE TANKS.
EXHIBIT A-1
PREMISES AND BUILDING
EXHIBIT A-2
INITIAL PREMISES and PARTIAL PREMISES
EXHIBIT A-3
PROJECT LEGAL DESCRIPTION
LOTS 5 AND 6 AND A PORTION OF LOT 7, OF MARICOPA FREEWAY CENTER UNIT 1 NORTH, A SUBDIVISION RECORDED IN BOOK 129 OF MAPS, PAGE 12, RECORDS OF MARICOPA COUNTY, ARIZONA LOCATED IN THE SOUTHWEST QUARTER OF SECTION 19, TOWNSHIP 1 NORTH, RANGE 4 EAST OF THE GILA AND SALT RIVER BASE AND MERIDIAN, MARICOPA COUNTY, ARIZONA MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE CITY OF PHOENIX BRASS CAP IN HANDHOLE MARKING THE SOUTHWEST QUARTER OF SAID SECTION 19 FROM WHICH A CITY OF PHOENIX BRASS CAP FLUSH MARKING THE WEST QUARTER CORNER OF SAID SECTION 19 BEARS NORTH 00 DEGREES 59 MINUTES 35 SECONDS WEST 2657.05 FEET, SAID DESCRIBED LINE BEING THE BASIS OF BEARING FOR THIS DESCRIPTION;
THENCE NORTH 00 DEGREES 59 MINUTES 35 SECONDS WEST 1608.56 FEET ALONG THE WEST LINE OF SAID SOUTHWEST QUARTER TO THE NORTH LINE OF THE STATE HIGHWAY WARRANTY DEED RECORDED IN BOOK 6535 OF DOCKETS, PAGE 303, RECORDS OF MARICOPA COUNTY, ARIZONA;
THENCE SOUTH 85 DEGREES 21 MINUTES 12 SECONDS EAST 104.44 FEET ALONG SAID NORTH LINE TO THE SOUTHWEST CORNER OF SAID LOT 5;
THENCE NORTH 02 DEGREES 12 MINUTES 31 SECONDS WEST 76.69 FEET ALONG THE WEST LINE OF SAID LOT 5 TO THE NORTH RIGHT OF WAY LINE OF INTERSTATE 10 RECORDED IN DOCUMENT NO. 2012-1179766, RECORDS OF MARICOPA COUNTY, ARIZONA AND THE POINT OF BEGINNING;
THENCE CONTINUING NORTH 02 DEGREES 12 MINUTES 31 SECONDS WEST 541.94 FEET TO THE NORTHWEST CORNER OF SAID LOT 5 AND THE BEGINNING OF A NON-TANGENT CURVE TO THE RIGHT THE CENTER OF WHICH BEARS SOUTH 00 DEGREES 34 MINUTES 42 SECONDS EAST 542.96 FEET;
THENCE EASTERLY ALONG SAID NORTH LINE AND THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 19 DEGREES 26 MINUTES 35 SECONDS, AN ARC LENGTH OF 184.25 FEET;
THENCE SOUTH 71 DEGREES 14 MINUTES 45 SECONDS EAST 99.86 FEET CONTINUING ALONG NORTH LINE OF SAID LOT 5 AND 6 TO THE BEGINNING OF A TANGENT CURVE TO THE LEFT HAVING A RADIUS OF 602.96 FEET;
THENCE EASTERLY ALONG SAID NORTH LINE AND THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 19 DEGREES 37 MINUTES 50 SECONDS, AN ARC LENGTH OF 206.58 FEET TO THE NORTHWEST CORNER OF SAID LOT 7;
THENCE NORTH 89 DEGREES 15 MINUTES 49 SECONDS EAST 135.32 FEET ALONG THE NORTH LINE OF SAID LOT 7;
THENCE SOUTH 04 DEGREES 38 MINUTES 17 SECONDS WEST 289.34 FEET;
THENCE SOUTH 85 DEGREES 21 MINUTES 12 SECONDS EAST 24.04 FEET;
THENCE SOUTH 04 DEGREES 38 MINUTES 48 SECONDS WEST 213.37 FEET TO NORTH RIGHT OF WAY LINE OF SAID INTERSTATE 10;
THENCE NORTH 85 DEGREES 01 MINUTES 21 SECONDS WEST 164.97 FEET ALONG SAID EASEMENT LINE;
THENCE NORTH 82 DEGREES 56 MINUTES 45 SECONDS WEST 99.87 FEET CONTINUING ALONG SAID EASEMENT LINE;
THENCE NORTH 85 DEGREES 05 MINUTES 21 SECONDS WEST 313.98 FEET CONTINUING ALONG SAID EASEMENT LINE TO THE POINT OF BEGINNING;
EXHIBIT B
WORK LETTER AGREEMENT
The undersigned Landlord and Tenant are executing concurrently with this Work Letter Agreement (“Work Letter”), a written Office Lease (the “Lease”) covering those certain premises more particularly described in Section 1.04 of the Lease, (hereinafter referred to as “Premises”). Capitalized terms used but not otherwise defined in this Work Letter shall have the meanings ascribed to them in the Lease.
1. Representatives. Landlord appoints Landlord’s Representative to act for Landlord in all matters covered by this Work Letter. Tenant appoints Tenant’s Representative to act for Tenant in all matters covered by this Work Letter. All inquiries, requests, instructions, authorizations and other communications with respect to the matters covered by this Work Letter will be made to Landlord’s Representative or Tenant’s Representative, as the case may be. Tenant will not make any inquiries of or requests to, and will not give any instructions or authorizations to, any other employee or agent of Landlord, including Landlord’s architect, engineers and contractors or any of their agents or employees, with regard to matters covered by this Work Letter. Either party may change its Representative under this Work Letter at any time with three (3) days prior written notice to the other party.
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Tenant’s Representative:
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Amy Klimek
ZipRecruiter, Inc
604 Arizona Avenue
Santa Monica, California 90401
Phone: (310) 925-2644
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With a copy to:
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Corey Shepard
2398 E. Camelback Road, Suite 900
Phoenix, Arizona 85016
Phone: (602) 648-7373
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Landlord’s Representative:
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Ms. Cathy Exeter
11452 El Camino Real, Suite 200
San Diego, California 92130
Phone: (858) 793-0202
Fax: (858) 793-5363
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2. Tenant’s Plans and Specifications.
a. Tenant agrees, at its sole cost and expense, through a space planner or architect selected by Tenant, and approved by Landlord in Landlord’s reasonable discretion given within five (5) business days (“Space Planner”), to furnish a space plan and specifications, including the space layout and improvement plan for the Premises (“Tenant’s Space Plan”) required for the performance of the work to construct the improvements to the building desired by Tenant (hereinafter referred to as the “Tenant Improvements”). Landlord hereby approves RSP Architects as the Space Planner, if selected by Tenant. Tenant’s Space Plan shall include but not
be limited to partition layout, reflected ceiling plans, electrical outlets, electrical switches and locations of each thereof. As part of the Tenant Improvements, subject to the Tenant Allowance, Tenant shall construct the demising wall, multi-tenant corridor and vestibule, if necessary, for the Partial Premises to be a separate easily accessible and readily marketable space. Tenant shall cause the Tenant Improvements to be constructed by a contractor (“Contractor”) selected by Tenant and approved by Landlord in Landlord’s reasonable discretion, given within five (5) business days. Landlord hereby approves Willmeng, Wespac, Jokake or Layton as the Contractor, if selected by Tenant. Tenant shall have the right to competitively bid the construction to union or non-union contractors.
b. The Space Planner shall be responsible for providing to Tenant, with a copy to Landlord, a complete set of construction drawings and documents, including Tenant’s Space Plan, which are permit ready and have completed plan check by the government agency having jurisdiction, for construction of the Tenant Improvements, the quantity and description of materials, equipment and other items required for bidding by the Contractor. The Space Planner shall be responsible for coordination of the architectural, mechanical, electrical and plumbing drawings. Landlord, Tenant and Contractor shall cooperate to the best of their ability to provide all information required for such coordination.
c. Tenant shall be responsible to pay the Space Planner’s fees for the Tenant’s Space Plan, which Landlord will reimburse Tenant by charging said reimbursement against the Tenant Allowance provided under this Agreement. In addition, upon execution and delivery of this Lease, Landlord agrees to pay Tenant’s Space Planner $0.12 per RSF of the entire Premises (including without limitation, the Partial Premises) for an initial “test fit” space plan, in addition to the Initial Tenant Allowance set forth in Section 10 below.
d. All work shall be performed, and all materials and equipment shall be supplied by suppliers, by or under the control of the Contractor or other consultants selected by Tenant. Such contractors, subcontractors and suppliers must be reasonably approved by Landlord within five (5) business days prior to performance of any work or furnishing of any materials or equipment. Landlord hereby approves Kraemer Consulting Engineers if selected by Tenant. Landlord shall use its reasonable discretion in approving Tenant’s choice of contractors, subcontractors and suppliers. Any contractor or subcontractor employed by Tenant shall be commercially licensed, bonded and insured in the State of Arizona. Before the commencement of any work by Contractor, Tenant shall provide Landlord with copies of Tenant’s and Contractor’s applicable insurance policies. At a minimum, such policies shall include builder’s all-risk coverage (unless maintained by Tenant), liability for death, personal injury and property damage arising out of the performance of any work at or about the Premises by Contractor, any subcontractor or any other party required to be under the control of Contractor, and shall provide comprehensive automobile liability insurance, shall be primary and non-contributing. Any insurance which Tenant is required to maintain hereunder shall include a provision which requires the insurance carrier to give Landlord not less than thirty (30) days’ written notice prior to any cancellation or modification of such coverage; provided however, if the insurer is unable or unwilling to provide such notice to Landlord, Tenant shall be required to provide notice to Landlord not less than twenty (20) days prior to any cancellation or modification of such coverage. The minimum
amount of such insurance coverage shall be One Million Dollars ($1,000,000.00) per occurrence for personal injury or property damage and Three Hundred Thousand Dollars ($300,000.00) for automobile liability. Said policies shall each name Landlord and Landlord’s lender(s), if applicable, as additional insured parties and shall each cover any occurrence caused by or occurring because of activities or failure to properly and safely perform the work.
e. All plans and specifications referred to hereinabove in Sections a, b and c are subject to the Landlord’s approval in its reasonable discretion, unless a Design Problem (as defined in the Lease) exists.
3. Landlord’s Approval.
Landlord may withhold its approval of any improvements and any Tenant Space Plan, Tenant Working Drawings, Tenant Extra Work or Change Orders which create a Design Problem, but Landlord shall approve or disapprove all within five (5) business days of receipt and within two (2) business days of a resubmittal:
4. Schedule of Tenant Improvement Activities.
Tenant shall cooperate with and submit to Space Planner the information (the “Tenant Information”) necessary for the Space Planner to prepare the Tenant’s Space Plan for the Premises. Landlord shall approve or reasonably disapprove Tenant’s Space Plan for a Design Problem within five (5) business days of receipt and any revision thereafter within two (2) business days of receipt.
After approval of the Tenant’s Space Plan by Landlord, Tenant will promptly have prepared a preliminary estimate of the cost of the Tenant Improvements (hard and soft cost of Tenant Improvements only) as set forth in the Tenant Space Plan (the “Tenant’s Estimated Construction Cost”). Tenant shall timely (not later than three (3) days after Tenant’s receipt thereof) provide a copy of the Tenant’s Estimated Construction Cost to Landlord. After approval of Tenant’s Estimated Construction Cost, Space Planner will prepare and deliver to Tenant, Landlord and Contractor working drawings for the Premises (“Tenant Working Drawings”). Tenant shall cause Contractor to prepare from the documents a cost proposal (“Tenant Cost Proposal”) for construction of the Tenant Improvements (hard and soft cost of Tenant Improvements only) in accordance with the Tenant Working Drawings, and construction schedule which will set forth estimated time frames for completion of construction of the Tenant Improvements. If the Tenant Cost Proposal is greater than the Tenant Allowance (“Excess Costs”), Tenant will so notify Landlord in writing and Tenant will either:
(i) acknowledge that Landlord will not be responsible for payment of the Excess Costs and agree in writing to pay the Excess Costs and, in the event the Excess Costs exceed $15 per RSF of the Initial Premises, Tenant shall deposit the Excess Costs that exceed $15 per RSF of the Initial Premises to Landlord to be disbursed following completion of Tenant Improvements and Tenant’s delivery of the documents required by Section 10(e) below, or
(ii) revise the Tenant Space Plan in order to assure that the Tenant Cost Proposal is either (a) no more than the Tenant Allowance, or (b) in excess of the Tenant Allowance by an amount which Tenant agrees to pay pursuant to clause (i) immediately above.
Following approval of the Tenant Working Drawings and the Tenant Cost Proposal by Tenant, Tenant shall cause Space Planner to make application to the appropriate governmental authorities for necessary approvals and building permits. Landlord acknowledges that the Tenant Working Drawings will be submitted simultaneously to Landlord and the City for review. Upon receipt of the necessary approvals and permits, the Contractor will begin construction. The Contractor may substitute materials of comparable or better quality if the materials specified in Tenant’s Working Drawings are unavailable or not available within the time required for timely completion.
5. Compliance With Laws.
Tenant, in completing the Tenant Improvements shall, at Tenant’s sole and cost and expense, ensure that Contractor complies with and observes all the requirements of all county, parochial, municipal, state, federal and other applicable governmental authorities (“Applicable Requirements”) now in force, or which may hereafter be in force, pertaining to the Premises, including, but not limited to (i) Industrial hygiene (ii) the American’s With Disabilities Act (ADA) (iii) environmental conditions on, in, under or about the Premises, including soil and groundwater conditions, (iv) OSHA and (v) the use, generation, manufacture, production, installation, maintenance, removal, transportation, storage, spill, or release of any Hazardous Substance, as that term is defined in the Lease.
Tenant shall, within five (5) business days after receipt of Landlord’s written request, provide Landlord with copies of all documents and information, including, but not limited to permits, licenses, registrations, manifests, applications, reports, and certificates evidencing or required for Tenant’s and/or Contractor’s compliance with any Applicable Requirements specified by Landlord and shall immediately, upon receipt, notify Landlord in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving failure by Tenant, Contractor or the Premises to comply with Applicable Requirements.
6. Change Orders. Tenant may authorize changes in the work during construction. All such changes will be subject to Landlord’s prior written reasonable approval in accordance with Section 3. Prior to commencing any material change, the Tenant shall prepare and deliver to Landlord, for Landlord’s approval, a change order (the “Change Order”) setting forth the total cost of such change, which will include associated architectural, engineering and construction contractor’s fees. If Tenant’s then current budget is in excess of the applicable Tenant Allowance, Tenant shall pay the amount of the cost for such Change Order before Landlord shall be required to pay any additional Tenant Allowance to Tenant.
7. Intentionally Omitted.
8. Construction Of The Premises. Tenant shall cause Contractor to construct the Tenant Improvements within the Premises under a guaranteed maximum price construction contract with the Tenant, reasonably acceptable to Landlord and to cause such construction to proceed reasonably and diligently. Landlord shall not impose any charge of any kind for profit, use of parking or elevator, overhead, and supervision or construction management fee in connection with the construction of the Tenant Improvements. Tenant shall not be responsible for paying any costs of trash removal and utilities including, without limitation, HVAC, electrical power, water, and sewer during construction of the Tenant Improvements. Tenant shall have the right to use portable bathrooms at its discretion. Tenant, at no charge to Tenant, shall have (i) the right use existing Building’s risers and/or install additional risers for Tenant’s cabling, and (ii) unrestricted access to all areas within the Premises and Building, including the Building’s MPO (main point of entry), to install the required infrastructure to service Tenant’s IT and telecommunications requirements.
9. Intentionally Deleted.
10. Tenant Improvements At Landlord’s Cost And Expense.
a. Landlord agrees to provide Tenant an allowance not to exceed Sixty and No/100 Dollars ($60.00) per RSF for the 65,188 RSF of the Initial Premises for a total of Three Million Nine Hundred Eleven Thousand Two Hundred Eighty Dollars ($3,911,280.00) to complete the design and construction of its Tenant Improvements in the Initial Premises (“Initial Tenant Allowance”). In addition to the foregoing, Landlord agrees to provide Tenant, at Tenant’s election, an additional allowance not to exceed Ten and No/100 Dollars ($10.00) per RSF for the 65,188 RSF of the Initial Premises for a total not to exceed Six Hundred Fifty-One Thousand Eight Hundred Eighty Dollars ($651,880.00), to complete the design and construction of its Tenant Improvements in the Initial Premises (the “Additional Tenant Allowance”). The Initial Tenant Allowance and any portion of the Additional Tenant Allowance that Tenant has elected to utilize are hereinafter referred to for purposes of this subsection a. as the “Tenant Allowance.” Tenant shall only be permitted to utilize the Tenant Allowance to construct Tenant Improvements for the Initial Premises (including the demising wall). In the event the Tenant fails to utilize the Additional Tenant Allowance during the time period that construction of the Tenant Improvements occurs, Tenant shall be deemed to forfeit any right to the unused Additional Tenant Allowance. In the event Tenant utilizes all or a portion of the Additional Tenant Allowance, the Additional Tenant Allowance utilized shall be amortized over Ten (10) Years at an interest rate of six percent (6%) per annum and commencing on the ninth (9th) month of the Lease Term said amortized amount shall be paid by Tenant monthly in equal payments at the start of each month simultaneously with the payment of Base Rent (plus applicable rent and privilege taxes thereon). To the extent that Landlord fails to pay Tenant from the Tenant Allowance amounts requested to pay Tenant’s Contractor, architects, engineers and Tenant’s agents in accordance with the terms hereof, and such amounts remain unpaid for thirty (30) days after notice from Tenant, then without limiting Tenant’s other remedies under the Lease, Tenant may, after Landlord’s failure to pay such amounts within five (5) business days
after Tenant’s delivery of a second notice from Tenant delivered after the expiration of such 30-day period, pay same and deduct the amount thereof from the Rent next due and owning under the Lease, including interest at the Interest Rate from the due date until the date of the Rent offset. Notwithstanding the foregoing, if during either the 30-day or 5-day period set forth above, Landlord (i) delivers notice to Tenant that it disputes any portion of the amounts claimed to be due (the “Allowance Dispute Notice”), and (ii) pays any amounts not in dispute, Tenant shall have no right to offset any amounts against rent, but may institute an action to recover such amounts from Landlord. Notwithstanding of the foregoing, in the event Tenant institutes an action as provided herein and the judgement is in favor of Tenant, Tenant shall be entitled, automatically, to offset the amount of such judgement against the Base Rent next coming due under the Lease, including interest at the Interest Rate from the due date until the date of the Rent offset. Further, in the event the judgement is in favor of Tenant, any delay actually caused to Tenant as a result of Landlord’s failure to pay the disputed amount shall be deemed to be a “Landlord Caused Delay” under Section 5 of this Tenant Work Letter.
