Second Software Development

EXHIBIT 10.2


SECOND SOFTWARE DEVELOPMENT
AND DEPLOYMENT AGREEMENT


This SECOND SOFTWARE DEVELOPMENT AND DEPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of December 23, 2002 (the "Effective Date") by and between AdStar, Inc., a Delaware corporation ("AdStar") and Tribune Company, a Delaware corporation ("Tribune") (collectively the "Parties" and each a "Party").


WHEREAS, Tribune and AdStar signed a Software Development and Deployment Agreement dated as of March 18, 2002 (the "First Agreement");


WHEREAS, AdStar is the sole and exclusive developer and worldwide owner of a proprietary software product that is used, together with AdStar's hosting and servicing facilities, to provide a service known as the "AdStar Service";


WHEREAS, AdStar provides services related to the implementation, customization and maintenance of the AdStar Service;


WHEREAS, Tribune, Gannett Co., Inc. ("Gannett") and Knight-Ridder Digital, a subsidiary of Knight-Ridder Inc. ("Knight Ridder") are, directly or indirectly, controlling stockholders in CareerBuilder, LLC, a Delaware limited liability company that operates the "CareerBuilder" recruitment business ("CareerBuilder");


WHEREAS, together with its newspaper partners (which together with CareerBuilder comprise the "CareerBuilder Network"), CareerBuilder provides an integrated print and online recruitment solution available in major markets throughout the United States;


WHEREAS, in the First Agreement, AdStar agreed to develop, customize and deploy the CareerBuilder Service (as defined below) solely for the benefit of Tribune, its Affiliates and the CareerBuilder Network;


WHEREAS, the Parties now desire to enhance the existing CareerBuilder Service by developing, customizing and deploying, solely for the benefit of Tribune, its Affiliates and the CareerBuilder Network, new Tribune specified functionalities, in the form of software Modules (as defined below), for use with the CareerBuilder Network;


WHEREAS, Tribune desires to license from AdStar the software Modules so developed for the CareerBuilder Service and license rights to use the AdStar Service and receive certain services of AdStar appurtenant thereto; and


WHEREAS, subject to the terms and under the conditions of this Agreement, AdStar desires to grant certain license and usage rights and provide such services.


NOW, THEREFORE, in consideration of the premises and the mutual agreements and covenants hereinafter set forth, and other good and valuable consideration (including,


without limitation, that described in Section 15.8), the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:


ARTICLE I - DEFINITIONS


SECTION 1.1. The following terms as used in this Agreement shall have the respective meanings set forth below or as defined elsewhere in the text of this Agreement.


(a) "Acceptance Tests" shall mean the software testing plan to be agreed upon by the Parties.


(b) "AdStar Service" means AdStar's hosting and servicing facilities and software, and includes without limitation the software and services comprising "AdStar User" and "AdStar Server".


(c) "Affiliate" has the meaning set forth in the Investment Agreement.


(d) "Bankruptcy" means, with respect to a Party, the happening of any one or more of the following events: a Party: (i) makes an assignment for the benefit of creditors; (ii) files a voluntary petition in bankruptcy; (iii) is adjudged a bankrupt or insolvent, or there has been entered against such Party an order for relief, in any bankruptcy or insolvency proceeding; (iv) files a petition or answer seeking in respect of such Party any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against such Party in any proceeding of a nature described above; or (vi) seeks, consents or acquiesces in the appointment of a trustee, receiver, conservator or liquidator of such Party or of all or any substantial part of such Party's properties.


(e) "CareerBuilder Network" has the meaning set forth in the recitals to this Agreement and includes without limitation the Tribune Newspapers, Gannett Newspapers and Knight Ridder Newspapers.


(f) "CareerBuilder Service" means the software comprising the AdStar Service as configured and customized pursuant to this Agreement, including the hosting and servicing facilities that are part of the AdStar Service, the Modules, including all Upgrades and Enhancements thereto and inherent or associated Intellectual Property Rights, Know-How, Source Code and Object Code therein.


(g) "Competitor" has the meaning set forth on Schedule 8.


(h) "Enhancements" means any improvement or modification made to the CareerBuilder Service pursuant to a request made by Tribune in accordance with Article V of this Agreement.


(i) "Error" means any deviations from the Functional Requirements or Technical Specifications, including without limitation cases where the CareerBuilder Service or


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any part thereof abnormally ceases functioning, produces incorrect or misleading information or erroneously interprets information given to it.


(j) "Escrow Project Plan has the meaning set forth in Section 10.2.


(k) "Force Majeure Event" has the meaning set forth in Section 15.15.


