-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FPfQ5sf7OmwXqa4bAQYr/B7DUh07Zq4N+pwL/PMsn1TG0sgKDkBn31iloP4ytXnM EODT4P3kMwwKoTYLOk2YgQ== /in/edgar/work/20000803/0000950142-00-000696/0000950142-00-000696.txt : 20000921 0000950142-00-000696.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950142-00-000696 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20000803 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PROBUSINESS SERVICES INC CENTRAL INDEX KEY: 0001028751 STANDARD INDUSTRIAL CLASSIFICATION: [7374 ] IRS NUMBER: 942976066 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-53099 FILM NUMBER: 685582 BUSINESS ADDRESS: STREET 1: 4125 HOPYARD RD CITY: PLEASANTON STATE: CA ZIP: 94588 BUSINESS PHONE: 9257373500 MAIL ADDRESS: STREET 1: 4125 HOPYARD RD CITY: PLEASANTON STATE: CA ZIP: 94588 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL ATLANTIC PARTNERS LLC CENTRAL INDEX KEY: 0001017645 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 3 PICKWICK STREET 2: 3 PICKWICK PLAZA CITY: GREENWICH STATE: CT ZIP: 08330 BUSINESS PHONE: 2036223050 MAIL ADDRESS: STREET 1: 3 PICKWICK STREET 2: 3 PICKWICK PLAZA CITY: GREENWICH STATE: CT ZIP: 08330 SC 13D/A 1 0001.txt AMENDMENT NO. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. 1) ----------------------- PROBUSINESS SERVICES, INC. (Name of Issuer) COMMON STOCK, PAR VALUE $.001 PER SHARE (Title of Class of Securities) 742674104 (CUSIP Number) ------------------ MATTHEW NIMETZ C/O GENERAL ATLANTIC SERVICE CORPORATION 3 PICKWICK PLAZA GREENWICH, CONNECTICUT 06830 TEL. NO.: (203) 629-8600 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) ----------------------- AUGUST 1, 2000 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 1(f) or 1(g), check the following box.|_| Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). ================================================================================ - ------------------------ ------------------------- 742674104 PAGE 2 OF 17 PAGES - ------------------------ ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON General Atlantic Partners, LLC - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------ BENEFICIALLY OWNED 8 SHARED VOTING POWER BY EACH REPORTING PERSON 4,306,274 WITH ------------------------------------------------ 9 SOLE DISPOSITIVE POWER -0- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 4,306,274 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,306,274 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON OO - -------------------------------------------------------------------------------- - ------------------------ ------------------------- 742674104 PAGE 3 OF 17 PAGES - ------------------------ ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON General Atlantic Partners 39, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------ BENEFICIALLY OWNED 8 SHARED VOTING POWER BY EACH REPORTING PERSON 4,306,274 WITH ------------------------------------------------ 9 SOLE DISPOSITIVE POWER -0- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 4,306,274 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,306,274 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- - ------------------------ ------------------------- 742674104 PAGE 4 OF 17 PAGES - ------------------------ ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON General Atlantic Partners 59, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------ BENEFICIALLY OWNED 8 SHARED VOTING POWER BY EACH REPORTING PERSON 4,306,274 WITH ------------------------------------------------ 9 SOLE DISPOSITIVE POWER -0- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 4,306,274 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,306,274 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- - ------------------------ ------------------------- 742674104 PAGE 5 OF 17 PAGES - ------------------------ ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON General Atlantic Partners 70, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------ BENEFICIALLY OWNED 8 SHARED VOTING POWER BY EACH REPORTING PERSON 4,306,274 WITH ------------------------------------------------ 9 SOLE DISPOSITIVE POWER -0- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 4,306,274 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,306,274 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- - ------------------------ ------------------------- 742674104 PAGE 6 OF 17 PAGES - ------------------------ ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON GAP Coinvestment Partners, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------ BENEFICIALLY OWNED 8 SHARED VOTING POWER BY EACH REPORTING PERSON 4,306,274 WITH ------------------------------------------------ 9 SOLE DISPOSITIVE POWER -0- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 4,306,274 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,306,274 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- - ------------------------ ------------------------- 742674104 PAGE 7 OF 17 PAGES - ------------------------ ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON GAP Coinvestment Partners II, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------ BENEFICIALLY OWNED 8 SHARED VOTING POWER BY EACH REPORTING PERSON 4,306,274 WITH ------------------------------------------------ 9 SOLE DISPOSITIVE POWER -0- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 4,306,274 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,306,274 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON PN - -------------------------------------------------------------------------------- - ------------------------ ------------------------- 742674104 PAGE 8 OF 17 PAGES - ------------------------ ------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON GapStar, LLC - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X] (b) [_] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF -0- SHARES ------------------------------------------------ BENEFICIALLY OWNED 8 SHARED VOTING POWER BY EACH REPORTING PERSON 4,306,274 WITH ------------------------------------------------ 9 SOLE DISPOSITIVE POWER -0- ------------------------------------------------ 10 SHARED DISPOSITIVE POWER 4,306,274 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 4,306,274 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 17.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON OO - -------------------------------------------------------------------------------- - ------------------------ ------------------------- 742674104 PAGE 9 OF 17 PAGES - ------------------------ ------------------------- Item 1. SECURITY AND ISSUER. This Amendment No. 1 ("Amendment No. 1) to Schedule 13D is filed by the undersigned to amend and supplement the Schedule 13D, dated as of December 23, 1999 (the "Original 13D") with respect to the shares of Common Stock, par value $.001 per share (the "Common Stock") of ProBusiness Services, Inc., a Delaware corporation (the "Company"). The address of the principal executive offices of the Company is 4125 Hopyard Road, Pleasanton, CA 94588. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Original 13D. Item 2. IDENTITY AND BACKGROUND. Item 2 is hereby amended and restated in its entirety as follows: This statement is being filed by a group, as defined in Rule 13d-5 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended. The members of the group are General Atlantic Partners, LLC, a Delaware limited liability company ("GAP"), General Atlantic Partners 39, L.P., a Delaware limited partnership ("GAP 39"), General Atlantic Partners 59, L.P., a Delaware limited partnership ("GAP 59"), General Atlantic Partners 70, L.P., a Delaware limited partnership ("GAP 70"), GAP Coinvestment Partners, L.P., a New York limited partnership ("GAPCO"), GAP Coinvestment Partners II, L.P., a Delaware limited partnership ("GAPCO II") and GapStar, LLC, a Delaware limited liability company ("GapStar" and, collectively with GAP, GAP 39, - ------------------------ ------------------------- 742674104 PAGE 10 OF 17 PAGES - ------------------------ ------------------------- GAP 59, GAP 70, GAPCO and GAPCO II, the "Reporting Persons"), all of which are located at 3 Pickwick Plaza, Greenwich, Connecticut 06830. Each of the Reporting Persons is engaged in acquiring, holding and disposing of interests in various companies for investment purposes. The general partner of GAP 39, GAP 59 and GAP 70 is GAP. GAP is also the Managing Member of GapStar. The managing members of GAP are Steven A. Denning, Peter L. Bloom, David C. Hodgson, William O. Grabe, William E. Ford, Clifton S. Robbins, Matthew Nimetz, Franchon M. Smithson, Mark Dzialga, Rene M. Kern, and John Wong (collectively, the "GAP Managing Members"). David Hodgson is a director of the Company. The GAP Managing Members are also the general partners of GAPCO and GAPCO II. The business address of each of the GAP Managing Members is 3 Pickwick Plaza, Greenwich, Connecticut 06830, and the present principal occupation or employment of each of the GAP Managing Members is as a managing member of GAP. Each of the GAP Managing Members, other than Messrs. Kern and Wong, is a citizen of the United States. Mr. Kern is a citizen of Germany and Mr. Wong is a citizen of Singapore. None of the Reporting Persons and none of the above individuals has, during the last five years, been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction which resulted in such Reporting Person or individual being subject to a judgment, decree or final order finding any violation of federal or state securities laws or enjoining future violations of, or prohibiting or mandating activities subject to, such laws. - ------------------------ ------------------------- 742674104 PAGE 11 OF 17 PAGES - ------------------------ ------------------------- Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Item 3 is hereby amended and supplemented by the addition of the following: This Amendment No. 1 is being filed as a result of GAP 70, GAPCO II and GapStar entering into a Stock Purchase Agreement, dated as of August 1, 2000 (the "Agreement"), with the Company pursuant to which GAP 70, GAPCO II and GapStar agreed to purchase from the Company 1,132,075 shares of the Company's 6.9% Senior Convertible Preferred Stock, par value $.001 per share (the "Preferred Stock"). The shares of Preferred Stock are currently convertible into the Company's Common Stock on a one-for-one basis. The Agreement provided for a per share purchase price of $26.50, resulting in an aggregate purchase price of $29,999,987.50. See Item 6 below for a more complete description of the Agreement. The source of the funds was contributions from the partners of GAPCO II and GAP 70 and advances under an existing credit facility for GapStar. Item 4. PURPOSE OF TRANSACTION. Item 4 is hereby amended and restated in its entirety as follows: The Reporting Persons acquired the shares of Preferred Stock for investment purposes and the Reporting Persons hold the shares of Common Stock and Preferred Stock, as the case may be, for investment purposes. From time to time the Reporting Persons may acquire additional shares of Common Stock, convert shares of Preferred Stock into shares of Common Stock or dispose of some or all of the shares of - ------------------------ ------------------------- 742674104 PAGE 12 OF 17 PAGES - ------------------------ ------------------------- Preferred Stock or Common Stock owned by them. None of the Reporting Persons has any other plans which relate to or would result in any of the items listed in paragraphs (a) through (j) of Item 4. Item 5. INTEREST IN SECURITIES OF THE ISSUER. Item 5 is hereby amended and restated in its entirety as follows: (a) As of the date hereof, GAP, GAP 39, GAP 59 and GAPCO each owns of record no shares of Common Stock, 1,851,009 shares of Common Stock, no shares of Common Stock and 323,190 shares of Common Stock, respectively, or 0.0%, 7.5%, 0.0% and 1.3%, respectively, of the Company's issued and outstanding shares of Common Stock. In addition, as of the date hereof, GAP 70 owns 915,515 shares of Preferred Stock convertible into 915,515 shares of Common Stock, GAPCO II owns 145,805 shares of Preferred Stock convertible into 145,805 shares of Common Stock and GapStar owns 70,755 shares of Preferred Stock convertible into 70,755 shares of Common Stock, respectively, or 3.7%, 0.1% and 0.0%, respectively, of the Company's issued and outstanding Common Stock. By virtue of the fact that (i) the Reporting Persons beneficially own 50% of the membership interests of InterPro Holdings and may designate 50% of the managers of the Board of Managers of InterPro Holdings and (ii) the GAP Managing Members are also the general partners authorized and empowered to vote and dispose of the securities held by GAPCO, GAPCO II and GapStar, and that GAP is the general partner of GAP 39, GAP 59 and GAP 70, the Reporting Persons may be deemed to share voting power and the power to direct the disposition of the shares of Common Stock owned by each of the Reporting Persons - ------------------------ ------------------------- 742674104 PAGE 13 OF 17 PAGES - ------------------------ ------------------------- and InterPro Holdings. Accordingly, as of August 1, 2000, each of the Reporting Persons may be deemed to own beneficially an aggregate of 4,306,274 shares of Common Stock or 17.4% of the Company's issued and outstanding shares of Common Stock. (b) Each of the Reporting Persons has the shared power to direct the vote and the shared power to direct the disposition of the 4,306,274 shares of Common Stock that may be deemed to be owned beneficially by each of them. (c) Except as set forth herein, to the knowledge of the Reporting Persons with respect to the persons named in response to paragraph (a), none of the persons named in response to paragraph (a) has effected any transactions in shares of Common Stock during the past 60 days. (d) No person other than the persons listed is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, any securities owned by any member of the group. (e) Not Applicable. Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIP WITH RESPECT TO THE SECURITIES OF THE ISSUER. Item 6 is hereby amended and supplemented by the addition of the following: As noted above, the GAP Managing Members are the partners authorized and empowered to vote and dispose of the securities held by GAPCO, GAPCO II and GapStar, and GAP is the partner authorized and empowered to vote the dispose of the securities held by GAP 39, GAP 59 and GAP 70. Accordingly, GAP and the GAP Managing - ------------------------ ------------------------- 742674104 PAGE 14 OF 17 PAGES - ------------------------ ------------------------- Members may, from time to time, consult among themselves and coordinate the voting and disposition of the Company's shares of Common Stock as well as such other action taken on behalf of the Reporting Persons with respect to the Company's shares of Common Stock as they deem to be in the collective interest of the Reporting Persons. On August 1, 2000, GAP 70, GAPCO II and GapStar entered into the Agreement pursuant to which the Company issued and sold to GAP 70, GAPCO II and GapStar an aggregate of 1,132,075 shares of its Preferred Stock, having rights, privileges and preferences as set forth in the Certificate of the Powers, Designations, Preferences and Rights filed with the State of Delaware (the "Certificate"). Each share of Preferred Stock is convertible at any time at the option of the holder or, subject to certain terms and conditions, at the option of the Company, into one share of Common Stock, subject to certain adjustments. The price per share for the Preferred Stock was $26.50 resulting in an aggregate purchase price of $29,999,987.50. In connection with the closing under the Agreement, the Company, GAP 39, GAP 70, GAPCO, GAPCO II and GapStar entered into an Amendment to the Amended and Restated Registration Rights Agreement, dated as of August 1, 2000 (the "Registration Rights Agreement"). Pursuant to the Registration Rights Agreement, the Company has agreed to use its reasonably commercial best efforts, as soon as practicable following the conversion of the Preferred Stock into shares of Common Stock (the "Conversion Stock"), to register for sale pursuant to a shelf registration statement filed under - ------------------------ ------------------------- 742674104 PAGE 15 OF 17 PAGES - ------------------------ ------------------------- the Securities Act of 1933, as amended, the Conversion Stock acquired by GAP 70, GAPCO II and GapStar, at the expense of the Company. The foregoing summaries of the Agreement, the Registration Rights Agreement and the Certificate are qualified in their entirety by reference to Exhibits 2, 3 and 4 which are incorporated herein by reference. Item 7. MATERIALS TO BE FILED AS EXHIBITS. Exhibit 1: Agreement relating to the filing of joint acquisition statements as required by Rule 13d-1(k)(1) under the Securities Exchange Act of 1934, as amended. Exhibit 2: Stock Purchase Agreement, dated August 1, 2000, among the Company, GAPCO II, GAP 70 and GapStar. Exhibit 3: Certificate of Powers, Designations, Preferences and Rights of the Preferred Stock. Exhibit 4: Amendment to Amended and Restated Registration Rights Agreement, dated August 1, 2000, among the Company and the Reporting Persons. SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated as of August 3, 2000. GENERAL ATLANTIC PARTNERS, LLC By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact - ------------------------ ------------------------- 742674104 PAGE 16 OF 17 PAGES - ------------------------ ------------------------- GENERAL ATLANTIC PARTNERS 39, L.P. By: General Atlantic Partners, LLC, Its General Partner By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact GENERAL ATLANTIC PARTNERS 59, L.P. By: General Atlantic Partners, LLC, Its General Partner By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact GENERAL ATLANTIC PARTNERS 70, L.P. By: General Atlantic Partners, LLC, Its General Partner By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact GAP COINVESTMENT PARTNERS, L.P. By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact - ------------------------ ------------------------- 742674104 PAGE 16 OF 17 PAGES - ------------------------ ------------------------- GAP COINVESTMENT PARTNERS II, L.P. By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact GAPSTAR, LLC By: General Atlantic Partners, LLC, Its General Partner By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact EX-99.1 2 0002.txt EXHIBIT 1 EXHIBIT 1 to AMENDMENT NO. 1 to SCHEDULE 13D JOINT ACQUISITION STATEMENT PURSUANT TO RULE 13D-(k)(1) The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D shall be filed on behalf of each of the undersigned without the necessity of filing additional joint acquisition statements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning him, her or it contained herein, but shall not be responsible for the completeness and accuracy of the information concerning the other entities or persons, except to the extent that he, she or it knows or has reason to believe that such information is accurate. Dated as of August 3, 2000. GENERAL ATLANTIC PARTNERS, LLC By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact GENERAL ATLANTIC PARTNERS 39, L.P. By: General Atlantic Partners, LLC, Its General Partner By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact GENERAL ATLANTIC PARTNERS 59, L.P. By: General Atlantic Partners, LLC, Its General Partner By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact 1 GENERAL ATLANTIC PARTNERS 70, L.P. By: General Atlantic Partners, LLC, Its General Partner By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact GAP COINVESTMENT PARTNERS, L.P. By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact GAP COINVESTMENT PARTNERS II, L.P. By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact GAPSTAR, LLC By: General Atlantic Partners, LLC, Its General Partner By: /s/ Thomas J. Murphy ------------------------- Name: Thomas J. Murphy Title: Attorney-In-Fact 2 EX-10.2 3 0003.txt EXHIBIT 2 EXHIBIT 2 to AMENDMENT NO. 1 to Schedule 13D ------------------------ PROBUSINESS SERVICES, INC. CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT AUGUST 1, 2000 ------------------------ TABLE OF CONTENTS PAGE ---- SECTION 1 - Authorization and Sale of Preferred Stock.........................3 1.1 Authorization...............................................3 1.2 Sale of Convertible Preferred...............................3 SECTION 2 - Closing Date; Delivery............................................3 2.1 Closing Date................................................3 2.2 Delivery....................................................4 SECTION 3 - Representations and Warranties of the Company.....................4 3.1 Organization and Standing...................................4 3.2 Capitalization. ............................................4 3.3 Corporate Power; Authorization..............................5 3.4 Issuance and Delivery of the Shares.........................5 3.5 SEC Documents; Financial Statements.........................6 3.6 No Material Adverse Change..................................6 3.7 Litigation..................................................6 3.8 Governmental Authorization; Third Party Consents............6 3.9 Compliance with Laws........................................6 3.10 Liabilities.................................................7 3.11 Private Offering............................................7 3.12 Broker's, Finder's or Similar Fees..........................7 3.13 Section 203.................................................7 SECTION 4 - Representations and Warranties of the Purchasers..................8 4.1 Investment Representations and Covenants of the Purchasers..8 4.2 Receipt of Information......................................9 4.3 Authorization...............................................9 4.4 Brokers or Finders..........................................9 4.5 Tax Advisors................................................9 4.6 Investor Counsel...........................................10 4.7 HSR Compliance.............................................10 SECTION 5 - Conditions to Closing of the Purchasers..........................10 5.1 Representations and Warranties Correct.....................10 5.2 Covenants..................................................10 5.3 Compliance Certificate.....................................10 5.4 Blue Sky...................................................11 5.5 Legal Matters..............................................11 5.6 Opinion of Counsel.........................................11 5.7 Registration Rights Agreement..............................11 5.8 Secretary's Certificate....................................11 5.9 Documents..................................................11 5.10 Filing of the Certificate of Designations..................11 5.11 Shares.....................................................11 -i- TABLE OF CONTENTS (continued) PAGE ---- SECTION 6 - Conditions to Closing of Company.................................12 6.1 Representations and Warranties.............................12 6.2 Blue Sky...................................................12 6.3 Legal Matters..............................................12 6.4 Board and Stockholder Approval.............................12 6.5 Registration Rights Agreements.............................12 SECTION 7 - Affirmative Covenants of the Company.............................12 7.1 SEC Filings................................................12 7.2 Reservation of Common Stock and Preferred Stock............13 7.3 Registration and Listing...................................13 7.4 Use of Proceeds............................................13 SECTION 8 - Indemnification..................................................13 8.1 Indemnification............................................13 8.2 Notification...............................................14 8.3 Contribution...............................................15 8.4 Limitation on Indemnification..............................15 SECTION 9 - Miscellaneous....................................................15 9.1 Governing Law..............................................15 9.2 Survival...................................................15 9.3 Successors and Assigns.....................................15 9.4 Entire Agreement; Amendment................................16 9.5 Notices, etc...............................................16 9.6 Delays or Omissions........................................16 9.7 California Corporate Securities Law........................17 9.8 Expenses...................................................17 9.9 Counterparts...............................................17 9.10 Severability...............................................17 9.11 Further Assurances.........................................17 9.12 Publicity..................................................17 EXHIBITS A. Schedule of Purchasers B. Certificate of Designations C. Schedule of Exceptions D. Compliance Certificate E. Registration Rights Agreement F. Opinion of Wilson Sonsini Goodrich & Rosati -ii- PROBUSINESS SERVICES, INC. 6.9% SENIOR CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT This Convertible Preferred Stock Purchase Agreement (the "AGREEMENT") is made as of the 1 day of August 2000 by and between ProBusiness Services, Inc., a Delaware corporation (the "COMPANY"), with its principal office at 4125 Hopyard Road, Pleasanton, California 94588, and the persons listed on the Schedule of Purchasers attached hereto as EXHIBIT A (the "PURCHASERS"). In consideration of the mutual promises, covenants and conditions hereinafter set forth, the parties hereto mutually agree as follows: DEFINITIONS As used in this Agreement, and unless the context requires a different meaning, the following terms have the meanings indicated: "AFFILIATE" shall mean any Person who is an "affiliate" as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. In addition, the following shall be deemed to be Affiliates of GAP Coinvestment, GAP LP and GapStar: (a) GAP LLC, the members of GAP LLC, the limited partners of GAP Coinvestment and the limited partners of GAP LP; (b) any Affiliate of GAP LLC, the members of GAP LLC, the limited partners of GAP Coinvestment or the limited partners of GAP LP; and (c) any limited liability company or partnership a majority of whose members or partners, as the case may be, are members or former members of GAP LLC or consultants or key employees of General Atlantic Service Corporation, a Delaware corporation and an Affiliate of GAP LLC. In addition, GAP LP, GAP Coinvestment and GapStar shall be deemed to be Affiliates of one another. "AGREEMENT" shall have the meaning as defined above. "BOARD OF DIRECTORS" means the Board of Directors of the Company. "BYLAWS" means the bylaws of the Company as amended and as in effect as of the Closing Date. "CERTIFICATE" shall have the meaning as defined in Section 1.1. "CERTIFICATE OF DESIGNATIONS" means the Certificate of Designations, Rights and Preferences of the Convertible Preferred Stock of the Company. "CLAIMS" shall mean any actions, suits, proceedings, claims, complaints, disputes, arbitrations or investigations. "CERTIFICATE OF INCORPORATION" means the Amended and Restated Certificate of Incorporation of the Company. "CLOSING" shall have the meaning as defined in Section 2.1. "CLOSING DATE" shall have the meaning as defined in Section 2.1. "COMMISSION" shall have the meaning as defined in Section 4.1(c). "COMMON STOCK" means Common Stock, par value $.001 per share, of the Company, or any other capital stock of the Company into which such stock is reclassified or reconstituted. "CONDITION OF THE COMPANY AND THE SUBSIDIARY" means the assets, business, properties, operations or condition (financial or otherwise) of the Company and the Subsidiary, taken as a whole. "CONVERTIBLE PREFERRED" shall have the meaning as defined in Section 1.1. "EXCHANGE ACT" shall have the meaning as defined in Section 3.4. "FINANCIAL STATEMENTS" shall have the meaning set forth in Section 3.5. "GAP LLC" means General Atlantic Partners, LLC, a Delaware limited liability company and the general partner of GAP LP and the managing member of GapStar, and any successor to such entity. "GAP COINVESTMENT" has the meaning set forth in the preamble to this Agreement. "GAP LP" shall mean General Atlantic Partners 70, L.P., a Delaware limited partnership. "GAPSTAR" shall mean GapStar, LLC, a Delaware limited liability company. "GOVERNMENTAL AUTHORITY" means the government of any nation, state, city, locality or other political subdivision thereof, any entity exercising, executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and any corporation or other entity owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "PERSON" means any individual, firm, corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, limited liability company, Governmental Authority or other entity of any kind, and shall include any successor (by merger or otherwise) of such entity. "REGISTRATION RIGHTS AGREEMENT" shall mean the Amended and Restated Registration Rights Agreement dated March 12, 1997 between the Company, the Purchasers and the Original Holders (as defined therein), as amended by the Amendment to the Amended and Restated Registration Rights Agreement dated the date hereof between such parties. -2- "REQUIREMENTS OF LAW" means, as to any Person, any law, statute, treaty, rule, regulation, right, privilege, qualification, license or franchise or determination or order of an arbitrator or a court or other Governmental Authority or stock exchange, in each case applicable or binding upon such Person or any of its property or to which such Person or any of its property is subject or pertaining to any or all of the transactions contemplated or referred to herein. "SECURITIES ACT" shall have the meaning as defined in Section 3.4. "STOCK EQUIVALENTS" means any security or obligation which is by its terms convertible into or exchangeable for shares of common stock or other capital stock or securities of the Company, and any option, warrant or other subscription or purchase right with respect to common stock or such other capital stock or securities. "STOCK OPTION PLAN" means the stock option plan of the Company pursuant to which up to 5,963,571 shares of restricted stock and options to purchase shares of Common Stock are reserved and available for grant to officers, directors, employees and consultants of the Company. "SUBSIDIARIES" means those subsidiaries of the Company set out under Schedule 3.2 to the Schedule of Exceptions. "TRANSACTION DOCUMENTS" means the Agreement and the Registration Rights Agreement. SECTION 1 AUTHORIZATION AND SALE OF PREFERRED STOCK 1.1 AUTHORIZATION. The Company has authorized the sale and issuance of up to 1,132,075 shares (the "Shares") of its 6.9% Senior Convertible Preferred Stock (the "CONVERTIBLE PREFERRED"), having rights, privileges and preferences as set forth in the Certificate of Designations (the "CERTIFICATE") in the form attached to this Agreement as EXHIBIT B. The Company's Certificate of Incorporation authorizes the issuance of up to 1,800,000 shares of Convertible Preferred. 1.2 SALE OF CONVERTIBLE PREFERRED. Subject to the terms and conditions hereof, the Company will issue and sell to the Purchasers and the Purchasers will severally purchase from the Company, at the Closing, the respective number of shares of Convertible Preferred indicated on the Schedule of Purchasers at a purchase price of $26.50 per share, for the aggregate purchase price for each Purchaser as indicated thereon. SECTION 2 CLOSING DATE; DELIVERY 2.1 CLOSING DATE. The closing of the execution of this Agreement and the sale and purchase of the Shares hereunder shall be held at the offices of Wilson Sonsini Goodrich & Rosati, 975 Page Mill Road, Palo Alto, California 94304 at 5:00 p.m., local time, on Tuesday August 1, -3- 2000 (the "Closing") or at such other time and place upon which the Company and the Purchasers shall agree (the date of the Closing is hereinafter referred to as the "CLOSING DATE"). 