b. Landlord agrees to provide Tenant an allowance not to exceed Sixty and No/100 Dollars ($60.00) per RSF for the 25,411 RSF of the Partial Premises for a total of One Million Five Hundred Twenty-Four Thousand Six Hundred Sixty Dollars ($1,524,660.00) to complete the design and construction of its Tenant Improvements in the Partial Premises (“Partial Premises Tenant Allowance”), which shall be made available to Tenant only after the Partial Premises Termination Right has expired and has not been exercised by Tenant. In addition to the foregoing, Landlord agrees to provide Tenant, at Tenant’s election, an additional allowance not to exceed Ten and No/100 Dollars ($10.00) per RSF for the 25,411 RSF of the Partial Premises for a total not to exceed Two Hundred Fifty-Four Thousand One Hundred Ten Dollars ($254,110.00), to complete the design and construction of its Tenant Improvements in the Partial Premises (the “Additional Partial Premises Tenant Allowance”), which shall be made available to Tenant only after the Partial Premises Termination Right has expired and has not been exercised by Tenant. Tenant shall notify Landlord of the amount of the Additional Partial Premises Tenant Allowance it will utilize on or before the Partial Premises Termination Date. The Partial Premises Tenant Allowance and any portion of the Additional Partial Premises Tenant Allowance that Tenant has elected to utilize are hereinafter referred to for purposes of this subsection b. as the “Tenant Allowance.” Tenant shall only be permitted to utilize the Tenant Allowance to construct Tenant Improvements for the Premises (including the demising wall). In the event the Tenant fails to utilize the Additional Partial Premises Tenant Allowance during the time period that construction of the Tenant Improvements occurs, Tenant shall be deemed to forfeit any right to the unused Additional Partial Premises Tenant Allowance. In the event Tenant utilizes all or a portion of the Additional Partial Premises Tenant Allowance, the Additional Partial Premises Tenant Allowance utilized shall be amortized over the remaining Lease Term at an interest rate of six percent (6%) per annum and commencing on the month of the Lease Term following completion of the Tenant Improvements for the Partial Premises, but in all events no later than thirty (30) months after the Effective Date, with said amortized amount to be paid by Tenant monthly in equal payments at the start of each month simultaneously with the payment of Base Rent (plus applicable rent and privilege taxes thereon). To the extent that Landlord fails to pay Tenant from the Tenant Allowance amounts requested to pay Tenant’s Contractor, architects, engineers and Tenant’s agents in accordance with the terms hereof, and such amounts
remain unpaid for thirty (30) days after notice from Tenant, then without limiting Tenant’s other remedies under the Lease, Tenant may, after Landlord’s failure to pay such amounts within five (5) business days after Tenant’s delivery of a second notice from Tenant delivered after the expiration of such 30-day period, pay same and deduct the amount thereof from the Rent next due and owning under the Lease, including interest at the Interest Rate from the due date until the date of the Rent offset. Notwithstanding the foregoing, if during either the 30-day or 5-day period set forth above, Landlord (i) delivers notice to Tenant that it disputes any portion of the amounts claimed to be due (the “Allowance Dispute Notice”), and (ii) pays any amounts not in dispute, Tenant shall have no right to offset any amounts against rent, but may institute an action to recover such amounts from Landlord. Notwithstanding of the foregoing, in the event Tenant institutes an action as provided herein and the judgement is in favor of Tenant, Tenant shall be entitled, automatically, to offset the amount of such judgement against the Base Rent next coming due under the Lease, including interest at the Interest Rate from the due date until the date of the Rent offset. Further, in the event the judgement is in favor of Tenant, any delay actually caused to Tenant as a result of Landlord’s failure to pay the disputed amount shall be deemed to be a “Landlord Caused Delay” under Section 5 of this Tenant Work Letter.
c. The Tenant Allowance for the Initial Premises and the Partial Premises shall only be utilized by Tenant for any and all city permits, space planning, engineering and construction costs (including the fee of Contractor), construction management fees, insurance, building permits and other required fees, and to plan and construct improvements which are real property fixtures that will remain with the Premises, and may not be used to purchase or construct trade fixtures, furniture, or other personal property. Notwithstanding the forgoing, Tenant shall be permitted to utilize up to Ten Dollars ($10) per RSF of the Tenant Allowance for data/telephone cabling and wireless equipment, security equipment (access control, alarm and CCTV) and cabling, moving costs, signage, furniture and auxiliary equipment required for the operation of Tenant business. All costs and expenses for such items beyond $10 per RSF and the Excess Costs shall be the sole responsibility of the Tenant subject to any and all change order expenses by Tenant.
d. Tenant must utilize the Tenant Allowance for the Initial Premises within eighteen (18) months of the Effective Date of the Lease. In the event the Tenant fails to timely utilize all or any portion of the Tenant Allowance, Tenant shall be deemed to forfeit any right to the unused Tenant Allowance.
e. Tenant shall be obligated to disburse funds relating to the Excess Costs prior to Landlord being obligated to disburse the Tenant Allowance.
f. Tenant shall periodically submit to Landlord the following items after completion of portions of the Tenant Improvements: (i) bills and invoices covering all labor and material expended for completed Tenant Improvements, (ii) an affidavit from Tenant stating that all such bills and invoices are due and payable for work completed at the Premises as Tenant Improvements, and that all such costs qualify hereunder, (iii) Tenant and Contractor completion affidavits (as applicable), (iv) “As Built” drawings and specifications, (v) a Certificate prepared by Space Planner confirming such Tenant Improvements have been completed in accordance
with the approved Tenant Working Drawings, (vi) valid mechanics’ lien releases and waivers from all general contractor(s) and subcontractor(s) performing the Tenant Improvements which shall be conditional for the current payment request and shall be unconditional for amounts previously paid by Landlord; and (vii) such other information as reasonably requested by Landlord. No disbursement of the Tenant Allowance shall be made unless: (i) such costs are included in the Tenant Cost Proposal, are for Tenant Improvements, and are covered by the Tenant Allowance for the Initial Premises and for the Partial Premises, respectively; (ii) Tenant has completed and delivered to Landlord a written request for payment, in form reasonably approved by Landlord; (iii) the request for payment is accompanied by the documentation set forth in the foregoing sentence; and (iv) Landlord’s Representative has inspected and approved the work for which Tenant seeks payment or reimbursement (such inspection to occur within the outside payment time period of fourteen (14) days as set forth below). Upon Tenant’s full compliance with the foregoing, and if Landlord determines that there are no applicable or claimed stop notices (or any other statutory or equitable liens of anyone performing any of Tenant Improvements or providing materials for Tenant Improvements) or actions thereon, Landlord shall disburse the Tenant Allowance directly to Tenant. Such payment shall be made within fourteen (14) days following Landlord’s receipt of the required information.
11. Intentionally Deleted.
12. Shell Construction. Landlord shall provide at its sole cost and expense as part of the initial construction of the Building the following items: (i) outside walls, columns and unfinished concrete floors, broom clean; (ii) Building Standard power supplied to the Building core, per building specifications; (iii) water lines to the Building (with Tenant to be responsible for all costs of hook-up of any and all utilities, water, sewer and other similar services with the City in which the Premises is located); (iv) Common Areas existing as of the Effective Date; (v) restrooms existing as of the Effective Date; and (vi) (28) 5-ton high efficient RTUs, (3) high efficient split system heat pumps, (4) wet column stacks to 2nd floor, restroom cores; women (6 toilet, 4 vanity), men (4 toilet, 2 urinal, 4 vanity), fire protection-light hazard (.10gpm/1500sf) NFPA 13/City of Phoenix Amended, SES 3600 A; 277/480 3 Phs Nema 1 rated; meter section w/1 ea=3600 A House Meter; 800 A 277/480 3 Phs Distribution Panels (two (2) per floor), Telco (4 ea) 4” conduits from Raymond ROW to Building (duct distribution and outside air units are excluded from the foregoing). Notwithstanding anything to the contrary contained herein, if Landlord fails to timely fulfill its obligation to perform the Landlord work or any portion thereof (the “Uncompleted Landlord Work”) prior to the Delivery Date, Tenant shall be entitled to deliver notice (the “Landlord Delay Notice”) thereof to Landlord and to any mortgage or trust deed holder of the Building whose identity and address have been previously provided to Tenant. If Landlord still fails to perform the Uncompleted Landlord Work, or commence to perform the same and proceed with due diligence to complete the same, or inform Tenant in reasonable detail why Landlord disagrees that the particular work requested by Tenant is not Landlord’s obligation under this Lease, within ten (10) business days after Landlord’s receipt of the Landlord Delay Notice from Tenant (the “Landlord Cure Period”) and if Landlord fails to deliver notice to Tenant prior to the expiration of the Landlord Cure Period notifying Tenant that Landlord’s failure to perform the Uncompleted Landlord Work is caused by Tenant or a Force Majeure Delay (a “Landlord Delay Response”), Tenant shall be entitled to perform the Uncompleted
Landlord Work and shall within five (5) business days of the completion thereof deliver written demand to Landlord for the reimbursement of Tenant’s reasonable and actual out-of-pocket costs incurred in connection with the completion of the Uncompleted Landlord Work (“Tenant’s Uncompleted Work Costs”).
13. Responsibility For Design. Tenant will be responsible for the design, function and maintenance of all improvements which are not Building Standard, whether or not approved by Landlord or installed by Contractor at Tenant’s request. Landlord’s approval of the Tenant Working Drawings and performance of Landlord’s duties hereunder do not constitute any representation or warranty and shall not obligate Landlord in any manner as to the adequacy, sufficiency, efficiency, performance or desirability of the Tenant Improvements in the Premises.
14. Indemnity. Tenant shall indemnify Landlord against and hold Landlord harmless from and against any and all costs, claims or liability arising from: (a) any work performed on or about the Property by or at Tenant’s request; (b) any breach or default in the performance of Tenant’s obligations under this Work Letter; (c) any death, personal injury or property damage caused by or arising from Tenant’s or Contractor’s performance of work or the installation of Tenant Improvements in or about the Premises; or (d) any other acts or omissions of Tenant or Contractor. Tenant shall defend Landlord against any such cost, claim or liability at Tenant’s expense with counsel reasonably acceptable to Landlord. As a material part of the consideration to Landlord, Tenant assumes all risk of damage to property or injury or death to persons in or about the Property arising from any cause, and Tenant hereby waives all claims in respect thereof against Landlord. As used in this Section, the term “Tenant” or “Contractor” shall include Tenant’s or Contractor’s employees, agents, contractors and invitees, if applicable.
15. Lien Protection. Tenant shall pay when due all claims for labor or materials furnished or alleged to have been furnished to or for Tenant for use in completing any work at or upon the Premises, which claims are or may be secured by any mechanic’s liens against the Premises or any interest therein. Tenant shall give Landlord not less than ten (10) days prior written notice of any work done on or in the Premises and Landlord shall have the right to post a notice of non-responsibility in or on the Premises as provided by law. If Tenant or Landlord shall contest the validity of any such lien, claim or demand, the Tenant, shall, at its sole cost and expense, defend and protect itself, the Premises and Landlord against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof against the Landlord or the Premises. If Landlord shall require, Tenant shall furnish to Landlord a surety bond satisfactory to Landlord in an amount equal to one and one half times the amount of such contested lien claim or demand, indemnifying Landlord against liability for the same, as required by law to hold the Premises free from the effect of such lien or claim.
16. Lease Commencement Date Delays. The Commencement Date shall occur as provided in Section 1.5 of this Lease, provided that the Commencement Date shall be extended by the number of days of actual delay of the Substantial Completion of the Tenant Improvements and/or Tenant’s move into the Premises to the extent caused by a “Commencement Date Delay,” as that term is defined, below. As used herein, the term “Commencement Date Delay” shall mean only a “Force Majeure Delay” or a “Landlord Delay,” as those terms are defined below in this
Section 16 of this Work Letter. As used herein, the term “Force Majeure Delay” shall mean only an actual delay resulting from strikes, fire, wind, damage or destruction to the Building, explosion, casualty, flood, hurricane, tornado, the elements, acts of God or the public enemy, sabotage, war, invasion, insurrection, rebellion, civil unrest, riots, or earthquakes, failure of utilities, inability to secure labor or materials or reasonable substitutions therefor or inability to secure permits and inspections on an objective basis by any other person or entity constructing improvements comparable to the Tenant Improvements. As used in this Tenant Work Letter, “Landlord Delay” shall mean actual delays to the extent resulting from the acts or omissions of Landlord including, but not limited to (i) failure of Landlord to timely approve or disapprove any construction drawings or change orders or any other items set forth in this Tenant Work Letter requiring Landlord’s approval within time periods set forth in this Tenant Work Letter or this Lease, as applicable, or otherwise within a reasonable period of time (except to the extent deemed approved); (ii) material and unreasonable interference by Landlord, its agents or Landlord Parties (except as otherwise allowed under this Work Letter) with the Substantial Completion of the Tenant Improvements and which objectively preclude or delay the construction of tenant improvements in the Building by any person, which interference relates to access by Tenant, or Tenant’s agents to the Building or any Building facilities (including loading docks and freight elevators) or service and utilities (including temporary power and parking areas as provided herein) during normal construction hours, or the use thereof during normal construction hours; (iii) delays due to the acts or failures to act of Landlord or Landlord parties, including without limitation, with respect to payment of the Tenant Allowance (except as otherwise allowed under this Work Letter) and/or cessation of work as a result thereof; (iv) Landlord’s failure to deliver the Premises with the Landlord work complete; and (v) the discovery by Tenant of Hazardous Materials in the Premises.
(a) If Tenant contends that a Commencement Date Delay has occurred, Tenant shall notify Landlord in writing of (i) the event which constitutes such Commencement Date Delay within three (3) business days of such event, and (ii) the date upon which such Commencement Date Delay is anticipated to end. If such actions, inaction or circumstance described in the notice set forth in (i) above of this Section 16 of this Tenant Work Letter (the “Delay Notice”) are not cured by Landlord within one (1) business day of Landlord’s receipt of the Delay Notice and if such action, inaction or circumstance otherwise qualify as a Commencement Date Delay, then a Commencement Date Delay shall be deemed to have occurred commencing as of the date of Landlord’s receipt of the Delay Notice and ending as of the date such delay ends.
(b) For purposes of this Section 16, “Substantial Completion of the Tenant Improvements” shall mean the issuance of a temporary certificate of occupancy or its equivalent for the Premises and completion of construction of the Tenant Improvements in the Premises pursuant to the approved construction drawings, including, with respect to the Tenant Improvements, any furniture, fixtures, work stations, build-in furniture or equipment necessary to obtain a temporary certificate of occupancy or its equivalent (including the final inspection sign-off), with the exception of any punch list items.
17. Conflict. In the event of any conflict between the terms of this Work Letter and the remainder of the Lease, the terms of this Work Letter will control.
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“LANDLORD”
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DARED 89 LLC,
an Arizona limited liability company
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By:
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Douglas Allred Company, a California Corporation
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Its:
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Co-Manager
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By:
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Name:
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Its:
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By:
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Jammer I LLC,
an Arizona limited liability company
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Its:
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Co-Manager
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By:
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Name:
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Its:
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“TENANT”
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ZipRecruiter, Inc., a Delaware corporation
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By:
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Name:
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EXHIBIT C
RULES AND REGULATIONS
1. Except as set forth in the Lease, no sign, placard, picture, advertisement, name or notice of any kind shall be inscribed, displayed, printed or affixed on or to any part of the outside or inside of the Project or, Building (excluding within the Premises) or the surrounding area (including sidewalks, landscaping, exterior walls) without the prior written reasonable consent of Landlord. Except as set forth in the Lease, if such consent is given by Landlord, Landlord may regulate the manner of display of the sign, placard, picture, advertisement, name or notice. Landlord shall have the right to remove any sign, placard, picture, advertisement, name or notice which has not been approved by Landlord or is being displayed in a non-approved manner without notice to and at the expense of tenant. All approved signs or lettering shall be printed, painted, affixed or inscribed at the expense of tenant by a person reasonably approved by Landlord. Tenant shall not place anything or allow anything to be placed near any window or any glass door, partition or wall which may appear unsightly from outside the Premises.
2. The directory for the Building will be provided exclusively for the display of the name and location of the tenants only, and Landlord reserves the right to exclude any other names therefrom.
3. The sidewalks, parking areas, halls, passages, exits, entrances, elevators, and stairways shall not be obstructed by Tenant or used for any purpose other than for ingress to and egress from the Premises. The halls, passages, exits, entrances, parking areas, elevators, stairways, toilets, balconies and roof are not for the use of the general public and Landlord shall in all cases retain the right to control the same and prevent access thereto by all persons whose presence in the judgment of Landlord shall be prejudicial to the character, reputation and interests of the Project or its tenants. Except as set forth in the Lease, no tenant and no employees or invitees of any tenant shall go upon the roof of the Building.
4. Tenant shall not alter or replace any lock or install any additional locks or any bolts on any door of the Premises without the written reasonable consent of Landlord. Tenant shall have key card access to the Building and Premises.
5. The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from a violation of this rule shall be borne by the tenant who, or whose agents, employees, contractors, customers or invitees, shall have caused the same.
6. Tenant shall not overload the floor of the Premises and shall not in any way deface the Premises or any part thereof.
7. No bulk freight or equipment of any kind shall be brought into the Project or Building without the reasonable consent of Landlord, and all moving of same in or out of the
Project or Building shall be done at such time and in such manner as Landlord may reasonably designate. Landlord shall have the right to prescribe the weight, size and position of all bulk safes and other heavy equipment brought into the Building and also the reasonable times and manner of moving the same in and out of the Building. Safes or other heavy objects shall, if considered necessary by Landlord, stand on wood strips of such thickness as shall be necessary to properly distribute the weight. Landlord will not be responsible for loss of or damage to any such safe or property from any cause and all damage done to the Building or Project by moving or maintaining any such safe or other property shall be repaired at the expense of Tenant. There shall not be used in the Premises or the Building any hand trucks except those equipped with rubber tires and side guards.
8. Window cleaning shall be done only by Landlord at intervals it deems reasonably appropriate.
9. Tenant shall not use, keep or permit to be used or kept any noxious gas substance in the Premises, or permit or suffer the Premises to be occupied or used in a manner reasonably offensive or objectionable to the Landlord or other occupants of the Building or Project by reason of noise, odors and/or vibrations, or unreasonably interfere in any way with other Tenants or those conducting business in the Building or Project. Tenant shall not make or permit to be made any disturbing noises or disturb or interfere with occupants of the Project or neighboring property, or with those having business with such occupants, by the use of any musical instrument, radio, phonograph, unusual noise, or in any other way. Tenant shall not throw anything out of doors or down the passageways. No cooking shall be done or permitted by Tenant in the Premises except the reheating of food by microwave or toaster oven.
10. The Premises shall not be used for the manufacturing or for the storage of merchandise except as such may be incidental to the use of the Premises for general office purposes. No Tenant shall occupy or permit any portion of its Premises to be occupied for the manufacture or sale of liquor, narcotics or tobacco in any form, or as a medical office, or as a barber shop or manicure shop except with prior written consent of Landlord. The Premises shall not be used for lodging or sleeping or for illegal purposes.
11. Except as allowed by the Lease, Tenant shall not use any method of heating or air conditioning other than that supplied by Landlord.
12. No boring or cutting above or below the Partial Premises or through common walls with other tenants for the stringing of wires will be allowed until the Partial Premises Termination Right has expired and has not been exercised by Tenant, without the written consent of Landlord. The location of the boring or cutting above or below the Partial Premises if not leased by Tenant or through common walls with other tenant for the stringing of wires shall be subject to the reasonable approval of Landlord, but the installation of same shall be at the expense of Tenant. Tenant, upon termination of the tenancy, shall deliver to Landlord all keys to the Building, main suite doors, and toilet rooms which shall have been furnished and remain in Tenant’s possession.
13. Tenant shall not lay linoleum, tile, carpet or other similar floor coverings so that the same are affixed to the floor of the premises in any manner except as reasonably approved by Landlord. The expense of repairing any damage resulting from a violation of this rule or removal of any floor covering shall be borne by Tenant.
14. Tenant shall use commercially reasonable efforts to see that the doors of the Premises are closed and securely locked before leaving the Building and that all water faucets, water apparatus and electrical items are shut off before Tenant or Tenant’s employees leave the Building. Tenant shall be responsible for any damage to the Building, the Project or to other Tenants caused by a failure to comply with this rule.
15. Landlord reserves the right to exclude or expel from the Project any person who, in the judgment of Landlord, is intoxicated or under the influence of drugs, or who shall in any manner do any act in violation of any of the Rules and Regulations of the Project.
16. Employees of Landlord shall not be requested to perform any work or do anything outside of their regular duties unless under special instructions from Landlord.
17. Tenant agrees that it shall comply with all fire regulations that may be reasonably issued from time to time by Landlord, and Tenant shall also provide Landlord with the name of a designated responsible employee to represent Tenant in all matters pertaining to fire regulations.
18. Landlord reserves the right to rescind, alter or waive any rule or regulation at any time prescribed for the Project when, in Landlord’s reasonable judgment, it is necessary, desirable or proper in the best interest of the Project or its Tenants.
19. Tenant shall not disturb, solicit or canvass an occupant of the Project and shall cooperate to prevent the same.
20. Without the written consent of Landlord, Tenant shall not use the name of the Project in connection with or in promoting or advertising the business of Tenant, except as Tenant’s address.
21. All interior, exterior window coverings must be approved by Landlord and Tenant may not install any awnings or other exterior window shades or coverings.