(l) "Functional Requirements" means the functional requirements and specifications for all components of the CareerBuilder Service (other than Third Party Technology) as specified on Exhibit A.


(m) "Gannett Newspaper" means a newspaper currently or in the future owned or operated by Gannett.


(n) "Infringe" or "Infringement" means the infringement, imitation, dilution, misappropriation or any other unauthorized use of any Intellectual Property Rights.


(o) "Intellectual Property Rights" means all patents, reexamined patents and patent applications (including all divisions, continuations, continuations-in-part, reissues, renewals, extensions, supplementary protection certificates, utility models and the like), copyrights (whether registered or unregistered), trade dress, trademarks and service marks (whether registered or unregistered), moral rights, all derivative works and other intellectual property rights and any applications for, or rights to obtain or acquire such rights.


(p) "Investment Agreement" means the Series B Preferred Stock Purchase Agreement dated the date hereof between the Parties.


(q) "Know-How" means all Confidential Information and all unpatented proprietary information, trade secrets, data and materials, in whatever form, including, but not limited to, the following: specifications, calculations, formulae, engineering and technical data, blueprints, diagrams, charts, results, computer programs, designs, skills, methods, techniques, procedures, manufacturing data and marketing or sales information.


(r) "Knight Ridder Newspaper" means a newspaper currently or in the future owned or operated by Knight Ridder.


(s) "License" means the license granted to Tribune under Section 3.1, as defined and limited by the terms and conditions of this Agreement.


(t) "Module" means the software initially developed pursuant to the First Agreement as the same will be enhanced by this Agreement, that has the features and functionality described on Exhibit B, including any Enhancements thereto.


(u) "Object Code" means machine-executable computer software prepared by compiling and linking Source Code or machine independent representations of computer software intended for subsequent interpretation or just-in-time compiling.


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(v) "Other Classified Verticals" mean real estate and automotive classified advertising.


(w) "Person" has the meaning set forth in the Investment Agreement.


(x) "Restricted Transaction" means either (i) the sale, lease, transfer, conveyance or other disposition, in one or a series of related transactions, of all or substantially all of the assets of AdStar, taken as a whole, or (ii) a transaction or series of transactions (including by way of merger, consolidation, or sale of stock) the result of which is that the holders of AdStar's outstanding voting stock immediately prior to such transaction are after giving effect to such transaction no longer, in the aggregate, the "beneficial owners" (as such term is defined in Rule 13d-3 and Rule 13d-5 promulgated under the Securities Exchange Act), directly or indirectly through one of more intermediaries, of more than 50% of the voting power of the outstanding voting stock of AdStar (or its successor), in which (in either (i) or (ii)) a purchaser, transferor or successor is (x) a Competitor of CareerBuilder or (y) not approved by Tribune based on Tribune's sole, good faith judgment that a purchaser, transferor or successor in any such transaction is unlikely to meet the obligations of this Agreement or support the CareerBuilder Service.


(y) "Source Code" means the source code form of any computer software and any associated documentation in human-readable form, including programmers' comments, data files and structures, APIs, Technical Specifications, and such other documents necessary to fully utilize, modify and maintain the computer software.


(z) "Statement of Work" means any agreement entered into by the Parties with respect to the development of Enhancements and the services to be performed by AdStar related thereto, as described more fully in Article V.


(aa) "Technical Specifications" means the detailed technical specifications and parameters for all components of the CareerBuilder Service, including, without limitation, flow charts, file layouts, output descriptions, screen outputs and response times as specified on Exhibit A.


(bb) "Third Party Technology" means equipment, designs, circuits, algorithms, computer software or other technology that is sourced from a third party and all third party intellectual property rights therein.


(cc) "Tribune Developers" has the meaning set forth in Section 2.3(a).


(dd) "Tribune Newspaper" means a newspaper currently or in the future owned or operated by Tribune.


(ee) "Upgrade" means all fixes, upgrades, integrations or new additions to and advances in the CareerBuilder Service and all new technology developed by AdStar or the rights to which are obtained by AdStar after the Effective Date, but excluding any Enhancements.


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ARTICLE II - DEVELOPMENT AND DEPLOYMENT


SECTION 2.1. Purpose. The Parties hereby acknowledge and agree that the CareerBuilder Service is being developed for the sole and exclusive benefit of Tribune and its Affiliates and the CareerBuilder Network.


