<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended: DECEMBER 31, 1999
or
/ / Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from_____to_____
Commission File Number: 0-20735
WEBHIRE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------
DELAWARE 04-2935271
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
91 HARTWELL AVENUE
LEXINGTON, MA 02421
(Address of principal executive offices) (zip code)
(781) 869-5000
(REGISTRANT'S TELEPHONE NUMBER)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
TITLE OF EACH CLASS
Common stock, $.01 par value, shares outstanding at January 31, 2000:
14,554,936 shares.
<PAGE>
WEBHIRE, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 1999
and September 30, 1999 2
Consolidated Statements of Operations for the three
months ended December 31, 1999 and December 31, 1998 3
Consolidated Statements of Cash Flows for the three
months ended December 31, 1999 and December 31, 1998 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosure About Market Risk 24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 2. Changes in Securities 25
Item 3. Defaults upon Senior Securities 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25
PART III - SIGNATURES 26
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
WEBHIRE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------- --------
1999 1999
-------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................................................ $ 2,536 $ 20,126
Short-term investments ................................................... 7,092 --
Accounts and installments receivable, less allowance for doubtful accounts
of $700 at December 31, 1999 and September 30, 1999.................... 5,661 4,693
Other current assets ...................................................... 3,954 2,321
Refundable income taxes ................................................... 709 700
-------- --------
Total current assets ............................................. 19,952 27,840
-------- --------
Long-term installments receivable, net ..................................... 407 444
Property and equipment, net ................................................ 5,219 4,593
Long-term investments ...................................................... 2,983 --
Acquired technologies, net of accumulated amortization of $8,922 and $6,642
at December 31, 1999 and September 30, 1999, respectively .............. 13,383 10,770
Deferred income taxes ...................................................... 1,068 1,068
Other assets, net .......................................................... 533 643
-------- --------
TOTAL ASSETS ..................................................... $ 43,545 $ 45,358
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of capital lease obligations ............................. $ 496 $ 578
Accounts payable ......................................................... 2,161 1,922
Notes payable ............................................................ 2,500 --
Accrued expenses ......................................................... 3,308 3,150
Deferred revenue ......................................................... 6,741 5,342
-------- --------
Total current liabilities ........................................ 15,206 10,992
-------- --------
Long-term notes payable .................................................... 925 --
-------- --------
Deferred rent .............................................................. 189 228
-------- --------
Capital lease obligations .................................................. 61 122
-------- --------
Stockholders' Equity:
Preferred stock, $.01 par value -- Authorized -- 5,000,000 shares,
Issued and outstanding-- none ......................................... -- --
Common stock, $.01 par value -- Authorized -- 30,000,000 shares, Issued --
15,195,321 shares at December 31, 1999, 15,089,067
shares at September 30, 1999 .......................................... 152 151
Additional paid-in capital ................................................. 50,826 49,353
Treasury stock, at cost .................................................... (831) (831)
Accumulated deficit ........................................................ (22,983) (14,657)
-------- --------
Total stockholders' equity ....................................... 27,164 34,016
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................... $ 43,545 $ 45,358
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
2
<PAGE>
WEBHIRE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenue:
Product revenue ......................................... $ 1,401 $ 2,500
Services revenue - Enterprise ........................... 3,216 3,078
Services revenue - Internet ............................. 1,877 824
------------ ------------
Total revenue ................................... 6,494 6,402
------------ ------------
Cost of Revenue:
Product revenue ......................................... 178 227
Services revenue - Enterprise ........................... 1,151 1,504
Services revenue - Internet ............................. 2,105 642
------------ ------------
Total cost of revenue ........................... 3,434 2,373
------------ ------------
Gross margin .............................................. 3,060 4,029
------------ ------------
Operating Expenses:
Research and development ................................ 2,946 1,425
Sales and marketing (excluding stock-based consideration) 3,630 3,027
General and administrative .............................. 1,820 1,133
Amortization of acquired technologies ................... 2,280 638
Amortization of stock-based consideration ............... 984 --
------------ ------------
Total operating expenses ........................ 11,660 6,223
------------ ------------
Loss from operations ...................................... (8,600) (2,194)
Other income, net ......................................... 274 161
------------ ------------
Loss before benefit for income taxes ...................... (8,326) (2,033)
Benefit for income taxes .................................. -- (183)
------------ ------------
Net loss .................................................. $ (8,326) $ (1,850)
============ ============
Basic and diluted loss per common share ................... $ (.58) $ (.20)
============ ============
Basic and diluted weighted average number of common shares
outstanding ............................................. 14,443,974 9,136,474
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
<PAGE>
WEBHIRE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss .................................................. $ (8,326) $ (1,850)
Adjustments to reconcile net loss to net cash used in
operating activities --
Depreciation and amortization .......................... 2,948 1,100
Amortization of stock-based consideration .............. 984 --
Provision for doubtful accounts ........................ 131 --
Deferred income taxes, net ............................. -- (183)
Deferred rent .......................................... (39) 6
Changes in assets and liabilities --
Accounts and installments receivable, net ............ (1,099) 711
Other current assets ................................. (1,633) (792)
Refundable income taxes .............................. (9) --
Long-term installments receivable .................... 37 33
Accounts payable ..................................... 239 (20)
Accrued expenses ..................................... 158 (630)
Deferred revenue ..................................... 1,399 412
Accrued income taxes ................................. -- (155)
-------- --------
Net cash used in operating activities ............. (5,210) (1,368)
-------- --------
Cash Flows from Investing Activities:
Purchases of acquired technologies ........................ (1,467) (6,778)
Purchases of property and equipment ....................... (1,295) (852)
Maturities and purchases of short-term investments, net ... (7,092) 794
Maturities and purchases of long-term investments, net .... (2,983) 303
Change in other assets .................................... 111 239
-------- --------
Net cash used in investing activities ............. (12,726) (6,294)
-------- --------
Cash Flows from Financing Activities:
Payments of capital lease obligations ..................... (143) (38)
Proceeds from exercise of common stock options ............ 426 9
Proceeds from employee stock purchase plan stock issuance . 68 59
Issuance costs in connection with private placement of
common stock .......................................... (5) --
-------- --------
Net cash provided by financing activities ......... 346 30
-------- --------
Net decrease in Cash and Cash Equivalents ................... (17,590) (7,632)
-------- --------
Cash and Cash Equivalents, beginning of period .............. 20,126 9,772
-------- --------
Cash and Cash Equivalents, end of period .................... $ 2,536 $ 2,140
======== ========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for
Interest ............................................... $ 7 $ 3
-------- --------
Income taxes ........................................... $ 9 $ 155
-------- --------
Supplemental Schedule of Noncash Financing Activities
Issuance of common stock in connection with Junglee
investment .......................................... $ -- $ 8,529
-------- --------
Notes issued in connection with acquired technologies
of HR Sites ......................................... $ 3,425 $ --
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
4
<PAGE>
WEBHIRE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Webhire, Inc. and its wholly-owned subsidiaries collectively referred to in
these Notes to Consolidated Financial Statements as "the Company". All
intercompany accounts and transactions have been eliminated in consolidation.
The consolidated financial statements of the Company presented herein,
without audit except for balance sheet information at September 30, 1999, have
been prepared pursuant to the rules of the Securities and Exchange Commission
for quarterly reports on Form 10-Q and do not include all of the information and
footnote disclosures required by generally accepted accounting principles. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended September 30, 1999 ("Fiscal
1999") included in the Company's Form 10-K which was filed with the Securities
and Exchange Commission on December 29, 1999.
The consolidated balance sheet as of December 31, 1999, the consolidated
statements of operations for the three month periods ended December 31, 1999 and
1998, and the consolidated statements of cash flows for the three month periods
ended December 31, 1999 and 1998, are unaudited but, in the opinion of
management, include all adjustments (consisting solely of normal, recurring
adjustments) necessary for a fair presentation of results for these interim
periods.
The consolidated results of operations for the three-month period ended
December 31, 1999 are not necessarily indicative of the results to be expected
for the fiscal year ending September 30, 2000 ("Fiscal 2000").
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application
of certain significant accounting policies described below and elsewhere in the
notes to the Fiscal 1999 consolidated financial statements referenced above.
(a) REVENUE RECOGNITION
Product revenue includes software license fees. Services revenue -
Enterprise includes customer maintenance fees and fees for training,
installation and consulting. Services revenue - Internet includes fees for
scanning, job posting services, recruiter training, Webhire Jumpstart, YAHOO!
RECRUITER (formerly named WEBHIRE RECRUITER), WEBHIRE JOB POST and WEBHIRE JOB
CANOPY (both introduced in November 1998), WEBHIRE AGENT (introduced in November
1999) and YAHOO! RESUMES (introduced in December 1999). The Company recognizes
product and services revenue in accordance with the provisions of Statement of
Position No. 97-2, SOFTWARE REVENUE RECOGNITION.
Product revenue from software license fees is recognized upon delivery,
provided there are no significant Company obligations remaining and
collectibility of the revenue is probable. If an acceptance period is allowed,
revenue is recognized upon the earlier of the acceptance or the expiration of
the acceptance period, as defined in the applicable software license agreement.
5
<PAGE>
WEBHIRE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Installments receivable represent the present value of future payments
related to the financing of noncancelable term license agreements that provide
for payment in installments over a five-year period. A portion of each
installment is recognized as interest income in the accompanying consolidated
statements of operations.
Services revenue from customer maintenance fees for postcontract support is
recognized ratably over the maintenance term, which is typically 12 months. When
customer maintenance fees are included in an initial software license fee, the
Company allocates approximately 15-17% of the software license fee to the first
year's maintenance. The amount allocated to customer maintenance fees for the
first year is comparable to customer maintenance fees charged separately by the
Company. Services revenue from training, installation, consulting, resume
scanning, recruiter training and Webhire Jumpstart is recognized as the related
services are performed. Services revenue from YAHOO! RECRUITER, WEBHIRE JOBPOST,
WEBHIRE JOB CANOPY, WEBHIRE AGENT and YAHOO! RESUMES is recognized ratably over
the service term.
Deferred revenue represents payments received by the Company in advance of
product delivery or service performance.
(b) NET LOSS PER SHARE
SFAS No. 128, EARNINGS PER SHARE, establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock or potential common stock. In accordance with SFAS No. 128, basic net loss
per share for December 31, 1999 and December 31, 1998 is calculated by dividing
net loss by the weighted average number of common shares outstanding for those
periods.
Diluted earnings per share includes the effect of dilutive securities. As a
net loss is presented for the periods ended December 31, 1999 and December 31,
1998, the loss per share was based only on the weighted average number of common
shares outstanding. Common equivalent shares, such as stock options, outstanding
during both periods were not used, as their inclusion would have been
anti-dilutive.
For the three-month periods ended December 31, 1999 and 1998, all 1,630,166
and 1,463,160 common equivalent shares, respectively, were excluded from the
above calculation, as their effect would have been anti-dilutive due to the
Company's net loss in those periods.
(c) CASH AND CASH EQUIVALENTS
Cash equivalents are recorded at amortized cost and consist of highly
liquid investments with original maturities of three months or less.
6
<PAGE>
WEBHIRE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(d) SHORT- AND LONG- TERM INVESTMENTS
Short-term investments consist of investments with original maturities
greater than three months and less than twelve months from the balance sheet
date. Long-term investments consist of investments that will mature greater than
twelve months from the balance sheet date. The Company classifies these short-
and long-term investments as held-to-maturity, and accordingly, they are carried
at amortized cost, which approximates market. These investments consist of
municipal debt securities.
The Company does not use derivative financial instruments in its investment
portfolio. The Company places its investments in instruments that meet high
quality standards, as specified in the Company's investment policy guidelines;
the policy also limits the amount of credit exposure to any one issue, issuer
and type of investment.
(3) SOFTBANK INVESTMENT
On July 19, 1999, the Company entered into a stock purchase agreement with
SOFTBANK Capital Partners LP and its affiliates (collectively, "SOFTBANK"),
pursuant to which SOFTBANK agreed to purchase in a private placement (the
"Private Placement") 3,960,396 shares of common stock at a price per share of
$5.05, for an aggregate purchase price of $20 million. The purchase price of
$5.05 per share represented the average closing price of the common stock for
the twenty trading days immediately preceding the date the parties entered into
the stock purchase agreement. The Private Placement was consummated on September
24, 1999 upon the approval of the stockholders of the Company.
Also on July 19, 1999, SOFTBANK entered into a separate stock purchase
agreement with Amazon.com, Inc. ("Amazon") to purchase 1,670,273 shares of the
common stock of Webhire held by Amazon. After consummation of the Private
Placement and the acquisition of common stock from Amazon, SOFTBANK and its
affiliates own 5,630,669 shares of Webhire common stock, representing
approximately 38.8% and 39.1% of the total outstanding shares as of December 31,
1999 and September 30, 1999, respectively.
(4) YAHOO! INVESTMENT AND SERVICE AGREEMENT
Yahoo! Inc., a SOFTBANK affiliate ("Yahoo!"), agreed to participate in the
Private Placement with the purchase of 274,726 of the Private Placement shares
of common stock of Webhire.
Webhire and Yahoo! have entered into a service agreement whereby, among
other things, Webhire provides resume management technology and services to
Yahoo! to create an online resume database.
7
<PAGE>
WEBHIRE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(4) YAHOO! INVESTMENT AND SERVICE AGREEMENT (CONTINUED)
In connection with this service agreement, the Company granted to Yahoo!
warrants to purchase 199,218 shares of common stock at $4.95 per share. The
warrants vest on June 3, 2000 provided the agreement is in effect on the vesting
date. At December 31, 1999 and September 30, 1999, the aggregate fair value of
the warrants was estimated at approximately $2,556 and $1,381, respectively,
using the Black-Scholes option pricing model in accordance with SFAS No. 123.
The Company is recognizing the expense related to the warrants over the vesting
period. For the three months ended December 31, 1999 and December 31, 1998, $984
and $0, respectively, was charged to operating expense in the accompanying
consolidated statements of operations.
(5) ACQUIRED TECHNOLOGIES
On November 18, 1998, the Company acquired certain assets and assumed
certain obligations of the Junglee Employment Services business of Amazon.com,
Inc. In exchange for cash of $6 million and 1,670,273 shares of Webhire common
stock valued at $8.5 million, Webhire received exclusive rights to Junglee's
online recruitment technologies. Webhire also acquired Junglee's Internet
production sites and assumed management and development of the employer and
career site business relationships established by Junglee Corp. ("Junglee").
Webhire did not retain any Junglee personnel in connection with the transaction.
The investment is being amortized over two years.
On July 9, 1999, the Company acquired 100% of the outstanding capital stock
of HireWorks, Inc. in exchange for cash of $385 and 312,072 shares of common
stock of Webhire valued at approximately $1.8 million. HireWorks, Inc. is a
developer of an Internet-based candidate search agent now called WEBHIRE AGENT.
The acquisition was accounted for as a purchase and, accordingly, the results of
operations from the date of acquisition are included in the Company's
consolidated statements of operations. The purchase price was allocated to the
technology acquired and is being amortized over two years. HireWorks Inc.'s
assets, liabilities and operations were not significant to the Company.
On December 13, 1999, the Company acquired certain assets, consisting
principally of technology, and assumed certain liabilities of Human Resources
Sites International, Inc. ("HR Sites") in exchange for $1.5 million in cash plus
junior subordinated convertible promissory notes totaling $3.4 million. HR Sites
was the developer of a leading Internet job-posting platform that provided
online job posting connections to more than 2,000 career sites and Internet news
groups. The Internet-recruiting services provided by HR Sites will continue to
be developed and supported in the former HR Sites offices in Chicago, Illinois.
Substantially all assets acquired were technology, the investment in which is
being amortized over two years.
8
<PAGE>
WEBHIRE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) BUSINESS SEGMENT INFORMATION
Effective for the year ended September 30, 1998, the Company adopted SFAS
131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which
requires disclosure of financial and descriptive information about the Company's
reportable operating segments. The operating segments reported below are the
segments for which separate financial information is available and for which
operating profit/loss amounts are evaluated regularly by senior management in
deciding how to allocate resources and in assessing performance.
The Company has two reportable segments: Enterprise software solutions and
Internet and transaction-based solutions, the latter of which started to emerge
in Fiscal 1997 with the offering of outsourced services (e.g., resume scanning,
acknowledgement letters) and the research and development activities undertaken
for this segment. The Internet and transaction-based solutions segment provides
outsourced management of private candidate pools via YAHOO! RECRUITER,
subscription services to public pools and job-posting sites, the job-posting
services initiated with the Junglee transaction, resume scanning, reference
checking and other fee-based staffing functions. The enterprise software
solutions segment provides perpetual licenses to the Company's software products
and the related maintenance, training, implementation and consulting services in
support of such licenses.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Expenses related to general
corporate functions such as Information Technology, Finance and Human Resources,
and general and administrative costs such as depreciation, rent and utilities
are allocated to the reportable segments based on relative headcount as a basis
of relative usage. Income tax provision (benefit) is allocated to the reportable
segments in deriving segment profit (loss) based on each segment's pro rata
income or loss before income tax provision (benefit). The Company has no
intersegment sales and transfers, and does not allocate assets to the operating
segments.
The Company's reportable segments are strategic business units that offer
different solutions tailored to a customer's needs. They are managed separately
because each business requires different technology and sales and marketing
strategies.