2.2 DELIVERY. At the Closing, the Company will deliver to each Purchaser an executed counterpart of this Agreement together with a certificate, registered in such Purchaser's name, representing the number of Shares to be issued on the Closing Date as set forth beside such Purchaser's name on the Schedule of Purchasers, against delivery of an executed counterpart of this Agreement, together with payment of the purchase price for the Shares by check payable to the Company or wire transfer per the Company's instructions. SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth on the "Schedule of Exceptions" attached hereto as EXHIBIT C, the Company hereby represents and warrants to the Purchasers as of the Closing Date as follows: 3.1 ORGANIZATION AND STANDING. The Company and each of the Subsidiaries (a) is a corporation duly organized and validly existing under, and by virtue of, the laws of the State of Delaware, (b) is in good standing as a domestic corporation under the laws of said state, (c) is duly qualified as a foreign corporation, licensed and in good standing under each jurisdiction in which its ownership, lease or operation of property or the conduct of its business requires such qualifications. No jurisdiction, other than those referred to in clause, (c) above, has claimed, in writing or otherwise, that the Company or any of the Subsidiaries is required to qualify as a foreign corporation or other entity therein, and neither the Company nor any of the Subsidiaries files any franchise, income or other tax returns in any other jurisdiction based upon the ownership or use of property therein or the derivation of income therefrom. 3.2 CAPITALIZATION. (a) As of June 30, 2000, the authorized capital stock of the Company consisted of (i) 60,000,000 shares of Common Stock, of which 23,584,000 shares were issued and outstanding, and (ii) 5,000,000 shares of Preferred Stock, none of which shares were issued and outstanding, but of which as of closing, 1,800,000 shall be designated as the Convertible Preferred. As of June 30, 2000, the aggregate number of shares subject to options to purchase shares of Common Stock which may be issued under the Stock Option Plan is 5,963,571, of which 4,344,606 have been granted. The Company has reserved an aggregate of 1,800,000 shares of Common Stock for issuance upon conversion of the Shares. Except for the (i) conversion privileges of the Shares, (ii) shares of Common Stock subject to outstanding options issued under the Company's Stock Option Plan and (iii) shares of Common Stock reserved for future issuance pursuant to the Company's Stock Option Plan, there are no options, warrants, conversion privileges, subscription or purchase rights or other rights outstanding to purchase or otherwise acquire (i) any authorized but unissued, unauthorized or treasury shares of the Company's capital stock, (ii) any Stock Equivalents or (iii) other securities of the Company and there are no commitments, contracts, agreements, arrangements or understandings -4- by the Company to issue any shares of the Company's capital stock or any Stock Equivalents or other securities of the Company. (b) SCHEDULE 3.2(B) sets forth, as of June 30, 2000, a true and complete list of (x) each of the Subsidiaries of the Company, (y) the aggregate number of authorized shares of capital stock of such Subsidiary and (z) the stockholders of such Subsidiary and, opposite the name of each stockholder, the amount of all outstanding capital stock and Stock Equivalents owned by such stockholder. The Company owns all of the issued and outstanding capital stock of the Subsidiaries, free and clear of all liens or encumberances. All of such shares of capital stock are duly authorized, validly issued, fully paid and non-assessable, and were issued in compliance with the registration and qualification requirements of all applicable federal, state and foreign securities laws. There are no options, warrants, conversion privileges, subscription or purchase rights or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued, unauthorized or treasury shares of capital stock or other securities of, or any proprietary interest in, any of the Subsidiaries, and there is no outstanding security of any kind convertible into or exchangeable for such shares or proprietary interest. Neither the Company nor any of its Subsidiaries, owns any interest, or has a right to acquire any interest, in any Person that is not a Subsidiary. 3.3 CORPORATE POWER; AUTHORIZATION. The Company has all requisite legal and corporate power and has taken all requisite corporate action to execute and deliver each of the Transaction Documents, to sell and issue the Shares and to carry out and perform all of its obligations under each of the Transaction Documents. Each of the Transaction Documents constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization or similar laws relating to or affecting the enforcement of creditors' rights generally and (ii) as limited by equitable principles generally. The execution and delivery of each of the Transaction Documents does not, and the performance of each of the Transaction Documents and the compliance with the provisions thereof and the issuance, sale and delivery of the Shares by the Company will not materially conflict with, or result in a material breach or violation of the terms, conditions or provisions of, or constitute a material default under, or result in the creation or imposition of any material lien pursuant to the terms of, the Certificate of Incorporation, the Certificate of Designations or Bylaws of the Company or any statute, law, rule or regulation or any state or federal order, judgment or decree (collectively, "Orders") or any indenture, mortgage, lease or other material agreement or instrument to which the Company or any of its properties is subject. 3.4 ISSUANCE AND DELIVERY OF THE SHARES. The Shares, when issued in compliance with the provisions of this Agreement, will be validly issued, fully paid and nonassessable. The shares of Common Stock issuable upon conversion of the Shares have been duly reserved for issuance upon conversion of the Shares and, when issued in compliance with the Certificate of Designation, will be validly issued, fully paid and non-assessable. Neither the issuance and delivery of the Shares nor the issuance of the shares of Common Stock issuable upon conversion of the Shares will be subject to preemptive or any other similar rights of the stockholders of the Company or any liens or encumbrances. -5- 3.5 SEC DOCUMENTS; FINANCIAL STATEMENTS. The Company has filed in a timely manner all documents that the Company was required to file with the Commission under Sections 13, 14(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), during the twelve (12) months preceding the date of this Agreement. As of their respective filing dates, all documents filed by the Company with the Commission (the "SEC DOCUMENTS") complied in all material respects with the requirements of the Exchange Act or the Securities Act of 1933, as amended (the "SECURITIES ACT"), as applicable. The SEC Documents did not contain any untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company and the notes thereto included in the SEC Documents (the "FINANCIAL STATEMENTS") comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect thereto. The Financial Statements have been prepared in accordance with generally accepted accounting principles consistently applied and fairly present the consolidated financial position of the Company and any subsidiaries at the dates thereof and the consolidated results of their operations and consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, recurring adjustments). 3.6 NO MATERIAL ADVERSE CHANGE. Except as otherwise disclosed herein, since March 31, 2000, there have not been any changes in the assets, liabilities, financial condition or operations of the Company from that reflected in the Financial Statements except changes in the ordinary course of business which have not had, either individually or in the aggregate, a materially adverse effect on the Condition of the Company or the Subsidiary. 3.7 LITIGATION. There are no actions, suits, proceedings, claims, complaints, disputes, arbitrations or investigations pending or, to the knowledge of the Company, threatened, at law, in equity, in arbitration or before any Governmental Authority against the Company or the Subsidiary which would, if adversely determined, have a material adverse effect on (a) the Condition of the Company and the Subsidiary or (b) the ability of the Company to perform its obligations under any of the Transaction Documents. No Order has been issued by any court or other Governmental Authority against the Company purporting to enjoin or restrain the execution, delivery or performance of any of the Transaction Documents. 3.8 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. No approval, consent, compliance, exemption, authorization or other action by, or notice to, or filing with any (i) Governmental Authority, (ii) NASD or (iii) other Person (whether acting in an individual, fiduciary or other capacity), and no lapse of a waiting period under a Requirement of Law, is necessary or is required to be made or obtained by the Company or any of its Subsidiaries for the execution, delivery and performance (including, without limitation, the sale, issuance and delivery of the Shares) by, or enforcement against, the Company of the Transaction Documents and the consummation of the transactions contemplated hereby and thereby. 3.9 COMPLIANCE WITH LAWS. (a) The Company is in compliance with all Requirements of Law issued by any court or Governmental Authority against the Company except for those that would have no material adverse effect on the Company. To the Company's knowledge, there is no existing or proposed Requirement of Law which could reasonably be expected to prohibit or restrict the Company from, or otherwise materially adversely effect the Company in, conducting its business in any jurisdiction in which it now conducts or proposes, to conduct its business. (b) (i) The Company has all licenses, permits and approvals of any Governmental Authority (collectively, "Permits") that are necessary for the conduct of the business of the Company; (ii) such Permits are in full force and effect; and (iii) no violations are or have been recorded in respect of any Permit. (c) No material expenditure is presently required by the Company to comply with any existing Requirement of Law. 3.10 LIABILITIES. The Company does not have any material direct or indirect obligation or liability ("LIABILITIES") other than (a) Liabilities fully and adequately reflected or reserved against on the Financial Statements and (b) Liabilities incurred since March 31, 2000 in the ordinary course of business. The Company has no knowledge of any circumstance, condition, event or arrangement that could reasonably be expected to give rise hereafter to any Liabilities of the Company except in the ordinary course of business. 3.11 PRIVATE OFFERING. No form of general solicitation or general advertising was used by the Company or its representatives in connection with the offer or sale of the Shares. No registration of the Shares, pursuant to the provisions of the Securities Act or any state securities or "blue sky" laws, will be required by the offer, sale or issuance of the Shares. The Company agrees that neither it, nor anyone acting on its behalf, shall offer to sell the Shares or any other securities of the Company so as to require the registration of the Shares pursuant to the provisions of the Securities Act or any state securities or "blue sky" laws, unless such Shares or other securities are so registered. 3.12 BROKER'S, FINDER'S OR SIMILAR FEES. There are no brokerage commissions, finder's fees or similar fees or commissions payable by the Company in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Company or any action taken by any such Person. 3.13 SECTION 203. This Agreement and the transactions contemplated hereby have been approved by all necessary action of the Board of Directors in accordance with Section 203(a)(1) of the General Corporation Law of the State of Delaware. -7- SECTION 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS Each Purchaser hereby represents and warrants (severally as to itself and not jointly) to the Company with respect to its purchase of the Shares as follows: 4.1 INVESTMENT REPRESENTATIONS AND COVENANTS OF THE PURCHASERS. (a) This Agreement is made by the Company with the Purchaser in reliance upon such Purchaser's representations and covenants made in this Section 4, which by its execution of this Agreement the Purchaser hereby confirms. The Purchaser represents that the Convertible Preferred to be received will be acquired for investment for its own account, not as a nominee or agent, and not with a view to the sale or distribution of any part thereof, and that it has no present intention of selling, granting any participation in or otherwise distributing the same. The Purchaser further represents that it does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participations to such person or to any third person, with respect to any of the Convertible Preferred or any Common Stock acquired on conversion thereof. (b) The Purchaser understands and acknowledges that the offering of the Convertible Preferred pursuant to this Agreement will not, and any issuance of Common Stock on conversion thereof may not, be registered under the Securities Act on the ground that the sale provided for in this Agreement and the issuance of securities hereunder is exempt pursuant to Section 4(2) of the Securities Act, and that the Company's reliance on such exemption is predicated on the Purchasers' representations set forth herein. (c) The Purchaser covenants that in no event will it make any disposition of any of the Convertible Preferred, or any Common Stock acquired upon the conversion thereof, except in accordance with the Registration Rights Agreement and pursuant to Rule 144 promulgated under the Securities Act ("Rule 144") or otherwise in compliance with federal and state securities laws. The Purchaser further covenants that it will not make any sale, transfer or other disposition of the Convertible Preferred or the Common Stock issuable upon conversion thereof in violation of the Securities Act, the Exchange Act, or the rules of the Securities and Exchange Commission (the "COMMISSION") promulgated thereunder. (d) The Purchaser represents that it is experienced in evaluating companies similar to the Company, is able to fend for itself in transactions such as the one contemplated by this Agreement, has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of its prospective investment in the Company, has the ability to bear the economic risks of the investment and is an "accredited investor" as defined by Regulation D promulgated under the Securities Act of 1933, as amended. (e) The Purchaser acknowledges and understands that the Convertible Preferred, and any Common Stock acquired upon the conversion thereof, must be held indefinitely unless it is -8- subsequently registered under the Securities Act or an exemption from such registration is available, and that, except as otherwise provided in the Registration Rights Agreement, the Company is under no obligation to register either the Convertible Preferred or Common Stock. (f) The Purchaser acknowledges that it has reviewed a copy of Rule 144, which permits limited public resales of securities acquired in a nonpublic offering, subject to the satisfaction of certain conditions. The Purchaser understands that before the Convertible Preferred, or any Common Stock issued upon conversion thereof, may be sold under Rule 144, the following conditions must be fulfilled: (i) certain public information about the Company must be available, (ii) the sale must occur at least one year after the Purchaser purchased and paid for the Convertible Preferred, (iii) the sale must be made in a broker's transaction and (iv) the number of shares of Convertible Preferred sold must not exceed certain volume limitations. (g) The Purchaser acknowledges that in the event the applicable requirements of Rule 144 are not met, registration under the Securities Act, compliance with the Commission's Regulation A or another exemption from registration will be required for any disposition of its stock. The Purchaser understands that although Rule 144 is not exclusive, the Commission has expressed its opinion that persons proposing to sell restricted securities received in a private offering other than in a registered offering or 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 the brokers who participate in the transactions do so at their own risk. 4.2 RECEIPT OF INFORMATION. The Purchaser has received and reviewed the Transaction Documents and all exhibits thereto and the SEC Documents. The Purchaser and its counsel have had access to and an opportunity to review all documents and other materials requested of the Company; the Purchaser and its counsel have been given an opportunity to ask any and all questions of, and receive answers from, the Company concerning the terms and conditions of the offering and to obtain all information it or they believe necessary or appropriate to evaluate the suitability of an investment in the Convertible Preferred; and, in evaluating the suitability of an investment in the Convertible Preferred, it and they have not relied upon any representations or other information (whether oral or written) other than as set forth in the documents and answers referred to above. 