SECTION 2.2. Obligations of AdStar. (a) AdStar shall be responsible for supplying the resources necessary to (i) reconfigure and customize the AdStar Service, (ii) install data and other components into the AdStar database, and (iii) develop the Modules and complete certain specified tasks, all in the manner, time and date as specified on Exhibit A hereto and as necessary to support the requirements of the CareerBuilder Service and (iv) build a user interface for use by agencies and advertisers with the "look and feel", branding and links requested by Tribune in its sole discretion. Tribune shall have the right to modify Exhibit A and Exhibit B. If any such modification requires the change of a delivery date, AdStar and Tribune shall mutually agree on a reasonable adjustment to such date. The Parties understand and agree that Exhibit A to this Agreement amends and restates in its entirety and replaces Exhibit A to the First Agreement.


(b) AdStar shall be responsible for the further development and enhancement of the CareerBuilder Service as specified in Exhibit A and for the completion of the tasks set forth in the Escrow Project Plan. Any development or other tasks performed by AdStar that are not (i) covered by Exhibit A or in the Escrow Project Plan or (ii) performed by the Tribune Developers shall be considered "Additional Development." AdStar shall complete all Additional Development according to specifications and on the dates mutually agreed by Tribune and AdStar, and Tribune shall pay AdStar a Development Fee (as described below) in connection with such Additional Development on a time and materials basis, subject to the prior approval of Tribune. The Development Fee for any month shall equal the Development Cost multiplied by (a) 1.0 if the average revenue per month from Tribune Newspapers and CareerBuilder for the preceding three-month period is more than $80,000 or (b) if the average revenue per month from Tribune Newspapers and CareerBuilder for the preceding three-month period is less than $80,000, 1.15 for all Development Costs less than $200,000 during 2003 or 2004 and 1.20 for all Development Costs in excess of $200,000 in 2003 or 2004. The methodology for calculating the Development Fee shall be reset on December 31, 2004. The "Development Cost" shall be equal to the number of hours worked on the Additional Development by each individual working on such Additional Development multiplied by the Hourly Rate of such individual. For 2003 the Hourly Rate for an individual equals (a) the base salary of such individual multiplied by 1.4 divided by (b) 2000. The Hourly Rate for 2004 shall be reset on or prior to December 31, 2003.


SECTION 2.3. Personnel. (a) The Parties understand and agree that AdStar's obligation under Section 2.2(b) of the First Agreement to devote the equivalent of two full-time employees (the "Tribune Developers") to the development and deployment of the CareerBuilder Service and to providing Upgrades and Enhancements is a continuing obligation under the First Agreement. The Parties further agree that AdStar's obligation to devote the Tribune Developers to the development and deployment of the CareerBuilder Service (including, without limitation, to the development of the Modules and the completion of the tasks set forth on Exhibit A or in the Escrow Project Plan and/or any other project designated by Tribune), shall continue for the Term. The Tribune Developers shall also be responsible for performing Upgrades and


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Enhancements for the Term. The Tribune Developers shall be provided at no additional cost to Tribune.


(b) In addition to any other personnel needed to meet the objectives of this Agreement and in addition to the two Tribune Developers, AdStar will employ six full-time employees (the "Additional Developers"), at no additional cost to Tribune. The Parties understand and agree that AdStar is obligated to continue to employ each Additional Developer until the later of (i) May 31, 2003 or (ii) the completion, to Tribune's reasonable satisfaction, of the tasks set forth on Exhibit A and in the Escrow Project Plan. AdStar may not reduce the number of Additional Developers without the prior written consent of Tribune, provided, however, that notwithstanding the foregoing, if the schedule set forth on Exhibit A and in the Escrow Project Plan is being met or exceeded and is likely to continue to be met or exceeded in Tribune's good faith judgment, then AdStar may, upon 15 days written notice, reduce the total number of Additional Developers to (i) four on March 1, 2003 and (ii) three on May 1, 2003. The Parties understand and agree that AdStar's obligation to employ any Additional Developer terminates upon the later to occur of (i) June 1, 2003 or (ii) the completion, to Tribune's reasonable satisfaction, of the tasks set forth on Exhibit A and in the Escrow Project Plan. If at any time the number of Additional Developers devoted to Tribune is less than the number required by the terms of this Section 2.3(b), Tribune may hire, at AdStar's sole expense, personnel necessary to meet such requirements.


