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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PROBUSINESS SERVICES, INC.
(Exact name of registrant as specified in charter)
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<S> <C> <C>
DELAWARE 7374 94-2976066
(State of incorporation) (Primary Standard Industrial (I.R.S. employer
Classification Code Number) identification
number)
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4125 HOPYARD ROAD
PLEASANTON, CA 94588
(925) 737-3500
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
THOMAS H. SINTON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PROBUSINESS SERVICES, INC.
4125 HOPYARD ROAD
PLEASANTON, CA 94588
(925) 737-3500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
ALAN K. AUSTIN
BRIAN C. ERB
JOHN L. WHITTLE
BRIAN M. MCDANIEL
WILSON SONSINI GOODRICH & ROSATI
650 PAGE MILL ROAD
PALO ALTO, CA 94304
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT AS
DETERMINED BY MARKET CONDITIONS.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
AMOUNT TO BE AGGREGATE PRICE AGGREGATE OFFERING REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1) FEE
<S> <C> <C> <C> <C>
Common stock, par value $0.001 per share.......... 1,750,967 $26.875 $47,057,238.13 $13,082
</TABLE>
(1) Includes 35,997 shares of Common Stock issuable upon the exercise of assumed
warrants.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(c) under the Securities Act of
1933 and based on the average of the high and low prices of the Common Stock
on the Nasdaq National Market on September 29, 1999.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD UNTIL THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES AND IT IS NOT A SOLICITATION OF AN OFFER TO BUY THESE
SECURITIES NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO THE REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
1,750,967 SHARES
COMMON STOCK
PROBUSINESS SERVICES, INC.
The Common Stock offered hereby will be sold from time to time by the
Selling Stockholders named herein. We will not receive any proceeds from the
sale of shares by the Selling Stockholders. We will pay certain of the expenses
of this offering; however, the Selling Stockholders will bear the cost of all
brokerage commissions and discounts incurred with the sale of shares to which
this prospectus relates.
Of the 1,750,967 shares hereunder, 35,997 are issuable upon the exercise of
warrants.
The Selling Stockholders may offer and sell all the shares in the
over-the-counter market or on one or more exchanges, or otherwise at prices and
at terms then prevailing or at prices related to the then current market price,
or in negotiated transactions, or to one or more underwriters for resale to the
public.
Our Common Stock is traded on the Nasdaq National Market under the symbol
"PRBZ." The last reported sale price of the Common Stock on the Nasdaq National
Market on September 29, 1999 was $26.813 per share.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
------------------------
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this prospectus is October , 1999.
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TABLE OF CONTENTS
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PAGE
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Where You Can Find More Information........................................................................ 1
Forward-Looking Statements................................................................................. 2
The Company................................................................................................ 2
Risk Factors............................................................................................... 3
Use of Proceeds............................................................................................ 10
Selling Stockholders....................................................................................... 10
Plan of Distribution....................................................................................... 12
Legal Matters.............................................................................................. 12
Experts.................................................................................................... 12
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission (SEC). You may read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Our SEC filings are also
available from the SEC's Website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is considered
to be part of this prospectus, and information that we file later with the SEC
will automatically update and supersede this information. We incorporate by
reference the following documents:
- Our annual report on Form 10-K for our fiscal year ended June 30, 1999
filed with the SEC on September 28, 1999;
- Our current report on Form 8-K/A filed with the SEC on July 12, 1999;
- Our current report on Form 8-K filed with the SEC on May 12, 1999;
- Our annual report on Form 10-K for our fiscal year ended June 30, 1998
filed with the SEC on September 28, 1998;
- The description of our common stock contained in our registration
statement on Form S-1 filed with the SEC on September 23, 1998; and
- Any future filings we will make with the SEC under Sections 13 (a), 13(c),
14 or 15(d) of the Securities Exchange Act.
We will provide you with a copy of these filings, at no cost, if you write
or telephone our Corporate Secretary at the following address:
ProBusiness Services, Inc.
4125 Hopyard Road
Pleasanton, CA 94588
(925)-737-3500
You should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any jurisdiction where the
offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document.