9
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WEBHIRE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) BUSINESS SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1999:
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNET AND ENTERPRISE
TRANSACTIONS SOFTWARE OTHER CONSOLIDATED
------------ -------- ----- ------------
<S> <C> <C> <C> <C>
Revenue:
Product revenue ............................................................ $ -- $ 1,401 $ -- $ 1,401
Services revenue ........................................................... 1,877 3,216 -- 5,093
-------- -------- -------- --------
Total revenue ............................................................ 1,877 4,617 -- 6,494
-------- -------- -------- --------
Cost of revenue:
Product revenue ............................................................ -- 178 -- 178
Services revenue ........................................................... 2,105 1,151 -- 3,256
-------- -------- -------- --------
Total cost of revenue .................................................... 2,105 1,329 -- 3,434
-------- -------- -------- --------
Gross margin .................................................................. (228) 3,288 -- 3,060
-------- -------- -------- --------
Operating expenses:
Research and development ................................................... 2,370 576 -- 2,946
Sales and marketing ........................................................ 2,496 1,134 -- 3,630
General and administrative ................................................. 1,182 638 -- 1,820
Amortization of acquired technologies ...................................... 2,280 -- -- 2,280
Amortization of stock-based consideration .................................. 984 -- -- 984
-------- -------- -------- --------
Total operating expenses ................................................. 9,312 2,348 -- 11,660
-------- -------- -------- --------
(Loss) income from operations ................................................. (9,540) 940 -- (8,600)
Other income, net ............................................................. -- -- 274 274
-------- -------- -------- --------
(Loss) income before (benefit) provision for
income taxes .............................................................. (9,540) 940 274 (8,326)
(Benefit) provision for income taxes .......................................... -- -- -- --
-------- -------- -------- --------
Net (loss) income ............................................................. $ (9,540) $ 940 $ 274 $ (8,326)
======== ======== ======== ========
Depreciation and amortization ................................................. $ 2,792 $ 156 $ -- $ 2,948
======== ======== ======== ========
</TABLE>
10
<PAGE>
WEBHIRE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(6) BUSINESS SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1998:
- ----------------------------------------------------------------------------------------------
INTERNET AND ENTERPRISE
TRANSACTIONS SOFTWARE OTHER CONSOLIDATED
------------ -------- ----- ------------
<S> <C> <C> <C> <C>
Revenue:
Product revenue ......................... $ -- $ 2,500 $ -- $ 2,500
Services revenue ........................ 824 3,078 -- 3,902
------- ------- ------- -------
Total revenue ......................... 824 5,578 -- 6,402
------- ------- ------- -------
Cost of revenue:
Product revenue ......................... -- 227 -- 227
Services revenue ........................ 642 1,504 -- 2,146
------- ------- ------- -------
Total cost of revenue ................. 642 1,731 -- 2,373
------- ------- ------- -------
Gross margin ............................... 182 3,847 -- 4,029
------- ------- ------- -------
Operating expenses:
Research and development ................ 480 945 -- 1,425
Sales and marketing ..................... 931 2,096 -- 3,027
General and administrative .............. 193 940 -- 1,133
Amortization of acquired technologies ... 638 -- -- 638
------- ------- ------- -------
Total operating expenses .............. 2,242 3,981 -- 6,223
------- ------- ------- -------
(Loss) income from operations .............. (2,060) (134) -- (2,194)
Other income, net .......................... -- -- 161 161
------- ------- ------- -------
(Loss) income before (benefit) provision for
income taxes ........................... (2,060) (134) 161 (2,033)
(Benefit) provision for income taxes ....... (186) (12) 15 (183)
------- ------- ------- -------
Net (loss) income .......................... $(1,874) $ (122) $ 146 $(1,850)
======= ======= ======= =======
Depreciation and amortization .............. $ 716 $ 384 $ -- $ 1,100
======= ======= ======= =======
</TABLE>
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE STATEMENTS CONTAINED IN THIS REPORT THAT ARE NOT PURELY
HISTORICAL ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF
THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES AND
EXCHANGE ACT OF 1934, AS AMENDED. FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT
LIMITATION, STATEMENTS CONTAINING THE WORDS "ANTICIPATES", "BELIEVES",
"EXPECTS", "INTENDS", "FUTURE", AND WORDS OF SIMILAR MEANING WHICH EXPRESS
MANAGEMENT'S BELIEF, EXPECTATIONS OR INTENTIONS REGARDING THE COMPANY'S FUTURE
PERFORMANCE. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT ARE BASED ON
INFORMATION AVAILABLE TO THE COMPANY ON THE DATE HEREOF, AND THE COMPANY HAS NO
OBLIGATION TO UPDATE ANY SUCH FORWARD- LOOKING STATEMENTS. THE COMPANY'S ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM ITS HISTORICAL OPERATING RESULTS AND FROM
THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING, WITHOUT LIMITATION, THOSE SET FORTH BELOW, UNDER "FACTORS
AFFECTING FUTURE OPERATING RESULTS".
CONSOLIDATED RESULTS OF OPERATIONS
(IN THOUSANDS)
REVENUE
Total revenue for the three-month period ended December 31, 1999 was $6,494
compared to $6,402 for the three-month period ended December 31, 1998.
PRODUCT REVENUE. Product revenue, which relates to the enterprise software
solutions segment, was $1,401 for the three months ended December 31, 1999
compared to $2,500 for the three months ended December 31, 1998. Protracted
sales cycles resulting from the transition to an Internet/intranet product line,
the introduction in the market of competitive Internet-based and outsourced
solutions, a general stagnation in sales of client-server software solutions,
and Year 2000 and other information technology constraints were the primary
contributors to the decrease. Because the Company's product revenue consists of
a small number of large dollar transactions, wide fluctuations can be
experienced from period to period. Such fluctuations are not necessarily
indicative of future results.
SERVICES REVENUE. Services revenue - Enterprise was $3,216 for the three
months ended December 31, 1999 compared to $3,078 for the three months ended
December 31, 1998. Services revenue - Internet increased 128% to $1,877 for the
three months ended December 31, 1999 from $824 for the three months ended
December 31, 1998. The increase was attributable to the continued growth of the
YAHOO! RECRUITER customer base and the addition of the candidate sourcing
services, WEBHIRE AGENT and YAHOO! RESUMES, introduced during the first fiscal
quarter of 2000.
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<PAGE>
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 - (CONTINUED)
COST OF REVENUE
COST OF PRODUCT REVENUE. Cost of product revenue represented 13% of total
product revenue for the three months ended December 31, 1999 as compared to 9%
for the three months ended December 31, 1998. The percentage increase is due
primarily to increased royalties due under third-party licensing arrangements
for the WEBHIRE ENTERPRISE product.
COST OF SERVICES REVENUE.
Cost of services revenue - Enterprise decreased 23% to $1,151 for the
period ended December 31, 1999 from $1,504 for the comparable 1999 period. The
decrease is due to management's continued cost containment efforts.
Cost of services revenue - Internet increased 228% to $2,105 for the three
months ended December 31, 1999 from $642 for the comparable 1999 period. The
increase in absolute dollars is principally attributable to costs associated
with building the infrastructure and operations to support the expanding YAHOO!
RECRUITER customer base.
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT. Research and development expenses were $2,946 or
45% of total revenue for the three months ended December 31, 1999 as compared to
$1,425 or 22% of total revenue for the comparable Fiscal 1999 period. This
increase is primarily due to increases in both personnel and consulting expenses
in support of the Company's new and existing product development initiatives and
its quality assurance programs. The Internet and transaction-based solutions
segment accounted for 80% of total research and development expenses in the
first quarter of Fiscal 2000 and 34% for the first quarter of Fiscal 1999. All
of the Company's research and development costs have been expensed as incurred.
SALES AND MARKETING. Sales and marketing expenses were $3,630 or 56% of
total revenue for the three months ended December 31, 1999 as compared to $3,027
or 47% of total revenue for the comparable Fiscal 1999 period. The increase in
absolute dollars is due primarily to the expansion of the Internet sales
organization. The Internet and transaction-based solutions segment accounted for
69% of total sales and marketing expenses in the first quarter of Fiscal 2000
and 31% for the first quarter of Fiscal 1999. The Company expects that sales and
marketing expenses may vary from quarter to quarter as a percentage of total
revenue.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $1,820
or 28% of total revenue for the three months ended December 31, 1999 as compared
to $1,133 or 18% of total revenue for the comparable three-month period of
Fiscal 1999. The absolute dollar increase for the three-month period of Fiscal
2000 as compared to Fiscal 1999 is the result of personnel increases in support
of the Company's infrastructure and a $150 penalty for an early cancellation of
a sales office lease.
13
<PAGE>
AMORTIZATION OF STOCK-BASED CONSIDERATION. Amortization of stock-based
consideration was $984 for the three months ended December 31, 1999 as compared
to $0 for the comparable period of Fiscal 1999. The increase is due to warrants
granted to Yahoo! in connection with a service agreement between Yahoo! and the
Company. The Company is recognizing the expense related to the warrants over the
vesting period. The amount recognizable may fluctuate from period to period
based on fluctuations in the Company's stock price.
OTHER INCOME, NET
Other income increased to $274 for the three-month period ended December
31, 1999 from $161 for the comparable Fiscal 1999 period. The increase is
primarily attributable to greater returns on investments due to higher average
combined cash and cash equivalents and short- and long- investment balances. The
Company expects to continue to yield investment income on its average balance of
combined cash and cash equivalents and short- and long-term investments at an
average rate consistent with that experienced for the first quarter of Fiscal
2000.
BENEFIT FOR INCOME TAXES
The Company did not record a tax benefit for the three months ended
December 31, 1999 as compared to a 9% benefit for the three months ended
December 31, 1998.
At December 31, 1999, the Company had available net operating loss ("NOL")
carryforwards, which may be used to offset future taxable income if any, and
expire through 2020. The Company has recorded a deferred tax asset for that
portion of that asset for which it is "more likely than not" to receive benefit
in the future. The Company has placed a significant valuation allowance against
the remaining deferred tax assets.
LIQUIDITY AND CAPITAL RESOURCES
(IN THOUSANDS)
At December 31, 1999, the Company had cash and cash equivalents and short-
and long-term investments of $12,611, a decrease of $7,515 from $20,126 at
September 30, 1999. Working capital was $4,746 at December 31, 1999 as compared
to $16,848 at September 30, 1999, a decrease of $12,102.
Cash used in operating activities was $5,210 during the three month period
ended December 31, 1999. Use of cash in operating activities consisted mainly of
the net loss for the three-month period of $8,326, the offsetting effects of
depreciation and amortization of $2,948 and amortization of stock-based
consideration of $984 and of fluctuations in certain assets and liabilities.
The Company used $12,726 in investing activities during the first quarter
of Fiscal 2000, principally for the purchases of short- and long-term
investments of $10,075, for the purchase of acquired technologies of $1,467 and
the purchase of property and equipment of $1,295 (primarily computer
14
<PAGE>
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 - (CONTINUED)
equipment). Net cash provided by financing activities for the three-month period
ended December 31, 1999 was $346.
To date, the Company has not invested in derivative securities or any other
financial instruments that involve a high level of complexity or risk. Cash has
been, and the Company contemplates that it will continue to be, invested in
interest-bearing, investment grade securities.
From time to time, the Company may evaluate potential acquisitions of
products, businesses and technologies that may complement or expand the
Company's business. Any such transactions consummated may use a portion of the
Company's working capital and/or require the issuance of equity or debt.
The Company believes that its current cash and cash equivalent balance will
be sufficient to meet its working capital expenditure requirements through
Fiscal 2000. Because operating and investing activities are expected to use cash
in the near term, any future growth will more likely than not require the
Company to obtain additional equity or debt financing.
IMPACT OF YEAR 2000 ISSUE
The following paragraphs in this section include "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act.
The Company has attempted to make an assessment with regard to whether its
own internal information systems are Year 2000 compliant. In particular, the
Company has upgraded its accounting and customer management systems with systems
that are warranted by the vendors to be Year 2000 compliant. Any failure of
third-party equipment or software comprising any part of the Company's systems
to operate properly with regard to Year 2000 and thereafter could require the
Company to incur unanticipated expenses to address associated problems. The
Company has received assurances that all material embedded systems included in
the Company's products are Year 2000 compliant.
The Company believes, based on an internal assessment, that the current
versions of its software products that are licensed to customers are Year 2000
compliant. The Company limits its contractual warranties on Year 2000 compliance
to objective performance standards that the Company has tested, and the Company
makes no warranties for nonconformance if the Company's software products are
combined with other software or data that are not conducive to accurately
calculating, comparing or sequencing date and time data between the twentieth
and twenty-first centuries. The Company has no plan to ascertain whether the
internal systems and products of its customers are Year 2000 compliant. Although
the Company has not been involved in any litigation or proceeding to date
involving its products or services related to Year 2000 issues, there can be no
assurance that the Company will not in the future be required to defend its
products or services or to negotiate resolutions of claims based on Year 2000
issues.
The Company does not have any specific contingency plans if any Year 2000
problems develop with respect to the Company's embedded systems, systems
acquired from vendors or systems used by third
15
<PAGE>
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 - (CONTINUED)
parties with whom the Company has a mutual relationship. Contingency plans will
be developed if it appears the Company or its key vendors will not be Year 2000
compliant, and such non-compliance is expected to have a material adverse impact
on the Company's operations.
Year 2000 issues have affected the purchasing patterns of customers and
potential customers in a variety of ways. Many companies expended significant
resources to replace or remedy their current hardware and software systems for
Year 2000 compliance. These expenditures have resulted in reduced funds
available to purchase software products such as those offered by the Company.
The Company does not believe that there is any practical way to ascertain the
extent of such a reduction in purchasing resources of its customers. Any such
reduction could, however, result in a material adverse effect on the Company's
business, operating results and financial condition. The Year 2000 issue is
pervasive and complex, as virtually every computer operation has been affected
in some way. Consequently, no assurance can be given that Year 2000 compliance
can be achieved without significant additional costs.
FACTORS AFFECTING FUTURE OPERATING RESULTS
An investment in Webhire's equity securities involves various risks. Current
and prospective investors in Webhire's securities should carefully consider the
following risk factors. These risk factors are not exhaustive and should be read
together with the other reports and documents that we file with the Securities
and Exchange Commission, which may include additional or more current
information that is important to an investment in Webhire.
TO COMPETE EFFECTIVELY, WE MUST ADAPT QUICKLY TO ADVANCES IN TECHNOLOGY AND
CHANGES IN CUSTOMER REQUIREMENTS.
The market for automated recruiting products and services is undergoing
rapid changes including continuing advances in technology and changes in
customer requirements and preferences. These market dynamics have been amplified
by the emergence of the Internet as a tool for recruiting solutions. Our future
success will depend in significant part on our ability to continually improve
the performance, features and reliability of our software and services in
response to the evolving demands of the marketplace and competitive product
offerings. Any failure on our part to quickly develop products and services that
address changes in technology or customer demands will likely result in loss of
market share to a competitor.
OUR BUSINESS IS DEPENDENT ON THE DEVELOPMENT AND MAINTENANCE OF THE INTERNET
INFRASTRUCTURE.
Our success will depend, in large part, upon the development and maintenance
of the Internet infrastructure as a reliable network backbone with the necessary
speed, data capacity and security, and timely development of enabling products,
such as high speed modems, for providing reliable Internet access and services.
We cannot assure you that the Internet infrastructure will continue to
effectively support the demands placed on it as the Internet continues to
experience increased numbers of users, greater frequency of use or increased
bandwidth requirements of users. Even if the necessary infrastructure or
technologies are developed, we may have to spend considerable resources to adapt
our offerings accordingly. Furthermore, in the past, the Internet has
experienced a variety of outages and other delays. Any future outages or delays
could affect the Internet sites on which our customers' job
16
<PAGE>
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 - (CONTINUED)
advertisements are posted and the willingness of employers and job seekers to
use our online recruitment offerings. If any of these events occur, our
business, results of operations and financial condition could be materially and
adversely affected.
WEBHIRE HAS RECENTLY EXPANDED ITS TECHNOLOGY INTO SEVERAL NEW BUSINESS AREAS
AND CANNOT BE CERTAIN THAT ITS EXPANSION WILL BE SUCCESSFUL.
Webhire has recently expanded its technology into products and services that
can be offered over the Internet to foster long-term growth. These areas are
relatively new to Webhire's product development, sales and marketing personnel
and Webhire cannot be assured that the markets for these products and services
will develop or that it will be able to compete effectively or will generate
significant revenues in these new areas making Webhire's success in this area
difficult to predict.
The success of Internet computing and, in particular, the Company's current
Internet computing software products and services is difficult to predict
because Internet computing represents a method of computing that is new. The
success of Internet computing will depend in large measure on (i) the lower cost
of ownership of Internet computing relative to client/server architecture, (ii)
the ease of use and administration relative to client/server architecture, and
(iii) how hardware and software vendors choose to compete in this market. There
can be no assurances that sufficient numbers of vendors will undertake this
commitment, that the market will accept Internet computing or that Internet
computing will generate significant revenues for the company.
OUR BUSINESS MODEL IS UNPROVEN.
We began offering online subscriptions for Yahoo! Recruiter (formerly
Webhire Recruiter) in Fiscal 1998. Product revenue from software sales are
expected over a relatively short period of time to become a much smaller
component of our revenue. Maintenance revenue associated with product sales will
also decrease over time. Our long-term business model and profit potential are
unproven. To be successful, we must develop and market online recruitment
offerings that achieve broad market acceptance by employers, job seekers and
interactive media companies.
It is possible that we will be required to further adapt our business model
in response to additional changes in the online recruitment market or if our
current business model is not successful. If we are not able to anticipate
changes in the online recruitment market or if our business model is not
successful, our business, financial condition and results of operations will be
materially and adversely affected.
WE MAY BE UNABLE TO CONTINUE TO BUILD CUSTOMER AWARENESS.
We believe that continuing to build brand recognition is critical to
achieving widespread acceptance of our online recruitment offerings. Brand
recognition is a key differentiating factor among providers of online
recruitment offerings and we believe it could become more important as
competition in the online recruitment market increases. We may find it necessary
to accelerate expenditures on our sales and marketing efforts or otherwise
increase our financial commitment to creating and maintaining brand awareness
among potential customers. If we fail to successfully promote and maintain our
brand or incur
17
<PAGE>
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 - (CONTINUED)
significant expenses in promoting our brand, our business, results of operations
and financial condition could be materially and adversely affected.
THE GROWTH IN DEMAND FOR AUTOMATED RECRUITING SOFTWARE AND SERVICES AND THE USE
OF THE INTERNET AS A RECRUITING MEDIUM ARE UNCERTAIN.
Our future success is substantially dependent on broader recognition of the
potential benefits of automated recruiting software and services and the growth
in demand for these products and services. It is difficult to assess the size of
the market that will develop and the rate at which it will develop. If the
market does not develop as we anticipate, or if it develops more slowly than we
expect, our business, operating results and financial condition will be
materially and adversely affected.
Our future is highly dependent on a significant increase in the use of the
Internet as a recruiting medium. The online recruitment market is new and
rapidly evolving, and we cannot yet gauge its effectiveness as compared to
traditional recruiting methods. As a result, demand and market acceptance of
online recruitment offerings are uncertain. The adoption of online recruiting,
particularly by those entities that have historically relied upon traditional
methods of recruiting, requires the acceptance of a new way of conducting
business, exchanging information and advertising for jobs. We cannot assure you
that the online recruitment market will continue to emerge or become
sustainable. If the online recruitment market fails to develop or develops more
slowly than we expect, our business, results of operations and financial
condition will be materially and adversely affected.
OUR COMPUTER SYSTEMS COULD FAIL OR OVERLOAD.
The success of our online recruitment offerings is highly dependent on the
efficient and uninterrupted operation of our computer and communications
systems. Power loss, telecommunications failures, computer viruses, electronic
break-ins or other similar disruptive problems could damage or cause
interruptions in these systems. If our systems are affected by any of these
occurrences, our business, results of operations and financial condition could
be materially and adversely affected. Our insurance policies may not cover, or
if covered, may not adequately compensate us for, any losses that may occur due
to any failures or interruptions in our systems. We do not presently have any
secondary "off-site" systems or a formal disaster recovery plan.
In addition, Webhire must accommodate a high volume of traffic and deliver
frequently updated information. Our websites have in the past and may in the
future experience slower response times or decreased traffic for a variety of
reasons. In addition, our users depend on Internet service providers and other
internet site operators for access to our websites. Many of the Internet service
providers have experienced significant outages in the past, and could experience
outages, delays and other difficulties due to system failures unrelated to our
systems.
If we experience any of these problems, our business, results of operations
and financial condition could be materially and adversely affected.
18
<PAGE>
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 - (CONTINUED)
IF WE ARE UNABLE TO OBTAIN ADDITIONAL CAPITAL AS NEEDED IN THE FUTURE, OUR
BUSINESS MAY BE ADVERSELY AFFECTED.
We currently anticipate that our available cash will be sufficient to meet
our anticipated working capital and capital expenditure requirements through
Fiscal 2000. We may need to raise additional capital, however, to fund more
rapid expansion to develop new and to enhance existing services to respond to
competitive pressures, and to acquire complementary services, businesses or
technologies. If we raise additional funds through further issuances of equity
or convertible debt securities, the percentage of ownership of our current
stockholders will be reduced and such securities may have rights, preferences
and privileges senior to those of our current stockholders. In addition, we may
not be able to obtain additional financing on terms favorable to us, if at all.
If adequate funds are not available or are not available on terms favorable to
us, our business, results of operations and financial condition could be
materially and adversely affected.
OUR NEW PRODUCT INTRODUCTIONS MAY HAVE DEFECTS WHICH COULD RESULT IN ADVERSE
PUBLICITY OR HAVE OTHER NEGATIVE EFFECTS.