22. Tenant shall not park in driveways or loading areas or in reserved parking spaces of other Tenants. Landlord or its agents shall have the right to cause to be removed any car of Tenant, its employees, agents, contractors, customers or invitees, that may be parked in unauthorized areas. Tenant will from time to time, upon request of Landlord, supply Landlord with a list of license plate numbers for vehicles owned or operated by its employees and agents.
23. Tenant understands that the buildings which make up the Premises are “Non-Smoking”. Any smoking to be done shall be done outside of the Smoke Free Arizona limits from building entries and only at designated smoking areas, and smoking material shall be disposed of in the appropriate containers provided.
24. By executing a copy of these Rules and Regulations, Tenant acknowledges and agrees that it has read and understands these Rules and Regulations and will fully comply with all of the terms and provisions contained herein.
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“TENANT”
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ZipRecruiter, Inc., a Delaware corporation
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By:
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Name:
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EXHIBIT D
COMMENCEMENT NOTICE
The undersigned Landlord and Tenant have executed that certain Office Lease (the “Lease”) covering those certain premises more particularly described in Section 1.4 of the Lease, (hereinafter referred to as “Premises”), located at 4039 East Raymond Street, Phoenix AZ 85040. Capitalized terms used but not otherwise defined in this Commencement Notice shall have the meanings ascribed to them in the Lease.
Pursuant to Section 1.5 of the Lease, Landlord and Tenant hereby agree and confirm and accordingly amend the Lease with the following information:
1. The Commencement Date is ________________________________.
2. The Expiration Date is ________________________________.
The provisions of this Commencement Notice do not and are not intended to void or modify any other provision(s) other than those specifically addressed and agreed to herein, and any construction to the contrary is expressly denied and negated.
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“LANDLORD”
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DARED 89 LLC, an Arizona limited liability company
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By:
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Its:
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By:
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Name:
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Its:
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By:
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Jammer I LLC,
an Arizona limited liability company
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Its:
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Co-Manager
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By:
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Name:
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Its:
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“TENANT”
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ZipRecruiter, Inc., a Delaware corporation
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By:
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Name:
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EXHIBIT E
IRREVOCABLE LETTER OF CREDIT
________Bank
DARED 89 LLC
11452 El Camino Real, Suite 200
San Diego, California 92130
RE: Irrevocable Standby Letter of Credit
Ladies and Gentlemen:
At the request and for the account of ZipRecruiter, Inc., a Delaware corporation as (“Tenant”), we hereby issue our irrevocable standby letter of credit no. ___________ in favor of DARED 89 LLC, an Arizona limited liability company as (“Landlord”), (“Beneficiary”) for the sum or sums not exceeding Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00) (“Letter of Credit”) available upon demand in accordance with the terms and conditions set forth in this letter.
You may draw on this Letter of Credit from time to time when we receive a signed certificate from you in one of the forms attached hereto. The certificate may be signed by one or more of your authorized signatory, or by an authorized signatory of the transferee of Beneficiary as follows.
1. In the form of Attachment A, if the drawing is made with respect to a default of the lease between Tenant and Landlord dated __________________, 2020 (the “Lease”).
Or
2. In the form of Attachment B if the drawing is made as a result of this Letter of Credit not being extended as provided below.
The appropriate certificate shall have all blanks filled in and, shall be personally delivered to us at our office listed above or shall be sent to us by overnight mail, or overnight courier service at our office listed above.
PARTIAL DRAWINGS AND MULTIPLE PRESENTATIONS ARE ALLOWED.
Demand for payment may be made by you hereunder at any time at our office listed above PAYMENT AGAINST CONFORMING PRESENTATIONS HEREUNDER PRIOR TO
10:00 A.M. CALIFORNIA TIME, ON A BUSINESS DAY SHALL BE MADE BY BANK DURING NORMAL BUSINESS HOURS OF THE BANK’S OFFICE ON THE NEXT SUCCEEDING BUSINESS DAY. PAYMENT AGAINST CONFORMING PRESENTATIONS HEREUNDER AFTER 10:00 A.M. CALIFORNIA TIME, ON A BUSINESS DAY SHALL BE MADE BY BANK DURING NORMAL BUSINESS HOURS OF THE BANK’S OFFICE ON THE SECOND SUCCEEDING BUSINESS DAY. AS USED IN THIS LETTER OF CREDIT, “BUSINESS DAY” SHALL MEAN ANY DAY OTHER THAN A SATURDAY, SUNDAY, LEGAL HOLIDAY OR A DAY ON WHICH BANKING INSTITUTIONS IN THE STATE OF CALIFORNIA ARE AUTHORIZED OR REQUIRED BY LAW TO CLOSE.
Drawings in respect of payments hereunder honored by us shall not, in the aggregate, exceed Three Million Five Hundred Thousand Dollars ($3,500,000.00). Each drawing honored by us shall reduce, by the amount of such drawing, the amount available under this Letter of Credit.
This Letter of Credit will expire on __________________, at 5:00 p.m., California time on that date; provided, however, it is a condition of this Letter of Credit that it shall be deemed to be automatically extended for successive terms of one (1) year from the present or any future expiration date hereof, unless at least (30) thirty days prior to any such annual extension date, we shall notify you in writing that we elect not to consider this Letter of Credit extended for any such additional one year period. Upon receipt by you of such notice, you may draw an amount equal to the aggregate undrawn amount hereof by means of your demand accompanied by your written certification (in the form attached hereto as Attachment “B”). IN NO EVENT SHALL THIS LETTER OF CREDIT BE AUTOMATICALLY EXTENDED BEYOND __________________.
THIS LETTER OF CREDIT IS TRANSFERABLE IN WHOLE BUT NOT IN PART ONE OR MORE TIMES, BUT IN EACH INSTANCE ONLY TO A SINGLE BENEFICIARY AS TRANSFEREE AND for THE THEN AVAILABLE AMOUNT, ASSUMING SUCH TRANSFER TO SUCH TRANSFEREE WOULD BE IN COMPLIANCE WITH THEN APPLICABLE LAW AND REGULATION, INCLUDING BUT NOT LIMITED TO THE REGULATIONS OF THE U.S. DEPARTMENT OF TREASURY AND U.S. DEPARTMENT OF COMMERCE. AT THE TIME OF TRANSFER, THE ORIGINAL LETTER OF CREDIT AND ORIGINALS OR COPIES OF ALL AMENDMENTS, IF ANY, TO THIS LETTER OF CREDIT MUST BE SURRENDERED TO US AT OUR ADDRESS INDICATED IN THIS LETTER OF CREDIT TOGETHER WITH OUR TRANSFER FORM ATTACHED HERETO AS EXHIBIT A DULY EXECUTED. APPLICANT SHALL PAY OUR TRANSFER FEE OF 1/4 OF 1% OF THE TRANSFER AMOUNT (MINIMUM US $250.00) UNDER THIS LETTER OF CREDIT. EACH TRANSFER SHALL BE EVIDENCED BY EITHER (1) OUR ENDORSEMENT ON THE REVERSE OF THE LETTER OF CREDIT AND WE SHALL FORWARD THE ORIGINAL OF THE LETTER OF CREDIT SO ENDORSED TO THE TRANSFEREE OR (2) OUR ISSUING A REPLACEMENT LETTER OF CREDIT TO THE TRANSFEREE ON SUBSTANTIALLY THE SAME TERMS AND CONDITIONS AS THE TRANSFERRED LETTER OF CREDIT (IN WHICH EVENT THE TRANSFERRED LETTER OF CREDIT SHALL HAVE NO FURTHER EFFECT).
All payments under this Letter of Credit will be made by wire transfer of immediately available funds into the bank account specified by you in the demand certificate. All amounts to be paid under this Letter of Credit shall be made without any deduction, set-off, counterclaim or withholding of any kind.
We hereby agree with you that document(s) drawn under and in compliance with the terms of this Letter of Credit will be duly honored upon presentation and delivery to_________________ Silicon Valley Bank at the address above, if presented on or prior to the expiration date or any automatically extended expiration date. Documents are to be sent in one lot by courier service, overnight mail, or hand delivery.
All banking charges under this Letter of Credit ARE for the account of the Applicant.
For all purposes of this Letter of Credit, “you”, “yours” and other similar terms shall refer to the Beneficiary.
THIS LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES (ISP98), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 590.
This Letter of Credit sets forth in full our undertaking, and such undertaking shall not in any way be modified, amended, amplified, or limited by reference to any document, instrument or agreement referred to herein. Any reference in this Letter of Credit to such documents shall not be deemed to incorporate herein by reference any document, instrument or agreement except for the attached certificates.
Except as stated herein, this Letter of Credit is not subject to any condition or qualification and THE OBLIGATION OF SILICON VALLEY BANK UNDER THIS LETTER OF CREDIT IS THE INDIVIDUAL OBLIGATION OF SILICON VALLEY BANK AND IS IN NO WAY CONTINGENT UPON REIMBURSEMENT WITH RESPECT THERETO.
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Very truly yours,
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BANK
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By:
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Its:
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Attachment A to the
________________ Bank
Irrevocable Standby Letter of Credit
_________________, 20__
RE: Drawing Certification of Default and Demand for Payment
Ladies and Gentlemen:
The undersigned hereby certifies to_____________________ Silicon Valley Bank that:
1. They are the beneficiary under that certain Stand-by Irrevocable Letter of Credit No. ____________, issued by _________________ Silicon Valley Bank dated _______________, 2020 (the “Letter of Credit”).
2. A default has occurred in connection with the lease between ZipRecruiter, Inc. (“Tenant”) and DARED 89 LLC (“Landlord”) dated , 2020 (the “Lease”).
3. The amount of $_____________ is the amount of the default under Section 2 above and such default amount is owing to Landlord pursuant to the Lease.
Demand is hereby made on ___________ Silicon Valley Bank for the sum of $_____________. Please wire transfer said funds to our account at ______________________, Account No. _________. The bank routing number is ________________.
DATED this ____ day of _____________________, ______.
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LANDLORD:
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[INSERT NAME OF BENEFICIARY]
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or
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TRANSFEREE of
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(Landlord)
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Attachment B to the
________________ Bank
Irrevocable Standby Letter of Credit
_________________, 20__
RE: Demand for Payment due to Non-Extension of Letter of Credit
Ladies and Gentlemen:
The undersigned hereby certifies that:
1. They are the beneficiary under that certain Stand-by Irrevocable Letter of Credit No. ____________, issued by _________________ Silicon Valley Bank dated______________, 2001 (the “Letter of Credit”).
2. Silicon Valley Bank has given notice to the undersigned Beneficiary of the Letter of Credit that it is not extending the Letter of Credit.
3. The undersigned Beneficiary is owed the amount of $__________________ by ZipRecruiter, Inc. (“Tenant”) pursuant to a lease dated ____________, 2020 with DARED 89 LLC (“Landlord”).
Demand is hereby made on __________________ Silicon Valley Bank for the sum of $__________________ . Please wire transfer said funds to our account at the , account number _______________. The bank routing number is _________________.
DATED this ____ day of _____________________, ______.
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LANDLORD:
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[INSERT NAME OF BENEFICIARY]
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or
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TRANSFEREE of
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(Landlord)
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Attachment C
Form of Transfer Form
DATE: ___________________
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TO: SILICON VALLEY BANK
3003 TASMAN DRIVE
SANTA CLARA, CA 95054
ATTN: GLOBAL TRADE FINANCE
STANDBY LETTERS OF CREDIT
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RE: IRREVOCABLE STANDBY LETTER OF CREDIT
NO. _______________________ ISSUED BY
SILICON VALLEY BANK, SANTA CLARA
L/C AMOUNT: ________________________
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GENTLEMEN:
FOR VALUE RECEIVED, THE UNDERSIGNED BENEFICIARY HEREBY IRREVOCABLY TRANSFERS TO:
ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY TO DRAW UNDER THE ABOVE LETTER OF CREDIT UP TO ITS AVAILABLE AMOUNT AS SHOWN ABOVE AS OF THE DATE OF THIS TRANSFER.
BY THIS TRANSFER, ALL RIGHTS OF THE UNDERSIGNED BENEFICIARY IN SUCH LETTER OF CREDIT ARE TRANSFERRED TO THE TRANSFEREE. TRANSFEREE SHALL HAVE THE SOLE RIGHTS AS BENEFICIARY THEREOF, INCLUDING SOLE RIGHTS RELATING TO ANY AMENDMENTS, WHETHER INCREASES OR EXTENSIONS OR OTHER AMENDMENTS, AND WHETHER NOW EXISTING OR HEREAFTER MADE. ALL AMENDMENTS ARE TO BE ADVISED DIRECTLY TO THE TRANSFEREE WITHOUT NECESSITY OF ANY CONSENT OF OR NOTICE TO THE UNDERSIGNED BENEFICIARY.
THE ORIGINAL OF SUCH LETTER OF CREDIT IS RETURNED HEREWITH, AND WE ASK YOU TO EITHER (1) ENDORSE THE TRANSFER ON THE REVERSE THEREOF, AND FORWARD IT DIRECTLY TO THE TRANSFEREE WITH YOUR CUSTOMARY NOTICE OF TRANSFER, OR (2) ISSUE A REPLACEMENT LETTER OF CREDIT TO THE TRANSFEREE ON SUBSTANTIALLY THE SAME TERMS AND CONDITIONS AS THE
TRANSFERRED LETTER OF CREDIT (IN WHICH EVENT THE TRANSFERRED LETTER OF CREDIT SHALL HAVE NO FURTHER EFFECT).
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SINCERELY,
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SIGNATURE AUTHENTICATED
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The name(s), title(s), and signature(s) conform to that/those on file with us for the company and the signature(s) is/are authorized to execute this instrument.
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(BENEFICIARY’S NAME)
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(Name of Bank)
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(SIGNATURE OF BENEFICIARY)
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(Address of Bank)
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(NAME AND TITLE)
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(City, State, ZIP Code)
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EXHIBIT F
SNDA
RECORDING REQUESTED BY
MUFG UNION BANK, N.A.
AND WHEN RECORDED MAIL TO:
MUFG UNION BANK, N.A.
Attn: Collateral Management (T-83E-5122)
P. O. Box 29235
Phoenix, AZ 85038-9235
Space above this line for Recorder’s use.
SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT
THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT (the “Agreement”) is made as of March , 2020 by and among MUFG Union Bank, N.A. (“Bank”), Dared 89 LLC, an Arizona limited liability company (“Borrower”), (“Collateral Owner”) and ZipRecruiter, Inc., a Delaware corporation (“Tenant”).
RECITALS:
A. Bank has made or has agreed to make a loan (the “Loan”) to Borrower evidenced by, among other things, a debt instrument executed or to be executed by Borrower in favor of Bank in the principal amount of the Loan (as amended from time to time, the “Note”).
B. The Note and certain other obligations of Borrower under the Loan are or will be secured by, among other things, a deed of trust (as amended from time to time, the “Deed of Trust”). The Deed of Trust, executed or to be executed by Borrower in favor of Bank, and previously recorded or to be recorded concurrently herewith, encumbers the estate of Borrower in certain real property and improvements commonly known as 4039 East Raymond Street, Phoenix, AZ 85040, and more particularly described on Exhibit A attached hereto (the “Property”).
C. Borrower has leased a portion of the Property to Tenant subject to the terms and conditions of an unrecorded lease dated March 2, 2020 (as amended from time to time, the “Lease”) covering that certain property commonly known as 4039 East Raymond Street, Phoenix, Arizona 85040 (the “Premises”).
D. As a condition to making the Loan, Bank requires that Tenant subordinate the Lease to the Deed of Trust and the lien thereof and attorn to Bank as provided below. Tenant is willing to provide such subordination and attornment provided Bank agrees not to disturb Tenant’s right to possession under the Lease as provided below.
AGREEMENT:
For good and valuable consideration, Tenant, Borrower, and Bank agree as follows:
1. SUBORDINATION. Tenant hereby subordinates the Lease and all rights, remedies and options of Tenant thereunder, including without limitation any option to purchase or right of first refusal to purchase the Property or any part thereof or interest therein, to the Deed of Trust and to the lien thereof and to all sums secured thereby and advances made thereunder with the same force and effect as if the Deed of Trust had been executed, delivered and recorded prior to the execution and delivery of the Lease.
2. NON DISTURBANCE. Bank will not join Tenant as a party in any Foreclosure unless the joinder is necessary or desirable to pursue its remedies under the Deed of Trust, and provided that such joinder shall not result in the termination of the Lease or disturb Tenant’s possession of the Premises. In the event of a Foreclosure (defined below), Bank agrees that the leasehold interest of Tenant under the Lease shall not be terminated by reason of the Foreclosure, but rather the Lease shall continue in full force and effect and Bank shall recognize and accept Tenant as tenant under the Lease subject to the provisions of the Lease except as otherwise provided below; provided that, if Tenant shall then be in default under the Lease beyond any notice, grace or cure period, at Bank’s option the Lease shall be terminated by reason of the Foreclosure and Bank shall have no obligation to Tenant under the Lease. As used in this Agreement, “Foreclosure” means any non-judicial or judicial foreclosure or other enforcement of the remedies of the Deed of Trust, or any deed or other transfer in lieu thereof.
3. ATTORNMENT. In the event of a transfer of Borrower’s interest in the Property to a Purchaser (defined below), Tenant agrees that the Lease of the Premises shall continue in full force and effect and Tenant agrees to attorn to the Purchaser as its landlord under the Lease and to be bound by all of the provisions of the Lease for the balance of the term thereof; provided that, the Purchaser shall not be:
3.1 Liable for any act or omission of any Prior Landlord (defined below) or subject to any offsets or defenses which Tenant might have against any Prior Landlord except (i) offsets specifically provided for in the Lease, or (ii) those which arose out of Prior Landlord’s default under the Lease and continue uncured after Tenant has notified Bank and given Bank an opportunity to cure as provided for in SNDA: Section 5 below;
3.2 Liable for the return of any rental security deposit, or bound by any payment of rents, additional rents or other sums which Tenant may have paid more than one month in advance to any Prior Landlord, except to the extent such sums are actually received by Purchaser;
3.3 Bound by any amendment to the Lease made without Bank’s prior written consent which would (i) reduce the fixed annual rent, additional rent, percentage rent or any other monetary obligations of Tenant under the Lease, (ii) reduce the term of the Lease, (iii) reallocate the responsibility for obtaining any insurance coverage required under the terms of the Lease, (iv) eliminate or substantially modify any representation, warranty, covenant or indemnity of Tenant under the Lease, (v) increase the repair or maintenance obligations of the landlord under the Lease, (vi) result in or make the landlord’s obligations thereunder any more onerous, or (vii) otherwise materially and adversely impact the economics of the Lease to the detriment of the landlord thereunder;
3.4 Liable for obligations which accrue after Purchaser has sold or otherwise transferred its interest in the Property;
3.5 Bound to install, construct or pay for any improvements on the Property, or bound to restore the Property after a casualty for a cost in excess of proceeds recovered under any insurance required to be carried under the Lease (excluding the deductible), or bound to restore the Property after a taking for a cost in excess of any condemnation award, but in each event, Tenant shall maintain a termination right if the Property is not fully restored;
3.6 Bound by any notice of termination, cancellation or surrender of the Lease made without Bank’s prior written consent unless the Lease expressly grants to Tenant the right to terminate or cancel the Lease in such circumstances;
3.7 Bound by any representation, warranty, covenant or indemnity contained in the Lease except to the extent that Bank’s affirmative act(s) constitute or result in a violation of any such representation, warranty, covenant or indemnity; provided, however, in no event shall Bank be bound by any representation, warranty, covenant or indemnity relating to the title, zoning designation, permitted use of the Property, or sufficiency of the Property for any use, or any matters related to the foregoing, and none of the foregoing exceptions shall apply to such representations, warranties, covenants or indemnities; and
3.8 Bound by any option to purchase or right of first refusal with respect to the Property or any portion thereof.
This attornment shall be immediately effective and self-operative, without the execution of any further instrument, upon Purchaser’s acquisition of Borrower’s interest in the Property. As used in this Agreement, “Purchaser” means any transferee, including Bank, of Borrower’s rest in the Property pursuant to a Foreclosure, and the successors and assigns of such transferee, and “Prior Landlord” means any landlord, including Borrower, under the Lease prior in time to Purchaser.