(c) The Parties understand and agree that (i) from the date hereof, until February 28,2003, AdStar will devote the time of three of the Additional Developers exclusively to the development of the Modules and the completion of the tasks set forth on Exhibit A and in the Escrow Project Plan or any other project specified by Tribune (it being understood that if any such other project is not related primarily to the completion of the tasks set forth on Exhibit A or the Escrow Project Plan, then the Parties will work in good faith to amend Exhibit A to reflect the reallocation of Additional Developers to any such other project) and (ii) if in Tribune's good faith judgment, the tasks set forth on Exhibit A and in the Escrow Project Plan are being completed on a timely basis, from March 1, 2003 until the later of (x) May 31, 2003 or (y) completion of the tasks set forth on Exhibit A and in the Escrow Project Plan, AdStar may reduce the number of Additional Developers devoted exclusively to the development of the Modules and the completion of the tasks set forth on Exhibit A or in the Escrow Project Plan or any other project specified by Tribune from three to one. The Parties understand and agree that AdStar's obligation to employ any Additional Developer terminates upon the later to occur of (x) May 31, 2003 or (y) completion of the tasks set forth on Exhibit A and in the Escrow Project Plan.


(d) In addition, AdStar has hired, or as soon as practicable shall hire, individuals to fill the following positions: (i) Project Manager, (ii) Quality Assurance Manager and (iii) Vice President/Technology (the "Management Positions"). AdStar shall permit an employee of Tribune (the "Interviewer") to interview candidates for the Management Positions and shall only extend an offer to hire any candidate after such candidate has been approved in writing (or e-mail) by the Interviewer; provided, however, that (i) Tribune shall not unreasonably withhold approval and (ii) Tribune's consent shall not be required if Tribune is not able to accommodate the good faith efforts of AdStar to set up an interview within the time-frames set forth in this Section. The Management Positions shall remain a part of AdStar's organizational


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structure until the later of (i) May 31, 2003 and (ii) date upon which all of the tasks set forth on Exhibit A or in the Escrow Project Plan are completed to the reasonable satisfaction of Tribune. Individuals performing in the Management Positions may not be terminated or replaced without the prior written consent of Tribune. If a Management Position becomes open through resignation or termination, AdStar shall hire a replacement within 45 calendar days of the date AdStar determines to terminate such employee or receives a notice of resignation from such employee. AdStar shall permit the Interviewer to interview replacement candidates and shall only extend an offer to hire any candidate after such candidate has been approved in writing (or e-mail) by the Interviewer; provided, however, that (i) Tribune shall not unreasonably withhold approval and (ii) Tribune's consent shall not be required if Tribune is not able to accommodate the good faith efforts of AdStar to set up an interview within the time-frames set forth in this Section. The Management Positions shall be compensated at a level subject to the reasonable approval of Tribune. If a vacancy exists for any reason in any Management Position, excluding the position of Vice President/Technology, for more than five business days, AdStar, at its sole expense, shall hire consultants to fill such positions until full-time employees are hired. Any such consultant shall be hired by AdStar on or before the sixth day after creation of the vacancy.


(e) Attached hereto as Exhibit C is a true, complete and correct copy of an organizational chart setting forth each officer, employee and consultant of AdStar and identifying the Tribune Developers and Additional Developers. Exhibit C also includes a brief description of each officer's, employee's or consultant's roles and responsibilities, length of service to AdStar and, in the case of officers and employees, number of AdStar stock options. AdStar shall be under no obligation to update Exhibit C. AdStar shall make compensation levels of all officers and employees available for review by Tribune upon request.


SECTION 2.4. Progress Reports. Beginning on the Effective Date and ending on the completion of the development of the Modules, the tasks set forth on Exhibit A and/or any other project designated by Tribune, AdStar shall submit to Tribune at such times as Tribune may reasonably request, but no less regularly than every Thursday, written progress reports relating to the completion of such development and tasks. Each progress report shall include, without limitation, project plans, discussion of progress to date, problems encountered, proposed solutions to such problems and any other items reasonably requested by Tribune. The reports shall be in the form of Exhibits D and E hereto.


SECTION 2.5. Acceptance Tests. (a) Upon delivery of the completed CareerBuilder Service pursuant to the schedule set forth in Exhibit A or in the Escrow Project Plan, as amended from time to time, Tribune, AdStar, any Tribune Newspaper and/or their representatives shall conduct the Acceptance Tests as specified in Exhibit A, as the same will be developed and updated by Tribune for the completed CareerBuilder Service.


(b) If in the course of conducting Acceptance Tests, Tribune or its representatives determine that the CareerBuilder Service (including the testing of any Upgrade or Enhancement) does not materially perform in accordance with the applicable Acceptance Tests, Tribune shall promptly notify AdStar and AdStar shall, within 30 days, or such other time period as may be requested by AdStar and approved by Tribune, at AdStar's sole cost and expense, modify or improve the CareerBuilder Service so that the same shall perform in accordance with the Acceptance Tests. Upon redelivery of the CareerBuilder Service, Tribune and AdStar or


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their representatives shall conduct, as applicable, additional Acceptance Tests as specified in Exhibit A or such other documents as agreed by the Parties.