4.3 AUTHORIZATION. Each of the Transaction Documents when executed and delivered by the Purchaser will constitute a valid and legally binding obligation of the Purchaser, enforceable in accordance with its terms, except (i) as limited by laws of general application relating to bankruptcy, insolvency and the relief of debtors and rules of law governing specific performance, injunctive relief or other equitable remedies and (ii) to the extent that the enforceability of the indemnification provisions of the Registration Rights Agreement may be limited by applicable law. 4.4 BROKERS OR FINDERS. The Purchaser has not, and will not, incur, directly or indirectly, as a result of any action taken by the Purchaser, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement. 4.5 TAX ADVISORS. The Purchaser has reviewed with its own tax advisors the federal, state, local and foreign tax consequences of this investment, where applicable, and the transactions -9- contemplated by this Agreement. The Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents and understands that it (and not the Company) shall be responsible for the Purchaser's own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. 4.6 INVESTOR COUNSEL. The Purchaser acknowledges that it has had the opportunity to review the Transaction Documents, the exhibits and the schedules attached hereto and thereto and the transactions contemplated by the Transaction Documents with its own legal and investment counsel. The Purchaser is relying solely on such counsel and not on any statements or representations of the Company or any of its agents for legal or investment advice with respect to this investment or the transactions contemplated by the Transaction Documents. 4.7 HSR COMPLIANCE (a) Each Purchaser is its own "ultimate parent entity" as defined in the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended or the rules and regulations promulgated thereto (together, the "HSR Act". (b) Each Purchaser, other than GAP LP, will hold less than $15,000,000 in voting securities of the Company following execution of this Agreement, as valued under the HSR Act. (c) GAP LP has less than $10,000,000 in assets and less than $10,000,000 in annual revenue, as defined under the HSR Act. SECTION 5 CONDITIONS TO CLOSING OF THE PURCHASERS The Purchasers' obligations to purchase the Shares at the Closing and to perform any obligations hereunder are, at the option of the Purchasers, subject to the fulfillment of the following conditions: 5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and warranties made by the Company in Section 3 hereof shall be true and correct in all material respects on the Closing Date as if made on such date. 5.2 COVENANTS. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing Date shall have been performed or complied with in all material respects. 5.3 COMPLIANCE CERTIFICATE. The Company shall have delivered to the Purchasers a certificate of the Company in the form of EXHIBIT D hereto, executed by the President of the Company, dated the Closing Date, and certifying, among other things, to the fulfillment of the conditions specified in Sections 5.1 and 5.2 of this Agreement. -10- 5.4 BLUE SKY. The Company shall have obtained all necessary Blue Sky law permits and qualifications, or have the availability of exemptions therefrom, required by any state for the offer and sale of the Convertible Preferred and the Common Stock issuable upon conversion of the Convertible Preferred. 5.5 LEGAL MATTERS. All material matters of a legal nature that pertain to the Transaction Documents and the transactions contemplated hereby and thereby, shall have been reasonably approved by special counsel to the Purchasers. 5.6 OPINION OF COUNSEL. The Purchasers shall have received an opinion of Wilson Sonsini Goodrich & Rosati, dated the Closing Date, relating to the transactions contemplated by or referred to herein, substantially in the form attached hereto as EXHIBIT F. 5.7 REGISTRATION RIGHTS AGREEMENT. The Company, each Purchaser and a majority of the Original Holders (as defined therein) shall have entered into the Registration Rights Agreement in substantially the form attached hereto as EXHIBIT E. 5.8 SECRETARY'S CERTIFICATE. The Purchasers shall have received a certificate from the Company, in form and substance satisfactory to the Purchasers, dated the Closing Date and signed by the Secretary or an Assistant Secretary of the Company, certifying (a) that the attached copies of the Certificate of Designations, the Bylaws and resolutions of the Board of Directors of the Company approving each of the Transaction Documents to which the Company is a party, are true, complete and correct and remain unamended and in full force and effect and (b) as to the incumbency and specimen signature of each officer of the Company executing each Transaction Document and any other document delivered at the Closing on behalf of the Company. 5.9 DOCUMENTS. The Purchasers shall have received true, complete and correct copies of such documents as they may reasonably request in connection with or relating to the sale of the Shares and the transactions contemplated hereby, all in form and substance reasonably satisfactory to the Purchasers. 5.10 FILING OF THE CERTIFICATE OF DESIGNATIONS. The Certificate of Designations shall have been filed by the Company with the Secretary of State of the State of Delaware in accordance with the General Corporation Law of the State of Delaware. 5.11 SHARES. The Company shall have delivered to the Purchasers certificates in definitive form representing the number of Shares set forth opposite such Purchaser's name on EXHIBIT A hereto, registered in the name of such Purchaser. -11- SECTION 6 CONDITIONS TO CLOSING OF COMPANY The Company's obligation to sell and issue the Shares pursuant to Section 1.2 hereof and to perform any obligations hereunder, is, at the option of the Company, subject to the fulfillment as of the Closing Date of the following conditions: 6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties made by the Purchasers in Section 4 hereof shall be true and correct when made, and shall be true and correct on the Closing Date. 6.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky law permits and qualifications, or have the availability of exemptions therefrom, required by any state for the offer and sale of the Shares and the Common Stock issuable upon conversion of the Shares. 6.3 LEGAL MATTERS. All material matters of a legal nature that pertain to the Transaction Documents and the transactions contemplated hereby and thereby, shall have been reasonably approved by counsel to the Company. At the time of the Closing, the purchase of the Shares shall be legally permitted by all laws and regulations to which each Purchaser and the Company are subject. 6.4 BOARD AND STOCKHOLDER APPROVAL. All approvals of the Company's Board of Directors and Stockholders necessary for performance of the transactions contemplated by the Transaction Documents shall have been obtained. 6.5 REGISTRATION RIGHTS AGREEMENTS. The Company, each Purchaser and a majority of the Original Holders (as defined therein) shall have entered into the Registration Rights Agreement in substantially the form attached hereto as EXHIBIT E. SECTION 7 AFFIRMATIVE COVENANTS OF THE COMPANY The Company hereby covenants and agrees with the Purchasers with respect to this Section 7 so long as any shares of Convertible Preferred or shares of Common Stock issuable upon the conversion thereof are outstanding as follows: 7.1 SEC FILINGS. From and after the date of this Agreement, the Company agrees that it will use commercially reasonable efforts to file with the Commission, within the time periods specified in the Commission's rules and regulations for as long as they are applicable to the Company, (i) all quarterly and annual financial information required to be filed with SEC on Forms 10-Q and 10-K, (ii) all current reports required to be filed with the Commission on Form 8-K and (iii) any other information required to be filed with the Commission. -12- 7.2 RESERVATION OF COMMON STOCK AND PREFERRED STOCK. The Company hereby covenants and agrees that it shall at all times reserve and keep available out of its authorized shares of Common Stock, solely for the purpose of issue or delivery upon conversion of the Shares, as provided in the Certificate of Designations, the maximum number of shares of Common Stock that may be issuable or deliverable upon such conversion. The Company shall issue such shares of Common Stock in accordance with the terms of the Certificate of Designations and otherwise comply with the terms thereof. 7.3 REGISTRATION AND LISTING. If any shares of Common Stock required to be reserved for purposes of conversion of the Shares, as provided in the Certificate of Designations, require registration with or approval of any Governmental Authority under any Federal or state or other applicable law before such shares of Common Stock may be issued or delivered upon conversion or exercise, the Company will in good faith and as expeditiously as possible cause such shares of Common Stock to be duly registered or approved, as the case may be. So long as the shares of Common Stock are quoted on the NASDAQ or listed on any national securities exchange, the Company will, if permitted by the rules of such system or exchange, quote or list and keep quoted or listed on such system or exchange, upon official notice of issuance, all shares of Common Stock issuable or deliverable upon conversion of the Shares. 7.4 USE OF PROCEEDS. The Company shall use the proceeds from the sale of the Shares to the Purchasers to fund the Company's working capital. SECTION 8 INDEMNIFICATION 8.1 INDEMNIFICATION. Except as otherwise provided in this Section 8, the Company (the "INDEMNIFYING PARTY") agrees to indemnify, defend and hold harmless each of the Purchasers and its Affiliates and their respective officers, directors, agents, employees, subsidiaries, partners, members and controlling persons (each, an "INDEMNIFIED PARTY") to the fullest extent permitted by law from and against any and all losses, Claims, or written threats thereof (including, without limitation, any Claim by a third party), damages, expenses (including reasonable fees, disbursements and other charges of counsel incurred by the Indemnified Party in any action between the Indemnifying Party and the Indemnified Party or between the Indemnified Party and any third party or otherwise) or other liabilities (collectively, "LOSSES") resulting from or arising out any breach of any representation or warranty, covenant or agreement by the Company in this Agreement or the other Transaction Documents; PROVIDED HOWEVER, that if and to the extent that such indemnification is unenforceable for any reason, the Indemnifying Party shall make the maximum contribution to the payment and satisfaction of such Losses which shall be permissible under applicable laws. In connection with the obligation of the Indemnifying Party to indemnify for expenses as set forth above, the Indemnifying Party shall, upon presentation of appropriate invoices containing reasonable detail, reimburse each Indemnified Party for all such expenses (including reasonable fees, disbursements and other charges of counsel incurred by the Indemnified Party in any action between -13- the Indemnifying Party and the Indemnified Party or between the Indemnified Party and any third party) as they are incurred by such Indemnified Party; PROVIDED HOWEVER, that if an Indemnified Party is reimbursed under this Section 8 for any expenses, such reimbursement of expenses shall be refunded to the extent it is finally judicially determined that the Losses in question resulted primarily from the willful misconduct or gross negligence of such Indemnified Party. 8.2 NOTIFICATION. Each Indemnified Party under this Section 8 shall, promptly after the receipt of notice of the commencement of any Claim against such Indemnified Party in respect of which indemnity may be sought from the Indemnifying Party under this Section 8, notify the Indemnifying Party in writing of the commencement thereof. The omission of any Indemnified Party to so notify the Indemnifying Party of any such action shall not relieve the Indemnifying Party from any liability which it may have to such Indemnified Party (a) other than pursuant to this Section 8 or (b) under this Section 8 unless, and only to the extent that, such omission results in the Indemnifying Party's forfeiture of substantive rights or defenses. In case any such Claim shall be brought against any Indemnified Party, and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to such Indemnified Party in its reasonable judgment; PROVIDED, HOWEVER, that any Indemnified Party may, at its own expense, retain separate counsel to participate in such defense at its own expense. Notwithstanding the foregoing, in any Claim in which both the Indemnifying Party, on the one hand, and an Indemnified Party, on the other hand, are, or are reasonably likely to become, a party, such Indemnified Party shall have the right to employ separate counsel and to control its own defense of such Claim if, in the reasonable opinion of counsel to such Indemnified Party, either (x) one or more defenses are available to the Indemnified Party that are not available to the Indemnifying Party or (y) a conflict or potential conflict exists between the Indemnifying Party, on the one hand, and such Indemnified Party, on the other hand, that would make such separate representation advisable; PROVIDED, HOWEVER, that the Indemnifying Party (i) shall not be liable for the fees and expenses of more than one counsel to all Indemnified Parties and (ii) shall reimburse the Indemnified Parties for all of such fees and expenses of such counsel incurred in any action between the Indemnifying Party and the Indemnified Parties or between the Indemnified Parties and any third party, as such expenses are incurred. The Indemnifying Party agrees that it will not, without the prior written consent of the Purchasers, settle, compromise or consent to the entry of any judgment in any pending or threatened Claim relating to the matters contemplated hereby (if any Indemnified Party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of each Indemnified Party from all liability arising or that may arise out of such Claim. The Indemnifying Party shall not be liable for any settlement of any Claim effected against an Indemnified Party without its written consent, which consent shall not be unreasonably withheld. The rights accorded to an Indemnified Party hereunder shall be in addition to any rights that any Indemnified Party may have at common law, by separate agreement or otherwise; PROVIDED, HOWEVER, that notwithstanding the foregoing or anything to the contrary contained in this Agreement, nothing in this Section 8 shall restrict or limit any rights that any Indemnified Party may have to seek equitable relief. -14- 8.3 CONTRIBUTION. If the indemnification provided for in this Section 8 from the Indemnifying Party is unavailable to an Indemnified Party hereunder in respect of any Losses referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such Losses, as well as any other relevant equitable considerations. The relative faults of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the Losses referred to above shall be deemed to include, subject to the limitations set forth in Sections 8.1 and 8.2, any legal or other fees, charges or expenses reasonably incurred by such party in connection with any investigations or proceeding. 