4. NOTICE TO TENANT; RENTALS DUE TO BANK. After written notice is given to Tenant by Bank that Borrower is in default under the Loan and that the rentals under the Lease should be paid to Bank pursuant to the terms of the Deed of Trust, Tenant shall thereafter pay to Bank all rent and all other sums due Borrower under the Lease, and Borrower hereby irrevocably authorizes Tenant to make such payments to Bank and releases and discharges Tenant of and
from any liability to Borrower on account of any such payments. Borrower shall hold Tenant harmless against any claim relating to such payments to Bank.
5. NOTICE TO BANK AND RIGHT TO CURE. Tenant shall provide written notice to Bank of any default by Borrower under the Lease and Tenant agrees that no notice of termination of the Lease or of an abatement of rent (except for rights to abate rent specifically set forth in the Lease) shall be effective unless Bank shall have received written notice of default giving rise to such termination or abatement and shall have failed within 30 days after receipt of such notice to cure such default, or if such default cannot be cured within 30 days, shall have failed within 30 days after receipt of such notice to commence and thereafter diligently pursue any action necessary to cure such default, including without limitation any action to obtain possession of the Property. Notwithstanding the foregoing, Bank shall have no obligation to cure any such default.
6. MISCELLANEOUS. This Agreement shall be binding upon and inure to the benefit of Bank and Tenant and their respective successors and assigns. This Agreement shall be governed and interpreted under the laws of the state where the Property is located. This Agreement is the entire agreement of the parties and supersedes any prior agreement with respect to its subject matter, and no provision of this Agreement may be waived or modified except in a writing signed by all parties. If any lawsuit, arbitration or other proceeding is brought under this Agreement, the prevailing party shall be entitled to recover the reasonable fees and costs of its attorneys in such proceeding. If any provision of this Agreement is held to be invalid or unenforceable in any respect, this Agreement shall be construed without such provision. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which taken together shall constitute one and the same document. Tenant represents and warrants to Bank that this Agreement is a valid and binding agreement of Tenant and the person(s) executing this Agreement on behalf of Tenant have the authority to do so.
IN WITNESS WHEREOF, Bank, Borrower, and Tenant have duly executed this Agreement as of the date first above written.
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BANK:
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MUFG Union Bank, N.A.
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By:
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Name:
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Title:
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BORROWER:
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Dared 89 LLC
an Arizona limited liability company
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By:
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Douglas Allred Company,
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a California corporation
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Its Manager
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By:
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Name:
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Bryan D. Putnam
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Title:
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Chief Financial Officer
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TENANT:
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ZipRecruiter, Inc.
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A Delaware Corporation
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By:
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Name:
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Title:
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EXHIBIT “A”
LEGAL DESCRIPTION OF PROPERTY
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF MARICOPA, STATE OF ARIZONA, AND IS DESCRIBED AS FOLLOWS:
LOTS 5 AND 6 AND A PORTION OF LOT 7, OF MARICOPA FREEWAY CENTER UNIT 1 NORTH, A SUBDIVISION RECORDED IN BOOK 129 OF MAPS, PAGE 12, RECORDS OF MARICOPA COUNTY, ARIZONA LOCATED IN THE SOUTHWEST QUARTER OF SECTION 19, TOWNSHIP 1 NORTH, RANGE 4 EAST OF THE GILA AND SALT RIVER BASE AND MERIDIAN, MARICOPA COUNTY, ARIZONA MORE PARTICULARLY DESCRIBED AS FOLLOWS:
BEGINNING AT THE CITY OF PHOENIX BRASS CAP IN HANDHOLE MARKING THE SOUTHWEST CORNER OF SAID SECTION 19 FROM WHICH A CITY OF PHOENIX BRASS CAP FLUSH MARKING THE WEST QUARTER CORNER OF SAID SECTION 19 BEARS NORTH 00 DEGREES 59 MINUTES 35 SECONDS WEST 2657.05 FEET, SAID DESCRIBED LINE BEING THE BASIS OF BEARING FOR THIS DESCRIPTION;
THENCE NORTH 00 DEGREES 59 MINUTES 35 SECONDS WEST 1608.56 FEET ALONG THE WEST LINE OF SAID SOUTHWEST QUARTER TO THE NORTH LINE OF THE STATE HIGHWAY WARRANTY DEED RECORDED IN DOCKET 6535, PAGE 303, RECORDS OF MARICOPA COUNTY, ARIZONA;
THENCE SOUTH 85 DEGREES 21 MINUTES 12 SECONDS EAST 104.44 FEET ALONG SAID NORTH LINE TO THE SOUTHWEST CORNER OF SAID LOT 5;
THENCE NORTH 02 DEGREES 12 MINUTES 31 SECONDS WEST 76.69 FEET ALONG THE WEST LINE OF SAID LOT 5 TO THE NORTH RIGHT OF WAY LINE OF INTERSTATE 10 RECORDED IN DOCUMENT NO. 2012-1179766, RECORDS OF MARICOPA COUNTY, ARIZONA AND THE POINT OF BEGINNING;
THENCE CONTINUING NORTH 02 DEGREES 12 MINUTES 31 SECONDS WEST 541.94 FEET TO THE NORTHWEST CORNER OF SAID LOT 5 AND THE BEGINNING OF A NON-TANGENT CURVE TO THE RIGHT THE CENTER OF WHICH BEARS SOUTH 00 DEGREES 34 MINUTES 42 SECONDS EAST 542.96 FEET;
THENCE EASTERLY ALONG SAID NORTH LINE AND THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 19 DEGREES 26 MINUTES 36 SECONDS, AN ARC LENGTH OF 184.25 FEET;
THENCE SOUTH 71 DEGREES 14 MINUTES 45 SECONDS EAST 99.86 FEET CONTINUING ALONG NORTH LINE OF SAID LOT 5 AND 6 TO THE BEGINNING OF A NON-TANGENT CURVE TO THE LEFT THE CENTER OF WHICH BEARS NORTH 18 DEGREES 54 MINUTES 21 SECONDS EAST 602.96 FEET;
THENCE EASTERLY ALONG SAID NORTH LINE AND THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 19 DEGREES 37 MINUTES 50 SECONDS, AN ARC LENGTH OF 206.58 FEET TO THE NORTHWEST CORNER OF SAID LOT 7;
THENCE NORTH 89 DEGREES 15 MINUTES 49 SECONDS EAST 135.32 FEET ALONG THE NORTH LINE OF SAID LOT 7;
THENCE SOUTH 04 DEGREES 38 MINUTES 17 SECONDS WEST 289.34 FEET; THENCE SOUTH 85 DEGREES 21 MINUTES 12 SECONDS EAST 24.04 FEET;
THENCE SOUTH 04 DEGREES 38 MINUTES 48 SECONDS WEST 213.37 FEET TO NORTH RIGHT OF WAY LINE OF SAID INTERSTATE 10;
THENCE NORTH 85 DEGREES 01 MINUTES 21 SECONDS WEST 164.97 FEET ALONG SAID RIGHT OF WAY LINE;
THENCE NORTH 82 DEGREES 56 MINUTES 45 SECONDS WEST 99.87 FEET CONTINUING ALONG SAID RIGHT OF WAY LINE;
THENCE NORTH 85 DEGREES 05 MINUTES 21 SECONDS WEST 313.98 FEET CONTINUING ALONG SAID RIGHT OF WAY LINE TO THE POINT OF BEGINNING;
CALIFORNIA NOTARY ACKNOWLEDGMENT FORM
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A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
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State of California
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County of
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)
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On
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before me,
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, Notary Public,
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Date
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Name
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Personally appeared
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Name(s) of Signer(s)
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who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
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WITNESS my hand and official seal.
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Signature
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Signature of Notary Public
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(Place Notary Seal Above)
CALIFORNIA NOTARY ACKNOWLEDGMENT FORM
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A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
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State of California
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)
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County of
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)
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On
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before me,
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, Notary Public,
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Date
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Name
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Personally appeared
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Name(s) of Signer(s)
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who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
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WITNESS my hand and official seal.
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Signature
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Signature of Notary Public
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(Place Notary Seal Above)
INSERT TENANT FORM OF NOTARY
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of September 2, 2020 (the “Effective Date”), between SILICON VALLEY BANK, a California corporation (“Bank”), and ZIPRECRUITER, INC., a Delaware corporation (“Borrower”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank and amends and supersedes, in its entirety, that certain Amended and Restated Loan and Security Agreement by and between Bank and Borrower dated as of November 21, 2019 (as amended from time to time, the “Original Agreement”). The parties agree as follows:
1. ACCOUNTING AND OTHER TERMS
Except as otherwise provided in this Agreement, (i) accounting terms not defined in this Agreement and (ii) calculations and determinations must be made following GAAP. Notwithstanding the foregoing, all financial covenant and other financial calculations shall be computed with respect to Borrower only, and not on a consolidated basis. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.
2. LOAN AND TERMS OF PAYMENT
2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.
2.2 Revolving Line.
(a) Availability. Subject to the terms and conditions of this Agreement and to the deduction of Reserves, Bank shall make Advances to Borrower in an aggregate amount not exceeding the lesser of (i) the Revolving Line or (ii) Availability Amount. Amounts borrowed under the Revolving Line may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein.
(b) Termination; Repayment. The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount of all Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable.
2.3 Letters of Credit Sublimit.
(a) As part of the Revolving Line, Bank shall issue or have issued Letters of Credit denominated in Dollars or a Foreign Currency for Borrower’s account. The aggregate Dollar Equivalent amount utilized for the issuance of Letters of Credit shall at all times reduce the amount otherwise available for Advances under the Revolving Line. The aggregate Dollar Equivalent of the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed Ten Million Dollars ($10,000,000).
(b) If, on the Revolving Line Maturity Date (or the effective date of any termination of this Agreement), there are any outstanding Letters of Credit, then on such date Borrower shall provide to Bank cash collateral in an amount equal to at least one hundred five percent (105.0%) for Letters of Credit denominated in Dollars or at least one hundred ten percent (110.0%) for Letters of Credit denominated in a Foreign Currency, in each case of the aggregate Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or estimated by Bank to become due in connection therewith, to secure all of the Obligations relating to such Letters of Credit. All Letters of Credit shall be in form and substance acceptable to Bank in its sole discretion and shall be subject to the terms and conditions of Bank’s standard Application and Letter of Credit Agreement (the “Letter of Credit Application”). Borrower agrees to execute any further documentation in connection with the Letters of Credit as Bank may reasonably request. Borrower further agrees to be bound by the regulations and interpretations of the issuer of any Letters of Credit guaranteed by Bank and opened for Borrower’s
account or by Bank’s interpretations of any Letter of Credit issued by Bank for Borrower’s account, and Borrower understands and agrees that Bank shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Borrower’s instructions or those contained in the Letters of Credit or any modifications, amendments, or supplements thereto.
(c) The obligation of Borrower to immediately reimburse Bank for drawings made under Letters of Credit shall be absolute, unconditional, and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, such Letters of Credit, and the Letter of Credit Application.
(d) Borrower may request that Bank issue a Letter of Credit payable in a Foreign Currency. If a demand for payment is made under any such Letter of Credit, Bank shall treat such demand as an Advance to Borrower of the Dollar Equivalent of the amount thereof (plus fees and charges in connection therewith such as wire, cable, SWIFT or similar charges).
(e) To guard against fluctuations in currency exchange rates, upon the issuance of any Letter of Credit payable in a Foreign Currency, Bank shall create a reserve (the “Letter of Credit Reserve”) under the Revolving Line in an amount equal to a percentage (which percentage shall be determined by Bank in its sole discretion) of the face amount of such Letter of Credit. The amount of the Letter of Credit Reserve may be adjusted by Bank from time to time to account for fluctuations in the exchange rate. The availability of funds under the Revolving Line shall be reduced by the amount of such Letter of Credit Reserve for as long as such Letter of Credit remains outstanding.
2.4 Cash Management Services Sublimit. Borrower may use an amount up to the Cash Management Sublimit for Bank’s cash management services which may include merchant services, FX Contracts, direct deposit of payroll, business credit card, and check cashing services identified in Bank’s various cash management services agreements (collectively, the “Cash Management Services”). Any amounts used by Borrower for Cash Management Services will be treated as Advances under the Revolving Line, will accrue interest at the interest rate applicable to Advances, and will reduce the amount otherwise available for Credit Extensions thereunder.
2.5 Overadvances. If, at any time, the sum of (a) the outstanding principal amount of any Advances plus (b) amounts used by Borrower for Cash Management Services, plus (c) the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), exceeds the Revolving Line, Borrower shall immediately pay to Bank in cash the amount of such excess (such excess, the “Overadvance”). Without limiting Borrower’s obligation to repay Bank any Overadvance, Borrower agrees to pay Bank interest on the outstanding amount of any Overadvance, on demand, at a per annum rate equal to the rate that is otherwise applicable to Advances plus five percent (5.00%).
2.6 Payment of Interest on the Credit Extensions.
(a) Interest Rate. Subject to Section 2.6(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to the greater of (i) one quarter of one percentage point (0.25%) above the Prime Rate, and (ii) four and one half percentage points (4.50%), which interest shall be payable monthly in accordance with Section 2.6(d) below.
(b) Default Rate. Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is five percent (5.00%) above the rate that is otherwise applicable thereto (the “Default Rate”). Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations. Payment or acceptance of the increased interest rate provided in this Section 2.6(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.
(c) Adjustment to Interest Rate. Changes to the interest rate of any Credit Extension based on changes to the Prime Rate shall be effective on the effective date of any change to the Prime Rate and to the extent of any such change.
(d) Payment; Interest Computation. Interest is payable monthly on the Payment Date of each month and shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed. In computing interest, (i) all payments received after 12:00 p.m. Pacific time on any day shall be deemed received at the opening of business on the next Business Day, and (ii) the date of the making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension.
2.7 Fees. Borrower shall pay to Bank:
(a) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or renewal of Letters of Credit upon the issuance of such Letter of Credit, each anniversary of the issuance during the term of such Letter of Credit, and upon the renewal of such Letter of Credit by Bank;
(b) Unused Revolving Line Facility Fee. Payable monthly in arrears on the last day of each calendar month occurring thereafter prior to the Revolving Line Maturity Date, and on the Revolving Line Maturity Date, a fee (the “Unused Revolving Line Facility Fee”) in an amount equal to one half of one percentage point (0.50%) per annum of the average unused portion of the Revolving Line, as determined by Bank, computed on the basis of a year with the applicable number of days as set forth in Section 2.6(d). The unused portion of the Revolving Line, for purposes of this calculation, shall be calculated on a calendar year basis and shall equal the difference between (i) the Revolving Line, and (ii) the average for the period of the daily closing balance of the Revolving Line outstanding (including outstanding amounts used by Borrower for Cash Management Services) plus the sum of the aggregate amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve); and
(c) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement; provided that Bank shall notify Borrower in writing prior to such fees and expenses exceeding Fifteen Thousand Dollars ($15,000)) incurred through and after the Effective Date, when due (or, if no stated due date, upon demand by Bank).
(d) Fees Fully Earned. Unless otherwise provided in this Agreement or in a separate writing by Bank, Borrower shall not be entitled to any credit, rebate, or repayment of any fees earned by Bank pursuant to this Agreement notwithstanding any termination of this Agreement or the suspension or termination of Bank’s obligation to make loans and advances hereunder. Bank may deduct amounts owing by Borrower under the clauses of this Section 2.7 pursuant to the terms of Section 2.8(c). Bank shall provide Borrower written notice of deductions made from the Designated Deposit Account pursuant to the terms of the clauses of this Section 2.7.
2.8 Payments; Application of Payments; Debit of Accounts.
(a) All payments to be made by Borrower under any Loan Document shall be made in immediately available funds in Dollars, without setoff or counterclaim, before 12:00 p.m. Pacific time on the date when due. Payments of principal and/or interest received after 12:00 p.m. Pacific time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.
(b) Bank has the exclusive right to determine the order and manner in which all payments with respect to the Obligations may be applied. Borrower shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required to be made by Borrower to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified elsewhere in this Agreement.
(c) Bank may debit any of Borrower’s deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes Bank when due; provided, however, that Bank shall not debit any deposit account other than the Designated Deposit Account unless the Designated Deposit Account contains insufficient funds to make any principal, any interest payment or payment for
any other amount when due, and only after providing written notice to Borrower that such funds shall be debited from an alternate account. These debits shall not constitute a set-off.
2.9 Withholding. Payments received by Bank from Borrower under this Agreement will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority (including any interest, additions to tax or penalties applicable thereto). Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to Bank, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, Bank receives a net sum equal to the sum which it would have received had no withholding or deduction been required, and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Authority. Borrower will, upon request, furnish Bank with proof reasonably satisfactory to Bank indicating that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained in this Section 2.9 shall survive the termination of this Agreement.
3 CONDITIONS OF LOANS
3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:
(a) duly executed original signatures to the Loan Documents;
(b) the Operating Documents and long-form good standing certificates of Borrower certified by the Secretary of State (or equivalent agency) of Borrower’s jurisdiction of organization or formation and each jurisdiction in which Borrower is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;
(c) a secretary’s certificate of Borrower with respect to such Borrower’s Operating Documents, incumbency, specimen signatures and resolutions authorizing the execution and delivery of this Agreement and the other Loan Documents to which it is a party;
(d) duly executed original signatures to the completed Borrowing Resolutions for Borrower;
(e) a Subordination Agreement duly executed by the creditors listed therein in favor of Bank, together with the duly executed signatures thereto and copies of the underlying documents evidencing Borrower’s Indebtedness with such Person;
(f) certified copies, dated as of a recent date, of financing statement searches, as Bank may request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit Extension, will be terminated or released;
(g) the Perfection Certificate of Borrower, together with the duly executed original signature thereto; and
(h) payment of the fees and Bank Expenses then due as specified in Section 2.7 hereof.
3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:
(a) timely receipt of the Credit Extension request and any materials and documents required by Section 3.4;
(b) the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the date of the proposed Credit Extension and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date or time period shall be true, accurate and complete in all material respects as of such date or with respect to such time period, and no Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in this Agreement remain true, accurate, and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date or time period shall be true, accurate and complete in all material respects as of such date or with respect to such time period; and
(c) Bank determines in its good faith business judgment that there has not been a Material Adverse Change.
3.3 Covenant to Deliver. Borrower agrees to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrower’s obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Bank’s sole discretion.
3.4 Procedures for Borrowing. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this Agreement, to obtain an Advance, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail by 12:00 p.m. Pacific time on the Funding Date of the Advance. Such notice shall be made by Borrower through Bank’s online banking program, provided, however, if Borrower is not utilizing Bank’s online banking program, then such notice shall be in a written format reasonably acceptable to Bank that is executed by an Authorized Signer. Bank shall have received reasonably satisfactory evidence that the provision of such notices and the requests for Advances have been approved by the Board. In connection with any such notification, Borrower must promptly deliver to Bank by electronic mail or through Bank’s online banking program such reports and information, including without limitation, sales journals, cash receipts journals, accounts receivable aging reports, as Bank may request in its sole discretion. Bank shall credit proceeds of an Advance to the Designated Deposit Account. Bank may make Advances under this Agreement based on instructions from an Authorized Signer or without instructions if the Advances are necessary to meet Obligations which have become due.
4.4 CREATION OF SECURITY INTEREST
4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.
Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that are permitted pursuant to the terms of this Agreement to have superior priority to Bank’s Lien in this Agreement), and by any and all other security agreements, mortgages or other collateral granted to Bank by Borrower as security for the Obligations, now or in the future.
If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations (other than inchoate indemnity obligations) and at such time as Bank’s obligation to make Credit Extensions has terminated, Bank shall, at the sole cost and expense of Borrower, release its Liens in the Collateral and all rights therein shall revert to Borrower. In the event (x) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full, and (y) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good faith business judgment for Bank Services, if any. In the event such Bank Services consist of outstanding Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to (x) if such Letters of Credit are denominated in Dollars, then at least one hundred five percent (105%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then at least one hundred ten percent (110%), of the Dollar Equivalent of the face amount of all such Letters of Credit plus, in each case, all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its business judgment), to secure all of the Obligations relating to such Letters of Credit.
4.2 Priority of Security Interest. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that are permitted pursuant to the terms of this Agreement to have superior priority to Bank’s Lien under this Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.