As the marketplace for recruiting solutions continues to evolve, we plan to
develop and introduce new products and services to enable us to effectively meet
the changing needs of the market. Products as complex as those we offer may
contain undetected errors when first introduced or when new versions are
released. In the past, despite prior testing, we have discovered software errors
in some of our products after their introduction. Product defects may result in
adverse publicity, loss of or delay in market acceptance, injury to our
reputation and brand awareness, or claims against us, any one of which could
have a material adverse effect on our business, financial condition and results
of operations.
WE HAVE SIGNIFICANT COMPETITION FROM A VARIETY OF SOURCES.
The market for recruitment solutions is intensely competitive and highly
fragmented. We compete with companies that offer a single database "job board"
solution, such as Monster.com and Career Mosaic, as well as newspapers,
magazines and other traditional media companies that provide online job search
services, such as Careerpath.com. We also compete with other large Internet
information portals, such as AOL.com. In addition, we compete with traditional
recruiting services, such as newspapers and employee recruiting agencies that
provide or source full-time, contract or temporary labor, for a share of
employers' total recruiting budgets. We expect to face additional competition as
other established and emerging companies, including print media companies and
employee recruiting agencies with established brands, enter the online
recruitment market.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources than we do. In addition, current and potential competitors may make
strategic acquisitions or establish cooperative relationships to expand their
offerings and to offer more comprehensive solutions.
19
<PAGE>
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 - (CONTINUED)
We believe that there will be rapid business consolidation in the online
recruitment industry. Accordingly, new competitors may emerge and rapidly
acquire significant market share. In addition, new technologies will likely
increase the competitive pressures that we face. The development of competing
technologies by market participants or the emergence of new industry standards
may adversely affect our competitive position. An increase in competition could
result in price reductions, render our existing software and services obsolete
or unmarketable and/or result in loss of market share.
WE MUST MANAGE OUR GROWTH IN ORDER TO ACHIEVE DESIRED RESULTS.
The evolution of our business and the expansion of our customer base has
resulted in substantial growth in the number of our employees and the scope of
our operations of the last few years. Our future results of operations will
depend in part on the ability of our officers and other key employees to
continue to implement our operational, customer support, and financial control
systems and to expand, train, and manage our employee base.
THE SUCCESSFUL OPERATION OF OUR BUSINESS DEPENDS IN LARGE PART ON OUR
RELATIONSHIPS WITH THIRD PARTIES.
A key element of our business strategy is to develop relationships with
leading industry organizations in order to increase our market presence, expand
distribution channels and broaden our product line. We believe that our
continued success depends in large part on our ability to maintain such
relationships and cultivate additional relationships. There can be no assurance
that our existing strategic partners will not discontinue their relationships
with us, or that we will be able to successfully develop additional strategic
relationships.
In addition, certain technology incorporated in our software is licensed
from third parties on a nonexclusive basis. The termination of any of these
licenses, or the failure of the third-party licensors to adequately maintain or
update their products, could result in delay in our ability to ship certain of
our products while we seek to implement technology offered by alternative
sources. In addition, any required replacement licenses could prove more costly
than our current license relationships and might not provide technology as
powerful and functional as the third-party technology we currently license.
Also, any such delay, to the extent it becomes extended or occurs at or near the
end of a fiscal quarter, could have a material adverse effect on our results of
operations for that quarter. While it may be necessary or desirable in the
future to obtain other licenses relating to one or more of our products or
relating to current or future technologies, we may not be able to do so on
commercially reasonable terms or at all.
OUR OPERATING RESULTS MAY BE SUBJECT TO SIGNIFICANT QUARTERLY FLUCTUATIONS.
Our results of operations have been, and may in the future be, subject to
significant quarterly fluctuations. Such fluctuations could be due to a variety
of factors, including the following:
20
<PAGE>
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 - (CONTINUED)
- - the fact that our product revenue consists of a relatively small number
of large dollar transactions and, as a result, may fluctuate
significantly from one quarter to another if the number of transactions
completed varies slightly;
- - the introduction of new products by us or our competitors;
- - the capital spending patterns of our customers;
- - our sales incentive strategy which is based in part on annual sales
targets;
- - the fact that a substantial portion of our product revenue often occurs
during the last few weeks of each quarter and, as a result, any delays
in orders or shipments are more likely to result in revenue not being
recognized until the following quarter; and
- - our current expense levels are based in part on our expectations of
future revenue and, as a result, net income for a given period could be
disproportionately affected by any reduction in revenue.
To the extent our level of revenue in the future decreases from past levels
or in some future quarter our revenue or operating results are below the
expectations of stock market securities analysts and investors, our
profitability and the price of our common stock is likely to be materially and
adversely affected.
ONE LARGE STOCKHOLDER BENEFICIALLY OWNS APPROXIMATELY 37% OF OUR OUTSTANDING
STOCK, IS REPRESENTED ON OUR BOARD OF DIRECTORS AND HAS RIGHTS TO PARTICIPATE IN
CERTAIN WEBHIRE TRANSACTIONS: SUCH STOCKHOLDER'S INTERESTS COULD CONFLICT WITH
YOURS AND SIGNIFICANT SALES OF STOCK HELD BY IT COULD HAVE A NEGATIVE EFFECT ON
OUR STOCK PRICE.
SOFTBANK beneficially owns approximately 37% of our outstanding common
stock. In addition, SOFTBANK's affiliate Yahoo! Inc., of which SOFTBANK owns
approximately 27.8%, owns approximately 2.0% of our outstanding common stock. As
a result of their stock ownership, SOFTBANK and its affiliate have significant
control over all matters requiring stockholder approval, including the election
of directors and approval of significant corporate transactions, and their
interests could conflict with those of other stockholders. Such concentration of
ownership may also have the effect of delaying or preventing a change in control
of Webhire. In addition, sales of significant amounts of shares held by these
entities, or the prospect of these sales, could adversely affect the market
price of our common stock.
SOFTBANK has the right to nominate two members of our Board of Directors,
which currently consists of 5 members (one of whom is a SOFTBANK
representative), and so long as it continues to hold 10% of our outstanding
common stock, it is entitled to nominate one director each time a class of
directors in which one of its representatives serves is subject to election.
Further, one of SOFTBANK's directors is entitled to serve as a member of the
Board's audit and compensation committees. As a result of SOFTBANK's board
representation, it has significant influence on all Webhire matters requiring
Board approval.
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<PAGE>
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 - (CONTINUED)
In addition, in the event we propose to enter into a joint venture for
operations in the United Kingdom, continental Europe or Japan or a business
transaction with any competitor of SOFTBANK's affiliate ZDNet, we are required
by the terms of the stock purchase agreement pursuant to which SOFTBANK acquired
our common stock to offer SOFTBANK or one of its affiliates the opportunity to
participate in the transaction on terms and conditions mutually acceptable to us
and them. As a result of these requirements, potential third parties may be
reluctant to negotiate joint ventures or business transactions with us because
they know SOFTBANK and its affiliates will be given the opportunity to
participate in such transactions.
WE DEPEND ON KEY PERSONNEL WHO MAY NOT CONTINUE TO WORK FOR US.
Our future success depends to a significant extent on our senior management
and other key employees, many of whom have acquired specialized knowledge and
skills with respect to our operations. As a result, if any of these individuals
were to leave Webhire, we could face substantial difficulty in hiring qualified
successors and could experience a loss of productivity while any such successor
obtains the necessary training and experience. We also believe that our future
success will depend in large part on our ability to attract and retain
additional key employees. Competition for qualified personnel in the high tech
industry is intense. If we do not succeed in attracting new personnel, or
retaining and motivating existing personnel, our business will be adversely
affected.
OUR STOCK PRICE MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS AND OUR
STOCKHOLDERS MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE THEIR PURCHASE
PRICE.
We cannot predict the extent to which investors' interest in us will lead to
a stable trading market or how liquid the market might become. The stock market
in general and the market prices of shares in technology companies, particularly
those such as ours that offer Internet-based products and services, have been
extremely volatile and have experienced fluctuations that have often been
unrelated or disproportionate to the operating performance of such companies.
The market price of our common stock could be highly volatile and subject to
wide fluctuations in response to many factors, including the following:
- - quarterly variations in our results of operations;
- - adverse business developments impacting Webhire;
- - changes in financial estimates by securities analysts;
- - investor perception of Webhire and online recruitment services in
general;
- - announcements by our competitors of new products and services; and
- - fluctuations in our common stock price, which may affect our visibility
and credibility in the online recruitment market.
In the event of broad fluctuations in the market price of our common stock, you
may be unable to resell your shares at or above your purchase price.
IT IS DIFFICULT TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.
22
<PAGE>
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 - (CONTINUED)
We regard our intellectual property rights as critical to our success and
rely on a combination of copyright and trade secret laws, employee and
third-party non-disclosure agreements and other methods to protect these rights.
We cannot be assured that the measures we have taken to protect our proprietary
rights will be adequate to prevent misappropriation of our technology or
independent development by others of similar technology. Our inability to
protect our proprietary rights would have a material adverse effect on our
business, financial condition and results of operations.
WE MAY BE SUBJECT TO COSTLY INTELLECTUAL INFRINGEMENT CLAIMS.
As the number of products and services in our industry increases and these
solutions further overlap, the likelihood that our current or future products
may become subject to infringement claims increases. Although we are not
currently the subject of any intellectual property litigation, there has been
substantial litigation regarding copyright, patent and other intellectual
property rights involving computer software companies. Any claims or litigation,
with or without merit, could be costly and could result in a diversion of
management's attention, which could have a material adverse effect on our
business, financial condition and results of operations. Adverse determinations
in such claims or litigation may require us to obtain a license and/or pay
damages, which could also have a material adverse effect on our business,
financial condition and results of operations.
WE MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS.
Although we have not experienced any product liability claims to date, the
sale and support of our products and the incorporation of products from other
companies may entail the risk of product liability claims. Our license
agreements with our customers typically contain provisions intended to limit our
exposure to such claims. For example, we limit our contractual warranties on
"Year 2000" compliance to objective performance standards that we have tested,
and we do not make any warranties for nonconformance if our software products
are combined with other software or data that is not conducive to accurately
calculating, comparing or sequencing date and time data between the twentieth
and twenty-first centuries. There can be no guarantee, however, that such
provisions will be effective in limiting our exposure. A successful product
liability action brought against us could adversely affect our business,
financial condition and results of operations.
ANTI-TAKEOVER PROVISIONS COULD MAKE IT MORE DIFFICULT FOR A THIRD-PARTY TO
ACQUIRE US.
Our Board of Directors has the authority to issue up to 5,000,000 shares of
preferred stock and to determine the price, rights, preferences, privileges and
restrictions, including voting rights, of those shares without any further vote
or action by the stockholders. The rights of the holders of common stock may be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. The issuance of preferred
stock may have the effect of delaying, deferring or preventing a change of
control of Webhire without further action by the stockholders and may adversely
affect the voting and other rights of the holders of common stock. We have no
present plans to issue shares of preferred stock. Further, certain provisions of
our charter documents, including provisions eliminating the ability of
stockholders to take action by written consent, providing for a staggered board
of directors and limiting the ability of stockholders to raise matters at a
meeting of stockholders without
23
<PAGE>
WEBHIRE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE-MONTH PERIOD ENDED DECEMBER 31, 1999 - (CONTINUED)
giving advance notice, may have the effect of delaying or preventing changes in
control or management of Webhire, which could have an adverse effect on the
market price of our stock.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Information relating to quantitative and qualitative disclosure about market
risk is set forth under the caption "Short- and Long- Term Investments" in Note
2(d) of the Notes to Consolidated Financial Statements. The company does not
have material foreign currency risks.
24
<PAGE>
WEBHIRE, INC.
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings
The Company is not involved in any pending legal proceedings other than
those arising in the ordinary course of the Company's business. Management
believes that the resolution of these matters will not materially affect the
Company's business or the financial condition of the Company.
Item 2. Changes in Securities and Use or Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits furnished as Exhibits hereto:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
10.30 Asset Purchase Agreement dated December 13, 1999 by and Among
Webhire, Inc., Human Resources Sites International, Inc. and
the Stockholders
27.1 Financial Data Schedule Pursuant to Regulation S-X Article 5
</TABLE>
(b) On October 13, 1999 the Company filed a form 8-K to report under Item 5
various risk factors related to the business, operations and strategies of the
Company.
25
<PAGE>
WEBHIRE, INC.
PART III - SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
WEBHIRE, INC.
Date: February 11, 2000
/s/ MARTIN J. FAHEY
---------------------------------------------
Martin J. Fahey
Chief Executive Officer
/s/ CYNTHIA G. EADES
---------------------------------------------
Cynthia G. Eades
Chief Financial Officer
26
<PAGE>
EXHIBIT 10.30
ASSET PURCHASE AGREEMENT
by and among
WEBHIRE, INC.
as Buyer
HUMAN RESOURCES SITES INTERNATIONAL, INC.
as Seller
and
THE STOCKHOLDERS
as defined herein
December 13, 1999
<PAGE>
ASSET PURCHASE AGREEMENT
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. PURCHASE AND SALE OF ASSETS......................................................................1
1.1 Sale of Assets..........................................................................1
1.2 Excluded Assets.........................................................................3
1.3 Assumption of Liabilities...............................................................3
1.4 Purchase Price..........................................................................5
1.5 Closing Payments........................................................................5
1.6 Additional Payment......................................................................5
1.7 Time and Place of Closing...............................................................5
1.8 Transfer of Subject Assets..............................................................5
1.9 Delivery of Records and Contracts.......................................................6
1.10 Further Assurances......................................................................6
1.11 Allocation of Purchase Price............................................................6
1.12 Sales and Transfer Taxes................................................................7
1.13 Employees...............................................................................7
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
STOCKHOLDERS.....................................................................................7
2.1 Making of Representations and Warranties................................................7
2.2 Organization and Qualifications of Seller...............................................7
2.3 Subsidiaries............................................................................7
2.4 Capital Stock of Seller; Beneficial Ownership...........................................8
2.5 Authority of Seller and the Stockholders................................................8
2.6 Authorization from Others...............................................................9
2.7 Real and Personal Property..............................................................9
2.8 Financial Statements...................................................................10
2.9 Taxes..................................................................................10
2.10 Collectibility of Accounts Receivable..................................................12
2.11 Absence of Certain Changes.............................................................12
2.12 Ordinary Course........................................................................13
2.13 Intellectual Property..................................................................14
2.14 Contracts..............................................................................16
2.15 Litigation.............................................................................18
2.16 Compliance with Laws...................................................................18
2.17 Warranty or Other Claims...............................................................18
2.18 Finder's Fee...........................................................................18
2.19 Permits; Burdensome Agreements.........................................................19
2.20 Corporate Records......................................................................19
2.21 Transactions with Interested Persons...................................................19
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
2.22 Employee Benefit Programs..............................................................19
2.23 Environmental Matters..................................................................20
2.24 Directors, Officers and Employees......................................................20
2.25 Disclosure.............................................................................20
2.26 Employees; Labor Matters...............................................................20
2.27 Customers and Distributors.............................................................21
2.28 Insurance..............................................................................21
2.29 Powers of Attorney.....................................................................21
2.30 Operation of Business..................................................................21
SECTION 3. INVESTMENT REPRESENTATIONS AND WARRANTIES OF SELLER.............................................21
SECTION 4. COVENANTS OF SELLER AND THE STOCKHOLDERS........................................................22
4.1 Making of Covenants and Agreements.....................................................22
4.2 Conduct of Business....................................................................23
4.3 Notice of Default......................................................................23
4.4 Consummation of Agreement..............................................................23
4.5 Cooperation of Seller..................................................................23
4.6 Non-competition........................................................................23
4.7 No Solicitation of Other Offers........................................................24
4.8 Confidentiality........................................................................24
4.9 Tax Returns............................................................................25
4.10 Administrative Support/Use of Equipment................................................25
4.11 Name Change............................................................................25
4.12 Domain Names...........................................................................25
4.13 Equitable Relief.......................................................................25
4.14 Sublease...............................................................................25
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.........................................................26
5.1 Making of Representations and Warranties...............................................26
5.2 Organization of Buyer..................................................................26
5.3 Capital Stock of Seller; Beneficial Ownership..........................................26
5.4 Authority of Buyer.....................................................................26
5.5 SEC Reports............................................................................26
5.6 Buyer Common Stock.....................................................................27
5.7 Intellectual Property..................................................................27
5.8 Year 2000..............................................................................27
5.9 Compliance.............................................................................27
5.10 No Conflict............................................................................27
5.11 No Consents............................................................................28
5.12 Litigation.............................................................................28
5.13 Finder's Fee...........................................................................28
5.14 Disclosure.............................................................................28
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 6. COVENANTS OF BUYER..............................................................................28
6.1 Making of Covenants and Agreement......................................................28
6.2 Confidentiality........................................................................28
6.3 Consummation of Agreement..............................................................29
6.4 Cooperation of Buyer...................................................................29
6.5 Equitable Relief.......................................................................29
6.6 Amendment of First Note................................................................29
SECTION 7. CONDITIONS......................................................................................29
7.1 Conditions to the Obligations of Buyer.................................................29
7.2 Conditions to Obligations of Seller....................................................31
SECTION 8. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.....................................................32
8.1 Termination............................................................................32
8.2 Effect of Termination..................................................................33
8.3 Right to Proceed.......................................................................33
SECTION 9. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING....................................................33
9.1 Survival of Warranties.................................................................33
9.2 Collection of Assets...................................................................33
9.3 Payment of Obligations.................................................................34
SECTION 10. INDEMNIFICATION......................................................................................34
10.1 Indemnification by Seller and the Stockholder..........................................34
10.2 Limitations on Indemnification by Seller...............................................35
10.3 Indemnification by Buyer...............................................................35
10.4 Limitations on Indemnification by Buyer................................................36
10.5 Notice; Defense of Claims..............................................................36
10.6 Stockholder Representative.............................................................37
SECTION 11. MISCELLANEOUS........................................................................................37
11.1 Bulk Sales Law.........................................................................37
11.2 Fees and Expenses......................................................................37
11.3 Governing Law..........................................................................37
11.4 Notices................................................................................37
11.5 Entire Agreement.......................................................................40
11.6 Assignability; Binding Effect..........................................................40
11.7 Captions and Gender....................................................................40
11.8 Execution in Counterparts..............................................................40
11.9 Amendments.............................................................................40
11.10 Publicity and Disclosures..............................................................40
SECTION 12. ARBITRATION..........................................................................................40
</TABLE>
(iii)
<PAGE>
EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
EXHIBITS
<S> <C>
Exhibit 1.5(b) Form of First Promissory Note
Exhibit 1.5(c) Form of Second Promissory Note
Exhibit 7.1(d) Form of Opinion of Seller's Counsel
Exhibit 7.1(i) Form of Marketing and Distribution Agreement
Exhibit 7.1(j) Form of Preferred Agency Agreement
Exhibit 7.1(k) Form of Sublease Agreement
Exhibit 7.2(c) Form of Opinion of Buyer's Counsel
<CAPTION>
SCHEDULES
<S> <C>
Schedule 1.1(a) Software Products
Schedule 1.1(e) Personal Property
Schedule 1.1(f) Contracts
Schedule 1.2(b) Excluded Assets
Schedule 1.6 InternetPost Service Integration
Schedule 2.2 Foreign Qualifications
Schedule 2.4 Capitalization
Schedule 2.5 Authority
Schedule 2.6 Consents
Schedule 2.7(b) Leased Real Property
Schedule 2.9 Taxes
Schedule 2.10 Collectibility of Accounts Receivable
Schedule 2.11 Absence of Certain Changes
Schedule 2.13(a) Rights to Intellectual Property
Schedule 2.13(b) Intellectual Property
Schedule 2.13(c) Licenses Granted to Seller
Schedule 2.13(d) Licenses Granted by Seller
Schedule 2.13(f) Other Agreements
Schedule 2.13(g) The Software
Schedule 2.13(h) Year 2000 Compliance
Schedule 2.14 Contracts
Schedule 2.15 Litigation
Schedule 2.16 Compliance with Laws
Schedule 2.17 Warranties
Schedule 2.18 Finder's Fee
Schedule 2.19 Burdensome Agreements
Schedule 2.21 Transactions with Interested Persons
</TABLE>
(iv)
<PAGE>
<TABLE>
<S> <C>
Schedule 2.22 Employee Benefit Programs
Schedule 2.23 Environmental Matters
Schedule 2.24 Directors, Officers and Employees
Schedule 2.26 Employees; Labor Matters
Schedule 2.27 Customers and Distributors
Schedule 2.28 Insurance
Schedule 2.30 Operation of Business
Schedule 4.10 Administrative Support/Use of Equipment
Schedule 5.7 Intellectual Property
Schedule 7.1(h) Employment Arrangements
</TABLE>
(v)
<PAGE>
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is entered into as of December 13, 1999
by and among Webhire, Inc., a Delaware corporation ("Buyer"), Human Resources
Sites International, Inc., an Illinois corporation ("Seller"), Joel M. Yaseen
("Yaseen" or a "Stockholder") and each of the stockholders of the Seller that
have executed a signature page to this Agreement (each individually, a
"Stockholder" and, collectively with Yaseen, the "Stockholders").