8.4 LIMITATION ON INDEMNIFICATION. Anything in this Agreement to the contrary notwithstanding, no indemnification payment shall be made to an Indemnified Party pursuant to Section 8 of this Agreement until the amounts which the Indemnified Party would otherwise be entitled to receive as indemnification under this Agreement aggregate at least $1,000,000, at which time the Indemnified Party shall be entitled to receive any such payments and any subsequent payments in full. Anything in this Agreement to the contrary notwithstanding, the Indemnifying Party's liability pursuant to this Section 8 shall in no event exceed $30,000,000. SECTION 9 MISCELLANEOUS 9.1 GOVERNING LAW. This Agreement shall be governed in all respects by and in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law thereof. The parties expressly stipulate that any litigation under this Agreement shall be brought in the state courts of the County of Alameda, California or the County of New York, New York and in the United States District Court for the Northern District of California or the Southern District of New York. The parties agree to submit to the jurisdiction and venue of any of those courts. 9.2 SURVIVAL. The representations, warranties, covenants and agreements made herein shall survive any investigation made by a Purchaser and the closing of the transactions contemplated hereby. 9.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto, provided, however, that the rights of a Purchaser to purchase the Convertible Preferred shall not be assignable without the consent of the Company, except subject to applicable securities laws, the Purchasers may assign any of their rights under any of the Transaction -15- Documents to any of their respective Affiliates; provided however, the Company shall not be obligated to register transfers to more than 15 such transferees, without prior written consent not to be unreasonably withheld. 9.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents delivered pursuant hereto at the Closing constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the party against whom enforcement of any such amendment, waiver, discharge or termination is sought; provided, however, that any provisions hereof may be amended, waived, discharged or terminated, on behalf of all holders, upon the written consent of the Company and the holders of a majority of the Common Stock issued or issuable upon the conversion of the Convertible Preferred. 9.5 NOTICES, ETC. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed (a) if to a Purchaser, to such Purchaser's address set forth on the Schedule of Purchasers, or at such other address as the Purchaser shall have furnished to the Company in writing with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New York 10019-6064, Telecopy: (212) 757-3990, Attention: Douglas A. Cifu, or (b) if to any other holder of any Shares, at such address as such holder shall have furnished the Company in writing, or, until any such holder so furnishes an address to the Company, then to and at the address of the last holder of such Shares who has so furnished an address to the Company, or (c) if to the Company, one copy should be sent to its address set forth at the beginning of this Agreement and addressed to the attention of the President of the Company, or at such other address as the Company shall have furnished to the Purchasers with a copy to Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304, Telecopy: (415) 493-6811, Attention: Brian Erb, Esq. Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given when delivered if delivered personally, or, if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid. 9.6 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy accruing to any holder of any Shares, upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy of such holder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in 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. Any waiver, permit, consent or approval of any kind or character on the part of any holder of any breach or default under this Agreement or any waiver on the part of any holder of any -16- provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any holder, shall be cumulative and not alternative. 9.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS AN EXEMPTION FROM SUCH QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, OR SUCH EXEMPTION BEING AVAILABLE. 9.8 EXPENSES. Each of the Company and the Purchasers shall bear its own expenses and legal fees incurred with respect to this Agreement and the transactions contemplated hereby. 9.9 COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be enforceable against the party actually executing such counterpart, and all of which together shall constitute one instrument. 9.10 SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability shall be effective if it materially changes the economic benefit of this Agreement to any party. 9.11 FURTHER ASSURANCES. Each of the parties shall execute such documents and perform such further acts (including, without limitation, obtaining any consents, exemptions, authorizations or other actions by, or giving any notices to, or making any filings with, any Governmental Authority or any other Person) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement. 9.12 PUBLICITY. Except as may be required by applicable Requirement of Law, none of the parties hereto shall issue a publicity release or public announcement or otherwise make any disclosure concerning this Agreement, the transactions contemplated hereby, the Purchases or the business, technology or financial affairs of the Company, without prior approval by the other parties hereto; PROVIDED, HOWEVER, that nothing in this Agreement shall restrict any of the Purchasers from disclosing information (a) that is already publicly available, (b) that was known to such Purchaser on a non-confidential basis prior to its disclosure by the Company as shown by written records of the Purchaser, (c) that may be required or appropriate in response to any summons or subpoena or in connection with any litigation, PROVIDED that such Purchaser will notify the Company in advance of such disclosure so as to permit the Company to seek a protective order or otherwise contest such disclosure, and such Purchaser will cooperate, at the expense of the Company, with the Company in pursuing any such protective order, (d) to such Purchaser's or the Company's officers, directors, shareholders, advisors, employees, members, partners, controlling persons, auditors or counsel who have good reason to know such information or (e) to Persons from whom releases, consents or -17- approvals are requires, or to whom notice is required to be provided, pursuant to the transactions contemplated by the Transaction Documents; and PROVIDED FURTHER, that GAP LLC may disclose on its worldwide web page WWW.GAPARTNERS.COM, the name of the Company, the name of the Chief Executive Officer of the Company, a brief description of the business of the Company and the aggregate amount of the Purchasers' investment in the Company. If any announcement is required by law to be made by any party hereto, prior to making such announcement such party will deliver a draft of such announcement to the other parties and shall give the other parties an opportunity to comment thereon. IN WITNESS WHEREOF, the foregoing Agreement is hereby executed as of the date first above written. PROBUSINESS SERVICES, INC. By: /s/ Thomas H. Sinton -------------------------------- Thomas H. Sinton, President -18- PROBUSINESS SERVICES, INC. 6.9% SENIOR CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT IN WITNESS WHEREOF, the foregoing Agreement is hereby executed as of the date first above written. GENERAL ATLANTIC PARTNERS 70, L.P. By: GENERAL ATLANTIC PARTNERS, LLC, its General Partner By: /s/ Steven A. Denning ----------------------------------- Name: Steven A. Denning Title: A Managing Member GAP COINVESTMENT PARTNERS II, L.P. By: /s/ Steven A. Denning ---------------------------------------- Name: Steven A. Denning Title: A General Partner GAPSTAR, LLC By: GENERAL ATLANTIC PARTNERS, LLC its Managing Member By: /s/ Steven A. Denning ----------------------------------- Name: Steven A. Denning Title: A Managing Member -19- EXHIBIT A PROBUSINESS SERVICES, INC. SCHEDULE OF PURCHASERS
Name and Address Number of Shares Total Purchase Price - ----------------------------------------- ----------------------------------- ----------------------------- General Atlantic Partners 70, L.P. 915,515 $24,261,147.50 General Atlantic Service Corporation 3 Pickwick Plaza Greenwich, Connecticut 06830 Telecopy: (203) 622-8818 Attn: Mr. David Hodgson GAP Coinvestment Partners II, L.P. 145,805 $3,863,832.50 c/o General Atlantic Service Corporation 3 Pickwick Plaza Greenwich, Connecticut 06830 Telecopy: (203) 622-8818 Attn: Mr. David Hodgson GapStar, LLC 70,755 $1,875,007.50 c/o General Atlantic Service Corporation 3 Pickwick Plaza Greenwich, Connecticut 06830 Telecopy: (203) 622-8818 Attn: Mr. David Hodgson ----------- -------------- Total 1,132,075 $29,999,987.50
-20- EX-99.3 4 0004.txt EXHIBIT 3 EXHIBIT 3 to AMENDMENT NO. 1 to Schedule 13D PROBUSINESS SERVICES, INC. CERTIFICATE OF THE POWERS, DESIGNATIONS, PREFERENCES AND RIGHTS OF THE 6.9% SENIOR CONVERTIBLE PREFERRED STOCK, PAR VALUE $.001 PER SHARE Pursuant to Section 151 of the Delaware General Corporation Law The undersigned, Thomas H. Sinton, President of ProBusiness Services, Inc., a Delaware corporation (the "Corporation"), DOES HEREBY CERTIFY that the following resolution, creating a series of 1,800,000 shares of Preferred Stock was duly adopted by the Board of Directors, on July 28, 2000: WHEREAS, the Board of Directors is authorized, within the limitations and restrictions stated in the Certificate of Incorporation of the Corporation, to provide by resolution or resolutions for the issuance of shares of Preferred Stock, par value $.001 per share, of the Corporation, in one or more classes or series with such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions as shall be stated and expressed in the resolution or resolutions providing for the issuance thereof adopted by the Board of Directors, and as are not stated and expressed in the Certificate of Incorporation, or any amendment thereto, including (but without limiting the generality of the foregoing) such provisions as may be desired concerning voting, redemption, dividends, dissolution or the distribution of assets and such other subjects or matters as may be fixed by resolution or resolutions of the Board of Directors under the General Corporation Law of the State of Delaware; and WHEREAS, it is the desire of the Board of Directors, pursuant to its authority as aforesaid, to authorize and fix the terms of a series of Preferred Stock and the number of shares constituting such series. NOW, THEREFORE, BE IT RESOLVED: 1. DESIGNATION AND NUMBER OF SHARES. There shall be hereby created and established a series of Preferred Stock designated as "6.9% Senior Convertible Preferred Stock" (the "Preferred Stock"). The authorized number of shares of Preferred Stock shall be 1,800,000. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in Section 11 below. 2 2. RANK. (a) The Preferred Stock shall with respect to distributions of assets and rights upon the occurrence of a Liquidation rank senior to (i) all classes of common stock of the Corporation (including, without limitation, the Common Stock, par value $.001 per share, of the Corporation (the "Common Stock")) and (ii) each other class or series of Capital Stock of the Corporation hereafter created which does not expressly rank PARI PASSU with or senior to the Preferred Stock (the "Junior Stock"). (b) Notwithstanding anything to the contrary contained in the Certificate of Incorporation of the Corporation, the affirmative vote of the holders of a majority of the Preferred Stock shall be a prerequisite to the designation or issuance of any shares of Capital Stock ranking senior to the Preferred Stock in the event of a Liquidation. 3. DIVIDENDS. (a) The holders of shares of Preferred Stock shall be entitled to receive cumulative dividends at an annual rate equal to 6.9% of the Liquidation Preference in the form of additional fully paid and nonassessable shares of Preferred Stock. Such dividends shall be payable quarterly on the first day of October, January, April and July, commencing October 1, 2000 ("Dividend Payment Dates"), except that if any Dividend Payment Date is not a Business Day, then such quarterly dividend shall be payable on the next succeeding Business Day and such next succeeding Business Day shall be the Dividend Payment Date. Each of such quarterly dividends shall be fully cumulative and shall accrue (whether or not declared) on a daily basis, with additional dividends on any accrued but unpaid dividends compounding quarterly at a rate of 6.9% per annum, from the first day of the quarter in which such dividend may be payable as herein provided, except that with respect to the first dividend payment, such dividend shall accrue from the date of original issuance of the shares of Preferred Stock. The issuance of shares of Preferred Stock shall constitute full payment of such dividend and all such shares which may be issued in payment of such dividend shall, upon issuance, be duly authorized, validly issued, fully paid and nonassessable. Upon the occurrence of a Sale Transaction or the announcement of a redemption of all of the outstanding shares of Preferred Stock pursuant to Section 5, accrued or accumulated dividends on Preferred Stock shall be due and payable upon the closing of such Sale Transaction or the date of such redemption, as the case may be. (b) RESERVATION OF SHARES. The Corporation shall reserve and keep available out of its authorized and unissued shares of Preferred Stock solely for the purposes of paying dividends on shares of Preferred Stock such number of shares of Preferred Stock as shall from time to time be sufficient for such purposes, including 3 (immediately following the initial issuance of shares of Preferred Stock) at least the number of additional shares of Preferred Stock to pay all dividends that will accrue on the Preferred Stock through August 1, 2006. The Board shall, from time to time, if necessary, propose to the stockholders of the Corporation amendments to the Certificate of Incorporation to increase the Corporation's authorized capital stock and take such actions as may be necessary to permit the issuance of shares of Preferred Stock upon the declaration of any dividend payable in shares of Preferred Stock. (c) In lieu of any fractional shares to which the holder of Preferred Stock would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then-effective Conversion Price. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock of each holder at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. 