4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank to file financing statements and other similar forms, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank under the Code. Such financing statements and other similar forms may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Bank’s discretion.
5 REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 Due Organization, Authorization; Power and Authority. Borrower is duly organized, validly existing and in good standing as a Registered Organization in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any other jurisdiction in which the conduct of its business or its ownership of property and other assets or business which it is engaged in requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower’s business. In connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by Borrower, entitled “Perfection Certificate” (the “Perfection Certificate”). Borrower represents and warrants to Bank that (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an organization of the type and is organized or is incorporated in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if different than its chief executive office); (e) except as indicated on the Perfection Certificate, Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement). If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence and provide Bank with Borrower’s organizational identification number.
The execution, delivery and performance by Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) filings and registrations contemplated by this Agreement, or (v) conflict with, contravene, constitute a default or breach under, or result in or permit the termination or acceleration of, any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Borrower’s business.
5.2 Collateral. Borrower has good title to, rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no Collateral Accounts at or with any bank or financial institution other than Bank or Bank’s Affiliates except for the Collateral Accounts described in the Perfection Certificate delivered to Bank in connection herewith and which Borrower has taken such actions as are necessary to give Bank a perfected security interest therein, pursuant to the terms of Section 6.8(b). The Accounts are bona fide, existing obligations of the Account Debtors.
The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate. None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2.
All Inventory is in all material respects of good and marketable quality, free from material defects.
Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate. Each Patent which it owns or purports to own and which is material to Borrower’s business is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrower’s business has been judged invalid or unenforceable, in whole or in part. To the best of Borrower’s knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not reasonably be expected to have a material adverse effect on Borrower’s business.
Except as noted on the Perfection Certificate, Borrower is not a party to, nor is it bound by, any Restricted License.
5.3 Intentionally Omitted.
5.4 Litigation. Except as noted on the Perfection Certificate delivered by Borrower to Bank on or prior to the Effective Date, there are no actions or proceedings pending or, to the knowledge of any Responsible Officer, threatened in writing by or against Borrower or any of its Subsidiaries involving more than, individually or in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000).
5.5 Financial Statements; Financial Condition. All consolidated financial statements for Borrower and any of its Subsidiaries delivered to Bank by submission to the Financial Statement Repository or otherwise submitted to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations. There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to the Financial Statement Repository or otherwise submitted to Bank.
5.6 Solvency. The fair salable value of Borrower’s consolidated assets (including goodwill minus disposition costs) exceeds the fair value of Borrower’s liabilities; Borrower is not left with unreasonably small
capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.
5.7 Regulatory Compliance. Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower (a) has complied in all material respects with all Requirements of Law, and (b) has not violated any Requirements of Law the violation of which could reasonably be expected to have a material adverse effect on its business. None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.
5.8 Subsidiaries; Investments. Borrower does not own any stock, partnership, or other ownership interest or other equity securities except for equity securities of its Subsidiaries and Permitted Investments.
5.9 Tax Returns and Payments; Pension Contributions. Borrower has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except to the extent such taxes are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor.
To the extent Borrower defers payment of any contested taxes, Borrower shall (i) notify Bank in writing of the commencement of, and any material development in, the proceedings, and (ii) post bonds or take any other steps required to prevent the Governmental Authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien.” Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could reasonably be expected to result in additional taxes becoming due and payable by Borrower in excess of Twenty-Five Thousand Dollars ($25,000). Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions solely as working capital and to fund its general business requirements and not for personal, family, household or agricultural purposes.
5.11 Full Disclosure. No written representation, warranty or other written statement of Borrower in any report, certificate, or written statement submitted to the Financial Statement Repository or otherwise submitted to Bank, as of the date such representation, warranty, or other written statement was made, taken together with all such written reports, written certificates and written statements submitted to the Financial Statement Repository or otherwise submitted to Bank, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the reports, certificates, or written statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).
5.12 Definition of “Knowledge.” For purposes of the Loan Documents, whenever a representation or warranty is made to Borrower’s knowledge or awareness, to the “best of” Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of any Responsible Officer.
6 AFFIRMATIVE COVENANTS
Until such time as all Obligations are satisfied in full, Bank has no further obligation to make Credit Extensions to Borrower and this Agreement is terminated, Borrower shall do all of the following:
6.1. Government Compliance.
(a) Maintain its and all its Subsidiaries’ legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrower’s business or operations. Borrower shall comply, and have each Subsidiary comply, in all material respects, with all material laws, ordinances and regulations to which it is subject.
(b) Obtain all of the Governmental Approvals necessary for the performance by Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in all of its property. Borrower shall promptly provide copies of any such obtained Governmental Approvals to Bank.
6.2. Financial Statements, Reports, Certificates. Provide Bank with the following by submitting to the Financial Statement Repository or otherwise submitting to Bank:
(a) within thirty (30) days after the end of each month a transaction report (and any schedules related thereto and including any other information requested by Bank with respect to Borrower’s Accounts);
(b) within thirty (30) days after the end of each month, (A) monthly accounts receivable agings, aged by invoice date, (B) monthly accounts payable agings, aged by invoice date, and outstanding or held check registers, if any, and (C) monthly reconciliations of accounts receivable agings (aged by invoice date), and general ledger;
(c) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet and income statement covering Borrower’s and each of its Subsidiary’s operations for such month, in a form reasonably acceptable to Bank (the “Monthly Financial Statements”);
(d) within thirty (30) days after the last day of each month and together with the Monthly Financial Statements, a completed Compliance Statement, confirming that, as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth calculations showing compliance with the financial covenants set forth in this Agreement and such other information as Bank may reasonably request, including, without limitation, a statement that at the end of such month there were no held checks;
(e) as soon as available, but no later than the earlier of (i) thirty (30) days after the end of each fiscal year of Borrower or (ii) seven (7) days of approval of the same by Borrower’s Board, and within seven (7) days of any updates or amendments thereto, (A) annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the then-current fiscal year of Borrower, and (B) annual financial projections for then-current fiscal year (on a monthly or quarterly basis), in each case as approved by the Board, together with any related business forecasts used in the preparation of such annual financial projections;
(f) as soon as available, and in any event within one hundred eighty (180) days following the end of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion (provided that such opinion may contain a “going concern” qualification solely with respect to Borrower’s liquidity typical for venture-backed companies similar to Borrower) on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank (the “Annual Financial Statements”); provided however, if the Board does not require audited Annual Financial Statements for any fiscal year, then Borrower shall instead deliver CPA reviewed Annual Financial Statements for such fiscal year only;
(g) in the event that Borrower becomes subject to the reporting requirements under the Exchange Act, then within five (5) days of filing, copies of all periodic and other reports, proxy statements and other materials filed by Borrower and/or any Guarantor with the SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange, or distributed to its shareholders, as the case may be. Documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the internet at Borrower’s website address; provided, however, Borrower shall promptly notify Bank in writing (which may be by electronic mail) of the posting of any such documents;
(h) annually, within thirty (30) days after approval by Borrower’s Board of Directors, any 409(A) valuation report prepared to establish the fair market value of Borrower’s Common Stock;
(i) prompt report of any legal actions pending or threatened in writing against Borrower or any of its Subsidiaries that could reasonably be expected to result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Two Hundred Fifty Thousand Dollars ($250,000) or more, and upon Bank’s reasonable request, provide updates regarding the status thereof;
(j) promptly, from time to time, such other information regarding Borrower or compliance with the terms of any Loan Documents as reasonably requested by Bank;
(k) prompt written notice of any changes to the beneficial ownership information set out in Section 13 of the Perfection Certificate delivered to Bank on or about the Third Amendment Effective Date. Borrower understands and acknowledges that Bank relies on such true, accurate and up-to-date beneficial ownership information to meet Bank’s regulatory obligations to obtain, verify and record information about the beneficial owners of its legal entity customers.
Any submission by Borrower of a Compliance Statement to the Financial Statement Repository pursuant to this Section 6.2 or otherwise submitted to Bank shall be deemed to be a representation by Borrower that (i) as of the date of such Compliance Statement, the information and calculations set forth therein are true, accurate and correct in all material respects, (ii) as of the end of the compliance period set forth in such submission, Borrower is in compliance in all material respects with all required covenants except as noted in such Compliance Statement, (iii) as of the date of such submission, no Events of Default have occurred or are continuing, (iv) all representations and warranties other than any representations or warranties that are made as of a specific date in Section 5 remain true and correct in all material respects as of the date of such submission except as noted in such Compliance Statement, (v) as of the date of such submission, Borrower and each of its Subsidiaries has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9, and (vi) as of the date of such submission, no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.
6.3. Accounts Receivable.
(a) Schedules and Documents Relating to Accounts. Borrower shall deliver to Bank transaction reports and schedules of collections, as provided in Section 6.2, on Bank’s standard forms; provided, however, that Borrower’s failure to execute and deliver the same shall not affect or limit Bank’s Lien and other rights in all of Borrower’s Accounts, nor shall Bank’s failure to advance or lend against a specific Account affect or limit Bank’s Lien and other rights therein. If requested by Bank, Borrower shall furnish Bank with copies (or, at Bank’s request, originals) of all contracts, orders, invoices, and other similar documents, and all shipping instructions, delivery receipts, bills of lading, and other evidence of delivery, for any goods the sale or disposition of which gave rise to such Accounts. In addition, Borrower shall deliver to Bank, on its request, the originals of all instruments, chattel paper, security agreements, guarantees and other documents and property evidencing or securing any Accounts, in the same form as received, with all necessary indorsements, and copies of all credit memos.
(b) Disputes. Borrower shall promptly notify Bank of all disputes or claims relating to Accounts. Borrower may forgive (completely or partially), compromise, or settle any Account for less than payment in full, or agree to do any of the foregoing so long as (i) Borrower does so in good faith, in a commercially reasonable manner, in the ordinary course of business, in arm’s-length transactions, and reports the same to Bank in the regular reports provided to Bank; (ii) no Event of Default has occurred and is continuing; and (iii) after taking into account all such discounts, settlements and forgiveness, the total outstanding Advances will not exceed the Revolving Line minus, (A) the outstanding principal balance of any Advances, minus (B) the aggregate Dollar Equivalent of the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), minus (C) all amounts outstanding under the Cash Management Sublimit.
(c) Collection of Accounts. Borrower shall direct Account Debtors to deliver or transmit all proceeds of Accounts into a lockbox account, or via electronic deposit capture or such other “blocked account” as specified by Bank (either such account, the “Cash Collateral Account”). Whether or not an Event of Default has occurred and is continuing, Borrower shall immediately deliver all payments on and proceeds of Accounts to the Cash Collateral Account. Subject to Bank’s right to maintain a reserve pursuant to Section 6.3(d),so long as no Event of Default has occurred and is continuing, all amounts received in the Cash Collateral Account shall be transferred on a daily basis to Borrower’s operating account with Bank. Borrower hereby authorizes Bank to transfer to the Cash Collateral Account any amounts that Bank reasonably determines are proceeds of the Accounts (provided that Bank is under no obligation to do so and this allowance shall in no event relieve Borrower of its obligations hereunder).
(d) Reserves. Notwithstanding any terms in this Agreement to the contrary, at times when an Event of Default exists, Bank may hold any proceeds of the Accounts and any amounts in the Cash Collateral Account as a reserve to be applied to any Obligations regardless of whether such Obligations are then due and payable.
(e) Returns. Provided no Event of Default has occurred and is continuing, if any Account Debtor returns any Inventory to Borrower, Borrower shall promptly (i) determine the reason for such return, (ii) issue a credit memorandum to the Account Debtor in the appropriate amount, and (iii) provide a copy of such credit memorandum to Bank, upon request from Bank. In the event any attempted return occurs after the occurrence and during the continuance of any Event of Default, Borrower shall hold the returned Inventory in trust for Bank, and immediately notify Bank of the return of the Inventory.
(f) Verifications; Confirmations; Credit Quality; Notifications. Bank may, from time to time, (i) verify and confirm directly with the respective Account Debtors the validity, amount and other matters relating to the Accounts, either in the name of Borrower or Bank or such other name as Bank may choose, and notify any Account Debtor of Bank’s security interest in such Account and/or (ii) conduct a credit check of any Account Debtor to approve any such Account Debtor’s credit.
(g) No Liability. Bank shall not be responsible or liable for any shortage or discrepancy in, damage to, or loss or destruction of, any goods, the sale or other disposition of which gives rise to an Account, or for any error, act, omission, or delay of any kind occurring in the settlement, failure to settle, collection or failure to collect any Account, or for settling any Account in good faith for less than the full amount thereof, nor shall Bank be deemed to be responsible for any of Borrower’s obligations under any contract or agreement giving rise to an Account. Nothing herein shall, however, relieve Bank from liability for its own gross negligence or willful misconduct.
6.4. Remittance of Proceeds. Deliver, in kind, all proceeds arising from the disposition of any Collateral to Bank in the original form in which received by Borrower not later than the following Business Day after receipt by Borrower, to be applied to the Obligations (a) prior to an Event of Default, pursuant to the terms of Section 6.3(c) hereof, and (b) after the occurrence and during the continuance of an Event of Default, pursuant to the terms of Section 9.4 hereof; provided that, if no Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to Bank the proceeds of the sale of worn out or obsolete Equipment disposed of by Borrower in good faith in an arm’s length transaction for an aggregate purchase price of One Hundred Fifty Thousand Dollars ($150,000) or less (for all such transactions in any fiscal year). Borrower agrees that it will not commingle proceeds
of Collateral with any of Borrower’s other funds or property, but will hold such proceeds separate and apart from such other funds and property and in an express trust for Bank. Nothing in this Section 6.4 limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.
6.5. Taxes; Pensions. Timely file, and require each of its Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and taxes not in excess of Fifty Thousand Dollars ($50,000) in the aggregate, and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.
6.6. Access to Collateral; Books and Records. At reasonable times, on five (5) Business Days’ notice (provided no notice is required if an Event of Default has occurred and is continuing), Bank, or its agents, shall have the right to inspect the Collateral and the right to audit and copy Borrower’s Books. The foregoing inspections and audits shall be conducted no more often than once every twelve (12) months (or more frequently as Bank in its sole discretion determines that conditions warrant, but in no event more than two (2) times per year) unless an Event of Default has occurred and is continuing in which case such inspections and audits shall occur as often as Bank shall reasonably determine is necessary. The foregoing inspections and audits shall be conducted at Borrower’s expense and the charge therefor shall be One Thousand Dollars ($1,000) per person per day (or such higher amount as shall represent Bank’s then-current standard charge for the same), plus reasonable documented out-of-pocket expenses. In the event Borrower and Bank schedule an audit more than ten (10) days in advance, and Borrower cancels or seeks to or reschedules the audit with less than ten (10) days’ written notice to Bank, then (without limiting any of Bank’s rights or remedies) Borrower shall pay Bank a fee of One Thousand Dollars ($1,000) plus any documented out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling.
6.7. Insurance.
(a) Keep its business and the Collateral insured for risks and in amounts standard for companies in Borrower’s industry and location and as Bank may reasonably request. Insurance policies shall be in a form, with financially sound and reputable insurance companies that are not Affiliates of Borrower, and in amounts that are reasonably satisfactory to Bank. All property policies shall have a lender’s loss payable endorsement showing Bank as lender loss payee. All liability policies shall show, or have endorsements showing, Bank as an additional insured. Bank shall be named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral.
(b) Ensure that proceeds payable under any property policy are, at Bank’s option, payable to Bank on account of the Obligations.
(c) At Bank’s request, Borrower shall deliver certified copies of insurance policies and evidence of all premium payments. Each provider of any such insurance required under this Section 6.7 shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to Bank, that it will give Bank twenty (20) days (ten (10) days for non-payment of premium) prior written notice before any such policy or policies shall be materially altered or canceled. If Borrower fails to obtain insurance as required under this Section 6.7 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.7, and take any action under the policies Bank deems prudent.
6.8. Accounts.
(a) Maintain its and all of its Subsidiaries’ primary US operating and other US deposit accounts, and the Cash Collateral Account with Bank and Bank’s Affiliates which shall at all times contain at least eighty-five percent (85%) of the aggregate amount of Borrower’s cash and cash equivalents at all financial institutions worldwide. Any Guarantor shall maintain all depository and operating accounts with Bank and Bank’s Affiliates.
(b) In addition, Bank shall be the primary provider of Bank Services to Borrower, including but not limited to, business credit cards, Letters of Credit, and FX Contracts.
(c) In addition to and without limiting the restrictions in (a), Borrower shall provide Bank five (5) days prior written notice before establishing any Collateral Account at or with any bank or financial institution other than Bank or Bank’s Affiliates. For each Collateral Account that Borrower at any time maintains, Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any Collateral Account is maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Bank’s Lien in such Collateral Account in accordance with the terms hereunder which Control Agreement may not be terminated without the prior written consent of Bank. The provisions of the previous sentence shall not apply to (i) subject to the requirements set forth in Section 6.8(a) above, accounts maintained by a Foreign Subsidiary of Borrower outside of the United States with financial institutions other than Bank, (ii) deposit accounts exclusively used for payroll, payroll taxes, and other employee wage and benefit payments to or for the benefit of Borrower’s employees and identified to Bank by Borrower as such or (iii) subject to the requirements set forth in Section 6.8(a) above, payment processing accounts.
6.9. Financial Covenants.
(a) Minimum Adjusted EBITDA. Borrower shall achieve Adjusted EBITDA (measured on a trailing twelve (12) month basis) of at least the amounts set forth in the table below for the corresponding measuring periods (tested as of the last day of each calendar quarter):
|
|
|
|
|
|
|
|
Measuring Period Ending
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Minimum Adjusted EBITDA
|
|
June 30, 2020
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$10,000,000
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September 30, 2020
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$10,000,000
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December 31, 2020
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$10,000,000
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|
March 31, 2021
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$0
|
|
June 30, 2021
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$0
|
|
September 30, 2021
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$5,000,000
|
|
December 31, 2021 and for each calendar quarter thereafter
|
$10,000,000
|
(b) Minimum Liquidity. Borrower shall maintain, at all times, subject to periodic reporting as of the last day of each month, Liquidity of not less than Ten Million Dollars ($10,000,000).
6.10. Protection of Intellectual Property Rights.
(a) (i) Use all commercially reasonable efforts necessary to protect, defend and maintain the validity and enforceability of its Intellectual Property with any material value to Borrower’s business; (ii) promptly advise Bank in writing of material infringements or any other event that could reasonably be expected to materially and adversely affect the value of its Intellectual Property with any material value to Borrower’s business; and (iii) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without Bank’s written consent.
(b) Provide written notice to Bank within fifteen (15) days after entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public). Borrower shall take such commercially reasonable steps as Bank requests to attempt to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability
in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s rights and remedies under this Agreement and the other Loan Documents.
6.11. Litigation Cooperation. From the date hereof and continuing through the termination of this Agreement, make available to Bank, without expense to Bank, Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower. All Confidential Information obtained by Bank during or as a result of such activities shall be governed by Section 12.9.
6.12. Online Banking. Utilize Bank’s online banking platform for all matters requested by Bank which shall include, without limitation (and without request by Bank for the following matters), uploading information pertaining to Accounts and Account Debtors, requesting approval for exceptions, requesting Credit Extensions, and uploading financial statements and other reports required to be delivered by this Agreement (including, without limitation, those described in Section 6.2 of this Agreement).
6.13. Formation or Acquisition of Subsidiaries. Notwithstanding and without limiting the negative covenants contained in Sections 7.3 and 7.7 hereof, promptly following the date that Borrower or any Guarantor forms any direct or indirect Subsidiary or acquires any direct or indirect Subsidiary after the Effective Date (including, without limitation, pursuant to a Division), Borrower and such Guarantor shall, upon Bank’s request in its sole but reasonable discretion, (a) cause any such new Domestic Subsidiary to provide to Bank a joinder to this Agreement to become a Co-Borrower hereunder or a Guaranty to become a Guarantor hereunder, together with such appropriate financing statements and/or Control Agreements, all in form and substance reasonably satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired Domestic Subsidiary), (b) provide to Bank appropriate certificates and powers and financing statements, pledging (i) all of the direct or beneficial ownership interest in such new Domestic Subsidiary, and (ii) sixty-five percent (65%) of the beneficial ownership interest in such new Foreign Subsidiary, each in form and substance reasonably satisfactory to Bank; and (c) provide to Bank all other documentation in form and substance reasonably satisfactory to Bank, if requested by Bank in its sole but reasonable discretion, including one or more opinions of counsel reasonably satisfactory to Bank, which in its reasonable opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above. Any document, agreement, or instrument executed or issued pursuant to this Section 6.13 shall be a Loan Document.