W I T N E S S E T H
WHEREAS, subject to the terms and conditions hereof, Seller desires to
sell substantially all of its properties and assets;
WHEREAS, subject to the terms and conditions hereof, Buyer desires to
purchase said properties and assets of Seller for the consideration specified
herein and the assumption by Buyer of certain liabilities and obligations of
Seller; and
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. PURCHASE AND SALE OF ASSETS.
1.1 SALE OF ASSETS. Subject to the exclusions in Section 1.2 below and
the other provisions of this Agreement, Seller agrees to sell and Buyer agrees
to purchase, at the Closing (as defined in Section 1.7 hereof), all of the
properties, assets and business of Seller of every kind and description,
tangible and intangible, real, personal or mixed, and wherever located,
including, without limitation, the following:
(a) All of Seller's right, title and interest in those certain
software products listed on SCHEDULE 1.1(A) hereto including, without
limitation, all related source code and object code (the "Primary Software");
(b) All of Seller's right, title and interest in all other
software of Seller, including, without limitation, all related source code and
object code (the "Miscellaneous Software");
(c) All flow charts, block diagrams, programmer documentation,
previous versions, notes, concepts or plans for future versions, enhancements,
improvements and other products, file layouts, logic flows, normative
descriptions, specifications, test reports, user guides, installation guides,
system and programming documentation, maintenance and update
<PAGE>
records, input forms and formats, output reports and other documentation
(collectively, the "Documentation") with respect to the Primary Software and the
Miscellaneous Software (all of such software, together with all related source
code and object code and the Documentation, being referred to herein as the
"Software");
(d) All copyrights, patents, patentable inventions,
proprietary rights, trademarks, tradenames, service marks, trade secret rights,
technical know-how, formulas, associated goodwill, confidential information and
all other intellectual property of Seller of every kind and description used or
useful in the licensing and marketing of the Software or any related business of
Seller, including, without limitation, the copyrights, patents, trademarks,
tradenames, service marks and other intellectual property listed on SCHEDULE
2.13(B); provided, however, that the only domain names Buyer is acquiring from
Seller are the domain names listed on SCHEDULE 2.13(B);
(e) All equipment (including office equipment), machinery,
computer hardware, supplies, furniture, furnishings and other tangible personal
property of Seller, including, without limitation, the items listed on SCHEDULE
1.1(E) hereto (collectively, the "Personal Property"), provided that SCHEDULE
1.1(E) need not list miscellaneous office supplies;
(f) The contracts and agreements to which Seller is a party
relating to the Software or the other assets and business of Seller which Buyer
agrees to assume and which are listed on SCHEDULE 1.1(F) hereto;
(g) All records and documentation of Seller relating to its
customers including, without limitation, customer lists; and all other business
records of Seller including, without limitation, copies of all historical
accounts of Seller;
(h) All of Seller's right, title and interest in and to any
cause of action against third parties that has arisen or may arise relating to
the Subject Assets (as defined below in this Section 1.1);
(i) All of Seller's licenses, permits and authorizations and
all judgments, claims and demands relating to the Subject Assets;
(j) All of Seller's inventory and files;
(k) All of Seller's goodwill including, to the extent
practicable, Seller's goodwill associated with all vendor, distributor, service
provider, contractor and customer relationships; and
(l) All of Seller's accounts receivable as of the Closing Date
(as defined in Section 1.7), if any, that are not set forth on the Base Balance
Sheet (as defined in Section 2.8(a)).
<PAGE>
The assets, property and business of Seller to be sold to and purchased
by Buyer under this Agreement, less the property excluded under Section 1.2
hereof, are hereinafter sometimes collectively referred to as the "Subject
Assets."
1.2 EXCLUDED ASSETS. Notwithstanding anything in this Agreement to the
contrary, there shall be excluded from the Subject Assets the following property
(collectively, the "Excluded Assets"):
(a) Seller's corporate franchise, stock record books, record
books containing minutes of meetings of directors and stockholders or records of
meetings or actions of partners, as applicable, and such other records as have
to do exclusively with Seller's organization, stock capitalization or equity
participation in such Seller (collectively, the "Company Records"); provided,
however, that Seller shall provide Buyer prior to the Closing with complete
copies of each of the foregoing, certified by Seller to be true, correct and
complete;
(b) All of the assets listed on SCHEDULE 1.2(B) hereto;
(c) Cash and cash equivalents held by Seller as of the Closing
Date;
(d) All of Seller's accounts receivable that are set forth on
the Base Balance Sheet;
(e) The Seller/Resumix Agreement (as defined in Section 7.1(g)
hereof); and
(f) All Employee Programs (as defined in Section 2.22 hereof).
1.3 ASSUMPTION OF LIABILITIES.
(a) Upon the sale and purchase of the Subject Assets, Buyer
shall assume and agree to pay or discharge when due in accordance with their
respective terms only the following liabilities (the "Assumed Liabilities") of
Seller:
(i) the executory obligations of performance under
the contracts listed on SCHEDULE 1.1(F) hereto, but not including any
liabilities or obligations arising out of any default or breach by Seller prior
to the Closing under any such contract or any liabilities or obligations arising
out of the return of any product which was sold prior to the Closing; and
(b) Buyer shall not assume and shall not pay any other
liabilities of Seller (collectively, the "Excluded Liabilities"), including, but
not limited to:
<PAGE>
(i) liabilities incurred by Seller in connection with
this Agreement and the transactions provided for herein, including,
without limitation, any counsel and accountant's fees or expenses, and
any expenses pertaining to the performance by Seller of its obligations
hereunder;
(ii) all Taxes (as defined in Section 2.9) of Seller
(whether relating to periods before or after the transactions
contemplated in this Agreement or incurred by Seller in connection with
this Agreement and the transactions provided for herein), and any
liability, pursuant to a Tax allocation agreement or otherwise for
Taxes arising out of the inclusion of Seller in any group filing
consolidated, combined or unitary tax returns or arising out of any
transferee or successor liability;
(iii) liabilities of Seller with respect to any
options, warrants, agreements or convertible or other rights to acquire
any shares of its capital stock of any class;
(iv) liabilities for customer returns, disputes,
complaints, product failures, claims and credits arising from the sale
or license of any product or provision of any service prior to the
Closing Date;
(v) liabilities of Seller for any mortgages, pledges,
loans, bank indebtedness, stockholder indebtedness, indebtedness for
Taxes, or otherwise, including, without limitation, liabilities for
interest due to any lender or Stockholder;
(vi) liabilities of Seller under any contracts,
agreements or other arrangements not listed on SCHEDULE 1.1(F);
(vii) liabilities with respect to events, acts,
circumstances, omissions, conditions or any other state of facts
(including, without limitation, any claim relating to or associated
with product liability or warranty matters, Tax matters, employee and
benefits matters and any failure to comply with applicable laws) to the
extent the same relate to the property, assets or business of Seller
and occur prior to the Closing Date;
(viii) any and all liabilities relating to the
Excluded Assets; and
(ix) liabilities of Seller of any kind or nature,
known, unknown, accrued, absolute, contingent or otherwise, whatsoever,
other than the Assumed Liabilities.
Consistent with the foregoing, and without limitation, Seller shall
retain and be responsible for and pay, as the same are incurred, and Buyer shall
have no obligations or liabilities whatsoever with respect to, any and all
losses, damages, obligations, liens, assessments, judgments, fines, costs and
expenses, liabilities and claims, including, without limitation, interest,
penalties and reasonable fees of counsel and experts of every kind or
<PAGE>
nature whatsoever, made by or owed to any person arising out of or in connection
with the Excluded Liabilities. Seller and the Stockholders agree, as provided in
Section 10, to indemnify and hold Buyer and its affiliates harmless from and
against any and all claims relating to Excluded Liabilities that Seller and the
Stockholders are responsible for as described in this Section 1.3(b).
The assumption of any liabilities by any party hereunder shall not
enlarge any rights of third parties under contracts or arrangements with the
Buyer or Seller and nothing herein shall prevent any party from contesting in
good faith any of said liabilities as against any third party.
1.4 PURCHASE PRICE. In consideration of the sale by Seller to Buyer of
the Subject Assets, subject to the assumption by Buyer of the Assumed
Liabilities and the satisfaction of all of the conditions contained herein,
Buyer agrees that it will pay to Seller the consideration described in Sections
1.5 and 1.6 hereof (collectively, the "Purchase Price").
1.5 CLOSING PAYMENTS. At the Closing, Buyer shall make the following
payments to Seller:
(a) Buyer shall deliver to Seller Seven Hundred Fifty Thousand
Dollars ($750,000) in cash by bank cashier check or by wire transfer of
immediately available funds;
(b) Buyer shall deliver to Seller a junior subordinated
convertible promissory note in the principal amount of Two Million Five Hundred
Thousand Dollars ($2,500,000) (the "First Note") substantially in the form
attached hereto as EXHIBIT 1.5(B); and
(c) Buyer shall deliver to Seller a junior subordinated
convertible promissory note in the principal amount of Nine Hundred Twenty-Five
Thousand Dollars ($925,000) substantially in the form attached hereto as EXHIBIT
1.5(C) (the "Second Note" and together with First Note, the "Notes").
1.6 ADDITIONAL PAYMENT. On the earlier of (i) the first business day
which is forty-five (45) days after the Closing Date or (ii) the date upon which
(a) Seller's InternetPost service is initially integrated into Buyer's Recruiter
services in accordance with the specifications set forth on SCHEDULE 1.6
attached hereto and (b) Seller's InternetPost service is upgraded to the
enterprise edition of Object Design, Inc.'s Object Store database, Buyer shall
deliver to Seller Seven Hundred Fifty Thousand Dollars ($750,000) in cash by
bank cashier check or by wire transfer of immediately available funds (the
"Additional Payment").
1.7 TIME AND PLACE OF CLOSING. The closing of the purchase and sale
provided for in this Agreement (called the "Closing") shall be held at the
offices of Goodwin, Procter & Hoar LLP at Exchange Place, 53 State Street,
Boston, Massachusetts on the date hereof or at such other place or earlier or
later date or time as may be fixed by mutual agreement of Buyer and Seller (such
date, the "Closing Date").
<PAGE>
1.8 TRANSFER OF SUBJECT ASSETS. At the Closing, Seller shall deliver
or cause to be delivered to Buyer good and sufficient instruments of transfer
transferring to Buyer title to all the Subject Assets. Such instruments of
transfer (i) shall be in the form and will contain the warranties, covenants and
other provisions (not inconsistent with the provisions hereof) which are usual
and customary for transferring the type of property involved under the laws of
the jurisdictions applicable to such transfers, (ii) shall be in form and
substance satisfactory to Buyer and its counsel, and (iii) shall effectively
vest in Buyer good and marketable title to all the Subject Assets free and clear
of all liens, restrictions and encumbrances.
1.9 DELIVERY OF RECORDS AND CONTRACTS. At the Closing, Seller shall
deliver or cause to be delivered to Buyer all of Seller's contracts,
commitments, agreements (including without limitation non-competition
agreements) and rights included in the Subject Assets, with such assignments
thereof and consents to assignments as are necessary to assure Buyer of the full
benefit of this Agreement. Seller shall also deliver to Buyer at the Closing all
of Seller's business records, tax returns, books and other data relating to the
Subject Assets, and Seller shall take all requisite steps to put Buyer in actual
possession and operating control of the Subject Assets. After the Closing, Buyer
will afford to Seller, for the purpose of preparing such tax returns of Seller
as may be required after the Closing, reasonable access to the books and records
of Seller delivered to Buyer under this Section, and shall permit Seller, at
Seller's expense, to make extracts and copies therefrom.
1.10 FURTHER ASSURANCES. Seller and the Stockholders from time to time
after the Closing at the request of Buyer and without further consideration
shall execute and deliver further instruments of transfer and assignment and
take such other action as Buyer may reasonably require to more effectively
transfer and assign to, and vest in, Buyer each of the Subject Assets. Nothing
herein shall be deemed to be a waiver by Buyer of its right to receive at the
Closing an effective assignment of each of the contracts, commitments or rights
of Seller included in the Subject Assets as otherwise set forth in this
Agreement. In addition, Buyer from time to time after the Closing at the request
of Seller and without further consideration shall execute and deliver such
further instruments and take such other action as Seller may reasonably require
to effectuate; (i) any transfer of either of the Notes in accordance with their
terms; (ii) any issuance of shares of Buyer Common Stock upon conversion of the
Notes in accordance with the terms; (iii) any sale of Buyer Common Stock
received upon conversion of the Notes in accordance with Rule 144 of the
Securities Act of 1933, as amended (the "Securities Act") (including the removal
of any restrictive legend); and (iv) any of the other transactions contemplated
by this Agreement or the Notes.
1.11 ALLOCATION OF PURCHASE PRICE. Within 20 business days of the
Closing, Buyer shall allocate the purchase price (and all other capitalized
costs) among the Subject Assets. Such allocation shall be made in accordance
with the provisions of Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"), and shall be binding upon Buyer and Seller for all
purposes (including financial accounting purposes, financial and regulatory
reporting
<PAGE>
purposes and tax purposes). Buyer and Seller also each agree to file
Internal Revenue Service form 8594 consistently with the foregoing and in
accordance with Section 1060 of the Code.
1.12 SALES AND TRANSFER TAXES. All sale, transfer, documentary, use,
stamp, registration and such other taxes, fees and duties (including, in each
case, any penalties or interest) under applicable law incurred in connection
with this Agreement or the transactions contemplated hereby or thereby will be
borne and paid by Seller, and Seller shall promptly reimburse Buyer for the
payment of any such taxes, fees or duties which Buyer is required to make under
applicable law.
1.13 EMPLOYEES. Immediately following the Closing, Buyer shall have the
right, at its discretion, to extend offers of employment to any or all of
Seller's other employees and Seller and the Stockholders shall cooperate fully
with Buyer in connection with the hiring by Buyer of any of such employees.
Seller and the Stockholders acknowledge and agree that Buyer is not assuming and
shall not have any liabilities or obligations in connection with or relating to
any of Seller's existing or former employees, any Employee Program (as defined
in Section 2.22) or any other employment related matters. In connection with the
foregoing, Seller and the Stockholders agree that Seller shall comply with all
applicable notification requirements under 29 U.S.C. ss. 1161 ET SEq. (commonly
known as "COBRA").
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND THE STOCKHOLDERS.
2.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, Seller and each of the Stockholders, jointly and severally,
hereby make to Buyer the representations and warranties contained in this
Section 2, except as otherwise may be set forth in a Schedule attached hereto.
Any fact or item disclosed in one Schedule shall not be deemed to be disclosed
with respect to all sections or subsections of this Section 2 or this Agreement,
unless specific cross-references appear in such Schedule.
2.2 ORGANIZATION AND QUALIFICATIONS OF SELLER. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Illinois with full corporate power and authority to own or lease its
properties and to conduct its business in the manner and in the places where
such properties are owned or leased or such business is currently conducted or
proposed to be conducted. The copies of Seller's charter as amended to date,
certified by the Illinois Secretary of State, and of Seller's by-laws, as
amended to date, certified by Seller's Secretary, and heretofore delivered to
Buyer's counsel, are complete and correct, and no amendments thereto are
pending. Seller is qualified to do business as a foreign corporation in each
jurisdiction set forth on SCHEDULE 2.2 attached hereto and is not required to be
licensed or qualified to conduct its business or own its property in any other
jurisdiction.
<PAGE>
2.3 SUBSIDIARIES. Seller has no subsidiaries and does not own any
securities issued by any other business organization or governmental authority,
except U.S. Government securities, bank certificates of deposit and money market
accounts acquired as short-term investments in the ordinary course of its
business. Seller does not own or have any direct or indirect interest in or
control over any corporation, partnership, joint venture or entity of any kind.
2.4 CAPITAL STOCK OF SELLER; BENEFICIAL OWNERSHIP. The authorized
capital stock of Seller consists of 10,000 shares of common stock, no par value
per share, of which 1,388 shares are duly and validly issued, outstanding, fully
paid and non-assessable and of which 8,612 shares are authorized but unissued.
Except as set forth on SCHEDULE 2.4 attached hereto, there are no outstanding
options, warrants, rights, commitments, preemptive rights or agreements of any
kind for the issuance or sale of, or outstanding securities convertible into,
any additional shares of capital stock of any class of Seller. None of Seller's
capital stock has been issued in violation of any federal or state law. SCHEDULE
2.4 attached hereto lists each of the stockholders of Seller and the number of
shares of common stock of the Seller beneficially owned by such stockholder.
2.5 AUTHORITY OF SELLER AND THE STOCKHOLDERS. Seller and each
Stockholder has full right, authority and power to enter into this Agreement and
each agreement, document and instrument to be executed and delivered by Seller
or such Stockholder pursuant to this Agreement and to perform its or his
obligations hereunder. The execution, delivery and due performance by Seller and
each Stockholder of this Agreement and each such other agreement, document and
instrument to be executed and delivered by Seller or such Stockholder pursuant
to this Agreement have been duly authorized by all necessary action and no other
action on the part of Seller or any Stockholder is required in connection
therewith. This Agreement and each agreement, document and instrument executed
and delivered by Seller or by any Stockholder pursuant to this Agreement
constitutes, or when executed and delivered will constitute, valid and binding
obligations of Seller and each Stockholder signatory thereto enforceable in
accordance with their terms. The execution, delivery and performance by Seller
and each Stockholder of this Agreement and of each such agreement, document and
instrument:
(a) in the case of Seller, does not and will not violate any
provision of its charter or by-laws;
(b) does not and will not violate any laws of the United
States, or any state or other jurisdiction applicable to Seller or any
Stockholder or require Seller or any Stockholder to obtain any approval, consent
or waiver of, or make any filing with, any person or entity (governmental or
otherwise) that has not been obtained or made; and
(c) does not and will not result in a breach of, constitute a
default under, accelerate any obligation under, or give rise to a right of
termination of any indenture or loan or credit agreement or any other agreement,
contract, instrument, mortgage, lien, lease,
<PAGE>
permit, authorization, order, writ, judgment, injunction, decree, determination
or arbitration award to which Seller or any Stockholder is a party or by which
the property of Seller or any Stockholder is bound or affected, or result in the
creation or imposition of any mortgage, pledge, lien, security interest or other
charge or encumbrance on any of the Subject Assets, except as specifically
identified on SCHEDULE 2.5.