4. LIQUIDATION PREFERENCE. (a) PRIORITY PAYMENT. Upon the occurrence of a Liquidation, the holders of shares of Preferred Stock shall be entitled to be paid for each share of Preferred Stock held thereby, out of, but only to the extent of, the assets of the Corporation legally available for distribution to its stockholders, an amount equal to $26.50 (the "Liquidation Preference") plus, as provided in Section 3 above, all accrued and unpaid dividends, if any, with respect to each share of Preferred Stock, before any payment or distribution is made to any Junior Stock. If the assets of the Corporation available for distribution to the holders of Preferred Stock shall be insufficient to permit payment in full to such holders of the sums which such holders are entitled to receive in such case, then all of the assets available for distribution to holders of the Preferred Stock shall be distributed among and paid to such holders ratably in proportion to the amounts that would be payable to such holders if such assets were sufficient to permit payment in full. (b) NO ADDITIONAL PAYMENT. After the holders of all shares of Preferred Stock shall have been paid in full the amounts to which they are entitled in paragraph 4(a), the shares of Preferred Stock shall not be entitled to any further participation in any distribution of assets of the Corporation and the remaining assets of the Corporation shall be distributed to the holders of Junior Stock. (c) NOTICE. Written notice of a Liquidation stating a payment or payments and the place where such payment or payments shall be payable, shall be delivered in person, mailed by certified mail, return receipt requested, mailed by overnight mail or sent by telecopier, not less than ten (10) days prior to the earliest payment date stated therein, to the holders of record of the Preferred Stock, such notice 4 to be addressed to each such holder at its address as shown by the records of the Corporation. (d) OPTION. At the election of the holders of two-thirds (2/3) of the Preferred Stock, a Sale Transaction shall be deemed to be a Liquidation pursuant to this Section 4. In the event such an election is made, the holders of shares of Preferred Stock shall be paid the Liquidation Preference in the same kind of consideration paid to the holders of shares of Common Stock upon such Sale Transaction and, if the consideration is paid in any combination of securities, property or cash, in the same ratio that each kind of consideration bears to the other. In addition, the holders of shares of Preferred Stock shall be entitled to make any election in the kind of consideration to be paid upon such Sale Transaction that is available to the holders of shares of Common Stock. Any securities of the surviving Person to be delivered to the holders of Preferred Stock pursuant to this Section 4(d) shall be valued as follows: (i) With respect to securities that do not constitute "restricted securities," as such term is defined in Rule 144(a)(3) promulgated under the Securities Act, the value shall be deemed to be the Current Market Price of such securities as of three (3) days prior to the date of distribution. (ii) With respect to securities that constitute "restricted securities," as such term is defined in Rule 144(a)(3) promulgated under the Securities Act, and that are of the same class or series as securities that are publicly traded, the value shall be adjusted to make an appropriate discount from the value as set forth above in clause (i) to reflect the appropriate fair market value thereof, as mutually determined by the Board of Directors and the holders of a majority of the shares of Preferred Stock, or if there is no active public market with respect to such class or series of securities, such securities shall be valued in accordance with clause (i) above, giving appropriate weight, if any, to such restriction as mutually determined by the Board of Directors and the holders of a majority of the shares of Preferred Stock, or if the Board of Directors and the holders of a majority of the shares of Preferred Stock shall fail to agree, at the Corporation's expense by an appraiser chosen by the Board of Directors and reasonably acceptable to the holders of a majority of the shares of Preferred Stock. 5. OPTIONAL REDEMPTION. If, as of any date after August 1, 2003, the Current Market Price of the Common Stock is equal to or greater than $39.00 (as adjusted for stock splits and dividends, recapitalizations, and similar transactions), then the Corporation may, at the option of the Board of Directors, redeem from any source of funds legally available therefor, in whole or in part, in the manner provided herein, any or all whole number of shares of Preferred Stock at any time outstanding for a cash 5 amount per share to be redeemed equal to the Liquidation Preference (the "Redemption Price"). 6. REDEMPTION PROCEDURE. At least 30 days prior to the date fixed for redemption of the Preferred Stock pursuant to Section 5 (the "Redemption Date"), written notice ("Redemption Notice") shall be mailed, postage prepaid, to each holder of record of the Preferred Stock at its address last shown on the records of the Corporation. The Redemption Notice shall state: (a) whether all or less than all of the outstanding shares of Preferred Stock are to be redeemed and the total number of shares of Preferred Stock being redeemed; (b) the number of shares of Preferred Stock held by the holder that the Corporation intends to redeem; (c) the date of the redemption and the Redemption Price; and (d) that the holder is to surrender to the Corporation, in the manner and at the place designated, his or her certificate or certificates representing shares of Preferred Stock to be redeemed upon payment in immediately available funds of the Redemption Price. On or before the date fixed for any redemption of shares, each holder of shares of Preferred Stock to be redeemed on such date, unless the holder has exercised his right to convert the shares as provided in Section 8, shall surrender the certificate or certificates representing such shares of Preferred Stock 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, and each surrendered certificate shall be canceled and retired. In the event less than all of the shares represented by such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. If the Redemption Notice is duly given, and if on or prior to the Redemption Date the Redemption Price is either paid or made available for payment, then notwithstanding that the certificates evidencing any of the shares of Preferred Stock so called for redemption have not been surrendered, all rights with respect to such shares shall forthwith after the Redemption Date cease and terminate, except only the right of the holders to receive the Redemption Price without interest upon surrender of their certificates therefor. 6 7. VOTING RIGHTS; ELECTION OF DIRECTOR. (a) The holders of Preferred Stock, except as otherwise required under Delaware law or as set forth in Sections 7(b) and 7(c), shall not be entitled or permitted to vote on any matter required or permitted to be voted upon by the stockholders of the Corporation. (b) Except as set forth in Sections 2(b) and (7(c), each outstanding share of Preferred Stock shall entitle the holder thereof to vote, in person or by proxy, at a special or annual meeting of stockholders or in any written consent in lieu of meeting, on all matters entitled to be voted on by holders of Common Stock voting together as a single class with the Common Stock (and with other shares entitled to vote thereon, if any). With respect to any such vote, each share of Preferred Stock shall entitle the holder thereof to cast that number of votes per share as is equal to the number of votes that such holder would be entitled to cast had its shares of Preferred Stock been converted into shares of Common Stock pursuant to Section 8(a) or Section 8(b) on the record date for determining the stockholders of the Corporation eligible to vote on any such matters. Fractional votes by the holders of Preferred Stock shall not, however, be permitted and any fractional voting rights shall (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) be rounded to the nearest whole number. (c) If General Atlantic Partners 70, L.P.("GAP LP"), GAP Coinvestment Partners II, L.P. ("GAP Coinvestment"), GapStar, LLC ("GapStar") and/or any Affiliate thereof in the aggregate own at least a majority of the outstanding shares of Preferred Stock, then the holders of the Preferred Stock, voting as a separate class, shall be entitled to elect one director of the Corporation. The Preferred Stock shall not vote together as a single class with the Common Stock (and all other classes and series of stock of the Corporation entitled to vote thereon, if any) with respect to the election of all of the other directors of the Corporation. If the conditions set forth in the first sentence of this Section 7(c) necessary for the holders of the Preferred Stock to vote as a separate class for the election of directors are not satisfied, the Preferred Stock shall vote together as a single class with the Common Stock (and all other classes and series of stock of the Corporation entitled to vote thereon, if any) with respect to the election of all of the directors of the Corporation elected by such holders. At any meeting held for the purpose of electing directors at a time when the Preferred Stock is entitled to vote as a separate class for the election of directors, the presence in person or by proxy of the holders of a majority of the shares of Preferred Stock then outstanding shall constitute a quorum of the Preferred Stock for the election of the directors to be elected solely by the holders of the Preferred Stock; the holders of Preferred Stock shall be entitled to cast one vote per share of Preferred Stock in any such election; and the directors to be elected exclusively by the holders of 7 Preferred Stock shall be elected by the affirmative vote of the holders of a majority of the outstanding shares of Preferred Stock. A vacancy in a directorship filled by the holders of the Preferred Stock voting as a separate class pursuant to this Section 7(c) shall be filled only by vote or written consent of the holders of the Preferred Stock. 8. CONVERSION. (a) CONVERSION AT THE OPTION OF THE HOLDER. Any holder of Preferred Stock shall have the right, at its option, at any time and from time to time, to convert, subject to the terms and provisions of this Section 8, any or all of such holder's shares of Preferred Stock into such number of fully paid and non-assessable shares of Common Stock as is equal to the product of the number of shares of Preferred Stock being so converted multiplied by the quotient of (i) the Liquidation Preference divided by (ii) the conversion price of $26.50 per share, subject to adjustment as provided in Section 8(d) (such price, the "Conversion Price"). Such conversion right shall be exercised by the surrender of certificate(s) representing the shares of Preferred Stock to be converted to the Corporation at any time during usual business hours at its principal place of business to be maintained by it (or such other office or agency of the Corporation as the Corporation may designate by notice in writing to the holders of Preferred Stock), accompanied by written notice that the holder elects to convert such shares of Preferred Stock and specifying the name or names (with address) in which a certificate or certificates for shares of Common Stock are to be issued and (if so required by the Corporation) by a written instrument or instruments of transfer in form reasonably satisfactory to the Corporation duly executed by the holder or its duly authorized legal representative and transfer tax stamps or funds therefor, if required pursuant to Section 8(j). All certificates representing shares of Preferred Stock surrendered for conversion shall be delivered to the Corporation for cancellation and canceled by it. (b) CONVERSION AT THE OPTION OF THE CORPORATION. If the Current Market Price of the Common Stock on August 1, 2005 is equal to or greater than the Conversion Price, the Corporation shall have the right, at its option, five (5) days following such date to cause the holders of Preferred Stock to convert, subject to the terms and provisions of this Section 8, all, but not less than all, of the outstanding shares of Preferred Stock into such number of fully paid and non-assessable shares of Common Stock as is equal to the product of the total number of outstanding shares of Preferred Stock multiplied by the quotient of (w) the Liquidation Preference divided by (x) the Conversion Price. If on August 1, 2005 (and on each successive August 1 thereafter until the Current Market Price equals or exceeds the Conversion Price) the Current Market Price of the Common Stock is less than the Conversion Price, the Corporation shall have the right, at its option, to either (i) extend the date specified in the first sentence of this Section 8(b) to the next August 1 (in which case all of the terms and provisions of such sentence shall be applicable to such extended date) or 8 (ii) cause the holders of Preferred Stock to convert, subject to the terms and provisions of this Section 8, all, but not less than all, of the outstanding shares of Preferred Stock into such number of fully paid and non-assessable shares of Common Stock as is equal to the product of the total number of outstanding shares of Preferred Stock multiplied by the quotient of (y) the Liquidation Preference divided by (z) the Current Market Price. At least 30 days prior to the date fixed for conversion of the Preferred Stock pursuant to Section 8(b), written notice ("Conversion Notice") shall be mailed, postage prepaid, to each holder of record of the Preferred Stock at its address last shown on the records of the Corporation. The Conversion Notice shall state: (I) the date of the conversion and the number of shares of Common Stock into which each share of Preferred Stock will be converted, assuming and provided that the Current Market Price on August 1, 2005 (or a successive August 1, if applicable) is equal to or greater than the Conversion Price; and (II) that the holder is to surrender to the Corporation, in the manner and at the place designated, his or her certificate or certificates representing shares of Preferred Stock to be converted. On or before the date fixed for any such conversion of shares, each holder of shares of Preferred Stock shall surrender the certificate or certificates representing such shares of Preferred Stock to the Corporation for cancellation, in the manner and at the place designated in the Conversion Notice, accompanied by a written notice specifying the name or names (with address) in which a certificate or certificates for shares of Common Stock are to be issued. As promptly as practicable after the surrender of any shares of Preferred Stock pursuant to Section 8(a) or 8(b), the Corporation shall (subject to compliance with the applicable provisions of federal and state securities laws) deliver to the holder of such shares so surrendered certificate(s) representing the number of fully paid and nonassessable shares of Common Stock into which such shares are entitled to be converted. At the time of the surrender of such certificate(s), the Person in whose name any certificate(s) for shares of Common Stock shall be issuable upon such conversion shall be deemed to be the holder of record of such shares of Common Stock on such date, notwithstanding that the share register of the Corporation shall then be closed or that the certificates representing such Common Stock shall not then be actually delivered to such Person. Immediately upon conversion as provided in this Section 8, each holder of Preferred Stock shall be deemed to be the holder of record of the Common Stock issuable upon conversion of such holder's Preferred Stock, notwithstanding that the 9 share register of the Corporation shall then be closed or that certificates representing the Common Stock shall not then actually be delivered to such Person. (c) TERMINATION OF RIGHTS. On the date of any conversion pursuant to Sections 8(a) or 8(b) above, all rights with respect to the shares of Preferred Stock so converted, including the rights, if any, to receive dividends (provided that all accrued and unpaid dividends with respect to the shares of Preferred Stock that have not been paid as of such date shall remain as obligations of the Company after the date of any such conversion), notices and to vote, shall terminate, except only the rights of holders thereof to (i) receive certificates for the number of shares of Common Stock into which such shares of Preferred Stock have been converted and (ii) exercise the rights to which they are entitled as holders of Common Stock. (d) CONVERSION PRICE ADJUSTMENTS. The Conversion Price, and the number and type of securities to be received upon conversion of the Preferred Stock, shall be subject to adjustment as follows: (i) DIVIDEND, SUBDIVISION, COMBINATION OR RECLASSIFICATION OF COMMON STOCK. In the event that the Corporation shall at any time or from time to time, prior to conversion of the Preferred Stock (w) pay a dividend or make a distribution (other than a dividend or distribution in which holders of shares of Preferred Stock participate, in the manner provided in Section 3) on the outstanding shares of Common Stock payable in Capital Stock, (x) subdivide the outstanding shares of Common Stock into a larger number of shares, (y) combine the outstanding shares of Common Stock into a smaller number of shares or (z) issue any shares of its Capital Stock in a reclassification of the Common Stock (other than any such event for which an adjustment is made pursuant to another clause of this Section 8(d)), then, and in each such case, the Conversion Price in effect immediately prior to such event shall be adjusted (and any other appropriate actions shall be taken by the Corporation) so that the holder of any share of Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock or other securities of the Corporation that such holder would have owned or would have been entitled to receive upon or by reason of any of the events described above, had such share of Preferred Stock been converted immediately prior to the occurrence of such event. An adjustment made pursuant to this Section 8(d)(i) shall become effective retroactively (x) in the case of any such dividend or distribution, to a date immediately following the close of business on the record date for the determination of holders of Common Stock entitled to receive such dividend or distribution or (y) in the case of any such subdivision, combination or reclassification, to the close of business on the day upon which such corporate action becomes effective. 