1
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FORWARD-LOOKING STATEMENTS
Forward-looking statements contained and incorporated by reference in this
prospectus are subject to the safe harbor created by the Private Securities
Litigation Reform Act of 1995 and are highly dependent upon a variety of
important factors that could cause actual results to differ materially from
those reflected in such forward-looking statements. When used in this document
and documents referenced herein, the words "intend," "anticipate," "believe,"
"estimate" and "expect" and similar expressions as they relate to us are
included to identify such forward-looking statements. These forward-looking
statements include statements regarding the demand for outsourcing employee
administrative services; our expansion of its client base; our intention to
increase its direct sales force; the development of a comprehensive and fully
integrated suite of employee administrative services; our ability to offer
additional services; the initiation or completion of any strategic acquisition,
investment or alliance; our ability to extend our technology leadership; our
ability to attract and retain new clients; market acceptance of any new services
offered by us; our ability to minimize the impact of interest rate fluctuations;
our ability to develop financial and managerial controls and systems; the
opening of additional facilities; the sufficiency of our back-up facilities and
disaster recovery procedures; our ability to develop or acquire new
technologies; our ability to attract and retain experienced employees; our
ability to make our internal system year 2000 compliant and to transition our
clients to a year 2000 compliant system; our ability to maintain a high payroll
client retention rate and our ability to increase our national presence. These
forward-looking statements are based largely on our current expectations and are
subject to a number of risks and uncertainties, including without limitation,
those incorporated herein by reference and other risks and uncertainties
indicated from time to time in our filings with the SEC. Actual results could
differ materially from these forward-looking statements. In addition, important
factors to consider in evaluating such forward-looking statements include
changes in external market factors, changes in our business or growth strategy
or an inability to execute its strategy due to changes in its industry or the
economy generally, the emergence of new or growing competitors and various other
competitive factors. In light of these risks and uncertainties, there can be no
assurance that the forward-looking statements contained or incorporated by
reference in this prospectus will in fact occur.
THE COMPANY
ProBusiness is a leading provider of employee administrative services for
large employers. Our primary service offerings are payroll processing, payroll
tax filing, benefits administrative services, human resources software and
self-service applications. Our proprietary PC-based payroll system offers the
cost-effective benefits of outsourcing and high levels of client service, while
providing the flexibility, control, customization and integration of an in-house
system. As of June 30, 1999, we provided services to approximately 1,750
clients. As of June 30, 1999, we provided payroll processing services to
approximately 560 clients with an aggregate of approximately 840,000 active
employees and an average of approximately 1,500 employees. For the quarter ended
June 30, 1999, we processed 5.8 million checks for our payroll clients. In
addition to providing tax filing services for our payroll clients, as of June
30, 1999 we provided national tax filing services to 119 clients with an
aggregate of approximately 1.7 million employees and an average of more than
14,400 employees.
2
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RISK FACTORS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE FOLLOWING RISK FACTORS COULD MATERIALLY AND ADVERSELY AFFECT
OUR FUTURE OPERATING RESULTS AND COULD CAUSE ACTUAL EVENTS TO DIFFER MATERIALLY
FROM THOSE PREDICTED IN OUR FORWARD-LOOKING STATEMENTS RELATED TO OUR BUSINESS.
IN EVALUATING OUR BUSINESS, PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE
FOLLOWING RISK FACTORS IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS.
OPERATING LOSSES; NEED TO COMMIT TO EXPENSE IN ADVANCE OF REVENUES. The
Company has experienced significant operating losses since its inception and
expects to incur significant operating losses in the future due to continued
client acquisition costs, investments in research and development and costs
associated with expanding its sales efforts and operations to new geographic
regions. As of June 30, 1999, the Company had an accumulated deficit of $47.9
million. The establishment of new client relationships involves lengthy and
extensive sales and implementation processes. The sales process generally takes
six to twelve months or longer, and the implementation process generally takes
an additional three to nine months or longer. In connection with the acquisition
of each new client, the Company incurs substantial client acquisition costs,
which consist primarily of sales and implementation expenses and, to a lesser
extent, marketing expenses. The Company's ability to achieve profitability will
depend in part upon its ability to attract and retain new clients, offer new
services and features and achieve market acceptance of new services. There can
be no assurance that the Company will achieve or sustain profitability in the
future. Failure to achieve or sustain profitability in the future could have a
material adverse effect on the Company's business, financial condition and
consolidated results of operations.