2.6 AUTHORIZATION FROM OTHERS. Seller has obtained all authorizations,
consents and permits of others required to permit the consummation by Seller of
the transactions contemplated by this Agreement, and SCHEDULE 2.6 contains a
list of each such authorization, consent and permit.
2.7 REAL AND PERSONAL PROPERTY.
(a) OWNED REAL PROPERTY. Seller owns no real property.
(b) LEASED REAL PROPERTY. All of the real property leased by
Seller as tenant or lessee is identified on SCHEDULE 2.7(B) (collectively
referred to herein as the "Leased Real Property"). The copies of the leases of
the Leased Real Property (collectively, the "Leases") delivered by Seller to
Buyer is complete, accurate, true and correct. With respect to each of the
Leases, except as set forth on SCHEDULE 2.7(B):
(i) each of the Leases is in full force and effect
and has not been modified, amended, or altered, in writing or
otherwise;
(ii) all obligations of the landlord or lessor under
the Leases which have accrued have been performed, and to the
best of the knowledge of Seller, no landlord or lessor is in
default under any Lease; and
(iii) all obligations of the tenant or lessee under
the Leases which have accrued have been performed, and Seller
is not in default under any Lease, and no circumstance
presently exists which, with notice or the passage of time, or
both, would give rise to a default by Seller.
(c) COMPLIANCE WITH LAW; GOVERNMENT APPROVALS. Seller has
received no notice from any governmental authority of any violation of any law,
ordinance, regulation, license, permit or authorization issued with respect to
any of the Leased Real Property that has not been corrected heretofore, and no
such violation now exists which could have an adverse effect on the operation of
any of the Leased Real Property.
(d) PERSONAL PROPERTY. A complete description of all Personal
Property other than miscellaneous office supplies is contained in SCHEDULE
1.1(E). Except as specifically disclosed in SCHEDULE 1.1(E), Seller has good and
marketable title to all such Personal Property. No item of such Personal
Property is subject to any mortgage, pledge, lien, conditional sale agreement,
security agreement, encumbrance or other charge except as
<PAGE>
specifically disclosed in said SCHEDULE 1.1(E). The Base Balance Sheet reflects
all Personal Property of Seller, and the Subject Assets are sufficient for Buyer
to continue the business of Seller as conducted by Seller.
2.8 FINANCIAL STATEMENTS.
(a) Seller has previously delivered to Buyer the following
financial statements (i) balance sheets of the Seller for the fiscal year ended
December 31, 1998 and statements of income, retained earnings and cash flows for
each of the periods then ended compiled by Edwin C. Sigel, Ltd. independent
public accountants, and (ii) a balance sheet of the Seller as of October 31,
1999 (the "Base Balance Sheet") and statements of income, retained earnings and
cash flows for the period then ended, with appropriate footnotes, certified by
Seller's Chief Financial Officer. Said financial statements have been prepared
in accordance with generally accepted accounting principles applied consistently
during the periods covered thereby, are complete and correct in all material
respects, and present fairly in all material respects the financial condition of
Seller at the dates of said statements and the results of its operations and its
cash flows for the periods covered thereby.
(b) As of the date of the Base Balance Sheet (the "Base
Balance Sheet Date"), Seller had no liabilities of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation liabilities as guarantor or otherwise with respect
to obligations of others, or liabilities for taxes due or then accrued or to
become due or contingent or potential liabilities relating to activities of
Seller or the conduct of its business prior to the Base Balance Sheet Date
regardless of whether claims in respect thereof had been asserted as of such
date), except liabilities stated or adequately reserved against on the Base
Balance Sheet and reflected in Schedules furnished to Buyer hereunder as of the
date hereof.
(c) As of the date hereof, Seller had and will have no
liabilities of any nature, whether accrued, absolute, contingent or otherwise,
asserted or unasserted, known or unknown (including without limitation
liabilities as guarantor or otherwise with respect to obligations or others, or
liabilities for taxes due or then accrued or to become due or contingent or
potential liabilities relating to activities of Seller or the conduct of its
business prior to the date hereof or the Closing, as the case may be, regardless
of whether claims in respect thereof had been asserted as of such date), except
liabilities (i) stated or adequately reserved against on the Base Balance Sheet
or the notes thereto and reflected in Schedules furnished to Buyer hereunder on
the date hereof or (ii) incurred after the Base Balance Sheet Date in the
ordinary course of business of Seller consistent with the terms of this
Agreement.
2.9 TAXES.
<PAGE>
(a) Except as disclosed in SCHEDULE 2.9, Seller has paid or
caused to be paid all federal, state, local, foreign, and other taxes,
including, without limitation, income taxes, estimated taxes, alternative
minimum taxes, excise taxes, sales taxes, use taxes, value-added taxes, gross
receipts taxes, franchise taxes, capital stock taxes, employment and
payroll-related taxes, withholding taxes, stamp taxes, transfer taxes windfall
profit taxes, environmental taxes and property taxes, whether or not measured in
whole or in part by net income, and all deficiencies, or other additions to tax,
interest, fines and penalties owed by it (collectively, "Taxes"), required to be
paid by it through the date hereof whether disputed or not.
(b) Seller has in accordance with applicable law filed all
federal, state, local and foreign tax returns required to be filed by it through
the date hereof, and all such returns correctly and accurately set forth the
amount of any Taxes relating to the applicable period. Seller has delivered to
Buyer correct and complete copies of all such federal, state, local and foreign
income tax returns, and of all examination reports and statements of
deficiencies assessed against or agreed to by Seller with respect to said
returns.
(c) Neither the Internal Revenue Service nor any other
governmental authority has ever asserted, is now asserting or, to the best
knowledge of Seller and the Stockholders, threatening to or expected to assert
against Seller any deficiency or claim for Taxes. Seller has never entered into
a closing agreement pursuant to Section 7121 of the Code.
(d) Except as set forth in SCHEDULE 2.9, there has not been
any audit of any tax return filed by Seller, no audit of any tax return of
Seller is in progress, and Seller has not been notified by any tax authority
that any such audit is contemplated or pending. Except as set forth in SCHEDULE
2.9, no extension of time with respect to any date on which a tax return was or
is to be filed by Seller is in force, and no waiver or agreement by Seller is in
force for the extension of time for the assessment or payment of any Taxes.
(e) Seller has never been (and has never had any liability for
unpaid Taxes because it once was), a member of an "affiliated group" (as defined
in Section 1504(a) of the Code). Seller has never filed, and has never been
required to file, a consolidated, combined or unitary tax return with any other
entity. Seller does not own and has never owned a direct or indirect interest in
any trust, partnership, corporation or other entity and therefore Buyer is not
acquiring from Seller an interest in any entity. Except as set forth in SCHEDULE
2.9, Seller is not a party to any tax sharing agreement. None of the Assumed
Liabilities is an obligation to make a payment that will not be deductible under
Section 280G of the Code.
(f) Seller is not a "foreign person" within the meaning of
Section 1445 of the Code and Treasury Regulations Section 1.1445-2.
(g) Seller has, at all times since May 6, 1997, qualified and
currently qualifies as an entity properly taxable as an S corporation (as
defined in Section 1361 of the Code).
<PAGE>
(h) For purposes of this Agreement, all references to Sections
of the Code shall include any predecessor provisions to such Sections and any
similar provisions of federal, state, local or foreign law.
2.10 COLLECTIBILITY OF ACCOUNTS RECEIVABLE. All of the accounts
receivable of Seller shown or reflected on the Base Balance Sheet (less the
reserve for returns set forth on the Base Balance Sheet) are valid and
enforceable claims, fully collectible in the ordinary course and subject to no
set off or counterclaim, and all such accounts receivable represent valid
accounts incurred in the ordinary course of business consistent with past
practice. Seller does not have any accounts or loans receivable from any person,
firm or corporation which is affiliated with Seller or the Stockholders or from
any director, officer or employee of Seller, except as disclosed on SCHEDULE
2.10 hereto, and all accounts and loans receivable from any such person, firm or
corporation shall be paid in cash prior to the Closing.
2.11 ABSENCE OF CERTAIN CHANGES. Since December 31, 1998, (i) Seller
has not sold, disposed of or otherwise transferred any asset or property of
Seller to any stockholder of Seller and (ii) there has not been any declaration,
setting aside or payment of any dividend by Seller, or the making of any other
distribution in respect of the capital stock of Seller, or any direct or
indirect redemption, purchase or other acquisition by Seller of its own capital
stock. Except as disclosed in SCHEDULE 2.11, since the date of the Base Balance
Sheet there has not been:
(a) Any change in the financial condition, properties, assets,
liabilities, prospects, business or operations of Seller which change by itself
or in conjunction with all other such changes, whether or not arising in the
ordinary course of business, has had a material adverse effect on the assets or
business of Seller transferred to Buyer hereunder, taken as a whole (a "Seller
Material Adverse Effect");
(b) Any contingent liability incurred by Seller as guarantor
or otherwise with respect to the obligations of others, any other contingent or
fixed obligations or liabilities except in the ordinary course of business or
any cancellation of any material debt or claim owing to, or waiver of any
material right of, Seller;
(c) Any mortgage, encumbrance or lien placed on any of the
Subject Assets which remains in existence on the date hereof or will remain on
the Closing Date;
(d) Any obligation or liability of any nature incurred by
Seller, whether accrued, absolute, contingent or otherwise, asserted or
unasserted, known or unknown (including without limitation liabilities for Taxes
due or to become due or contingent or potential liabilities relating to products
or services provided by Seller or the conduct of Seller's business since the
date of the Base Balance Sheet regardless of whether claims in respect thereof
have been asserted), other than obligations and liabilities incurred in the
ordinary course of business consistent with the terms of this Agreement (it
being understood that
<PAGE>
product or service liability claims shall not be deemed to be incurred in the
ordinary course of business);
(e) Any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of Seller other than in the ordinary course of business or
any purchase of any capital asset costing more than $5,000;
(f) Any damage, destruction or loss, whether or not covered by
insurance, which has had, or is likely to have, a Seller Material Adverse
Effect;
(g) Any change in the compensation payable or to become
payable by Seller to any of its officers, employees, agents or independent
contractors (including without limitation any change in commission arrangements)
other than normal merit increases in accordance with its usual practices, or any
bonus payment or arrangement made to or with any of such officers, employees,
agents or independent contractors;
(h) Any change with respect to the officers or management of
Seller;
(i) Any payment or discharge of a material lien or liability
of Seller which was not shown on the Base Balance Sheet or incurred in the
ordinary course of business thereafter;
(j) Any change in Seller's business relationship with its
Customers (as defined in Section 2.27), Distributors (as defined in Section
2.27), independent contractors or others having business relationships with
Seller.
(k) Any obligation or liability incurred by Seller to any of
its officers, directors, stockholders or employees, or any loans or advances
made by Seller to any of its officers, directors, stockholders or employees,
except normal compensation and expense allowances payable to officers or
employees;
(l) Any change in accounting methods or practices, payment
practices, credit practices or collection policies used by Seller;
(m) Any prepayment of loans from any stockholders, officers or
directors or any change in Seller's borrowing arrangements with any of the
foregoing.
(n) Any other transaction entered into by Seller having a
value individually in excess of $5,000, other than transactions in the ordinary
course of business; or
(o) Any agreement or understanding whether in writing or
otherwise, for Seller to take any of the actions specified in paragraphs (a)
through (n) above.
<PAGE>
2.12 ORDINARY COURSE. Since December 31, 1998, Seller has conducted its
business only in the ordinary course and consistent with past practice.
2.13 INTELLECTUAL PROPERTY.
(a) Except as described in SCHEDULE 2.13(A) and except for
"Off-the-Shelf Software" (as defined below), Seller has exclusive ownership of,
or exclusive license to use, all patent, copyright, trade secret, trademark, or
other proprietary rights (collectively, "Intellectual Property") used in the
business of Seller, or has obtained any licenses, releases or assignments
reasonably necessary to use all third parties' Intellectual Property rights in
works embodied in its Software. Except as described in SCHEDULE 2.13(A) all of
the rights of Seller in such Intellectual Property are freely transferable.
There are no claims or demands of any other person pertaining to any of such
Intellectual Property and no proceedings have been instituted, or are pending
or, to the knowledge of Seller, threatened, which challenge the rights of Seller
in respect thereof except as disclosed in SCHEDULE 2.13(A). Except as described
in SCHEDULE 2.13(A), Seller has the right to use, free and clear of claims or
rights of other persons, all customer lists, designs, manufacturing or other
processes, computer software, systems, data compilations, research results and
other information required for or incident to its products or its business as
presently conducted or contemplated. For purposes of this Agreement, the term
"Off-the-Shelf Software" shall mean software utilized in the internal operations
of Seller which is generally commercially available to the public at retail,
provided, however, that such software is not used in the development of, or
embodied in (i.e., all or part of the code comprising such software is included
in any Software), any of Seller's Software.
(b) All patents, patent applications, trademarks, trademark
applications and registrations, domain names, domain name applications and
registrations and registered copyrights which are owned by or licensed to Seller
or used or to be used by Seller in its business as presently conducted, and all
other items of Intellectual Property which are material to the business or
operations of Seller, are listed in SCHEDULE 2.13(B); PROVIDED, HOWEVER, that
SCHEDULE 2.13(B) only lists domain names and domain name applications that are
being acquired by Buyer in connection with this transaction.
(c) All licenses or other agreements under which Seller is
granted rights in Intellectual Property, other than licenses of Off-the-Shelf
Software, are listed in SCHEDULE 2.13(C). All said licenses or other agreements
are in full force and effect, there is no material default by any party thereto,
and except as set forth on SCHEDULE 2.13(C), all of the rights of Seller
thereunder are freely assignable. To the knowledge of Seller and the
Stockholders, the licensors under said licenses and other agreements have and
had all requisite power and authority to grant the rights purported to be
conferred thereby. The Buyer has been provided access to true and complete
copies of all such licenses or other agreements, and any amendments thereto.
(d) All licenses or other agreements under which Seller has
granted rights to others in Intellectual Property owned or licensed by Seller
(other than standard shrink-wrapped
<PAGE>
user licenses) are listed in SCHEDULE 2.13(D). All of said licenses or other
agreements are in full force and effect, there is no material default by any
party thereto, and, except as set forth on SCHEDULE 2.13(D), all of the rights
of Seller thereunder are freely assignable. The Buyer has been provided with
true and complete copies of all such licenses or other agreements, and any
amendments thereto.
(e) Seller has taken all steps required in accordance with
sound business practice to establish and preserve its ownership of all
Intellectual Property rights with respect to its products, services and
technology. Seller has affixed appropriate copyright and trademark notices on
all of its products and any related documentation. Seller has required all of
its professional and technical employees, all other employees having access to
valuable non-public information of Seller, and all consultants and independent
contractors involved in the development of any of the Intellectual Property to
execute agreements under which such persons are required to convey to Seller
ownership of all inventions and developments conceived or created by them in the
course of their employment with Seller or while they are providing services to
Seller and to maintain the confidentiality of all such information of Seller.
Seller and the Stockholders have not made any such information available to any
person other than employees of Buyer except pursuant to written agreements
requiring the recipients to maintain the confidentiality of such information and
appropriately restricting the use thereof. Seller and the Stockholders have no
knowledge of any infringement by others of any Intellectual Property rights of
Seller.
(f) The present business, activities and products of Seller do
not infringe any Intellectual Property of any other person. No proceeding
charging Seller with infringement of any adversely held Intellectual Property
has been filed or, to the knowledge of Seller, is threatened to be filed. To the
best knowledge of Seller and the Stockholders, there exists no unexpired patent
or patent application which includes claims that would be infringed by or
otherwise adversely affect the products, activities or business of Seller.
Seller is not making unauthorized use of any confidential information or trade
secrets of any person, including without limitation, any former employer of any
past or present employee, consultant or independent contractor of Seller. Except
as set forth in SCHEDULE 2.13(F), neither Seller nor, to the knowledge of Seller
and the Stockholders, any of Seller's employees, consultants or independent
contractors have any agreements or arrangements with any persons other than
Seller related to confidential information or trade secrets of such persons or
restricting any such person's ability to engage in business activities of any
nature. The activities of Seller's present and former employees, consultants and
independent contractors on behalf of Seller do not violate any such agreements
or arrangements known to Seller.
(g) SCHEDULE 2.13(G) sets forth a true and complete list of
all components of the Software other than Off-the-Shelf Software, and each
author of each component of the Software. Except as set forth in SCHEDULE
2.13(G), each author of each component of the Software has assigned ownership of
all proprietary rights in and to the Software (including without limitation
rights of copyright, patent and trade secret) to Seller. Seller has clear and
exclusive title to the Software and all proprietary rights therein and there are
no facts upon
<PAGE>
which any third party could assert a valid claim of ownership with respect to
any Software. Any and all third party software used in the creation of each
component of the Software is listed in SCHEDULE 2.13(G) with reference to the
component in question, and was used in accordance with a duly granted software
license also listed in SCHEDULE 2.13(G). Seller's rights in the Software
(including source code) constitute Intellectual Property subject to all of the
representations and warranties set forth in the foregoing provisions of this
Section 2.13. Except as set forth in SCHEDULE 2.13(G), the software and designs
of the Software have been developed and implemented in a professional manner and
are documented in accordance with normal professional standards so as to enable
a qualified software engineer, to maintain and modify the Software conveniently
and effectively on the basis of such documentation. Seller has conducted a
regular program of maintaining and updating the Software in response to defects,
and has in effect reliable procedures for version control with respect to the
Software. Except as set forth on SCHEDULE 2.13(G), (i) there are no material
software or design defects in any of the Software which prevent customers from
using the Software under the terms and conditions of Seller's customer service
agreements; and (ii) the Software conforms in all material respects to the
respective specifications and documentation provided by the Seller.
(h) Except as set forth on SCHEDULE 2.13(H), all computer
software products that are owned by Seller, exclusively licensed to Seller,
licensed, sold or otherwise distributed to others by Seller or are otherwise
required for the conduct of its business, including the Software but excluding
the Off-the-Shelf Software products are Year 2000 Compliant. As used herein,
"Year 2000 Compliant" shall mean the ability of the software to provide the
following date related functions:
(i) consistently handle date information before,
during and after January 1, 2000, including but not limited to
accepting date input, providing date output and performing calculations
on dates or portions of dates;
(ii) function accurately in accordance with the
documentation relating to the applicable software and without
interruption before, during and after January 1, 2000, without any
change in operations associated with the advent of the new century;
(iii) respond to two-digit date input in a way that
resolves any ambiguity as to the century in a disclosed, defined and
predetermined manner; and
(iv) store and provide output of date information in
ways that are unambiguous as to century.