10 (ii) ISSUANCE OF COMMON STOCK OR COMMON STOCK EQUIVALENT BELOW CONVERSION PRICE. If the Corporation shall at any time or from time to time prior to conversion of the Preferred Stock, issue or sell in excess of an aggregate of 1,396,430 shares of Common Stock or Common Stock Equivalents (subject to adjustment for the events described in Section 8(d)(i) above) at a price per share of Common Stock (the "New Issue Price") that is less than 94.3% of the Conversion Price then in effect as of the record date or Issue Date (as defined below), as the case may be (the "Relevant Date") (treating the price per share of Common Stock, in the case of the issuance of any Common Stock Equivalent, as equal to (x) the sum of the price for such Common Stock Equivalent plus any additional consideration payable (without regard to any anti-dilution adjustments) upon the conversion, exchange or exercise of such Common Stock Equivalent divided by (y) the number of shares of Common Stock initially underlying such Common Stock Equivalent), other than (A) issuances or sales for which an adjustment is made pursuant to another paragraph of this Section 8(d) and (B) issuances in connection with an Excluded Transaction, THEN, and in each such case, the Conversion Price then in effect shall be adjusted by MULTIPLYING the Conversion Price in effect on the day immediately prior to the Relevant Date by a fraction (i) the numerator of which shall be the sum of the number of shares of Common Stock outstanding on the Relevant Date PLUS the number of shares of Common Stock which the aggregate consideration received by the Corporation for the total number of such additional shares of Common Stock so issued would purchase at the Conversion Price on the Relevant Date (or, in the case of Common Stock Equivalents, the number of shares of Common Stock which the aggregate consideration received by the Corporation upon the issuance of such Common Stock Equivalents and receivable by the Corporation upon the conversion, exchange or exercise of such Common Stock Equivalents would purchase at the Conversion Price on the Relevant Date) and (ii) the denominator of which shall be the sum of the number of shares of Common Stock outstanding on the Relevant Date PLUS the number of additional shares of Common Stock issued or to be issued (or, in the case of Common Stock Equivalents, the maximum number of shares of Common Stock into which such Common Stock Equivalents initially may convert, exchange or be exercised). Such adjustment shall be made whenever such shares of Common Stock or Common Stock Equivalents are issued, and shall become effective retroactively (x) in the case of an issuance to the stockholders of the Corporation, as such, to a date immediately following the close of business on the record date for the determination of stockholders entitled to receive such shares of Common Stock or Common Stock Equivalents and (y) in all other cases, on the date (the "Issue Date") of such issuance; PROVIDED, HOWEVER, that the determination as to whether an adjustment is required to be made pursuant to this Section 8(d)(ii) shall only be made upon the issuance of such shares of Common Stock or Common Stock Equivalents, and not upon the issuance of any security into which the Common Stock Equivalents convert, exchange or may be 11 exercised; and PROVIDED, FURTHER, that if any Common Stock Equivalents (or any portions thereof) which shall have given rise to an adjustment pursuant to this Section 8(d)(ii) shall have expired or terminated without the exercise thereof and/or if by reason of the terms of such Common Stock Equivalents there shall have been an increase or increases, with the passage of time or otherwise, in the price payable upon the exercise or conversion thereof, then the Conversion Price hereunder shall be readjusted (but to no greater extent than originally adjusted) in order to (A) eliminate from the computation any additional shares of Common Stock corresponding to such Common Stock Equivalents as shall have expired or terminated, (B) treat the additional shares of Common Stock, if any, actually issued or issuable pursuant to the previous exercise of such Common Stock Equivalents as having been issued for the consideration actually received and receivable therefor and (C) treat any of such Common Stock Equivalents which remain outstanding as being subject to exercise or conversion on the basis of such exercise or conversion price as shall be in effect at the time. (iii) CERTAIN DISTRIBUTIONS. In case the Corporation shall at any time or from time to time, prior to conversion of the Preferred Stock, distribute to all holders of shares of the Common Stock (including any such distribution made in connection with a merger or consolidation in which the Corporation is the resulting or surviving Person and the Common Stock is not changed or exchanged) cash, evidences of indebtedness of the Corporation or another issuer, securities of the Corporation or another issuer or other assets (excluding dividends or distributions in which holders of shares of Preferred Stock participate in the manner provided in Section 3 and dividends payable in shares of Common Stock for which adjustment is made under another paragraph of this Section 8(d) or rights or warrants to subscribe for or purchase securities of the Corporation (excluding those distributions in respect of which an adjustment in the Conversion Price is made pursuant to another paragraph of this Section 8(d)), THEN, and in each such case, the Conversion Price then in effect shall be adjusted (and any other appropriate actions shall be taken by the Corporation) by multiplying the Conversion Price in effect immediately prior to the date of such distribution by a fraction (x) the numerator of which shall be the Current Market Price of the Common Stock immediately prior to the date of distribution less the then fair market value (as determined by the Board of Directors in the exercise of their fiduciary duties) of the portion of the cash, evidences of indebtedness, securities or other assets so distributed or of such rights or warrants applicable to one share of Common Stock and (y) the denominator of which shall be the Current Market Price of the Common Stock immediately prior to the date of distribution (but such fraction shall not be greater than one); PROVIDED, HOWEVER, that no adjustment shall be made with respect to any distribution of rights or warrants to subscribe for or purchase securities of the Corporation if the holder of shares of Preferred Stock would otherwise be entitled to receive such rights or warrants upon conversion at any time of shares of Preferred Stock into Common Stock. Such adjustment shall be made whenever any such 12 distribution is made and shall become effective retroactively to a date immediately following the close of business on the record date for the determination of stockholders entitled to receive such distribution. (iv) OTHER CHANGES. In case the Corporation at any time or from time to time, prior to the conversion of the Preferred Stock, shall take any action affecting its Common Stock similar to or having an effect similar to any of the actions described in any of Sections 8(d)(i) or (ii) or Section 8(g) (but not including any action described in any such Section) and the Board of Directors in good faith determines that it would be equitable in the circumstances to adjust the Conversion Price as a result of such action, then, and in each such case, the Conversion Price shall be adjusted in such manner and at such time as the Board of Directors in good faith determines would be equitable in the circumstances (such determination to be evidenced in a resolution, a certified copy of which shall be mailed to the holders of the shares of Preferred Stock). (v) NO ADJUSTMENT. Notwithstanding anything herein to the contrary, no adjustment under this Section 8(d) need be made to the Conversion Price if the Corporation receives written notice from holders of a majority of the outstanding Preferred Stock that no such adjustment is required. (e) ABANDONMENT. If the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, and shall thereafter and before the distribution to stockholders thereof legally abandon its plan to pay or deliver such dividend or distribution, then no adjustment in the Conversion Price shall be required by reason of the taking of such record. (f) CERTIFICATE AS TO ADJUSTMENTS. Upon any increase or decrease in the Conversion Price, the Corporation shall within a reasonable period (not to exceed ten (10) Business Days) following any of the foregoing transactions deliver to each registered holder of Preferred Stock a certificate, signed by (i) the Chief Executive Officer of the Corporation and (ii) the Chief Financial Officer of the Corporation, setting forth in reasonable detail the event requiring the adjustment and the method by which such adjustment was calculated and specifying the increased or decreased Conversion Price then in effect following such adjustment. (g) REORGANIZATION, RECLASSIFICATION. In case of any merger or consolidation of the Corporation (other than a Sale Transaction) or any capital reorganization, reclassification or other change of outstanding shares of Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value) (each, a "Transaction"), the Corporation shall execute and deliver to each holder of Preferred Stock at least twenty (20) Business Days prior to effecting 13 such Transaction a certificate stating that the holder of each share of Preferred Stock shall have the right to receive in such Transaction, in exchange for each share of Preferred Stock, a security identical to (and not less favorable than) the Preferred Stock, and provision shall be made therefor in the agreement, if any, relating to such Transaction. Any certificate delivered pursuant to this Section 8(g) shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 8. The provisions of this Section 8(g) and any equivalent thereof in any such certificate similarly shall apply to successive transactions. In the event the holders of two-thirds (2/3) of the Preferred Stock do not elect to receive the payments contemplated by Section 4(d), then upon the consummation of a Sale Transaction, each outstanding share of Preferred Stock shall be converted into the kind and amount of shares of stock or other securities, property or cash receivable upon such Sale Transaction by a holder of the number of shares of Common Stock into which such share of Preferred Stock could have been converted immediately prior to such Sale Transaction and provision shall be made therefor in the agreement, if any, relating to such Sale Transaction. (h) NOTICES. In case at any time or from time to time: (w) the Corporation shall declare a dividend (or any other distribution) on its shares of Common Stock; (x) the Corporation shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any shares of stock of any class or of any other rights or warrants; (y) there shall be any Transaction; or (z) there shall occur a Sale Transaction; then the Corporation shall mail to each holder of shares of Preferred Stock at such holder's address as it appears on the transfer books of the Corporation, as promptly as possible but in any event at least ten (10) days prior to the applicable date hereinafter specified, a notice stating (A) the date on which a record is to be taken for the purpose of such dividend, distribution or granting of rights or warrants or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution or granting of rights or warrants are to be determined, or (B) the date on which such Transaction or Sale Transaction is expected to become effective and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their Common Stock for shares of stock or other securities or property or cash deliverable upon such Transaction or Sale Transaction. Notwithstanding 14 the foregoing, in the case of any event to which Section 8(g) is applicable, the Corporation shall also deliver the certificate described in Section 8(g) to each holder of Preferred Stock at least ten (10) Business Days' prior to effecting such reorganization or reclassification as aforesaid. (i) RESERVATION OF COMMON STOCK. The Corporation shall at all times reserve and keep available for issuance upon the conversion of the Preferred Stock, such number of its authorized but unissued shares of Common Stock as will from time to time be sufficient to permit the conversion of all outstanding shares of Preferred Stock, and shall take all action to increase the authorized number of shares of Common Stock if at any time there shall be insufficient authorized but unissued shares of Common Stock to permit such reservation or to permit the conversion of all outstanding shares of Preferred Stock; PROVIDED that (i) the holders of shares of Preferred Stock vote such shares in favor of any such action that requires a vote of stockholders and (ii) such holders cause any directors elected by them pursuant to Section 7(c) to vote in favor of any such action that requires a vote of the Board of Directors. (j) NO CONVERSION TAX OR CHARGE. The issuance or delivery of certificates for Common Stock upon the conversion of shares of Preferred Stock shall be made without charge to the converting holder of shares of Preferred Stock for such certificates or for any tax in respect of the issuance or delivery of such certificates or the securities represented thereby (excluding any federal or state income taxes owed by the holders of the Preferred Stock as a consequence of such issuance or delivery), and such certificates shall be issued or delivered in the respective names of, or (subject to compliance with the applicable provisions of federal and state securities laws) in such names as may be directed by, the holders of the shares of Preferred Stock converted; PROVIDED, HOWEVER, that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any such certificate in a name other than that of the holder of the shares of Preferred Stock converted, and the Corporation shall not be required to issue or deliver such certificate unless or until the Person or Persons requesting the issuance or delivery thereof shall have paid to the Corporation the amount of such tax or shall have established to the reasonable satisfaction of the Corporation that such tax has been paid. 9. CERTAIN REMEDIES. Any registered holder of Preferred Stock shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Certificate of Designations and to enforce specifically the terms and provisions of this Certificate of Designations in any court of the United States or any state thereof having jurisdiction, this being in addition to any other remedy to which such holder may be entitled at law or in equity. 