SEASONALITY; FLUCTUATION IN QUARTERLY RESULTS. The Company's business is
characterized by significant seasonality. As a result, the Company's revenue has
been subject to significant seasonal fluctuations, with the largest percentage
of annual revenue being realized in the third and fourth fiscal quarters,
primarily due to new clients beginning services in the beginning of the tax year
(the Company's third fiscal quarter) and higher interest income earned on
payroll tax funds invested. Further, the Company's operating expenses are
typically higher as a percentage of revenue in the first and third fiscal
quarters as the Company increases personnel to acquire new clients and to
implement and provide services to such new clients, a large percentage of which
begin services in the third quarter.
The Company's quarterly operating results have in the past and will in the
future vary significantly depending on a variety of factors, including the
number and size of new clients starting services, the decision of one or more
clients to delay or cancel implementation or ongoing services, interest rates,
seasonality, the ability of the Company to design, develop and introduce new
services and features for existing services on a timely basis, costs associated
with strategic acquisitions and alliances or investments in technology, the
success of any such strategic acquisition, alliance or investment, costs to
transition to new technologies, expenses incurred for geographic expansion,
risks associated with payroll tax and benefits administration services, price
competition, a reduction in the number of employees of its clients and general
economic factors. Revenue from new clients typically represents a significant
portion of quarterly revenue in the third and fourth fiscal quarters. A
substantial majority of the Company's operating expenses, particularly personnel
and related costs, depreciation and rent, is relatively fixed in advance of any
particular quarter. The Company's agreements with its clients generally do not
have significant penalties for cancellation. As a result, any decision by a
client to delay or cancel implementation of the Company's services or the
Company's underutilization of personnel may cause significant variations in
operating results in a particular quarter and could result in losses for such
quarter. As the Company secures larger clients, the time required for
implementing the Company's services increases, which could contribute to larger
fluctuations in revenue. Interest income earned from investing payroll tax
funds, which is a significant portion of the Company's revenue, is vulnerable to
fluctuations in interest rates. In addition, the Company's business may be
affected by shifts in the general condition of the economy, client staff
reductions, strikes, acquisitions of its clients by other
3
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companies and other downturns. There can be no assurance that the Company's
future revenue and results of operations will not vary substantially. It is
possible that in some future quarter the Company's results of operations will be
below the expectations of public market analysts and investors. In either case,
the market price of the Company's Common Stock could be materially adversely
affected.
RISKS ASSOCIATED WITH STRATEGIC ACQUISITIONS AND INVESTMENTS. In April
1999, the Company acquired Conduit Software, Inc., a leading provider of
Employee Relationship Management applications, in a transaction accounted for
using the pooling of interests method of accounting. There can be no assurance
that this acquisition will be effectively assimilated into the Company's
business. The integration of Conduit will place a burden on the Company's
management. Such integration is subject to risks commonly encountered in making
such acquisitions, including, among others, loss of key personnel of the
acquired company, the difficulty associated with assimilating the personnel and
operations of the acquired company, the potential disruption of the Company's
ongoing business, the maintenance of uniform standards, controls, procedures and
policies, and the impairment of the Company's reputation and relationships with
employees and clients. There can be no assurance that the Company will be
successful in overcoming these risks or any other problems encountered in
connection with its acquisition of Conduit.
The Company has no other current agreements or negotiations underway other
than those described above with respect to any acquisition of, or investment in,
businesses that provide complementary services or technologies to those of the
Company. The Company has in the past and intends in the future to make
additional acquisitions of, and investments in, such businesses. In addition,
future acquisitions could result in the issuance of dilutive equity securities,
the incurrence of debt or contingent liabilities. Furthermore, there can be no
assurance that any strategic acquisition or investment will succeed. Any future
acquisitions or investments could have a material adverse effect on the
Company's business, financial condition and results of operations.