2.14 CONTRACTS. Except as set forth in SCHEDULE 2.14, Buyer may
terminate at anytime and without penalty each of the contracts and agreements
set forth on SCHEDULE 1.1(F). Except for contracts, commitments, plans,
agreements and licenses described in SCHEDULE 2.14 (true and complete copies of
which have been delivered to Buyer), and except for contracts, agreements,
indentures, mortgages, licenses and promissory notes, the terms of which have
been satisfied, completed, performed or discharged, Seller is not a party to or
subject to:
<PAGE>
(a) any plan or contract providing for bonuses, options, stock
purchases, deferred compensation, retirement payments or profit sharing;
(b) any employment contract or contract for services;
(c) any contract or agreement with any job posting board or
Internet career site;
(d) any contract or agreement for the purchase of any
equipment except purchase orders in the ordinary course for less than $5,000
each, such orders not exceeding $25,000 in the aggregate;
(e) any other contracts or agreements creating any obligations
of Seller of $5,000 or more with respect to any such contract or agreement not
specifically disclosed elsewhere under this Agreement;
(f) any contract or agreement involving more than $5,000 which
by its terms does not terminate or is not terminable without penalty by Seller
or any successor or assign within ninety days after the date hereof;
(g) any contract or agreement for the sale or lease of its
products not made in the ordinary course of business;
(h) any contract with any sales agent or distributor of
products of Seller;
(i) any contract containing covenants limiting the freedom of
Seller to compete in any line of business or with any person or entity;
(j) any contract or agreement for the purchase of any fixed
asset for a price in excess of $5,000 whether or not such purchase is in the
ordinary course of business;
(k) any license agreement (as licensor or licensee) other than
license agreements with respect to Off-the-Shelf Software and the agreements
executed by Seller as licensee or licensor which are listed in SCHEDULE 2.13(C)
and SCHEDULE 2.13(D);
(l) partnership or joint venture agreements;
(m) contracts under which Seller has acquired or will acquire
ownership of, or license to, intangible property, including software, other than
the license agreements listed on SCHEDULE 2.13(C);
(n) contracts and other agreements under which Seller is
obligated to enhance, modify or customize software products for any customer;
<PAGE>
(o) contracts or other agreements under which Seller is
required to provide services pursuant to the Seller/Resumix Agreement (as
defined in Section 7.1(g)) or any other arrangements with Resumix, Inc.
("Resumix");
(p) contracts and other arrangements under which Seller is
obligated to make royalty payments out of revenues generated from sales of any
of the Subject Assets;
(q) any indenture, mortgage, promissory note, loan agreement,
guaranty or other agreement or commitment for the borrowing of money;
(r) any contract or agreement with any officer, employee,
director or stockholder of Seller or with any persons or organizations
controlled by or affiliated with any of them;
(s) any contract or agreement for the provision of maintenance
or technical support services by Seller; or
(t) any contract or agreement providing for the performance of
software customization, enhancement or other development services by a third
party for or on behalf of Seller.
Seller is not in default under any such contracts, commitments, plans,
agreements or licenses described in said Schedule and has no knowledge of
conditions or facts which with notice or passage of time, or both, would
constitute a default.
2.15 LITIGATION. SCHEDULE 2.15 hereto lists all currently pending or,
to the best knowledge of Seller and the Stockholders, threatened litigation and
governmental or administrative proceedings or investigations to which Seller is
a party.
2.16 COMPLIANCE WITH LAWS. To the best of Seller's and the
Stockholders' knowledge, except as set forth in SCHEDULE 2.16, Seller is in
compliance in all material respects with all applicable statutes, ordinances,
orders, judgments, decrees and rules and regulations promulgated by any federal,
state, municipal or other governmental authority which apply to the Seller or to
the conduct of its business. Seller has not received notice of a violation or
alleged violation of any such statute, ordinance, order, rule or regulation.
2.17 WARRANTY OR OTHER CLAIMS. There are no pending or, to the best of
Seller's and the Stockholders' knowledge, threatened product liability, warranty
or other similar claims, or any facts upon which a material claim of such nature
could be based, against Seller except as disclosed in SCHEDULE 2.17. There are
no pending or, to the best of Seller's and the Stockholders' knowledge,
threatened claims against Seller for renegotiation or price redetermination of
any business transaction that could result in a claim against any of the Subject
Assets, and, to the best of Seller's and the Stockholders' knowledge, there are
no facts upon which any such claim could be based.
<PAGE>
2.18 FINDER'S FEE. Except as set forth in SCHEDULE 2.18, neither Seller
nor any of the Stockholders has incurred or become liable for any broker's
commission or finder's fee relating to or in connection with the transactions
contemplated by this Agreement.
2.19 PERMITS; BURDENSOME AGREEMENTS. SCHEDULE 2.19 lists, to the best
of Seller's and the Stockholders' knowledge, all permits, registrations,
licenses, franchises, certifications and other approvals (collectively, the
"Approvals") required from federal, state or local authorities in order for
Seller to conduct its business except when the failure to obtain such Approval
would not be reasonably likely to have a material adverse effect on the value of
the Subject Assets taken as a whole or on the business, financial condition or
results of operations of the Company. Seller has obtained all such Approvals,
which are valid and in full force and effect, and is operating in compliance
therewith. Except as disclosed in SCHEDULE 2.19, all such Approvals will be
available and assigned to Buyer and remain in full force and effect upon Buyer's
purchase of the Subject Assets, and, to the best of Seller's and the
Stockholders' knowledge, no further Approvals will be required in order for
Buyer to conduct the business currently conducted by Seller subsequent to the
Closing. With respect to any exports of Seller's products, SCHEDULE 2.19 lists
each product which Seller has exported and the country to which such product has
been exported. To the best of Seller's and the Stockholders' knowledge, Seller
is in compliance with all applicable rules and regulations regarding the export
of its products. Except as disclosed in SCHEDULE 2.19 or in any other Schedule
hereto, Seller is not subject to or bound by any agreement, arrangement,
judgment, decree or order which may materially and adversely affect its business
or prospects, its condition, financial or otherwise, or any of its assets or
properties.
2.20 CORPORATE RECORDS. The corporate record books of Seller accurately
record all corporate action taken by its stockholders and board of directors and
committees thereof. Seller has made available for inspection and copying by
Buyer and its counsel complete and correct copies of all documents referred to
in this Section or in the Schedules delivered to Buyer pursuant to this
Agreement.
2.21 TRANSACTIONS WITH INTERESTED PERSONS. Except as set forth in
SCHEDULE 2.21 hereto, neither Seller, nor any stockholder, officer, supervisory
employee or director of Seller or, to the best knowledge of Seller and the
Stockholders, any of their respective spouses or family members owns directly or
indirectly on an individual or joint basis any material interest in, or serves
as an officer or director or in another similar capacity of, any competitor or
supplier of Seller, or any organization which has a material contract or
arrangement with Seller.
2.22 EMPLOYEE BENEFIT PROGRAMS. Except as disclosed in SCHEDULE 2.22,
Seller has never maintained an "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended,
("ERISA") (an "Employee Benefit Plan"), and Seller has no liabilities or
obligations under ERISA. Except as set forth in SCHEDULE 2.22, Seller has not
maintained any stock option plans, bonus or incentive award plans, severance pay
policies or agreements, deferred compensation agreements, supplemental income
arrangements, vacation plans, or other employee benefit plans, agreements, or
<PAGE>
arrangements (collectively with the Employee Benefit Plans, the "Employee
Programs"). True and correct copies of all Employee Programs set forth on
SCHEDULE 2.22 have been provided to Buyer. In addition, neither Seller nor any
Affiliate (as defined below) (i) has ever maintained any Employee Program which
has been subject to Title IV of ERISA or (ii) has ever provided health care or
any other non-pension benefits to any employees after their employment is
terminated (other than as required by part 6 of subtitle B of title I of ERISA)
or has ever promised to provide such post-termination benefits. For purposes of
the Section 2.22, an entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise covers
employees of such entity, or their spouses, dependents or beneficiaries. An
entity is an "Affiliate" of Seller if it would have ever been considered a
single employer with Seller under ERISA Section 4001(b) or part of the same
"controlled group" as Seller for purposes of ERISA Section 302(d)(8)(C).
2.23 ENVIRONMENTAL MATTERS. Except as set forth in SCHEDULE 2.23, (i)
Seller has no liability under, nor has it ever violated, any Environmental Law
(as defined below); and (ii) Seller, any property owned, operated, leased, or
used by Seller, and any facilities and operations thereon are presently in
compliance with all applicable Environmental Laws. For purposes of this Section
2.23, "Environmental Law" shall mean any environmental or health and
safety-related law, regulation, rule, ordinance, or by-law at the foreign,
federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted; and (ii) "Seller" shall mean and
include Seller and all other entities for whose conduct Seller is or may be held
responsible under any Environmental Law.
2.24 DIRECTORS, OFFICERS AND EMPLOYEES. SCHEDULE 2.24 contains a true
and complete list of all current directors and officers of Seller. In addition,
SCHEDULE 2.24 contains a list of all current managers, employees and consultants
of Seller. In each case such Schedule includes the current job title and
aggregate annual compensation of each such individual.
2.25 DISCLOSURE. The representations, warranties and statements
contained in this Agreement and in the certificates, exhibits and schedules
delivered by Seller pursuant to this Agreement to Buyer do not contain any
untrue statement of a material fact, and, when taken together, do not omit to
state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading in light of
the circumstances under which they were made. To the best knowledge of Seller
and the Stockholders, there are no facts which presently or in the future may
have a Seller Material Adverse Effect which have not been specifically disclosed
herein or in a Schedule furnished herewith, other than general economic
conditions affecting Seller's industry.
2.26 EMPLOYEES; LABOR MATTERS. Seller employs approximately eight (8)
full-time employees and no part-time employees. Seller is not delinquent in
payments to any of its employees for any wages, salaries, commissions, bonuses
or other direct compensation for any
<PAGE>
services performed for it to the date hereof or amounts required to be
reimbursed to such employees. Except as provided in SCHEDULE 2.26, upon
termination of the employment of any of said employees, neither Seller nor Buyer
will by reason of the acquisition transaction or anything done prior to the
Closing be liable to any of said employees for so-called "severance pay" or any
other payments. Seller does not have any policy, practice, plan or program of
paying severance pay or any form of severance compensation in connection with
the termination of employment. Seller is in material compliance with all
applicable laws and regulations respecting labor, employment, fair employment
practices, terms and conditions of employment, and wages and hours.
2.27 CUSTOMERS AND DISTRIBUTORS. SCHEDULE 2.27 sets forth each of
Seller's customers, representatives and distributors as of the date hereof
(whether pursuant to a commission, royalty or other arrangement and including
Resumix) and each prior customer, representative and distributor who accounted
for more than 5% of the sales of Seller for the nine months ended September 30,
1999 (collectively, the "Customers and Distributors"). The relationships of
Seller with its Customers and Distributors are good commercial working
relationships. Except as set forth on SCHEDULE 2.27, no Customer or Distributor
of Seller has canceled, materially modified, or otherwise terminated its
relationship with Seller or decreased materially its usage or purchase of the
services or products of Seller, nor does any Customer or Distributor have, to
the knowledge of Seller, any plan or intention to do any of the foregoing.
SCHEDULE 2.27 sets forth all contracts or arrangements Seller is a party to or
subject to with all Customers and Distributors. In addition, with respect to
each of Seller's Distributors, including Resumix, SCHEDULE 2.27 sets forth in
reasonable detail all commissions, royalty or other payments Seller has received
or is otherwise entitled to received for the nine months ended September 30,
1999.
2.28 INSURANCE. The physical properties and assets used in connection
with the Subject Assets are insured to the extent disclosed in SCHEDULE 2.28 and
all insurance policies and arrangements of Seller are disclosed in said SCHEDULE
2.28. Said insurance policies and arrangements are in full force and effect, all
premiums with respect thereto are currently paid in accordance with their terms,
and Seller is in compliance in all material respects with the terms thereof.
Said insurance is adequate and customary for the Subject Assets and is
sufficient for compliance by Seller with all requirements of law and all
agreements and leases to which either Seller is a party.
2.29 POWERS OF ATTORNEY. Neither Seller nor any Stockholder has granted
any power of attorney which is presently outstanding.
2.30 OPERATION OF BUSINESS. Except as set forth on SCHEDULE 2.30
attached hereto, the Subject Assets constitute all of the assets, other than the
Excluded Assets, used in or necessary to operate Seller's business as it is
currently being operated.
<PAGE>
SECTION 3. INVESTMENT REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer that with respect to
Seller's receipt of the Notes hereunder:
Seller is acquiring the Notes for its own account, for investment, and
not with a view to any "distribution" thereof within the meaning of the
Securities Act. The principal place of business of Seller is the State of
Illinois and the offer and sale of the Notes to Seller will take place in the
State of Massachusetts. Seller is an "accredited investor" as defined in the
Securities Act and is knowledgeable and experienced in the making of investments
of the type involved in the acquisition of the Notes pursuant to this Agreement,
is able to bear the economic risk of loss of its investment in Buyer, has been
given the opportunity to investigate the affairs of Buyer and to ask questions
of its officers, directors and employees, and all such questions have been
answered to the full satisfaction of Seller.
Seller understands that because neither the Notes nor the shares of
common stock, par value $.01 per share (the "Conversion Stock") of Buyer into
which the Notes may be converted at the election of the Seller (collectively,
the "Securities") have been registered under the Securities Act or securities or
"blue sky" laws of any jurisdiction, Seller cannot dispose of any or all of the
Securities unless such shares are subsequently registered under the Securities
Act or exemptions from such registration are available. Seller acknowledges and
understands that it has no independent right to require Buyer to register the
Securities. Seller is aware that Buyer will not accomplish a public offering of
the Notes and may not accomplish a public offering of the Conversion Stock.
Seller further understands that Buyer may, as a condition to the transfer of any
of the Securities, require that the request for transfer be accompanied by an
opinion of counsel, reasonably acceptable to Buyer, as to the legality of the
proposed transfer. Seller understands that any certificate representing
Conversion Stock will bear a legend in substantially the form provided below (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED HEREBY HAVE BEEN ACQUIRED BY THE HOLDER
NAMED HEREON FOR ITS OWN ACCOUNT FOR INVESTMENT; AND SUCH
SECURITIES MAY NOT BE PLEDGED, SOLD OR IN ANY OTHER WAY
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS IN EFFECT AT THAT TIME, OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT.
<PAGE>
SECTION 4. COVENANTS OF SELLER AND THE STOCKHOLDERS
4.1 MAKING OF COVENANTS AND AGREEMENTS. Seller and the each of the
Stockholders hereby make their respective covenants and agreements set forth in
this Section 4.
4.2 CONDUCT OF BUSINESS. Between the date of this Agreement and the
Closing Date, Seller will: (i) conduct its business only in the ordinary course
and refrain from changing or introducing any method of management or operations
(including methods of collecting and disbursing cash) except in the ordinary
course of business and consistent with prior practices and (ii) prevent the
occurrence of any event that would require disclosure under Section 2.11 of this
Agreement, unless otherwise agreed to in writing by Buyer.
4.3 NOTICE OF DEFAULT. Promptly upon the occurrence of, or promptly
upon Seller or any Stockholder becoming aware of the impending or threatened
occurrence of, any event which would cause or constitute a breach or default, or
would have caused or constituted a breach or default had such event occurred or
been known to Seller or any Stockholder prior to the date hereof, of any of the
representations, warranties or covenants of Seller or any Stockholder contained
in or referred to in this Agreement or in any Schedule or Exhibit referred to in
this Agreement, Seller shall give detailed written notice thereof to Buyer and
shall use its best efforts to prevent or promptly remedy the same.
4.4 CONSUMMATION OF AGREEMENT. Seller and each Stockholder shall use
its or his best efforts to perform and fulfill all conditions and obligations on
its or his part to be performed and fulfilled under this Agreement, to the end
that the transactions contemplated by this Agreement shall be fully carried out.
To this end, Seller will obtain prior to the Closing all necessary
authorizations or approvals of its Stockholders and Board of Directors.
4.5 COOPERATION OF SELLER. Seller and each Stockholder shall cooperate
with all reasonable requests of Buyer and Buyer's counsel in connection with the
consummation of the transactions contemplated hereby.
4.6 NON-COMPETITION. Seller and each of the Stockholders agree that for
a period of three (3) years after the Closing Date, none of Seller, the
Consultants (as defined in Section 7.1(i)) or any Stockholder will, without the
prior written consent of Buyer, directly or indirectly, engage or participate
in, be employed by or assist in any manner or in any capacity, or have any
interest in or make any loan to any person, firm, corporation or business which
engages in any activity anywhere in the world which provides an Internet-based
service similar to, or competitive with, Buyer's or Seller's current, or
presently contemplated, Internet-based recruiting services, so long as Buyer (or
its successor, if any) shall engage in such activity; provided, however, that
the foregoing shall not prevent (x) Seller, the Consultants, and each such
Stockholder from owning beneficially or of record up to one percent of the
outstanding securities of a publicly-held corporation which engages in
competitive activities; (y) the Consultants from entering a non-exclusive
marketing and distribution agreement for Internet- based recruiting services;
provided, however, that the Consultants are no longer parties to a
<PAGE>
marketing and distribution agreement with Buyer; or (z) the Stockholders from
owning and operating any of the Consultants, Mega Job Sites, Inc., or
JobsBy.com, Inc. as long as these businesses do not offer any Internet-based
service similar to, or competitive with, Buyer's or Seller's current, or
presently contemplated and previously disclosed, Internet-based recruiting
services; provided, however, that Buyer will permit the Stockholders to provide,
through Mega Jobs, Inc. and/or through JobsBy.com, Inc., an Internet-based
recruiting service that includes features to (i) create and search a resume
database; (ii) provide job posting services to Mega Jobs, Inc. and JobsBy.com,
Inc. career sites; (iii) automatically match candidates, who visit the Mega
Jobs, Inc. and JobsBy.com, Inc. career sites, with jobs listed on the Mega Jobs,
Inc. and JobsBy.com, Inc. career sites; and (iv) after matching candidates and
jobs, provide automated communication between companies and candidates using
both electronic and non-electronic communication tools; with the restriction
that such features as identified in (i), (ii), (iii) and (iv) above are limited
to the Internet recruiting sites operated by Mega Jobs, Inc. and/or by
JobsBy.com, Inc. In addition, Seller, the Consultants and each Stockholder shall
refrain from soliciting or encouraging any employee of Buyer to terminate his or
her employment by Buyer and to become employed by Seller, any Consultant or any
such Stockholder, or any business or entity which competes with Buyer or with
which Seller, any Consultant or any Stockholder is affiliated as an owner,
investor, lender or in any other capacity.
4.7 NO SOLICITATION OF OTHER OFFERS. Each of Seller and the
Stockholders agrees from and after the date hereof until the Closing, unless
this Agreement is terminated in accordance with Section 8, that it or he will
not directly or indirectly (i) solicit, initiate discussions or engage in
negotiations with any person or persons, other than Buyer, relating to the
proposed acquisition of Seller or any material asset of Seller (whether such
negotiations are initiated by Seller or any of its representatives or
otherwise), (ii) provide or cause to provide any information to any person
relating to the possible acquisition of Seller (whether by way of merger,
purchase of capital stock, purchase of assets or otherwise) or (iii) enter into
a transaction with any person concerning the possible acquisition of Seller
(whether by way of a merger, purchase of assets or otherwise). Seller will
promptly notify Buyer in the event of any invitation or solicitation from any
third party to initiate any such discussions or negotiations.
4.8 CONFIDENTIALITY. Seller and each Stockholder agree that at all
times from and after the date hereof, Seller, its affiliates, officers,
directors, agents and representatives, and each Stockholder will hold in strict
confidence, and will not use, any confidential or proprietary data or
information obtained from Buyer with respect to Buyer's business or financial
condition except for the purpose of evaluating, negotiating and completing the
transactions contemplated hereby. Information generally known in Buyer's
industry or which has been disclosed to Seller or any Stockholder by third
parties which have a right to do so (other than for the purpose of evaluating,
negotiating and completing the transactions contemplated hereby) shall not be
deemed confidential or proprietary information for purposes of this Agreement.
If the transactions contemplated by this Agreement are not consummated, Seller
and each Stockholder will return to Buyer (or certify that it or he has
destroyed) all
<PAGE>
copies of such data and information, including but not limited to financial
information, customer lists, business and corporate records, worksheets, test
reports, tax returns, lists, memoranda, and other documents prepared by or made
available to Seller or any Stockholder in connection with the transactions
contemplated hereby. Seller and each Stockholder further agree that at all times
from and after the date hereof, unless this Agreement is terminated in
accordance with Section 8, Seller, its officers, directors, employees agents and
representatives and each Stockholder shall keep secret and retain in strictest
confidence, and shall not use for the benefit of itself or others, any
confidential matters relating to the Subject Assets including, without
limitation, trade secrets, source code, know-how, customer lists, operational
methods, marketing plans or strategies, product development techniques or plans,
technical processes and designs and design projects relating thereto.