6.14. Further Assurances. Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes of this Agreement. Deliver to Bank, within five (5) days after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a material effect on any of the Governmental Approvals or otherwise on the operations of Borrower or any of its Subsidiaries.
6.15. Subsidiary Assets. At no time shall the aggregate value of assets (excluding any right of use assets relating to a lease agreement) held at all of Borrower’s Subsidiaries that are not Co-Borrowers or Guarantors hereunder exceed Ten Million Dollars ($10,000,000).
7 NEGATIVE COVENANTS
Borrower shall not do any of the following without Bank’s prior written consent:
7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of (including, without limitation, pursuant to a Division) (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out, fully-depreciated or obsolete Equipment that is, in the reasonable judgment of Borrower, no longer economically practicable to maintain or useful in the ordinary course of business of Borrower; (c) consisting of Permitted Liens and Permitted Investments; (d) consisting of the sale or issuance of any stock of Borrower permitted under Section 7.2 of this Agreement; (e) consisting of Borrower’s use or transfer of money or Cash Equivalents in the ordinary course of its business for the payment of ordinary course business expenses in a manner that is not
prohibited by the terms of this Agreement or the other Loan Documents; and (f) of non-exclusive licenses for the use of the property of Borrower or its Subsidiaries in the ordinary course of business and licenses that could not result in a legal transfer of title of the licensed property but that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discreet geographical areas outside of the United States.
7.2 Changes in Business, Management, Control, or Business Locations. (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; (c) fail to provide notice to Bank of any Key Person departing from or ceasing to be employed by Borrower within five (5) days after his or her departure from Borrower; or (d) permit or suffer any Change in Control.
Borrower shall not, without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Five Hundred Thousand Dollars ($500,000) in Borrower’s assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Five Hundred Thousand Dollars ($500,000) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization. In respect of clause (1) above, Borrower has notified Bank that it intends to acquire additional office space in Tempe, Arizona and is obtaining a larger office space in Israel. If Borrower intends to deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Five Hundred Thousand Dollars ($500,000) to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral, then Borrower will first receive the written consent of Bank, and such bailee shall execute and deliver a bailee agreement in form and substance reasonably satisfactory to Bank.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person (including, without limitation, by the formation of any Subsidiary or pursuant to a Division) except for Permitted Acquisitions. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.
7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s Intellectual Property, except (i) customary restrictions on assignment in any license agreement where Borrower or Subsidiary is the licensee (and not the licensor) and (ii) as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein.
7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to the terms of Section 6.8(b) hereof.
7.7 Distributions; Investments. (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock, provided that Borrower may (i) convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, (ii) pay dividends solely in common stock; and (iii) repurchase the stock of former employees or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of any such repurchase and would not exist after giving effect to any such repurchase, provided that the aggregate amount of all such repurchases does not exceed Five Hundred Thousand Dollars ($500,000) per fiscal year; or (b) directly or indirectly
make any Investment (including, without limitation, by the formation of any Subsidiary) other than Permitted Investments, or permit any of its Subsidiaries to do so.
7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower, except for transactions that are in the ordinary course of Borrower’s business or as otherwise permitted by this Agreement, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.
7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof, provide for earlier or greater principal, interest, or other payments thereon, or adversely affect the subordination thereof to Obligations owed to Bank.
7.10 Compliance. Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to (a) meet the minimum funding requirements of ERISA, (b) prevent a Reportable Event or Prohibited Transaction, as defined in ERISA, from occurring, or (c) comply with the Federal Fair Labor Standards Act, or violate any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
8 EVENTS OF DEFAULT
Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:
8.1 Payment Default. Borrower fails to (a) make any payment of principal or interest on any Credit Extension when due, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure period shall not apply to payments due on the Revolving Line Maturity Date). During the cure period, the failure to make or pay any payment specified under clause (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9, 6.10, 6.12, 6.13, 6.14, or 6.15 or violates any covenant in Section 7; or
(b) Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Cure periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in clause (a) above;
8.3 Intentionally Omitted.
8.4 Attachment; Levy; Restraint on Business.
(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of Borrower (including a Subsidiary), or (ii) a notice of lien or levy is filed against any of Borrower’s assets by any Governmental Authority, and the same under subclauses (i) and (ii) hereof are not, within ten (10) Business Days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; or
(b) (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting all or any material part of its business;
8.5 Insolvency. (a) Borrower or any of its Subsidiaries is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower or any of its Subsidiaries and is not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements. There is, under any agreement to which Borrower or any Guarantor is a party with a third party or parties, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Two Hundred Fifty Thousand Dollars ($250,000); or (b) any breach or default by Borrower or Guarantor, the result of which could reasonably be expected to have a material adverse effect on Borrower’s or any Guarantor’s business;
8.7 Judgments; Penalties. One or more fines, penalties or final judgments, orders or decrees for the payment of money in an amount, individually or in the aggregate, of at least Two Hundred Fifty Thousand Dollars ($250,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against Borrower by any Governmental Authority, and the same are not, within ten (10) days after the entry, assessment or issuance thereof, discharged, satisfied, or paid, or after execution thereof, stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay (provided that no Credit Extensions will be made prior to the satisfaction, payment, discharge, stay, or bonding of such fine, penalty, judgment, order or decree);
8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;
8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement or any applicable subordination or intercreditor agreement;
8.10 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for any reason to be in full force and effect; (b) any Guarantor does not perform any obligation or covenant under any guaranty of the Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.6, 8.7, or 8.8 of this Agreement occurs with respect to any Guarantor, (d) the death, liquidation, winding up, or termination of existence of any Guarantor; or (e) (i) a material impairment in the perfection or priority of Bank’s Lien in the collateral provided by Guarantor or in the value of such collateral or (ii) a material adverse change in the general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations occurs with respect to any Guarantor; or
8.11 Governmental Approvals. Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could reasonably be expected to result in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (i) causes, or could reasonably be expected to cause, a Material Adverse Change, or (ii) adversely affects in a material way the legal qualifications of Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or legal qualifications of Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction.
9 BANK’S RIGHTS AND REMEDIES
9.1 Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, without notice or demand, do any or all of the following:
(a) declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);
(b) stop advancing money or extending credit for Borrower’s benefit under this Agreement or under any other agreement between Borrower and Bank;
(c) demand that Borrower (i) deposit cash with Bank in an amount equal to at least (A) one hundred five percent (105%) of the Dollar Equivalent of the aggregate face amount of all Letters of Credit denominated in Dollars remaining undrawn, and (B) one hundred ten percent (110%) of the Dollar Equivalent of the aggregate face amount of all Letters of Credit denominated in a Foreign Currency remaining undrawn (plus, in each case, all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment)), to secure all of the Obligations relating to such Letters of Credit, as collateral security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit; provided that Bank shall promptly return to Borrower each such cash deposit if and when the related Letter of Credit terminates without being drawn upon if the same is not renewed at Bank;
(d) terminate any FX Contracts;
(e) verify the amount of, demand payment of and performance under, and collect any Accounts and General Intangibles, settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, and notify any Person owing Borrower money of Bank’s security interest in such funds. Borrower shall collect all payments in trust for Bank and, if requested by Bank, immediately deliver the payments to Bank in the form received from the Account Debtor, with proper endorsements for deposit;
(f) make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank reasonably designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) amount held by Bank owing to or for the credit or the account of Borrower;
(h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production
of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section 9.1, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit;
(i) place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(j) demand and receive possession of Borrower’s Books; and
(k) exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).
9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable following the occurrence of an Event of Default, to: (a) endorse Borrower’s name on any checks, payment instruments, or other forms of payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) demand, collect, sue, and give releases to any Account Debtor for monies due, settle and adjust disputes and claims about the Accounts directly with Account Debtors, and compromise, prosecute, or defend any action, claim, case, or proceeding about any Collateral (including filing a claim or voting a claim in any bankruptcy case in Bank’s or Borrower’s name, as Bank chooses) for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, or other claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and the Loan Documents have been terminated. Bank’s foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and the Loan Documents have been terminated.
9.3 Protective Payments. If Borrower fails to obtain the insurance called for by Section 6.7 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document or which may be required to preserve the Collateral, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral. Bank will make reasonable efforts to provide Borrower with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default.
9.4 Application of Payments and Proceeds. Bank shall have the right to apply in any order any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations. Bank shall pay any surplus to Borrower by credit to the Designated Deposit Account or to other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, directly or indirectly, enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.
9.5 Bank’s Liability for Collateral. So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect,
or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given. Bank’s rights and remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election and shall not preclude Bank from exercising any other remedy under this Agreement or other remedy available at law or in equity, and Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence.
9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable.
10 NOTICES
All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below. Bank or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.
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If to Borrower:
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ZIPRECRUITER, INC.
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604 Arizona Ave
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Santa Monica, CA 90401
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Attn: Ian Siegel, CEO
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Email: legal@ziprecruiter.com
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With a copy (which
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shall not constitute
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notice) to:
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FENWICK & WEST LLP
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Attn: Steven Levine, Esq.
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801 California St.
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Mountain View, CA 94041
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Telephone: (650) 988-8500
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Email: slevine@fenwick.com
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If to Bank:
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SILICON VALLEY BANK
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1901 Main Street, 3rd Floor
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Santa Monica, CA 90405
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Attn: Chris Lee – Director
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Fax: (310) 664-5856
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Email: chrlee@svb.com
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11 CHOICE OF LAW, VENUE, JURY TRIAL WAIVER AND JUDICIAL REFERENCE
Except as otherwise expressly provided in any of the Loan Documents, California law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive
jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in, or subsequently provided by Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure Sections 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure Section 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.
This Section 11 shall survive the termination of this Agreement.
12. GENERAL PROVISIONS
12.1 Termination Prior to Maturity Date; Survival. This Agreement and Bank’s Lien on the Collateral shall terminate when all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been paid in full in cash and Bank has no commitment to make any Credit Extensions under this Agreement. All covenants, representations and warranties made in this Agreement shall continue in full force until this Agreement has terminated pursuant to its terms and all Obligations have been satisfied. So long as Borrower has satisfied the Obligations (other than inchoate indemnity
obligations, and any other obligations which, by their terms, are to survive the termination of this Agreement, and any Obligations under Bank Services Agreements that are cash collateralized in accordance with Section 4.1 of this Agreement), this Agreement may be terminated prior to the Revolving Line Maturity Date by Borrower, effective three (3) Business Days after written notice of termination is given to Bank. Those obligations that are expressly specified in this Agreement as surviving this Agreement’s termination shall continue to survive notwithstanding this Agreement’s termination.
12.2 Successors and Assigns. This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which may be granted or withheld in Bank’s discretion). Bank has the right, without the consent of or notice to Borrower, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents.
12.3 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an “Indemnified Person”) harmless against: (i) all obligations, demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (ii) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.
This Section 12.3 shall survive until all statutes of limitation with respect to the Claims, losses, and expenses for which indemnity is given shall have run.
12.4 Time of Essence. Time is of the essence for the performance of all Obligations in this Agreement.
12.5 Severability of Provisions. Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.
12.6 Correction of Loan Documents. Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties.
12.7 Amendments in Writing; Waiver; Integration. No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, or release, or consent to the transfer of, any Collateral shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver. The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents.
12.8 Counterparts. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.
12.9 Confidentiality. In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Bank’s Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, collectively, “Bank Entities”) solely in connection with their business with Borrower; (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Bank shall use its best efforts to obtain any prospective transferee’s or
purchaser’s agreement to the terms of this provision prior to disclosure thereof or such prospective transferee or purchaser shall have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise required in connection with Bank’s examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein. Confidential information does not include information that is either: (i) in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain (other than as a result of its disclosure by Bank in violation of this Agreement) after disclosure to Bank; or (ii) disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information.
Bank Entities may use confidential information for the development of databases, reporting purposes, and market analysis so long as such confidential information is aggregated and anonymized prior to distribution unless otherwise expressly permitted by Borrower. The provisions of the immediately preceding sentence shall survive the termination of this Agreement.
12.10 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between Borrower and Bank arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled.
12.11 Electronic Execution of Documents. The words “execution,” “signed,” “signature” and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
12.12 Right of Setoff. Borrower hereby grants to Bank a Lien and a right of setoff as security for all Obligations to Bank, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity under the control of Bank (including a subsidiary of Bank) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may setoff the same or any part thereof and apply the same to any liability or Obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.13 Captions. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.
12.14 Construction of Agreement. The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist.
12.15 Relationship. The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement. The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arm’s-length contract.
12.16 Third Parties. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.
12.17 Effect of Amendment and Restatement. This Agreement is intended to and does completely amend and restate, without novation, the Original Agreement. All security interests granted by Borrower under the Original Agreement are hereby confirmed and ratified and shall continue to secure all Obligations under this Agreement. Without limiting the foregoing, any warrant(s) and all other loan documents issued in connection with the Original Agreement (to the extent not yet exercised, terminated or amended and restated in connection with this Agreement) remain in full force and effect.
12.18 Waiver. Bank hereby waives filing any legal action or instituting or enforcing any rights and remedies it may have against Borrower with respect to an Event of Default (as such term is defined in the Original Agreement) arising under the Original Agreement, through the Effective Date, including, but not limited to, for Borrower’s failure to reset the minimum revenue covenant levels on or prior to June 30, 2020. Hereinafter, Bank waives the occurrence of any Event of Default arising under the Original Agreement and Borrower shall be in compliance with all provisions of this Agreement. Bank’s agreement to waive the foregoing default (a) in no way shall be deemed an agreement by Bank to waive Borrower’s compliance with this Agreement as of any other date, and (b) shall not limit or impair the Bank’s right to demand strict performance of this Agreement.
13 DEFINITIONS
13.1 Definitions. As used in the Loan Documents, the word “shall” is mandatory, the word “may” is permissive, the word “or” is not exclusive, the words “includes” and “including” are not limiting, the singular includes the plural, and numbers denoting amounts that are set off in brackets are negative. As used in this Agreement, the following capitalized terms have the following meanings:
“Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Borrower.
“Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.
“Acquisition” means a transaction pursuant to which a third-party agrees to purchase all or substantially all of the equity interests or assets of Borrower where all Obligations are repaid in full.
“Adjusted EBITDA” shall mean the following: (a) Net Income, plus (b) Interest Expense, plus (c) to the extent deducted in the calculation of Net Income, depreciation expense and amortization expense, plus (d) income tax expense, plus (e) non-cash stock based compensation, plus (f) one-time cash restructuring charges, including, without limitation, any costs and expenses relating to cost saving initiatives, operating expense reductions, and severance costs in an amount not to exceed Two Million Dollars ($2,000,000), plus or minus (g) changes in Deferred Revenue, minus (h) any increase in capitalized software costs.
“Advance” or “Advances” means a revolving credit loan (or revolving credit loans) under the Revolving Line.
“Affiliate” is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.
“Agreement” is defined in the preamble hereof.
“Annual Financial Statements” is defined in Section 6.2(f).
“Authorized Signer” is any individual listed in Borrower’s Borrowing Resolution who is authorized to execute the Loan Documents, including making (and executing if applicable) any Credit Extension request, on behalf of Borrower.
“Availability Amount” is (a) the Revolving Line, minus (b) the aggregate Dollar Equivalent amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) plus an amount equal to the
Letter of Credit Reserve, minus (c) any amounts used for Cash Management Services, and minus (d) the outstanding principal balance of any Advances.
“Bank” is defined in the preamble hereof.
“Bank Entities” is defined in Section 12.9.
“Bank Expenses” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower or any Guarantor.
“Bank Services” are any products, credit services, and/or financial accommodations previously, now, or hereafter provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Bank’s various agreements related thereto (each, a “Bank Services Agreement”) and shall include, without limitation, any Letters of Credit and Cash Management Services.
“Bank Services Agreement” is defined in the definition of Bank Services.
“Board” is Borrower’s board of directors.
“Borrower” is defined in the preamble hereof.
“Borrower’s Books” are all Borrower’s books and records including ledgers, federal and state tax returns, records regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
“Borrowing Resolutions” are, with respect to any Person, those resolutions adopted by such Person’s board of directors (and, if required under the terms of such Person’s Operating Documents, stockholders) and delivered by such Person to Bank approving the Loan Documents to which such Person is a party and the transactions contemplated thereby, together with a certificate executed by its secretary on behalf of such Person certifying (a) such Person has the authority to execute, deliver, and perform its obligations under each of the Loan Documents to which it is a party, (b) that set forth as a part of or attached as an exhibit to such certificate is a true, correct, and complete copy of the resolutions then in full force and effect authorizing and ratifying the execution, delivery, and performance by such Person of the Loan Documents to which it is a party, (c) the name(s) of the Person(s) authorized to execute the Loan Documents, including making (and executing if applicable) any Credit Extension request, on behalf of such Person, together with a sample of the true signature(s) of such Person(s), and (d) that Bank may conclusively rely on such certificate unless and until such Person shall have delivered to Bank a further certificate canceling or amending such prior certificate.
“Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed.
“Cash Collateral Account” is defined in Section 6.3(c).
“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having a rating of at least “investment grade” or “A” by Moody’s or any successor rating agency; (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.
“Cash Management Services” is defined in Section 2.4.
“Cash Management Sublimit” means a sublimit under the Revolving Line for Cash Management Services in an aggregate amount not to exceed Five Million Dollars ($5,000,000).
“Change in Control” means (a) at any time, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act) (other than Institutional Venture Partners XIV, L.P), shall become, or obtain rights (whether by means of warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)5 under the Exchange Act), directly or indirectly, of forty-nine percent (49%) or more of the ordinary voting power for the election of directors of Borrower (determined on a fully diluted basis) other than by the sale of Borrower’s equity securities in a public offering or to venture capital or private equity investors so long as Borrower identifies to Bank the venture capital or private equity investors at least seven (7) Business Days prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction; (b) during any period of twelve (12) consecutive months, a majority of the members of the board of directors or other equivalent governing body of Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; (c) Institutional Venture Partners XIV, L.P ceases to own at least seven and one half of one percent (7.5%) of the voting securities of Borrower or (d) at any time, Borrower shall cease to own and control, of record and beneficially, directly or indirectly, one hundred percent (100%) of each class of outstanding capital stock of each subsidiary of Borrower free and clear of all Liens (except Liens created by this Agreement).
“Claims” is defined in Section 12.3.
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
“Collateral” is any and all properties, rights and assets of Borrower described on Exhibit A.
“Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.
“Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.
“Compliance Statement” is that certain statement in the form attached hereto as Exhibit B.
“Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation, in each case, directly or indirectly guaranteed, endorsed, co made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.
“Control Agreement” is any control agreement entered into among the depository institution at which Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account.
“Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
“Credit Extension” is any Advance, Overadvance, Letter of Credit, amount utilized for Cash Management Services, or any other extension of credit by Bank for Borrower’s benefit.
“Default Rate” is defined in Section 2.6(b).
“Deferred Revenue” is all amounts received or invoiced in advance of performance under contracts and not yet recognized as revenue.
“Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.
“Designated Deposit Account” is the account number ending XXXXXX5649 maintained by Borrower with Bank (provided, however, if no such account number is included, then the Designated Deposit Account shall be any deposit account of Borrower maintained with Bank as chosen by Bank).
“Division” means, in reference to any Person which is an entity, the division of such Person into two (2) or more separate Persons, with the dividing Person either continuing or terminating its existence as part of such division, including, without limitation, as contemplated under Section 18-217 of the Delaware Limited Liability Company Act for limited liability companies formed under Delaware law, or any analogous action taken pursuant to any other applicable law with respect to any corporation, limited liability company, partnership or other entity.
“Dollars,” “dollars” or use of the sign “$” means only lawful money of the United States and not any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted into lawful money of the United States.
“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.
“Domestic Subsidiary” means a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia.
“Effective Date” is defined in the preamble hereof.
“Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
“ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.
“Event of Default” is defined in Section 8.