RISKS ASSOCIATED WITH PAYROLL TAX SERVICE AND BENEFITS ADMINISTRATION
SERVICES. The Company's payroll tax filing service is subject to various risks
resulting from errors and omissions in filing client tax returns and paying tax
liabilities owed to tax authorities on behalf of clients. The Company's clients
transfer to the Company contributed employer and employee tax funds. The Company
processes the data received from the client and remits the funds along with a
tax return to the appropriate tax authorities when due. Tracking, processing and
paying such tax liabilities is complex. Errors and omissions have occurred in
the past and may occur in the future in connection with such service. The
Company is subject to large cash penalties imposed by tax authorities for late
filings or underpayment of taxes. To date, such penalties have not been
significant. However, there can be no assurance that any liabilities associated
with such penalties will not have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that the Company's reserves or insurance for such penalties will be
adequate. In addition, failure by the Company to make timely or accurate tax
return filings or pay tax liabilities when due on behalf of clients may damage
the Company's reputation and could adversely affect its relationships with
existing clients and its ability to gain new clients.
The Company's payroll tax filing service is also dependent upon government
regulations, which are subject to continual changes. Failure by the Company to
implement these changes into its services and technology in a timely manner
would have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, since a significant portion of
the Company's revenue is derived from interest earned from investing on
collected but unremitted payroll tax funds, changes in policies relating to
withholding federal or state income taxes or reduction in the time allowed for
taxpayers to remit payment for taxes owed to government authorities would have a
material adverse effect on the Company's business, financial condition and
results of operations.
4
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The Company's benefits administration services are subject to various risks
resulting from errors and omissions in processing and filing COBRA or other
benefit plan forms in accordance with governmental regulations and the
respective plans. The Company processes data received from employees and
employers and is subject to penalties for any late or misfiled plan forms. There
can be no assurance the Company's reserves or insurance for such penalties will
be adequate. In addition, failure to properly file plan forms would have a
material adverse effect on the Company's reputation, which could adversely
affect its relationships with existing clients and its ability to gain new
clients. The Company's benefits administration services are also dependent upon
government regulations which are subject to continuous changes that could reduce
or eliminate the need for benefits administration services. The Company has
access to confidential information and to client funds. As a result, the Company
is subject to potential claims by its clients for the actions of the Company's
employees arising from damages to the client's business or otherwise. There can
be no assurance that the Company's fidelity bond and errors and omissions
insurance will be adequate to cover any such claims. Such claims could have a
material adverse effect on the Company's business, financial condition and
results of operations.
INVESTMENT RISKS. The Company invests funds, including payroll tax funds
transferred to it by clients in short-term, top tier, high quality financial
instruments such as overnight U.S. government direct and agency obligation
repurchase agreements, commercial paper, and institutional money market funds
which are subject to credit risks and interest rate fluctuations. These
investments are exposed to several risks, including credit risks from the
possible inability of the borrowers to meet the terms of their obligations under
the financial instruments. The Company would be liable for any losses on such
investments. Interest income earned from the investment of client tax funds
represents a significant portion of the Company's revenues. As a result, the
Company's business, financial condition and results of operations are
significantly impacted by interest rate fluctuations. The Company enters into
interest rate swap agreements to minimize the impact of interest rate
fluctuations. There can be no assurance, however, that the Company's swap
agreements will protect the Company from all interest rate risks. Under certain
circumstances if interest rates rise, the Company would have payment obligations
under its interest rate swap agreements which may not be offset by interest
earned by the Company on deposited funds. A payment obligation under the
Company's swap agreements could have a material adverse effect on the Company's
business, financial condition and results of operations. A default by the
Company under its swap agreements could result in acceleration and setoff by the
bank of all outstanding contracts under the swap agreement, and could result in
cross-defaults of other debt agreements of the Company, any of which could have
a material adverse effect on the Company's business, financial condition and
results of operations.
MANAGEMENT OF GROWTH. The Company's business has grown significantly in
size and complexity over the past five years. This growth has placed, and is
expected to continue to place, significant demands on the Company's management,
systems, internal controls, and financial and physical resources. In order to
meet such demands, the Company intends to continue to hire new employees, open
new offices to attract clients in new geographic regions, increase expenditures
on research and development, and invest in new equipment and make other capital
expenditures. In addition, the Company expects that it will need to develop
further its financial and managerial controls and reporting systems and
procedures to accommodate any future growth. Failure to expand any of the
foregoing areas in an efficient manner could have a material adverse effect on
the Company's business, financial condition and results of operations. The
Company opened a satellite sales and implementation center in New Jersey in
January 1999 and may open additional sales offices in the future. In May 1999,
the Company moved into an additional leased office space built adjacent to its
Pleasanton, California headquarters and moved its benefits administration center
from its location in Bellevue, Washington to Bothell, Washington. Any inability
to manage growth effectively could have a material adverse effect on the
Company's business, financial condition and results of operations.