15 10. BUSINESS DAY. If any payment shall be required by the terms hereof to be made on a day that is not a Business Day, such payment shall be made on the immediately succeeding Business Day. 11. DEFINITIONS. As used in this Certificate of Designations, the following terms shall have the following meanings (with terms defined in the singular having comparable meanings when used in the plural and VICE VERSA), unless the context otherwise requires: "Affiliate" shall mean any Person who is an "affiliate" as defined in Rule 12b-2 of the General Rules and Regulations under the Exchange Act. In addition, the following shall be deemed to be Affiliates of GAP Coinvestment, GAP LP and GapStar: (a) GAP LLC, the members of GAP LLC, the limited partners of GAP Coinvestment and the limited partners of GAP LP; (b) any Affiliate of GAP LLC, the members of GAP LLC, the limited partners of GAP Coinvestment and the limited partners of GAP LP; and (c) any limited liability company or partnership a majority of whose members or partners, as the case may be, are members or former members of GAP LLC or consultants or key employees of General Atlantic Service Corporation, a Delaware corporation and an Affiliate of GAP LLC. In addition, GAP LP, GapStar and GAP Coinvestment shall be deemed to be Affiliates of one another. "Board of Directors" means the Board of Directors of the Corporation. "Business Day" means any day except a Saturday, a Sunday, or other day on which commercial banks in the State of New York or California are authorized or required by law or executive order to close. "Capital Stock" means, with respect to any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting or non-voting) of, such Person's capital stock and any and all rights, warrants or options exchangeable for or convertible into such capital stock (but excluding any debt security whether or not it is exchangeable for or convertible into such capital stock). "Commission" means the United States Securities and Exchange Commission. "Common Stock" shall have the meaning ascribed to it in Section 2(a) hereof. "Common Stock Equivalent" shall mean any security or obligation which is by its terms convertible or exchangeable into shares of Common Stock or another Common Stock Equivalent, and any option, warrant or other subscription or purchase right with respect to Common Stock. 16 "Conversion Notice" shall have the meaning ascribed to it in Section 8(b) hereof. "Conversion Price" shall have the meaning ascribed to it in Section 8(a) hereof. "Corporation" shall have the meaning ascribed to it in the first paragraph of this Certificate of Designation. "Current Market Price" per share shall mean, as of the date of determination, (a) the average of the daily Market Price under clause (a), (b) or (c) of the definition thereof of the Common Stock during the immediately preceding thirty (30) trading days ending on such date, excluding for the purposes of calculating such average the five highest and five lowest Market Prices from such 30 trading day period, and (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange or quoted in the over-the-counter market, then the Market Price under clause (d) of the definition thereof on such date. "Dividend Payment Date" shall have the meaning ascribed to it in Section 3(a) hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Excluded Transaction" means (a) any issuance of up to an aggregate of 5,963,571 shares of restricted stock or options to purchase shares of Common Stock (subject to adjustment in the event of stock splits, combinations or similar occurrences) to employees, officers or directors of the Corporation pursuant to a stock option plan or other employee benefit arrangement approved by the Board of Directors, (b) capital stock issued as full or partial consideration for a merger, acquisition, strategic alliance or other similar non-financing agreement approved by the Board of Directors and (c) any issuance of Common Stock (i) upon the conversion of shares of Preferred Stock, (ii) as a dividend on shares of Preferred Stock or (iii) upon conversion or exercise of any Common Stock Equivalents. "GAP Coinvestment" shall have the meaning ascribed to it in Section 7(c) hereof. "GAP LLC" means General Atlantic Partners, LLC, a Delaware limited liability company and the general partner of GAP LP and the managing member of GapStar, and any successor to such entity. "GAP LP" shall have the meaning ascribed to it in Section 7(c) hereof. 17 "GapStar" shall have the meaning ascribed to it in Section 7(c) hereof. "Issue Date" shall have the meaning ascribed to it in Section 8(d)(ii) hereof. "Junior Stock" shall have the meaning ascribed to it in Section 2(a) hereof. "Liquidation" shall mean the voluntary or involuntary liquidation under applicable bankruptcy or reorganization legislation, or the dissolution or winding up of the Corporation. "Liquidation Preference" shall have the meaning ascribed to it in Section 4(a) hereof. "Market Price" shall mean, as of the date of determination, (a) if the Common Stock is listed on a national securities exchange, the closing price per share of Common Stock on such date published in THE WALL STREET JOURNAL (NATIONAL EDITION) or, if no such closing price on such date is published in THE WALL STREET JOURNAL (NATIONAL EDITION), the average of the closing bid and asked prices on such date, as officially reported on the principal national securities exchange on which the Common Stock is then listed or admitted to trading; or (b) if the Common Stock is not then listed or admitted to trading on any national securities exchange but is designated as a national market system security by the National Association of Securities Dealers, Inc., the last trading price of the Common Stock on such date; or (c) if there shall have been no trading on such date or if the Common Stock is not designated as a national market system security by the National Association of Securities Dealers, Inc., the average of the reported closing bid and asked prices of the Common Stock on such date as shown by the National Market System of the National Association of Securities Dealers, Inc. Automated Quotations System and reported by any member firm of the New York Stock Exchange selected by the Corporation; or (d) if none of (a), (b) or (c) is applicable, a market price per share determined in good faith by the Board of Directors. "New Issue Price" shall have the meaning ascribed to it in Section 8(d)(ii) hereof. "Person" means any individual, firm, corporation, partnership, limited liability company, trust, incorporated or unincorporated association, joint venture, joint stock company, governmental body or other entity of any kind. "Redemption Notice" shall have the meaning ascribed to it in Section 6 hereof. "Redemption Price" shall have the meaning ascribed to it in Section 5 hereof. 18 "Relevant Date" shall have the meaning ascribed to it in Section 8(d)(ii) hereof. "Sale Transaction" shall mean (a) (i) the merger or consolidation of the Corporation into or with one or more Persons, (ii) the merger or consolidation of one or more Persons into or with the Corporation or (iii) a tender offer or other business combination, if, in the case of (i), (ii) or (iii) the stockholders of the Corporation prior to such merger or consolidation do not retain at least a majority of the voting power of the surviving Person or (b) the voluntary sale, conveyance, exchange or transfer to another Person of (i) the voting Capital Stock of the Corporation if, after such sale, conveyance, exchange or transfer, the stockholders of the Corporation prior to such sale, conveyance, exchange or transfer do not retain at least a majority of the voting power of the Corporation or (ii) all or substantially all of the assets of the Corporation. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Preferred Stock" shall have the meaning ascribed to it in Section 1 hereof. "Transaction" shall have the meaning ascribed to it in Section 8(g) hereof. IN WITNESS WHEREOF, the undersigned has executed and subscribed this certificate this 28th day of July, 2000. By: /s/ Thomas H. Sinton --------------------------------------------- Name: Thomas H. Sinton Title: President and Chief Executive Officer EX-10.4 5 0005.txt EXHIBIT 4 EXHIBIT 4 to AMENDMENT NO. 1 to Schedule 13D PROBUSINESS SERVICES, INC. AMENDMENT TO AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT The undersigned, being parties to that certain Amended and Restated Registration Rights Agreement (the "Agreement") dated March 12, 1997, by and among ProBusiness, Inc., a California corporation (the "Company"), General Atlantic Partners 39, L.P. ("GAP L.P.") and GAP Coinvestment Partners, L.P. ("GAP Coinvestment") (collectively, the "Purchasers"), and the Holders (as defined in the Registration Rights Agreement, dated December 1, 1989, as amended, between the Company and the Original Holders) (the "Original Holders"), in consideration of valuable consideration, the receipt and sufficiency of which is hereby acknowledged, hereby agree and consent to the following amendments to the Agreement: 1. General Atlantic Partners 70, L.P., GAP Coinvestment Partners II, L.P., and GapStar, LLC, shall each have the rights and obligations of a "Purchaser," as defined in the Agreement. 2. Section 1.2 "REGISTRABLE SECURITIES" shall be deleted and replaced with the following Section 1.2 "REGISTRABLE SECURITIES": "REGISTRABLE SECURITIES" means (i) shares of the Company's Common Stock issued or issuable pursuant to the conversion of the Company's Preferred Stock, (ii) any Common Stock of the Company issued or issuable in respect of the shares of the Company's Common Stock or other securities issued or issuable pursuant to the conversion of the Company's Preferred Stock upon any stock split, stock dividend, reapitalization or similar event, (iii) shares of the Company's Common Stock issued or issuable pursuant to the conversion of the Company's 6.9% Senior Convertible Preferred Stock issued on August 1, 2000 (the "Senior Preferred Stock"), and (iv) any Common Stock of the Company issued or issuable in respect of the shares of the Company's Common Stock or other securities issued or issuable pursuant to the conversion of the Senior Preferred Stock upon any stock split, stock dividend, reapitalization or similar event; provided, however, Registrable Securities shall not include any such shares that were transferred by a Holder to a transferree that did not comply with Section 1.15 hereof or of the Original Agreement. 3. The following provision shall be added to the Agreement below Section 1.7.2 as Section 1.7.3: 1.7.3 SHELF REGISTRATION (a) FILING AND EFFECTIVENESS OF SHELF REGISTRATION. As soon as practicable following the conversion of the Senior Preferred Stock into shares of Common Stock (the "CONVERSION SHARES") the Company shall file a shelf registration statement solely with respect to the Conversion Shares and pursuant to Rule 415 under the Securities Act (the "SHELF REGISTRATION") on Form S-3 (or any successor form). The Company shall use its reasonably commercial best efforts to have the Shelf Registration declared effective as soon as practicable after such filing, and shall use its reasonably commercial best efforts to keep the Shelf Registration effective and updated, from the date such Shelf Registration is declared effective (the "EFFECTIVE DATE") until the second anniversary of the Effective Date (the "EFFECTIVE PERIOD"); PROVIDED, that if the Company declares a Blackout Period (as defined below) during the Effective Period, the Effective Period shall be extended by the number of days equal to the length of time that any Blackout Periods were in effect. Notwithstanding the foregoing, if the Board of Directors makes a good faith determination that a filing of the Shelf Registration or the sale of any Conversion Shares under an effective Shelf Registration would interfere with any material financing or material investment transaction, business combination or material acquisition then under consideration, involving the Company or any of its affiliates, and the Company provides written notice (the "SHELF NOTICE") to the holders containing a general statement of the reasons for such determination (which shall be kept confidential by such holders), the Company may postpone the filing of the Shelf Registration for the period indicated in the Shelf Notice (which shall be kept confidential by such holders), which period shall in no event exceed 90 days (a "BLACKOUT PERIOD"). (b) SUPPLEMENTS AND AMENDMENTS; EXPENSES. The Company shall supplement or amend, if necessary, the Shelf Registration, as required by the instructions applicable to such registration form or by the Securities Act or as reasonably required by the holders of (or any underwriter for) more than 50% of the Conversion Shares and the Company shall furnish to the holders of the Conversion Shares to which the Shelf Registration relates copies of any such supplement or amendment prior to its being used and/or filed with the Commission. The Company shall pay all Registration Expenses in connection with the Shelf Registration, whether or not it becomes effective, and whether all, none or some of the Conversion Shares are sold pursuant to the Shelf Registration. (c) EFFECTIVE SHELF REGISTRATION STATEMENT. A Shelf Registration pursuant to this Section 1.7.3 shall not be deemed to have been effected (i) unless a Shelf Registration has become effective and remained effective in compliance with the provisions of the Securities Act with respect to the disposition of all Conversion Shares and until such time as all of such Conversion Shares have been disposed of under the Shelf Registration or (ii) if after it has become effective, the Shelf Registration is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court and has not thereafter become effective." 4. Section 1.11.2 under the heading "LOCK-UP AGREEMENT" shall be deleted and replaced with the following Section 1.11.2: "In consideration for the Company agreeing to its obligations under this Section 1, each Purchaser and each transferee of such Purchaser pursuant to Section 1.15 hereof agrees (but only if each officer, director, shareholder owning beneficially ten percent (10%) or more -2- of the Company's equity securities, and each shareholder selling shares in such offering also agrees), in connection with the first registration (an "Initial Public Offering") of the Company's securities for its own account to be offered to the general public (other than a registration relating to a Rule 145 transaction or with respect to an employee benefit plan) and in connection with any subsequent registration of the Company's securities that occurs within the five-year period after the closing of an Initial Public Offering, not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Registrable Securities or other securities of the Company (other than those included in the registration) without the prior written consent of the underwriters, for one hundred eighty (180) days from the date of the final prospectus related to the offering. The Company may impose stop-transfer instructions with respect to such securities subject to the foregoing restriction until the end of said period." -3- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 1st of August, 2000. PROBUSINESS SERVICES, INC. (successor to ProBusiness, Inc.) By /s/ Thomas H. Sinton -------------------------------- Thomas H. Sinton President and Chief Executive Officer GENERAL ATLANTIC PARTNERS, 39, L.P. GAP COINVESTMENT PARTNERS, L.P. General Atlantic Service Corporation 3 Pickwick Plaza Greenwich, Connecticut 06830 - -------------------------------- (Printed Name of Purchaser) - -------------------------------- (Signature) - -------------------------------- (Title, if Applicable) -4- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 1st of August, 2000. GENERAL ATLANTIC PARTNERS 39, L.P. By: GENERAL ATLANTIC PARTNERS, LLC, its General Partner By: /s/ Steven A. Denning ----------------------------------- Name: Steven A. Denning Title: A Managing Member GAP COINVESTMENT PARTNERS, L.P. By: /s/ Steven A. Denning ---------------------------------------- Name: Steven A. Denning Title: A General Partner -5- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 1st of August, 2000. GENERAL ATLANTIC PARTNERS 70, L.P. By: GENERAL ATLANTIC PARTNERS, LLC, its General Partner By: /s/ Steven A. Denning ----------------------------------- Name: Steven A. Denning Title: A Managing Member GAP COINVESTMENT PARTNERS II, L.P. By: /s/ Steven A. Denning ---------------------------------------- Name: Steven A. Denning Title: A General Partner GAPSTAR, LLC By: GENERAL ATLANTIC PARTNERS, LLC its Managing Member By: /s/ Steven A. Denning ----------------------------------- Name: Steven A. Denning Title: A Managing Member 6 -----END PRIVACY-ENHANCED MESSAGE-----