“Exchange Act” is the Securities Exchange Act of 1934, as amended.
“Financial Statement Repository” is S43da5@svb.com or such other means of collecting information approved and designated by Bank after providing notice thereof to Borrower from time to time.
“Foreign Currency” means lawful money of a country other than the United States.
“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.
“Funding Date” is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business Day.
“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is conducting its normal business and (b) the Foreign Currency being purchased or sold by Borrower is available to Bank from the entity from which Bank shall buy or sell such Foreign Currency.
“FX Contract” is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency on a specified date.
“GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.
“General Intangibles” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.
“Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.
“Guarantor” is any Person providing a Guaranty in favor of Bank.
“Guaranty” is any guarantee of all or any part of the Obligations, as the same may from time to time be amended, restated, modified or otherwise supplemented.
“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.
“Indemnified Person” is defined in Section 12.3.
“Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.
“Intellectual Property” means, with respect to any Person, all of such Person’s right, title, and interest in and to the following:
(a) its Copyrights, Trademarks and Patents;
(b) any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how and operating manuals;
(c) any and all source code;
(d) any and all design rights which may be available to such Person;
(e) any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and
(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
“Interest Expense” means for any fiscal period, interest expense (whether cash or non-cash) determined in accordance with GAAP for the relevant period ending on such date, including, in any event, interest expense with respect to any Credit Extension and other Indebtedness of Borrower and its Subsidiaries, including, without limitation or duplication, all commissions, discounts, or related amortization and other fees and charges with respect to letters of credit and bankers’ acceptance financing and the net costs associated with interest rate swap, cap, and similar arrangements, and the interest portion of any deferred payment obligation (including leases of all types).
“Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
“Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person.
“IPO” means an initial, underwritten offering and sale of its securities to the public pursuant to an effective registration statement under Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended.
“Key Person” is each of Borrower’s (a) Chief Executive Officer, who is Ian Siegel as of the Effective Date, (b) Chief Financial Officer, who is David Travers as of the Effective Date, and (c) Chief Operating Officer, who is Jeff Zwelling as of the Effective Date.
“Letter of Credit” means a standby letter of credit issued by Bank or another institution based upon an application, guarantee, indemnity or similar agreement on the part of Bank as set forth in Section 2.3.
“Letter of Credit Application” is defined in Section 2.3(b).
“Letter of Credit Reserve” is defined in Section 2.3(e).
“Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
“Liquidity” is, at any time, the sum of (a) Borrower’s unrestricted cash and Cash Equivalents held at Bank or subject to a Control Agreement in favor of Bank, and (b) the Availability Amount.
“Loan Documents” are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents related to this Agreement any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower or any Guarantor, and any other present or future agreement by Borrower and/or any Guarantor with or for the benefit of Bank, all as amended, restated, or otherwise modified.
“Material Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.
“Monthly Financial Statements” is defined in Section 6.2(c).
“Net Income” means, as calculated on a consolidated basis for Borrower and its Subsidiaries for any period as at any date of determination, the net profit (or loss), determined in accordance with GAAP after provision for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting period.
“Obligations” are Borrower’s obligations to pay when due any debts, principal, interest, fees, Bank Expenses, the Unused Revolving Line Facility Fee, and other amounts Borrower owes Bank now or later, whether under this Agreement, the other Loan Documents, or otherwise, including, without limitation, all obligations relating to Bank Services and interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan Documents.
“Operating Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.
“Original Agreement” is defined in the preamble hereof.
“Overadvance” is defined in Section 2.5.
“Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.
“Payment Date” is the last calendar day of each month.
“Perfection Certificate” is defined in Section 5.1.
“Permitted Acquisition” is an acquisition of all or substantially all of the equity interests or assets (or all or substantially all of the assets constituting a business unit, division, product line or line of business) of a Person, provided:
(a) the Person acquired or assets acquired is a type of business (or the assets are used in a type of business) permitted to be engaged by Borrower under this Agreement;
(b) the Person or Persons to be acquired shall be solely organized in the United States and shall conduct their principal operations in the United States;
(c) no Event of Default exists or would result from such acquisition;
(d) Borrower shall be in compliance with all covenants set forth in this Agreement both before and after giving effect to any such acquisition;
(e) the total cash consideration paid in connection with all such acquisitions, does not exceed Two Million Dollars ($2,000,000) per acquisition and Four Million Dollars ($4,000,000) in in the aggregate in any fiscal year;
(f) Bank shall have received at least twenty (20) days prior written notice of the closing date for such acquisition;
(g) Borrower shall remain a surviving legal entity; and
(h) any Person that is acquired and remains a separate legal entity shall be organized in the United States and shall become a co-borrower under this Agreement in accordance with Section 6.13 hereof.
“Permitted Indebtedness” is:
(a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents;
(b) Indebtedness existing on the Effective Date which is shown on the Perfection Certificate;
(c) Subordinated Debt;
(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(e) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(f) Indebtedness secured by Liens permitted under clauses (a) and (c) of the definition of “Permitted Liens” hereunder;
(g) (i) Indebtedness owing from one Co-Borrower or Guarantor to another Co-Borrower or Guarantor hereunder, (ii) Indebtedness owing from Borrower to any Subsidiaries that are not Co-Borrowers or Guarantors hereunder in an aggregate amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000) and (iii) Indebtedness of any Subsidiaries that are not Co-Borrowers or Guarantors hereunder to Borrower in an aggregate principal amount not to exceed Two Hundred Fifty Thousand Dollars ($250,000);
(h) undrawn letters of credit issued by Bank;
(i) unsecured Indebtedness of Borrower arising in connection with corporate credit cards with financial institutions other than Bank incurred in the ordinary course of business in an aggregate amount not to exceed One Hundred Thousand Dollars ($100,000);
(j) Indebtedness not to exceed Five Hundred Thousand Dollars ($500,000) in aggregate amount outstanding at any time in connection with that certain letter of credit no. 3129736 issued by Bank of America at Borrower’s request; and
(k) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (j) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be.
“Permitted Investments” are:
(a) Investments (including, without limitation, Subsidiaries) existing on the Effective Date which are shown on the Perfection Certificate;
(b) Investments consisting of Cash Equivalents;
(c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;
(d) Investments consisting of deposit accounts (but only to the extent that Borrower is permitted to maintain such accounts pursuant to Section 6.8 of this Agreement) in which Bank has a first priority perfected security interest;
(e) Investments accepted in connection with Transfers permitted by Section 7.1;
(f) Investments consisting of the creation of a Subsidiary for the purpose of consummating a merger transaction permitted by Section 7.3 of this Agreement, which is otherwise a Permitted Investment;
(g) Investments (i) by Borrower in Subsidiaries that are Co-Borrowers or Guarantors hereunder, (ii) by Borrower in Subsidiaries that are not Co-Borrowers or Guarantors hereunder in an aggregate amount not to exceed Five Million Dollars ($5,000,000) in the aggregate during the term of this Agreement, and (iii) by Subsidiaries in other Subsidiaries not to exceed Five Million Dollars ($5,000,000) in the aggregate during the term of this Agreement, or in Borrower;
(h) Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by the Board in an aggregate amount not to exceed One Hundred Thousand Dollars ($100,000) in any fiscal year;
(i) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;
(j) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (j) shall not apply to Investments of Borrower in any Subsidiary;
(k) Investments consisting of treasury stock of Borrower held by Borrower as a result of repurchases of the stock of former employees or consultants pursuant to stock repurchase agreements to the extent otherwise permitted hereunder; and
(l) joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the non-exclusive licensing of technology, the development of technology or the providing of technical support, provided that any cash investments by Borrower do not exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year.
“Permitted Liens” are:
(a) Liens existing on the Effective Date which are shown on the Perfection Certificate or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which Borrower maintains adequate reserves on Borrower’s Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;
(c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than One Hundred Thousand Dollars ($100,000) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;
(d) Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed One Hundred Thousand Dollars ($100,000) and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;
(e) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);
(f) Liens incurred in the extension, renewal or refinancing of the Indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;
(g) leases or subleases of real property granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest therein;
(h) non-exclusive license of Intellectual Property granted to third parties in the ordinary course of business, and licenses of Intellectual Property that could not result in a legal transfer of title of the licensed property that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discreet geographical areas outside of the United States;
(i) Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7; and
(j) Liens in favor of other financial institutions arising in connection with Borrower’s or Borrower’s Subsidiary’s deposit and/or securities accounts held at such institutions, provided that (i) Bank has a first priority perfected security interest in the amounts held in such deposit and/or securities accounts to the extent required pursuant to Section 6.8(b) and (ii) such accounts are permitted to be maintained pursuant to Section 6.8 of this Agreement.
“Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
“Prime Rate” is the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the “prime rate” then in effect; provided that, in the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement; and provided further that if such rate of interest, as set forth from time to time in the money rates section of The Wall Street Journal, becomes unavailable for any reason as determined by Bank, the “Prime Rate” shall mean the rate of interest per annum announced by Bank as its prime rate in effect at its principal office in the State of California (such Bank announced Prime Rate not being intended to be the lowest rate of interest charged by Bank in connection with extensions of credit to debtors); provided that, in the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement.
“Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.
“Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Reserves” means, as of any date of determination, such amounts as Bank may from time to time establish and revise in its good faith business judgment, reducing the amount of Advances and other financial accommodations which would otherwise be available to Borrower (a) to reflect events, conditions, contingencies or risks which, as determined by Bank in its good faith business judgment, do or may adversely affect (i) the Collateral or any other property which is security for the Obligations or its value (including without limitation any increase in delinquencies of Accounts), (ii) the assets, business or prospects of Borrower or any Guarantor, or (iii) the security interests and other rights of Bank in the Collateral (including the enforceability, perfection and priority thereof); or (b) to reflect Bank's reasonable belief that any collateral report or financial information furnished by or on behalf of Borrower or any Guarantor to Bank is or may have been incomplete, inaccurate or misleading in any material respect; or (c) in respect of any state of facts which Bank determines constitutes an Event of Default or may, with notice or passage of time or both, constitute an Event of Default.
“Responsible Officer” is any of the Chief Executive Officer, SVP of Finance, Chief Business Officer, Chief Financial Officer and Chief Operating Officer of Borrower.
“Restricted License” is any material license or other agreement with respect to Intellectual Property which is material to the conduct of Borrower’s business where Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could reasonably be expected to interfere with Bank’s right to sell any Collateral.
“Revolving Line” is an aggregate principal amount equal to Thirty-Five Million Dollars ($35,000,000).
“Revolving Line Maturity Date” is September 2, 2022.
“SEC” shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.
“Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.
“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
“Subsidiary” is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or Guarantor.
“Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
“Transfer” is defined in Section 7.1.
“Unused Revolving Line Facility Fee” is defined in Section 2.7(b).
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.
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BORROWER:
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ZIPRECRUITER, INC.
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By:
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/s/ David Travers
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Name:
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David Travers
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Title:
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Chief Financial Officer
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BANK:
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SILICON VALLEY BANK
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By:
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/s/ Chris Lee
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Name:
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Chris Lee
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Title:
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Director
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[Signature Page to Second Amended and Restated Loan and Security Agreement]
EXHIBIT A - COLLATERAL DESCRIPTION
The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as provided below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, certificates of deposit, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and
all Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include (i) more than sixty-five percent (65%) of the issued and outstanding capital stock, membership units or other securities entitled to vote owned or held of record by Borrower in any Foreign Subsidiary or any Subsidiary that is a controlled foreign corporation (as defined in the Internal Revenue Code), provided that the Collateral shall include one hundred percent (100%) of the issued and outstanding non-voting capital stock of such Subsidiary; (ii) rights held under a license that are not assignable by their terms without the consent of the licensor thereof (but only to the extent such restriction on assignment is enforceable under applicable law); (iii) any interest of Borrower as a lessee under an Equipment lease or real property lease if Borrower is prohibited by the terms of such lease from granting a security interest in such lease or under which such an assignment or Lien would cause a default to occur under such lease; provided, however, that upon termination of such prohibition, such interest shall immediately become Collateral without any action by Borrower or Bank; or (iv) any Intellectual Property; provided, however, the Collateral shall include all Accounts and all proceeds of Intellectual Property. If a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Bank’s security interest in such Accounts and such other property of Borrower that are proceeds of the Intellectual Property.
Pursuant to the terms of a certain negative pledge arrangement with Bank, Borrower has agreed not to encumber any of its Intellectual Property without Bank’s prior written consent.
EXHIBIT B
COMPLIANCE STATEMENT
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TO:
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SILICON VALLEY BANK
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Date:
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FROM:
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ZIPRECRUITER, INC.
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Under the terms and conditions of the Second Amended and Restated Loan and Security Agreement between Borrower and Bank (the “Agreement”): Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below. Attached are the required documents evidencing such compliance, setting forth calculations prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.
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Please indicate compliance status by circling Yes/No under “Complies” column.
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Reporting Covenants
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Required
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Complies
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Monthly financial statements (consolidated and consolidating) with Compliance Statement
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Monthly within 30 days
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Yes No
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Annual financial statements (CPA Audited)*
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FYE within 180 days
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Yes No
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10-Q, 10-K and 8-K
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Within 5 days after filing with SEC
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Yes No
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A/R & A/P Agings
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Monthly within 30 days
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Yes No
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Transaction report
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Monthly within 30 days
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Yes No
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409A Valuation
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Annually within 30 days of completion
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Yes No
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Board approved projections
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(A) The earlier of (i) FYE within 30 days or (ii) within 7 days of approval by Borrower’s board of directors and (B) as amended/updated within 7 days
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Yes No
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*Provided however, if the Board does not require audited Annual Financial Statements for any fiscal year, then Borrower shall instead deliver CPA reviewed Annual Financial Statements for such fiscal year only.
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Financial Covenant
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Required
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Actual
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Complies
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Maintain as indicated:
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Minimum Adjusted EBITDA
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See Schedule 1
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$________
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Yes No
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Minimum Liquidity
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≥ $10,000,000
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Yes No
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Other Matters
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Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? If yes, provide copies of any such amendments or changes with this Compliance Statement.
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Yes
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No
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The following are the exceptions with respect to the statements above: (If no exceptions exist, state “No exceptions to note.”)
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Schedule 1 to Compliance Statement
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated: ____________________
I. Minimum Adjusted EBITDA (Section 6.9(a))
Required: See chart below (measured on a trailing 12 month basis)
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Measuring Period Ending
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Minimum Adjusted EBITDA
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June 30, 2020
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$10,000,000
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September 30, 2020
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$10,000,000
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December 31, 2020
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$10,000,000
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March 31, 2021
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$0
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June 30, 2021
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$0
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September 30, 2021
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$5,000,000
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December 31, 2021 and for each calendar quarter thereafter
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$10,000,000
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Actual: Measured on a trailing 12 month basis
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A.
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Net Income
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$
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B.
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Interest Expense
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$
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C.
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Depreciation and Amortization Expense (to the extent deducted in the calculation of Net Income)
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$
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D.
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Income Tax Expense
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$
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E.
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Non-Cash Stock Based Compensation
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$
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F.
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One-time Cash restructuring charges (including, without limitation, any costs and expenses relating to cost saving initiatives, operating expense reductions, and severance costs) in an amount not to exceed Two Million Dollars ($2,000,000)
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$
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G.
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Changes in Deferred Revenue
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$
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H.
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Capitalized software costs
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$
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I.
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Adjusted EBITDA (line A, plus lines B, C, D, and E, plus line F, plus or minus line G, minus line H)
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$
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Is line H greater than or equal to the minimum Adjusted EBITDA required for the applicable measuring period set forth in the chart above?
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No, not in compliance
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Yes, in compliance
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II.
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Minimum Liquidity (Section 6.9(b)
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Required: Liquidity ≥ $10,000,000
Actual:
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A.
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Aggregate value of Borrower’s unrestricted cash and Cash Equivalents held at Bank or subject to a Control Agreement in favor of Bank
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$
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B.
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Availability Amount
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$
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C.
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Liquidity (the sum of lines A and B)
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$
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Is line C greater than or equal to $10,000,000?
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No, not in compliance
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Yes, in compliance
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EXHIBIT C
CORPORATE BORROWING CERTIFICATE
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BORROWER
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ZIPRECRUITER, INC.
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DATE:
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September 2, 2020
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BANK:
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SILICON VALLEY BANK
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I hereby certify as follows, as of the date set forth above:
1. I am the Secretary, Assistant Secretary or other officer of Borrower. My title is as set forth below.
2. Borrower’s exact legal name is set forth above. Borrower is a corporation existing under the laws of the State of Delaware.
3. Attached hereto are true, correct and complete copies of Borrower’s Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth above. Such Certificate of Incorporation has not been amended, annulled, rescinded, revoked or supplemented, and remains in full force and effect as of the date hereof.
4. The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action). Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and Silicon Valley Bank (“Bank”) may rely on them until Bank receives written notice of revocation from Borrower.
RESOLVED, that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower:
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Name
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Title
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Signature
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Authorized to Add or Remove Signatories
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David Travers
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Chief Financial Officer
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☐
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Ian Siegel
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Chief Executive Officer
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☐
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Tim Yarbrough
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Chief Business Officer
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☐
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Amy Garefis
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Senior VP Accounting
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☐
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RESOLVED FURTHER, that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower.
RESOLVED FURTHER, that such individuals may, on behalf of Borrower:
Borrow Money. Borrow money from Bank.
Execute Loan Documents. Execute any loan documents Bank requires.
Grant Security. Grant Bank a security interest in any of Borrower’s assets.
Negotiate Items. Negotiate or discount all drafts, trade acceptances, promissory notes, or other indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.
Apply for Letters of Credit. Apply for letters of credit from Bank.
Enter Derivative Transactions. Execute spot or forward foreign exchange contracts, interest rate swap agreements, or other derivative transactions.
Further Acts. Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrower’s right to a jury trial) they believe to be necessary to effect these resolutions.
RESOLVED FURTHER, that all acts authorized by the above resolutions and any prior acts relating thereto are ratified.
5. The persons listed above are Borrower's officers or employees with their titles and signatures shown next to their names
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By:
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/s/ David Travers
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Name:
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David Travers
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Title:
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Chief Financial Officer
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*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.
I, the Chief Executive Officer of Borrower, hereby certify as to paragraphs 1 through 5 above, as of the date set forth above.
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By:
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/s/ Ian Siegel
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Name:
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Ian Siegel
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Title:
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Chief Executive Officer
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ZIPRECRUITER, INC.
AMENDED AND RESTATED 2014 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD AND
RESTRICTED STOCK UNIT AGREEMENT
ZipRecruiter, Inc. (the “Company”), pursuant to its Amended and Restated 2014 Equity Incentive Plan (the “Plan”), pursuant to this Notice of Restricted Stock Unit Award (this “Notice of Grant”) grants to Participant an award of restricted stock units (“RSUs”) representing shares of the Company’s Common Stock (the “Shares”) subject to the terms and conditions of the Plan and the attached Restricted Stock Unit Agreement attached hereto as Exhibit A (the “Agreement”) under the Plan, each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Stock Option Grant Notice (“Grant Notice”) and the Agreement.
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Participant:
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Ian Siegel
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Grant Date:
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April 19, 2021
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Vesting Commencement Date:
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N/A
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Total Number of RSUs:
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1,398,000
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Expiration Date:
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As described on Carta April 19, 2031
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Vesting: The RSUs will be eligible to vest based on the achievement of Performance Milestones and a period of service as described below, while Participant remains the Chief Executive Officer of the Company and before the Expiration Date or earlier termination of the RSUs pursuant to the Plan or Agreement.
Performance Milestones: For so long as Participant continues to be the Chief Executive Officer of the Company through each applicable date, Participant is eligible to vest in the following tranches (each a “Tranche” and collectively the “Tranches”).
Tranche 1: If the Liquid Price Per Share is at least 2.7 times the Reference Price, 20% of the RSUs subject to this award will vest. Minimum Service period is through first anniversary of Grant Date.
Tranche 2: If the Liquid Price Per Share is at least 3.3 times the Reference Price, 20% of the RSUs subject to this award will vest. Minimum Service period is through second anniversary of Grant Date.
Tranche 3: If the Liquid Price Per Share is at least 4.1 times the Reference Price, 20% of the RSUs subject to this award will vest. Minimum Service period is through third anniversary of Grant Date.