4.9 TAX RETURNS. Seller, in accordance with the allocation agreed upon
by Buyer and Seller pursuant to Section 1.11 and in accordance with applicable
law, shall (i) promptly prepare and file on or before the due date or any
extension thereof all federal, state and local tax returns required to be filed
by it with respect to taxable periods of Seller that include any period ending
on or before the Closing and (ii) pay all Taxes of Seller attributable to
periods ending on or before the Closing.
4.10 ADMINISTRATIVE SUPPORT/USE OF EQUIPMENT. From and after the
Closing Date, for so long as Buyer shall reasonably request, Seller shall (i)
provide Buyer with the administrative support set forth on SCHEDULE 4.10
attached hereto and (ii) permit Buyer to use the equipment set forth on SCHEDULE
4.10 attached hereto, in each case to facilitate Buyer's operation of the
business of Seller as currently conducted. Buyer shall compensate Seller for the
use of such administrative support and equipment to the extent, if any, set
forth on SCHEDULE 4.10.
4.11 NAME CHANGE. As soon as practical after the Closing, but in no
event more than ten (10) days after the Closing Date, Seller shall have changed
its name to a name that is substantially different from, and not confusing with
the names "Human Resources Sites International", "HR Sites" or any derivative
thereof.
4.12 DOMAIN NAMES. As soon as practicable after the Closing, but in no
event more than ten (10) days after the Closing Date, Seller shall have filed
the required documentation to assign the domain names set forth on SCHEDULE
2.13(B) to Buyer.
4.13 EQUITABLE RELIEF. Notwithstanding any other provision of this
Agreement, each of the parties hereto acknowledge that any breach of the
covenants contained in Section 4.6, 4.7 or 4.8 would cause an irreparable injury
to Buyer and that damages and remedies at law for any breach of any such
covenant would be inadequate. The parties hereto accordingly consent to the
entry of an order by any court of competent jurisdiction for specific
performance or for injunctive relief and other equitable relief to prevent an
actual or probable breach of any such covenant.
<PAGE>
4.14 SUBLEASE. To the extent such consent is not obtained prior to the
Closing, Seller and each of the Stockholders agree to use their best efforts to
promptly obtain the consent of Murdoch, Cole & Lillibridge, Inc. to the sublease
referred to in Section 7.1(k) hereof, such consent to be to the same economic
terms, and substantially similar non-economic terms, as are set forth in the
Sublease Agreement attached hereto as EXHIBIT 7.1(K).
SECTION 5. REPRESENTATIONS AND WARRANTIES OF BUYER.
5.1 MAKING OF REPRESENTATIONS AND WARRANTIES. As a material inducement
to Seller and each Stockholder to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer hereby makes to Seller and each
Stockholder the representations and warranties contained in this Section 5.
5.2 ORGANIZATION OF BUYER. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with full corporate power to own or lease its properties and to conduct its
business in the manner and in the places where such properties are owned or
leased or such business is conducted or proposed to be conducted. Buyer is not
in violation of any of the terms of its charter or by-laws.
5.3 CAPITAL STOCK OF SELLER; BENEFICIAL OWNERSHIP. The authorized
capital stock of Buyer consists of (i) 30,000,000 shares of common stock, par
value .01 per share (the "Buyer Common Stock"), of which 14,429,635 shares are
duly and validly issued, outstanding, fully paid and non-assessable as of
November 20, 1999; and (ii) 5,000,000 shares of preferred stock, $.01 per share,
of which no shares are issued and outstanding. Except for options to purchase up
to 1,673,704 shares of Buyer Common Stock which were granted under Buyer's 1994
Stock Option Plan and its 1996 Stock Option and Grant Plan and remain
outstanding and unexercised as of November 20, 1999 and warrants to purchase up
to 199,218 shares of Buyer Common Stock, there are no outstanding options,
warrants, rights, commitments, preemptive rights or agreements of any kind for
the issuance or sale of, or outstanding securities convertible into, any
additional shares of capital stock of any class of Buyer. None of Buyer's
capital stock has been issued in violation of any federal or state law.
5.4 AUTHORITY OF BUYER. Buyer has full corporate authority and power to
enter into this Agreement and each agreement, document and instrument to be
executed and delivered by Buyer pursuant to this Agreement and to perform its
obligations hereunder. The execution, delivery and due performance by Buyer of
this Agreement and each such other agreement, document and instrument have been
duly authorized by all necessary corporate action of Buyer and no other action
on the part of Buyer is required in connection herewith. This Agreement and each
other agreement, document and instrument executed and delivered by Buyer
pursuant to this Agreement constitutes, or when executed and delivered will
constitute, valid and binding obligations of Buyer enforceable in accordance
with their terms.
<PAGE>
5.5 SEC REPORTS. Buyer's Annual Report on Form 10-K for the period
ended September 30, 1998 (the "Form 10-K") and all other forms, reports and
documents filed with the Securities and Exchange Commission (the "SEC") since
the filing of such Form 10-K (collectively, the "SEC Reports") have been
prepared in accordance with the applicable requirements of the Securities Act
and the Securities Exchange Act of 1934, as amended. The balance sheets
(including the related notes) included in the SEC Reports are complete and
correct in all material respects and fairly present the financial position of
Buyer as of the respective dates thereof, and the other related statements
(including the related notes) included therein are complete and correct in all
material respects and fairly present the results of operations and cash flows of
Buyer for the respective fiscal periods set forth therein in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis,
except in the case of interim financial statements for normal recurring and
certain non-recurring audit adjustments necessary for a fair presentation of the
financial position and operating results of Buyer for the interim periods which
will not be materially adverse and for the omission of footnotes to said interim
financial statements that would be required by GAAP. Since June 30, 1999, there
has not been any material adverse change in the financial position or the
earnings and operations of Buyer that has not been publicly disclosed.
5.6 BUYER COMMON STOCK. Any shares of Buyer Common Stock issued and
delivered in accordance with the terms of the Notes will be, upon issuance and
delivery, duly and validly authorized and issued, fully paid and non-assessable.
5.7 INTELLECTUAL PROPERTY. SCHEDULE 5.7 contains a list of all material
patents, trademarks, trade names and copyrights used by Buyer in the conduct of
its business. To the best of Buyer's knowledge, Buyer has the valid and
enforceable right to use each of such patents, trademarks, trade names and
copyrights and such use in the conduct of its business does not conflict with
valid rights of others.
5.8 YEAR 2000. Buyer has taken all actions necessary and adequate to
ensure that all computer software and data processing devices (i) used by Buyer
in its management information systems, or (ii) utilized in or by any Buyer
products or services, including any Buyer products sold and/or installed prior
to the date hereof, are presently or will become "Year 2000 Compliant" and Buyer
will not incur costs associated with ensuring such Year 2000 Compliance in an
amount that would reasonably likely be more than $250,000. "Year 2000 Compliant"
means that the computer software or data processing devices accurately process
and store date/time data (including, but not limited to calculating, comparing,
displaying, recording and sequencing operations involving date/time data) during
the twenty- first century and the years 1999 and 2000, including correct
processing of leap year data; PROVIDED, HOWEVER, that Buyer makes no
representations regarding any hardware or operating systems on which its
products operate, any third party products that may operate within Buyer's
products or any public or common carrier networks.
5.9 COMPLIANCE. To the best of Buyer's knowledge, Buyer (i) has
complied in all material respects with all federal, state, local and foreign
laws, regulations and orders
<PAGE>
applicable to its business, and (ii) has obtained all federal, state, local and
foreign governmental licenses, registrations and permits necessary for the
conduct of its business, and such licenses, registrations and permits are in
full force and effect.
5.10 NO CONFLICT. The execution and delivery of this Agreement and the
performance of Buyer's obligations hereunder will not (i) violate or be in
conflict with provisions of any law, rule or regulation, any order, judgment or
award of any court or other agency of government or arbitrator, or any provision
of the Certificate of Incorporation or ByLaws of Buyer, (ii) violate, be in
conflict with, result in a breach of, or constitute (with or without notice or
lapse of time or both) a default under any indenture, agreement, lease or other
instrument to which Buyer is a party or by which it or any of its properties is
bound, or (iii) result in the creation or imposition of any lien, charge or
encumbrance upon any of its properties or assets.
5.11 NO CONSENTS. Assuming the accuracy of Seller's representations and
warranties in Section 3, no consent, approval or authorization of or declaration
or filing with any governmental authority or other person or entity on the part
of Buyer is required in connection with the execution or delivery of this
Agreement or the consummation of the transactions contemplated hereby.
5.12 LITIGATION. There is no litigation or governmental or
administrative proceeding or investigation pending or, to the best of Buyer's
knowledge, threatened against Buyer or its properties or its business, which is
likely to have a material adverse effect on the financial condition, business,
or operations of Buyer or which would prevent or hinder the consummation of the
transactions contemplated by this Agreement.
5.13 FINDER'S FEE. Buyer has not incurred or become liable for any
broker's commission or finder's fee relating to or in connection with the
transactions contemplated by this Agreement.
5.14 DISCLOSURE. The representations, warranties and statements
contained in this Agreement and in the certificates, exhibits and schedules
delivered by Buyer pursuant to this Agreement to Seller do not contain any
untrue statement of a material fact, and, when taken together, do not omit to
state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading in light of
the circumstances under which they were made.
SECTION 6. COVENANTS OF BUYER.
6.1 MAKING OF COVENANTS AND AGREEMENT. Buyer hereby makes the covenants
and agreements set forth in this Section 6.
<PAGE>
6.2 CONFIDENTIALITY. Buyer agrees that, unless and until the Closing
has been consummated, Buyer and its officers, directors, agents and
representatives will hold in strict confidence, and will not use any
confidential or proprietary data or information obtained from Seller, the
Stockholders or any of their authorized representatives with respect to the
business or financial condition of Seller except for the purpose of evaluating,
negotiating and completing the transaction contemplated hereby. Information
generally known in Seller's industry or which has been disclosed to Buyer by
third parties which have a right to do so (other than for the purpose of
evaluating, negotiating and completing the transaction contemplated hereby)
shall not be deemed confidential or proprietary information for purposes of
this Agreement. If the transactions contemplated by this Agreement are not
consummated, Buyer will return to Seller (or certify that it has destroyed) all
copies of such data and information, including but not limited to financial
information, customer lists, business and corporate records, worksheets, test
reports, tax returns, lists, memoranda, and other documents prepared by or made
available to Buyer in connection with the transactions contemplated hereby.
6.3 CONSUMMATION OF AGREEMENT. Buyer shall use its best efforts to
perform and fulfill all conditions and obligations on its part to be performed
and fulfilled under this agreement, to the end that the transactions
contemplated by this agreement shall be fully carried out.
6.4 COOPERATION OF BUYER. Buyer shall cooperate with all reasonable
requests of Seller and Seller's counsel in connection with the consummation of
the transactions contemplated hereby.
6.5 EQUITABLE RELIEF. Notwithstanding any other provision of this
Agreement, each of the parties hereto acknowledge that any breach of the
covenants contained in Section 6.2 would cause an irreparable injury to Seller
and that damages and remedies at law for any breach of any such covenant would
be inadequate. The parties hereto accordingly consent to the entry of an order
by any court of competent jurisdiction for specific performance or for
injunctive relief and other equitable relief to prevent an actual or probable
breach of any such covenant.
6.6 AMENDMENT OF FIRST NOTE. In the event Seller obtains, on or before
December 11, 2000, an assignment of proprietary rights from each of Robert
Hallman, Wade Pziombka, Yijung Xu and Brad Green (collectively, the "Alta
Consultants"), pursuant to which each Alta Consultant agrees to assign to Seller
any and all proprietary rights such Alta Consultant may have with respect to all
services he, she or it has performed for Seller (collectively, the "Alta
Consultant Assignments"), Buyer agrees, to the extent the Alta Consultant
Assignments are reasonably acceptable to Buyer, to amend and restate the First
Note to permit Seller to freely transfer up to $1,575,000 of the principal
amount of the First Note, provided, however, that any such transfer is in
compliance with all applicable securities laws, including, without limitation,
the Securities Act. Such amended and restated First Note
<PAGE>
shall be delivered to Seller within ten (10) business days of the date Seller
delivers to Buyer the First Note for cancellation.
SECTION 7. CONDITIONS.
7.1 CONDITIONS TO THE OBLIGATIONS OF BUYER. The obligation of Buyer to
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of Seller and the Stockholders contained in
Section 2, and the representatives and warranties of the Stockholders contained
in Section 3, shall be true and correct in all respects as of the Closing Date
as though made on and as of the Closing Date; Seller and the Stockholders shall,
on or before the Closing, have performed all of their respective obligations
hereunder which by the terms hereof are to be performed on or before the
Closing; Seller and the Stockholders shall have complied with all of their
respective covenants set forth in this Agreement; and Seller shall have
delivered to Buyer a certificate of the President or any Vice President of
Seller dated the Closing date to such effect.
(b) NO MATERIAL CHANGE. There shall have been no material
adverse change in the financial condition, prospects, properties, assets,
liabilities, business or operations of the Seller since the date hereof, whether
or not in the ordinary course.
(c) APPROVAL OF BUYER'S COUNSEL. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters contemplated by
this Agreement shall have been approved by Goodwin, Procter & Hoar LLP as
counsel for Buyer, and such counsel shall have received on behalf of Buyer such
other certificates, opinions, and documents in form satisfactory to counsel for
Buyer, as Buyer may reasonably require from Seller and the Stockholders to
evidence compliance with the terms and conditions hereof as of the Closing and
the correctness as of the Closing of the representations and warranties of
Seller and the Stockholders and the fulfillment of their respective covenants.
(d) OPINION OF COUNSEL. On the Closing Date, Buyer shall have
received from counsel for Seller, an opinion as of said date, substantially in
the form attached hereto as EXHIBIT 7.1(D).
(e) NO LITIGATION. There shall have been no determination by
Buyer, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of (i) the institution or threat by any person or any federal, state or other
governmental authority of litigation, proceedings or other action against Buyer,
Seller or any Stockholder or (ii) any material adverse change in the laws or
regulations applicable to Seller.
<PAGE>
(f) CONSENTS. Seller shall have made all filings with and
notifications of governmental authorities, regulatory agencies and other
entities required to be made by Seller in connection with the execution and
delivery of this Agreement and the performance of the transactions contemplated
hereby, and Seller and Buyer shall have received all required authorizations,
waivers, consents and permits to permit the continuation of the business and the
transactions contemplated by this Agreement, in form and substance reasonably
satisfactory to Buyer, from all third parties, including, without limitation,
applicable governmental authorities, regulatory agencies, lessors, lenders and
contract parties, required in connection with the transfer of Subject Assets or
Seller's contracts, permits, leases, licenses and franchises, to avoid a breach,
default, termination, acceleration or modification of any indenture, loan or
credit agreement or any other agreement, contract, instrument, mortgage, lien,
lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award as a result of, or in connection with, the
execution and performance of this Agreement.
(g) TERMINATION OF SELLER/RESUMIX AGREEMENT; CONTINUING
OBLIGATIONS OF BUYER. The Exclusive Distribution Agreement dated September 11,
1998 by and between the Seller and Resumix (the "Seller/Resumix Agreement")
shall have been terminated in a manner that is mutually acceptable to Buyer and
Seller, and Buyer and Resumix shall have entered into an Internet Recruiter
Service Transition Period Agreement (the "Buyer/Resumix Agreement"), acceptable
to Buyer in its sole discretion, pursuant to which Buyer will provide services
to certain Resumix customers as set forth in more detail in such agreement.
(h) EMPLOYMENT ARRANGEMENTS. Each of the individuals set forth
on SCHEDULE 7.1(H) attached hereto shall be entered into a mutually satisfactory
Employment Agreement with Buyer.
(i) MARKETING AND DISTRIBUTION AGREEMENT. Each of Presearch,
Inc., ePresearch, Inc. and Applied Staffing Consultants, Inc. (collectively, the
"Consultants") shall have executed and delivered to Buyer a Marketing and
Distribution Agreement, substantially in the form attached hereto as EXHIBIT
7.1(I) (the "Marketing and Distribution Agreement").
(j) PREFERRED AGENCY AGREEMENT. Each of Mega Jobs, Inc. and
JobsBy.com, Inc. shall have executed and delivered to Buyer a Preferred Agency
Agreement, substantially in the form attached hereto as EXHIBIT 7.1(J) (the
"Preferred Agency Agreement").
(k) SUBLEASE. Presearch, Inc. and Buyer shall have entered
into a Sublease Agreement (the "Sublease Agreement"), substantially in the form
attached hereto as EXHIBIT 7.1(K) pursuant to which Presearch, Inc. subleases to
Buyer specified space that it occupies pursuant to that certain Lease Agreement
dated July 1, 1997, by and between Presearch, Inc., as Tenant, and Murdoch, Cole
& Lillibridge, Inc., as Landlord.
<PAGE>
(l) DUE DILIGENCE. Buyer shall be satisfied, in its sole
discretion, with its technical and proprietary rights due diligence review of
Seller and the Subject Assets.
(m) RELEASES. Seller shall have obtained from any of its
secured creditors the full release of any security interest held by such
creditors in any of the Subject Assets.
7.2 CONDITIONS TO OBLIGATIONS OF SELLER. Seller's obligation to
consummate this Agreement and the transactions contemplated hereby is subject to
the fulfillment, prior to or at the Closing, of the following conditions
precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of Buyer contained in Section 5 shall be true and
correct in all respects as of the Closing Date as if made on and as of the
Closing Date; Buyer shall, on or before the Closing, have performed all of its
obligations hereunder which by the terms hereof are to be performed on or before
the Closing; Buyer shall have complied with all of its covenants set forth in
this Agreement and Buyer shall have delivered to Seller a certificate of the
President or any Vice President of Buyer dated the Closing date to such effect.
(b) NO LITIGATION. There shall have been no determination by
Seller, acting in good faith, that the consummation of the transactions
contemplated by this Agreement has become inadvisable or impracticable by reason
of the institution or threat by any person or any federal, state or other
governmental authority of material litigation, proceedings or other action
against Buyer, Seller or any Stockholder.
(c) OPINION OF COUNSEL. On the Closing Date, Seller shall have
received from Goodwin, Procter & Hoar LLP, counsel for Buyer, an opinion as of
said date, substantially in the form attached hereto as EXHIBIT 7.2(C).
(d) DISTRIBUTION AND AGENCY AGREEMENTS. Buyer shall have
executed and delivered to each Consultant the Marketing and Distribution
Agreement and the Preferred Agency Agreement.
(e) EMPLOYMENT ARRANGEMENTS. Buyer shall have executed and
delivered to each of the individuals set forth in Schedule 7.1(h) attached
hereto a mutually acceptable Employment Agreement.
SECTION 8. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
8.1 TERMINATION. At any time prior to the Closing, this Agreement may
be terminated as follows:
(a) by mutual written consent of Buyer and Seller;
<PAGE>
(b) by Buyer, pursuant to written notice by Buyer to Seller,
if any of the conditions set forth in Section 7.1 have not been satisfied at or
prior to the Closing, or if it has become reasonably and objectively certain
that any of such conditions, other than a condition within the control of Buyer,
will not be satisfied at or prior to the Closing, such written notice to set
forth such conditions which have not been or will not be so satisfied;
(c) by Seller, pursuant to written notice by Seller to Buyer,
if any of the conditions set forth in Section 7.2 have not been satisfied at or
prior to the Closing, or if it has become reasonably and objectively certain
that any of such conditions, other than a condition within the control of Seller
or any Stockholder, will not be satisfied at or prior to the Closing, such
written notice to set forth such conditions which have not been or will not be
so satisfied; and
(d) by either Seller or Buyer if the transactions contemplated
hereby are not consummated by January 31, 2000, unless the failure of the
Closing to occur by such date shall be due to the failure of the party seeking
to terminate this Agreement to perform or observe the covenants and agreements
of such party set forth herein.