(c) The material failure of the CareerBuilder Service to meet the applicable Acceptance Tests, which failure is not due to any action or inaction on the part of Tribune, shall constitute a material breach of this Agreement by AdStar; provided, that no inaction on the part of Tribune shall be deemed to cause any such failure unless Tribune was notified by AdStar of the need for Tribune to take certain action and Tribune failed to take such action.


SECTION 2.6. Milestones; Delay. (a) AdStar shall notify Tribune on a continuing basis of any event or occurrence that could cause a material delay in meeting any milestone set forth on Exhibit A or in the Escrow Project Plan or otherwise delay the development of the CareerBuilder Service. Any material delay which is caused directly by AdStar, other than a delay resulting from a Force Majeure Event or due to any action or inaction on the part of Tribune, CareerBuilder or the Escrow Agent (as defined in Article X) shall be deemed to be a material breach of this Agreement; provided, that no inaction on the part of Tribune, CareerBuilder or the Escrow Agent shall be deemed to cause any such failure unless Tribune was notified by AdStar of the need for Tribune to take certain action and Tribune failed to take such action. If, in the event of such delay, Tribune, in its sole discretion, elects not to exercise its rights under Article X or otherwise pursuant to this Agreement, Tribune may, by written notice, designate a new date for the completion of the delayed CareerBuilder Service.


(b) If a new completion date is designated, AdStar shall pay Tribune, as liquidated damages and not as a penalty, Two Thousand Dollars ($2,000) for each week between the original completion date as set forth on Exhibit A the applicable development schedule and the actual completion date.


(c) If a delay is caused by a Force Majeure Event or by Tribune, the outstanding milestone dates and the completion dates for the tasks set forth on Exhibit A and in the Escrow Project Plan shall be extended by the number of days attributable to the delay.


SECTION 2.7. Change in Scope. Tribune may request a change to the specifications set forth on Exhibit A pursuant to a written change order ("Change Order"). Each Change Order shall identify with specificity any modifications to the applicable Functional Requirements, Technical Specifications, and schedule, including, without limitation, modifications to tasks, timetables, deliverables, fees and charges. Within five business days after the receipt of a Change Order, the Parties shall discuss the availability of personnel and resources to fulfill such Change Order and the resulting adjustments to the Functional Requirements, Technical Specifications and schedule. AdStar shall have no obligation to commence work in connection with any Change Order until both Parties execute such Change Order. Each Change Order executed by Tribune and AdStar shall be incorporated into and constitute an amendment to this Agreement. The terms of any Change Order shall control over any inconsistent provisions set forth in this Agreement or any attachment hereto.


SECTION 2.8. Project Management. (a) Each Party shall designate one of its employees to be its project manager (the "Project Manager"). Each Project Manager's responsibilities shall include, without limitation: (i) having direct responsibility for the overall


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performance of its Party under this Agreement and have final authority vis-a-vis the other Party on all matters that relate to such Party's performance under this Agreement; (ii) interacting with the other Party's Project Manager; and (iii) supervising the performance of such Party's obligations under this Agreement. Project Managers of each Party shall meet as needed, but no less often than monthly to review progress and to resolve issues relating to this Agreement.


(b) Tribune may, if good cause exists therefor, withdraw its approval of AdStar's Project Manager. If AdStar's Project Manager is unable to continue to serve due to physical disability or termination of employment, or if Tribune withdraws its approval of AdStar's Project Manager, AdStar shall appoint a successor Project Manager, subject to Tribune prior written approval, which approval will not be unreasonably withheld or delayed.


SECTION 2.9. Management by Tribune. Notwithstanding anything to the contrary herein, Tribune shall have the right to manage the development specified herein and the tasks set forth in the Escrow Project Plan to be provided and completed by AdStar if, in Tribune's reasonable judgment, it appears reasonably likely that AdStar will fail to meet any requirement specified in Exhibit A, the Escrow Project Plan or other applicable development schedule. In the event that Tribune exercises its rights under this Section 2.9 (i) AdStar will continue to use best efforts to meet the objectives of this Agreement, (ii) AdStar will not be subject to any liquidated damages under Section 2.6 accruing after the date on which Tribune begins such management and (iii) Tribune will be entitled to reimbursement commensurate with the management so provided.


ARTICLE III - GRANT OF LICENSE


SECTION 3.1. License Grant; Scope. (a) AdStar hereby grants to Tribune and its Affiliates an exclusive (even as against AdStar), perpetual, irrevocable, sublicensable (but only to Affiliates of Tribun ...