Tranche 4: If the Liquid Price Per Share is at least 5.1 times the Reference Price, 20% of the RSUs subject to this award will vest. Minimum Service period is through fourth anniversary of Grant Date.
Tranche 5: If the Liquid Price Per Share is at least 6.3 times the Reference Price, 20% of the RSUs subject to this award will vest. Minimum Service period is through fifth anniversary of Grant Date.
The “Vesting Date” for each Tranche of the RSUs will be the later of the date on or before the Expiration Date upon which the Liquid Price Per Share has been achieved with respect to a Tranche of the RSUs (as to the number of Shares for which the Liquid Price Per Share has been achieved), and the applicable Minimum Service period for that Tranche has been completed, subject in all cases to Participant’s continuation as the Chief Executive Officer of the Company through such date. Vesting of the RSUs will be determined as a step function, meaning that there will be no interpolated or additional vesting to the extent of achievement of a Liquid Price Per Share that is in between the prices specified above.
“Reference Price” will be deemed to be $25.04 per share, as equitably adjusted for stock splits, stock dividends, stock combinations, reorganizations, recapitalizations or other events described in Section 8(a) of the Plan.
“Liquid Price Per Share” means a price per share achieved for the Company’s Common Stock in a Change in Control or following an IPO, determined as follows:
• In the case of a Change in Control, the Liquid Price Per Share will be the amount per share distributable to holders of the Company’s Common Stock in the Change in Control; provided that (i) to the extent that any consideration is subjected to an escrow or holdback as security for indemnification obligations or purchase price obligations, up to 15% of the total proceeds of a Change in Control will be valued as though such consideration were paid at closing; and (ii) any non-cash transaction proceeds or other contingent proceeds will be valued at the value ascribed thereto in the Change in Control or, if not ascribed a value in such transaction, valued reasonably and in good faith by the Board of Directors, and without discounts for lack of marketability or liquidity in the case of consideration that consists of securities of a class that is publicly traded, notwithstanding that the securities received as consideration may not be freely traded as of the closing of the Change in Control.
• In the case of an IPO, the Liquid Price Per Share will be based on the arithmetic average of the volume-weighted average closing price of the Company’s Class A Common Stock over any thirty (30)-trading-day-window period beginning on or after the day that the IPO closes.
The Board of Directors will determine whether and the extent to which the Liquid Price Per Share has been achieved based on the foregoing rules reasonably and in good faith.
“IPO” will be satisfied on the earliest to occur of: (a) the first trading day following the Company’s initial public offering or direct listing pursuant to an effective registration statement under the Securities Act covering the offer and sale of the Company’s equity securities (whether by the Company or any holders of the Company’s equity securities), as a result of or following which the Shares shall be publicly held, or (b) the consummation of a merger, acquisition or other business combination involving the Company and a publicly traded special purpose acquisition company (i.e., a company that has no commercial operations and that was formed to raise capital for the purpose of acquiring an existing company), that results in the operating business of the Company becoming a publicly traded company.
Minimum Service: The Minimum Service requirement will be satisfied for a Tranche on the applicable anniversary of the Grant Date, subject to Participant’s continuation as the Chief Executive Officer of the Company through such date. For clarity, if the Liquid Price Per Share for a Tranche is achieved prior to the date on which the Minimum Service requirement for that Tranche is met, the portion of the RSU for which the Liquid Price Per Share has been achieved will vest on the date on which the Minimum Service requirement is met. Notwithstanding the foregoing, the Minimum Service requirement shall be deemed
satisfied with respect to all tranches of RSUs upon the occurrence of a Change in Control and with respect to the next Tranche to vest in time following the death or Disability of Participant.
Disability: means that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months.
Settlement:
(a) RSUs in respect of (i) an IPO shall be settled no later than March 15 of the calendar year following the calendar year in which such RSUs become vested or (ii) a Change in Control shall be settled not later than immediately prior to the consummation of the Change in Control. Settlement means the delivery of the Shares vested under an RSU. Settlement of RSUs shall be in Shares. Settlement of vested RSUs shall occur regardless of whether Participant is a Service Provider at the time of settlement. No fractional RSUs or rights for fractional Shares shall be created pursuant to this Notice of Grant.
(b) Participant understands that Participant’s employment or consulting relationship with the Company is for an unspecified duration, can be terminated at any time (i.e., is “at-will”) and that nothing in this Notice of Grant, the Agreement or the Plan changes the at-will nature of that relationship. Participant also understands that this Notice of Grant is subject to the terms and conditions of both the Agreement and the Plan, both of which are incorporated herein by reference. Participant has read both the Agreement and the Plan.
(c) By Participant’s acceptance hereof (whether written, electronic or otherwise), Participant agrees, to the fullest extent permitted by law, that in lieu of receiving documents in paper format, Participant accepts the electronic delivery of any documents the Company, or any third party involved in administering the Plan which the Company may designate, may deliver in connection with this grant (including the Plan, the Notice of Grant, the Agreement, any disclosures provided pursuant to Rule 701, account statements or other communications or information) whether via the Company’s intranet or the internet site of another such third party or via email, or such other means of electronic delivery specified by the Company.
Termination:
(a) The RSUs shall terminate on the Expiration Date or earlier, as provided in this paragraph. If Participant ceases to be the Chief Executive Officer for any reason, all RSUs for which vesting is no longer possible under the terms of this Notice of Grant and the Agreement shall be forfeited to the Company immediately, and all rights of Participant to such RSUs shall immediately terminate. In case of any dispute as to whether such Termination of Chief Executive Officer status has occurred, the Administrator shall have sole discretion to determine whether such Termination of Chief Executive Officer status has occurred and the effective date of such Termination of Chief Executive Officer status. All RSUs for which vesting is still possible will remain outstanding for the minimum amount of time necessary to determine whether such RSUs will vest.
(b) By Participant’s and the Company’s acceptance hereof (in each case, whether written, electronic or otherwise), Participant and the Company agree that this RSU is granted under and governed by the terms and conditions of the Plan, this Notice of Grant and the Agreement.
EXHIBIT A
TO RESTRICTED STOCK UNIT AWARD NOTICE
RESTRICTED STOCK UNIT AGREEMENT
Participant has been granted Restricted Stock Units (“RSUs”) subject to the terms, restrictions and conditions of the Company’s Amended and Restated 2014 Equity Incentive Plan (the “Plan”), the Notice of Restricted Stock Unit Award (“Notice of Grant”) and this Restricted Stock Unit Agreement (this “RSU Agreement”). Unless otherwise defined herein or in the Notice of Grant, the terms defined in the Plan shall have the same defined meanings in this RSU Agreement.
1. No Stockholder Rights. Unless and until such time as Shares are issued in settlement of vested RSUs, Participant shall have no ownership of the Shares allocated to the RSUs and shall have no right to dividends or to vote such Shares.
2. Dividend Equivalents. Dividend equivalents, if any, shall not be credited to Participant in respect of Participant’s RSUs.
3. No Transfer. The RSUs and any interest therein may not be transferred in any manner otherwise than by will or by the laws of descent or distribution. The terms of the Plan, the Notice of Grant and this RSU Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of Participant. Further, until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, or after the Administrator determines that it is, will, or may no longer be relying upon the exemption from registration of RSUs under the Exchange Act as set forth in Rule 12h-1(f) promulgated under the Exchange Act (the “Reliance End Date”), Participant shall not transfer these RSUs in any manner other than (i) to persons who are “family members” (as defined in Rule 701(c)(3) of the Securities Act) through gifts or domestic relations orders or (ii) to an executor or guardian of Participant upon the death or disability of Participant. Until the Reliance End Date, the RSUs may not be pledged, hypothecated or otherwise transferred or disposed of, including by entering into any short position, any “put equivalent position” or any “call equivalent position” (as defined in Rule 16a-1(h) and Rule 16a-1(b) of the Exchange Act, respectively), other than as permitted in clauses (i) and (ii) of this paragraph.
4. Acknowledgement. The Company and Participant agree that the RSUs are granted under and governed by the Notice of Grant, this RSU Agreement and by the provisions of the Plan (incorporated herein by reference). Participant (i) acknowledges receipt of a copy of each of the foregoing documents, (ii) represents that Participant has carefully read and is familiar with their provisions and (iii) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice of Grant.
5. Limitations on Transfer of Stock. In addition to any other limitation on transfer created by applicable securities laws, Participant shall not assign, encumber or dispose of any interest in the Shares issued pursuant to this RSU Agreement except with the Company’s prior written consent and in compliance with the Company’s Bylaws, the Company’s then-current Insider Trading Policy and applicable securities laws. The restrictions on transfer also include a prohibition on any short position, any “put equivalent position” or any “call equivalent position” by the RSU holder with respect to the RSU itself as well as any Shares issuable upon settlement of the RSU prior to the settlement thereof until the Company becomes subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.
6. Restrictions Binding on Transferees. All transferees of Shares or any interest therein will receive and hold such shares or interest subject to the provisions of this RSU Agreement, including the transfer restrictions of Sections 3 and 5, and the transferee shall acknowledge such restrictions in writing. Any sale or transfer of the Shares shall be void unless the provisions of this RSU Agreement are satisfied.
7. Withholding of Tax. When the RSUs are vested and/or settled, the fair market value of the Shares shall be treated as income subject to withholding by the Company for income and employment taxes if Participant is or was an employee of the Company. Prior to any relevant taxable or tax withholding event, as applicable, Participant shall pay or make adequate arrangements satisfactory to the Company to satisfy any or all income tax, social insurance, payroll tax, fringe benefits tax, payment on account and other tax-related items related to the Participant's participation in this Plan and legally applicable to the Participant (collectively, “Tax-Related Obligations”). In this regard, Participant authorizes the Company to withhold all applicable Tax-Related Obligations legally payable by Participant from Participant’s wages or other cash compensation paid to Participant by the Company and/or a Parent or Subsidiary of the Company. With the Company’s consent, these arrangements may also include, if permissible under local law, (i) withholding Shares that otherwise would be issued to Participant when Participant’s RSUs are settled, (ii) having the Company withhold taxes from the proceeds of the sale of the Shares, through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf and Participant hereby authorizes such sales by this authorization), (iii) Participant’s payment of a cash amount or (iv) any other arrangement approved by the Company, all under such rules as may be established by the Administrator and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable, provided, however, that if Participant is a Section 16 officer of the Company under the Exchange Act, then the method of withholding shall be through a mandatory sale under (ii) above. Depending on the withholding method, the Company and/or a Parent or Subsidiary of the Company may withhold or account for Tax-Related Obligations by considering up to the applicable maximum statutory withholding rates, in which case Participant may receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent in Shares. In the case of withholding in Shares, the Company shall issue the net number of Shares to Participant by deducting the Shares retained for Tax-Related Obligations from the Shares issuable upon vesting. For tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Obligations.
8. Code Section 409A. For purposes of this RSU Agreement, a termination of employment will be determined consistent with the rules relating to a “separation from service” as defined in Section 409A of the Code and the regulations thereunder (“Section 409A”). Notwithstanding anything else provided herein, to the extent any payments provided under this RSU Agreement in connection with Participant’s termination of employment constitute deferred compensation subject to Section 409A, and Participant is deemed at the time of such termination of employment to be a “specified employee” under Section 409A, then such payment shall not be made or commence until the earlier of (i) the expiration of the six-month period measured from Participant’s separation from service from the Company or (ii) the date of Participant’s death following such a separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax treatment to Participant including, without limitation, the additional tax for which Participant would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral. The first payment thereof will include a catch-up payment covering the amount that would have otherwise been paid during the period between Participant’s termination of employment and the first payment date but for the application of this provision, and the balance of the installments (if any) will be payable in accordance with their original schedule. To the extent that any provision of this RSU Agreement is ambiguous as to its exemption from or compliance with Section
409A, the provision will be read in such a manner so that all payments hereunder are exempt from Section 409A to the maximum permissible extent and, for any payments where such construction is not reasonable, that those payments comply with Section 409A. To the extent any payment under this RSU Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment shall be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.
9. U.S. Tax Consequences. Participant acknowledges that there will be tax consequences upon vesting and/or settlement of the RSUs and/or disposition of the Shares, if any, received in connection therewith, and Participant should consult a tax adviser regarding Participant’s tax obligations prior to such settlement or disposition.
10. Compliance with Laws and Regulations. The issuance of Shares will be subject to and conditioned upon compliance by the Company and Participant (including any written representations, warranties and agreements as the Administrator may request of Participant for compliance with Applicable Laws) with all applicable state, federal and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Common Stock may be listed or quoted at the time of such issuance or transfer. Participant may not be issued any Shares if such issuance 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 Shares may then be listed. 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 shall relieve the Company of any liability in respect of the failure to issue or sell such Shares.
11. Legend on Certificates. The certificates representing the Shares issued hereunder shall be subject to such stop transfer orders and other restrictions as the Administrator may deem advisable under the Plan, this RSU Agreement, the Company’s Bylaws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which such shares of the Common Stock are listed and any applicable state, Federal or foreign laws, and the Administrator may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
12. Successors and Assigns. The Company may assign any of its rights under this RSU Agreement. This RSU Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. This RSU Agreement will be binding upon Participant and Participant’s heirs, executors, administrators, legal representatives, successors and assigns.
13. Entire Agreement; Severability. The Plan and Notice of Grant are incorporated herein by reference. The Plan, the Notice of Grant and this RSU Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof (including, without limitation, any commitment to make any other form of equity award (such as stock options) that may have been set forth in any employment offer letter or other agreement between the parties). If any provision of this RSU Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.
14. No Rights as Employee, Director or Consultant. Nothing in this RSU Agreement shall affect in any manner whatsoever the right or power of the Company, or a Parent or Subsidiary of the Company, to cause Participant as a Service Provider, for any reason, with or without cause.
15. Information to Participants. If the Company is relying on an exemption from registration under Section 12(h)-1 of the Exchange Act and such information is required to be provided by such Section 12(h)-1, the Company shall provide the information described in Rules 701(e)(3), (4) and (5) of the Securities Act by a method allowed under Section 12(h)-1 of the Exchange Act in accordance with Section 12(h)-1 of the Exchange Act, provided, that Participant agrees to keep the information confidential.
16. Delivery of Documents and Notices. Any document relating to participating in the Plan and/or notice required or permitted hereunder shall be given in writing and shall be deemed effectively given (except to the extent that this RSU Agreement provides for effectiveness only upon actual receipt of such notice) upon personal delivery, electronic delivery or deposit in the U.S. Post Office or foreign postal service, by registered or certified mail, with postage and fees prepaid, addressed to the other party at the address, if any, provided for Participant by the Company or at such other address as such party may designate in writing from time to time to the other party.
17. Choice of Law and Venue. This RSU Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State. For purposes of any action, lawsuit or other proceedings brought to enforce this RSU Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of Los Angeles County, California, or the federal courts for the United States for the Southern District of California, and no other courts, where this grant is made and/or to be performed.
Ziprecruiter, Inc.
April 22, 2021
Ian Siegel
Dear Ian:
We are excited to have you continue your relationship as Chief Executive Officer of Ziprecruiter, Inc., a Delaware corporation (the “Company”). This letter (this “Letter Agreement”) sets forth your rights to a bonus on the terms set forth herein. Terms are defined in Section 5 of this Letter Agreement. Upon the consummation of a Public Listing or Change in Control, you will be entitled to receive a special liquidity bonus (your “Leadership Bonus”). The Leadership Bonus is subject to the terms of this Letter Agreement as follows:
1.Leadership Bonus Amount. The amount of your Leadership Bonus is $10 million and shall be paid in cash subject to applicable withholdings.
2.Conditions to Payment of Leadership Bonus. The obligation of the Company to pay your Leadership Bonus is subject to and contingent upon the conditions set forth below. You shall not be entitled to receive any portion of your Leadership Bonus until all such conditions have been fulfilled (such conditions, the “Bonus Conditions”):
(a)A Public Listing or Change in Control is consummated.
(b)You are actively employed by the Company as the Company’s Chief Executive Officer as of the closing of the Public Listing or Change in Control.
(c)As of the closing of the Public Listing or Change in Control, there has been no reasonable determination by the Board that you have (i) breached your obligations under any confidential information and invention assignment agreement between you and the Company, (ii) materially breached any other contract between you and the Company or (iii) breached any Company policy or code of conduct, in each case, which breach has caused material harm to the Company; provided, that no breach described in any of the foregoing clauses (i) through (iii), inclusive, that is reasonably capable of being cured or corrected will be determined to have occurred for purposes of this Letter Agreement unless you have been first notified by the Company in writing that the Company believes that such breach has occurred and you have failed to cure or correct such breach within thirty (30) days following your receipt of such notice.
No Leadership Bonus will be paid if your employment ends prior to the payment date for any reason.
3.Time of Payments. Subject to and contingent upon satisfaction of the Bonus Conditions set forth in Section 2 above, the Leadership Bonus shall be paid, subject to applicable withholdings: (i) in the case of a Change in Control, simultaneously with disbursements of initial consideration to stockholders in conjunction with the Change in Control or (ii) in the case of a Public Listing, the first regular payroll cycle after the 1st day of trading on NYSE.
4.General Provisions.
(a)Interpretation. This Letter Agreement will be interpreted and administered by the Board. The determinations of the Board with regards to this Letter Agreement will be final and binding.
(b)Term. This Letter Agreement will terminate automatically three (3) years from the date hereof unless earlier terminated as a result of (i) your termination of employment or (ii) following the payment of the Leadership Bonus.
(c)Choice of Law. All questions concerning the construction, validity and interpretation of this Letter Agreement will be governed by the laws of the State of California, exclusive of the conflict of laws provisions thereof.
(d)Extraordinary. The Leadership Bonus shall be an extraordinary item of compensation outside the scope of your employment contract, if any, and shall not be considered a part of your normal or expected compensation for purposes of calculating severance, bonuses, long-service awards, retirement benefits or similar payments.
(e)No Prior Funding. No amounts payable under this Letter Agreement shall actually be funded, set aside or otherwise segregated from the general assets of the Company prior to payment. The obligation to pay the benefits hereunder shall at all times be an unfunded and unsecured obligation of the Company and be paid out of the general assets of the Company. You have no rights under this Letter Agreement other than those of a general creditor.
(f)At Will Employment. Nothing contained in this Letter Agreement is intended to alter the “at will” employment relationship between you and the Company. You understand and agree that your employment with the Company is “at will” and may be terminated at any time, for any or no reason, by either you or the Company with or without notice.
5.Definitions.
(a)“Board” means the Company’s Board of Directors.
(b)“Change in Control” has the meaning assigned to such term in the Plan.
(c)“Code” means the Internal Revenue Code of 1986, as amended.
(d) The “Plan” means the Company’s Amended and Restated 2014 Equity Incentive Plan
(e)“Public Listing” means the earliest to occur of: (i) the first trading day following the Company’s initial public offering or direct listing pursuant to an effective registration statement under the Securities Act covering the offer and sale of the Company’s equity securities (whether by the Company or by any holders of the Company’s equity securities), as a result of or following which the Shares shall be publicly held, or (ii) the consummation of a merger, acquisition or other business combination involving the Company and a publicly traded special purpose acquisition company (i.e., a company that has no commercial operations and that was formed to raise capital for the purpose of acquiring an existing company), that results in the Company or its business becoming a publicly traded company.
6.Entire Agreement; Acceptance. This Letter Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication
and prior writings with respect thereto, including any and all matters described in the minutes of the meeting of the Board held on April 19, 2021. By signing below, you acknowledge that this Letter Agreement constitutes the entire agreement between you and the Company, and it is the complete, final, and exclusive embodiment of the subject matter herein. It is entered into without reliance on any promise or representation other than those expressly contained herein.
[Remainder of Page Intentionally Left Blank]
We are pleased to offer this benefit. To accept, please sign the enclosed copy of this letter and return to me.
Sincerely,
/s/David Travers
David Travers
Participant Acknowledgement and Agreement
By signing this letter, I acknowledge that I have reviewed and understand the foregoing letter and agree to the terms and conditions.
Acknowledged and Agreed by:
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/s/ Ian Siegel
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4/22/2021
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Ian Siegel
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CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form S-1 of ZipRecruiter, Inc. of our report dated March 9, 2021 relating to the financial statements of ZipRecruiter, Inc., which appears in this Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Los Angeles, California
April 23, 2021