8.2 EFFECT OF TERMINATION. All obligations of the parties hereunder
shall cease upon any termination pursuant to Section 8.1 hereof; provided,
however, that: (i) the provisions of this Section 8.2, Section 4.8, Section 6.2,
Section 11.2 and Section 11.10 hereof shall survive any termination of this
Agreement; (ii) nothing herein shall relieve any party from any liability for a
fraudulent or intentional misrepresentation in any of its representations or
warranties contained herein or a wilful failure to comply with any of its
covenants, conditions or agreements contained herein; and (iii) the parties
shall have rights to proceed as further set forth in Section 8.3.
8.3 RIGHT TO PROCEED. Anything in this Agreement to the contrary
notwithstanding, if any of the conditions specified in Section 7.1 have not been
satisfied, Buyer shall have the right to proceed with the transactions
contemplated hereby without waiving any of its rights hereunder, and if any of
the conditions specified in Section 7.2 have not been satisfied, Seller shall
have the right to proceed with the transactions contemplated hereby without
waiving any of their rights hereunder.
<PAGE>
SECTION 9. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING.
9.1 SURVIVAL OF WARRANTIES. Each of the representations, warranties,
agreements, covenants and obligations herein or in any schedule, exhibit,
certificate or financial statement delivered by any party to the other party
incident to the transactions contemplated hereby and all rights and remedies
arising in connection with the untruth, inaccuracy or breach thereof, are
material, shall be deemed to have been relied upon by the other party, and shall
survive the Closing regardless of any investigation and shall not merge in the
performance of any obligation by any party hereto; PROVIDED, HOWEVER, that such
representations and warranties shall expire on the same dates as and to the
extent that the rights to indemnification with respect thereto under Section 10
shall expire and, PROVIDED, FURTHER, that such covenants and agreements shall
expire on the dates and to the extent specified therein.
9.2 COLLECTION OF ASSETS. Subsequent to the Closing, Buyer shall have
the right and authority to collect all receivables and other items transferred
and assigned to it by Seller hereunder and to endorse with the name of Seller
any checks received on account of such receivables or other items and Seller
agrees that it will promptly transfer or deliver to Buyer from time to time any
cash or other property that Seller may receive with respect to any claims,
contracts, licenses, leases, commitments, sale orders, purchaser orders,
receivables of any character or any other items included in the Subject Assets.
9.3 PAYMENT OF OBLIGATIONS. Seller shall pay all Excluded Liabilities
in the ordinary course of business as they become due.
SECTION 10. INDEMNIFICATION.
10.1 INDEMNIFICATION BY SELLER AND THE STOCKHOLDER. Seller and each of
the Stockholders jointly and severally agree subsequent to the Closing to
indemnify and hold Buyer and its respective subsidiaries and affiliates and
persons serving as officers, directors, stockholders, partners or employees
thereof (individually a "Buyer Indemnified Party" and collectively the "Buyer
Indemnified Parties") harmless from and against any damages, liabilities,
losses, taxes, fines, penalties, costs, and expenses (including, without
limitation, reasonable fees and expenses of counsel) of any kind or nature
whatsoever (whether or not arising out of third-party claims and including all
amounts paid in investigation, defense or settlement of the foregoing) which may
be sustained or suffered by any of them arising out of or based upon any of the
following matters:
(a) fraud, intentional misrepresentation, or a deliberate and
wilful breach by Seller or any Stockholder of any of their representations,
warranties or covenants under this Agreement or in any certificate, schedule,
exhibit or other instrument delivered pursuant hereto;
<PAGE>
(b) a breach of any representation or warranty contained in
Section 2.13 or 2.17 or any representation or warranty with respect to Seller's
title to the Subject Assets or a breach of any covenant contained in Section
4.6, 4.7 or 4.8;
(c) except as provided in Section 10.1(a) or 10.1(b), any
other breach of any representation, warranty or covenant of Seller or any
Stockholder under this Agreement or in any certificate, schedule, exhibit or
other instrument delivered pursuant hereto, or by reason of any claim, action or
proceeding asserted or instituted growing out of any matter or thing
constituting a breach of such representations, warranties or covenants;
(d) all claims asserted under the Bulk Sales Act relative to
any Excluded Liabilities;
(e) any claims related to (i) the Excluded Assets or (ii) the
failure by Seller or any Stockholder to perform and discharge any of the
Excluded Liabilities in accordance with this Agreement; and
(f) any liability of Seller or any Stockholder for Taxes which
are not included in the Assumed Liabilities.
10.2 LIMITATIONS ON INDEMNIFICATION BY SELLER. Notwithstanding the
foregoing, the right of Buyer Indemnified Parties to indemnification under
Section 10.1 shall be subject to the following limitations:
(a) No indemnification shall be payable pursuant to Section
10.1(c) above to any Buyer Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 10.1 shall exceed $50,000 in the aggregate
(the "Threshold Amount"), whereupon the full amount of such claims up to an
aggregate of $5,000,000 (the "Maximum Amount") shall be recoverable in
accordance with the terms hereof;
(b) No indemnification shall be payable to a Buyer Indemnified
Party with respect to any claims asserted pursuant to Section 10.1(c) after a
period of eighteen (18) months (the "Indemnification Cut-Off Date") except that
claims arise under Section 2.9 shall survive until expiration of the applicable
statute of limitations.
10.3 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify and hold
Seller and its affiliates and persons serving as officers, directors, partners
or employees thereof and each Stockholder (individually a "Seller Indemnified
Party" and collectively the "Seller Indemnified Parties") harmless from and
against any damages, liabilities, losses and expenses (including, without
limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising out of or based upon any of the following
matters:
<PAGE>
(a) fraud, intentional misrepresentation, or a deliberate and
wilful breach by Buyer of any of its representations, warranties or covenants
under this Agreement or in any certificate, schedule, exhibit or other
instrument delivered pursuant hereto;
(b) any other breach of any representation, warranty or
covenant of Buyer under this Agreement or in any certificate, schedule, exhibit
or other instrument delivered pursuant hereto, or by reason of any claim, action
or proceeding asserted or instituted growing out of any matter or thing
constituting a breach of such representations, warranties or covenants;
(c) any failure by Buyer to perform and discharge any of the
Assumed Liabilities as set forth in this Agreement in accordance with their
terms; and
(d) any liability of Buyer relating to the Subject Assets;
provided, however, that such liability results solely from actions taken by
Buyer after the Closing and in no way arises out of a breach of any
representation, warranty, covenant or agreement of Seller or any of the
Stockholders contained in this Agreement.
10.4 LIMITATIONS ON INDEMNIFICATION BY BUYER. Notwithstanding the
foregoing, the right of Seller Indemnified Parties to indemnification under
Section 10.3 shall be subject to the following limitations:
(a) No indemnification shall be payable pursuant to Section
10.3(b) above to Seller Indemnified Party, unless the total of all claims for
indemnification pursuant to Section 10.3 shall exceed the Threshold Amount in
the aggregate, whereupon the full amount of such claims up to an aggregate of
the Maximum Amount shall be recoverable in accordance with the terms hereof;
(b) No indemnification shall be payable to a Seller
Indemnified Party with respect to any claims asserted pursuant to Section
10.3(b) after the Indemnification Cut-Off Date.
10.5 NOTICE; DEFENSE OF CLAIMS. An indemnified party may make claims
for indemnification hereunder by giving written notice thereof to the
indemnifying party within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party promptly after it receives notice of the claim or liability
being asserted, but the failure to do so shall not relieve the indemnifying
party from any liability except to the extent that it is prejudiced by the
failure or delay in giving such notice. Such notice shall summarize the bases
for the claim for indemnification and any claim or liability being asserted by a
third party. Within 20 days after receiving such notice the indemnifying party
shall give written notice to the indemnified party stating whether it disputes
the claim for indemnification and whether it will defend against any third party
claim or liability at its own cost and expense. If the indemnifying party fails
to give notice that it
<PAGE>
disputes an indemnification claim within 20 days after receipt of notice
thereof, it shall be deemed to have accepted and agreed to the claim, which
shall become immediately due and payable. The indemnifying party shall be
entitled to direct the defense against a third party claim or liability with
counsel selected by it (subject to the consent of the indemnified party, which
consent shall not be unreasonably withheld) as long as the indemnifying party is
conducting a good faith and diligent defense. The indemnified party shall at all
times have the right to fully participate in the defense of a third party claim
or liability at its own expense directly or through counsel; provided, however,
that if the named parties to the action or proceeding include both the
indemnifying party and the indemnified party and the indemnified party is
advised that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the
indemnified party may engage separate counsel at the expense of the indemnifying
party. If no such notice of intent to dispute and defend a third party claim or
liability is given by the indemnifying party, or if such good faith and diligent
defense is not being or ceases to be conducted by the indemnifying party, the
indemnified party shall have the right, at the expense of the indemnifying
party, to undertake the defense of such claim or liability (with counsel
selected by the indemnified party), and to compromise or settle it, exercising
reasonable business judgment. If the third party claim or liability is one that
by its nature cannot be defended solely by the indemnifying party, then the
indemnified party shall make available such information and assistance as the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in such defense, at the expense of the indemnifying party.
10.6 STOCKHOLDER REPRESENTATIVE. In any dealings with the Stockholders
regarding indemnification obligations under this Section 10, including disputes
as to the existence or amount of any indemnification obligation, Buyer shall be
entitled to rely on its communications with Yaseen (the "Stockholder
Representative") on behalf of all Stockholders; and any notice required to be
given by Buyer in connection with any indemnification obligations under this
Section 10 shall be deemed given to all of the Stockholders if given to the
Stockholder Representative. The Stockholder Representative shall take, and the
Stockholders agree that the Stockholder Representative shall take, any and all
actions which he believes are necessary or appropriate under this Agreement for
and on behalf of the Stockholders, including without limitation defending
indemnity claims, consenting to, compromising or settling all indemnity claims,
conducting negotiations with Buyer and its representatives regarding such
claims, taking any and all other actions specified in or contemplated by this
Agreement and engaging counsel, accountants or other representatives in
connection with the foregoing matters.
SECTION 11. MISCELLANEOUS.
11.1 BULK SALES LAW. Buyer waives compliance by Seller with the
provisions of any applicable bulk sales, fraudulent conveyance or other law for
the protection of creditors in connection with the transfer of the Subject
Assets under this Agreement.
<PAGE>
11.2 FEES AND EXPENSES. Each of the parties will bear its own expenses
in connection with the negotiation and the consummation of the transactions
contemplated by this Agreement, and no expenses of Seller relating in any way to
the purchase and sale of the Subject Assets hereunder and the transactions
contemplated hereby, including without limitation legal, accounting or other
professional expenses of Seller or any Stockholder, shall be charged to or paid
by Buyer or included in any of the Assumed Liabilities.
11.3 GOVERNING LAW. This Agreement shall be construed under and
governed by the internal laws of the Commonwealth of Massachusetts without
regard to its conflict of laws provisions.
11.4 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given if delivered or sent by facsimile transmission, upon receipt, or if
sent by registered or certified mail or by private overnight courier or delivery
in person, upon the sooner of the date on which receipt is acknowledged or the
expiration of three days after deposit in United States post office facilities
properly addressed with postage prepaid. All notices to a party will be sent to
the addresses set forth below or to such other address or person as such party
may designate by notice to each other party hereunder:
<TABLE>
<S> <C>
TO BUYER: Webhire, Inc.
91 Hartwell Avenue
Lexington, Massachusetts 02421
Attn: Martin J. Fahey, President
Tel: (781) 869-5000
Fax: (781) 869-5060
With a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Attn: Paul W. Lee, P.C.
Tel: (617) 570-1000
Fax: (617) 523-1231
TO SELLER: Human Resources Sites
International, Inc.
820 North Orleans
Suite 205
Chicago, IL 60610
Attn: Joel M. Yaseen, President
Tel: (312) 202-9696
Fax: (312) 202-1503
</TABLE>
<PAGE>
<TABLE>
<S> <C>
With a copy to: Brozosky & Brosk, P.C.
40 Skokie Boulevard
Suite 630
Northbrook, IL 60662-1601
Attn: Joel Brosk, Esq.
Tel: (847) 559-9190
Fax: (847) 559-9197
TO THE STOCKHOLDERS: Joel M. Yaseen
820 North Orleans
Suite 218
Chicago, Illinois 60610
Tel: (312) 202-9595
Fax: (312) 202-1818
Joel M. Yaseen as Trustee of
The Joel M. Yaseen Trust
Dated November 2, 1990
820 North Orleans
Suite 218
Chicago, Illinois 60610
Tel: (312) 202-9595
Fax: (312) 202-1818
Steven Racz
820 North Orleans
Suite 218
Chicago, Illinois 60610
Tel: (312) 202-9595
Fax: (312) 202-1818
John Kuzma
820 North Orleans
Suite 218
Chicago, Illinois 60610
Tel: (312) 202-9595
Fax: (312) 202-1818
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Arthur Koff
820 North Orleans
Suite 218
Chicago, Illinois 60610
Tel: (312) 202-9595
Fax: (312) 202-1818
Christopher Homberg
820 North Orleans
Suite 218
Chicago, Illinois 60610
Tel: (312) 202-9595
Fax: (312) 202-1818
With a copy to: Brozosky & Brosk, P.C.
40 Skokie Boulevard
Suite 630
Northbrook, IL 60662-1601
Attn: Joel Brosk, Esq.
Tel: (847) 559-9190
Fax: (847) 559-9197
</TABLE>
Any notice given hereunder may be given on behalf of any party by his counsel or
other authorized representatives.
11.5 ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits referred to herein and the other writings specifically identified
herein or contemplated hereby, is complete, reflects the entire agreement of the
parties with respect to its subject matter, and supersedes all previous written
or oral negotiations, commitments and writings with respect to its subject
matter.
11.6 ASSIGNABILITY; BINDING EFFECT. Buyer's rights and obligations
hereunder shall be freely assignable. This Agreement may not be assigned by
Seller without the prior written consent of Buyer, which consent will not be
unreasonably withheld. This Agreement shall be binding upon and enforceable by,
and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
11.7 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter
pronoun, as the context may require.
11.8 EXECUTION IN COUNTERPARTS. For the convenience of the parties and
to facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
<PAGE>
11.9 AMENDMENTS. This Agreement may not be amended or modified, nor may
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by each party hereto, or in the case of a
waiver, the party waiving compliance.
11.10 PUBLICITY AND DISCLOSURES. Except as required by law, no press
releases or public disclosure, either written or oral, of the transactions
contemplated by this Agreement shall be made by a party to this Agreement
without, in the case of releases and disclosures by Seller or any Stockholder,
the prior written consent of Buyer and, in the case of releases and disclosures
by Buyer, the prior written consent of Seller.
SECTION 12. ARBITRATION.
Except for matters regarding payment of the Additional Payment as
provided in Section 1.6 or as otherwise specifically provided in this Agreement,
if any controversy or dispute arises under, out of or in relation to any of the
provisions hereof which cannot be settled by the parties hereto within sixty
(60) days after the same shall arise (the parties hereby agreeing to use best
efforts to communicate in person, by telephone or by letter to discuss any such
controversy or dispute) such controversy or dispute shall be resolved solely and
exclusively by binding arbitration to be conducted before the American
Arbitration Association or its successor. The arbitration shall be held in
Boston, Massachusetts before a panel of three (3) arbitrators with each party
selecting one (1) and the two (2) selected arbitrators selecting the third and
shall be conducted in accordance with the rules and regulations promulgated by
the American Arbitration Association unless specifically modified herein.
The parties covenant and agree that the arbitration shall commence
within one hundred eighty (180) days of the date on which a written demand for
arbitration is filed by any party hereto. In connection with the arbitration
proceeding, the arbitrators shall have the power to order the production of
documents by each party and any third-party witnesses. In addition, each party
may take up to three (3) depositions as of right, and the arbitrators may in
their discretion allow additional depositions upon good cause shown by the
moving party. However, the arbitrators shall not have the power to order the
answering of interrogatories or the response to requests for admission. In
connection with any arbitration, each party shall provide to the other, no later
than seven (7) business days before the date of the arbitration, the identity of
all persons that may testify at the arbitration and a copy of all documents that
may be introduced at the arbitration or considered or used by a party's witness
or expert. The arbitrators' decision and award shall be made and delivered
within six (6) months of the selection of the arbitrators. The arbitrators'
decision shall set forth a reasoned basis for any award of damages or finding of
liability. The arbitrators shall not have power to award damages in excess of
actual compensatory damages and shall not multiply actual damages or award
punitive damages or any other damages that are specifically excluded under this
Agreement, and each party hereby irrevocably waives any claim to such damages.
<PAGE>
The parties covenant and agree that they will participate in the
arbitration in good faith and that they will share equally its costs, except as
otherwise provided herein. The arbitrator may in their discretion assess costs
and expenses (including the reasonable legal fees and expenses of the prevailing
party) against any party to a proceeding. Any party unsuccessfully refusing to
comply with an order of the arbitrators shall be liable for costs and expenses,
including attorneys' fees, incurred by the other party in enforcing the award.
This Section 12 applies equally to requests for temporary, preliminary or
permanent injunctive relief, except that in the case of temporary or preliminary
injunctive relief any party may proceed in court without prior arbitration for
the limited purpose of avoiding immediate and irreparable harm. The provisions
of this Section 12 shall be enforceable in any court of competent jurisdiction.
The parties shall bear their own attorneys' fees, costs and expenses in
connection with the arbitration. The parties will share equally in the fees and
expenses charged by the American Arbitration Association.
Except as otherwise provided herein, each of the parties hereto
irrevocably and unconditionally consents to the exclusive jurisdiction of the
American Arbitration Association to resolve all disputes, claims or
controversies arising out of or relating to (i) this Agreement or the
negotiation, validity or performance hereof, and further consents to the
jurisdiction of the courts of the Commonwealth of Massachusetts for the purposes
of enforcing the arbitration provisions of this Section 12. Each party further
irrevocably waives any objection to proceeding before the American Arbitration
Association based upon lack of personal jurisdiction or to the laying of venue
and further irrevocably and unconditionally waives and agrees not to make a
claim in any court that arbitration before the American Arbitration Association
has been brought in an inconvenient forum. Each of the parties hereto hereby
consents to service of process by registered mail at the address to which
notices are to be given. Each of the parties hereto agrees that its or his
submission to jurisdiction and its or his consent to service of process by mail
is made for the express benefit of the other parties hereto.
[Remainder of Page Intentionally Left Blank]
<PAGE>
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date set forth above by their duly authorized
representatives.
WEBHIRE, INC.
By:
------------------------------
Name:
Title:
HUMAN RESOURCES SITES
INTERNATIONAL, INC.
By:
------------------------------
Name:
Title:
STOCKHOLDERS
-----------------------------------
Name: Joel M. Yaseen
THE JOEL M. YASEEN TRUST DATED
NOVEMBER 2, 1990
By:
--------------------------------
Name: Joel M. Yaseen
Title: Trustee
-----------------------------------
Name: Steven Racz
-----------------------------------
Name: John Kuzma
-----------------------------------
Name: Arthur Koff
-----------------------------------
<PAGE>
Name: Christopher Homberg
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<PAGE>
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