5
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SUBSTANTIAL COMPETITION. The market for the Company's services is intensely
competitive, subject to rapid change and significantly affected by new service
introductions and other market activities of industry participants. The Company
primarily competes with several public and private payroll service providers,
such as Automatic Data Processing, Inc., Ceridian Corporation and Paychex, Inc.,
as well as smaller, regional competitors. Many of these companies have longer
operating histories, greater financial, technical, marketing and other
resources, greater name recognition and a larger number of clients than the
Company. In addition, certain of these companies offer more services or features
than the Company and have processing facilities located throughout the United
States. The Company also competes with in-house employee services departments
and, to a lesser extent, banks and local payroll companies. With respect to
benefits administration services, the Company competes with insurance companies,
benefits consultants and other local benefits outsourcing companies. The Company
may also compete with marketers of related products and services that may offer
payroll or benefits administration services in the future. The Company has
experienced, and expects to continue to experience, competition from new
entrants into its markets. Increased competition, the failure of the Company to
compete successfully, pricing pressures, loss of market share and loss of
clients could have a material adverse effect on the Company's business,
financial condition and results of operations.
RISKS ASSOCIATED WITH THE DEVELOPMENT AND INTRODUCTION OF NEW OR ENHANCED
SERVICES; RISKS OF SOFTWARE DEFECTS. The technologies in which the Company has
invested to date are rapidly evolving and have short life cycles, which requires
the Company to anticipate and rapidly adapt to technological changes. In
addition, the Company's industry is characterized by increasingly sophisticated
and varied needs of clients, frequent new service and feature introductions and
emerging industry standards. The introduction of services embodying new
technologies and the emergence of new industry standards and practices can
render existing services obsolete and unmarketable. The Company's future success
will depend, in part, on its ability to develop or acquire advanced
technologies, enhance its existing services with new features, add new services
that address the changing needs of its clients, and respond to technological
advances and emerging industry standards and practices on a timely and
cost-effective basis. Several of the Company's competitors invest substantially
greater amounts in research and development than the Company, which may allow
them to introduce new services or features before the Company. Even if the
Company is able to develop or acquire new technologies in a timely manner, it
may incur substantial costs in developing or acquiring such technologies and in
deploying new services and features to its clients, including costs associated
with acquiring in-process technology, amortization expenses related to
intangible assets and costs of additional personnel. If the Company is unable to
develop or acquire and successfully introduce new services and new features of
existing services in a timely or cost-effective manner, the Company's business,
financial condition and results of operations could be materially adversely
affected. Application software used by the Company may contain defects or
failures when introduced or when new versions or enhancements are released. The
Company has in the past discovered software defects in certain of its
applications, in some cases only after its systems have been used by clients.
There can be no assurance that future defects will not be discovered in existing
or new applications or releases. Any such occurrence could have a material
adverse effect upon the Company's business, financial condition and results of
operations.
DEPENDENCE ON THIRD-PARTY PROVIDERS. The Company depends on third-party
courier services to deliver paychecks to clients. The Company does not have any
formal written agreements with any of the courier services that it uses. Such
courier services have been in the past and may be in the future unable to timely
pick up or deliver the paychecks from the Company to its clients for a variety
of reasons, including employee strikes, storms or other adverse weather
conditions, earthquakes or other natural disasters, logistical or mechanical
failures or accidents. Failure by the Company to deliver client paychecks on a
timely basis could damage the Company's reputation and have a material adverse
effect on the Company's business, financial condition and results of operations.
6
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DISASTER RECOVERY; RISK OF LOSS OF CLIENT DATA. The Company currently
conducts substantially all of its payroll and payroll tax processing at the
Company's headquarters in Pleasanton, California and divides the payroll
printing and finishing between its Pleasanton and Irvine, California facilities.
The Irvine facility serves both as an alternative processing center and a
back-up payroll center. The Company's benefits administration services are
conducted solely in Bothell, Washington, and no benefits administration back-up
facility exists. The Company establishes for each payroll client a complete set
of payroll data at the Pleasanton processing center, as well as at the client's
site. In the event of a disaster in Pleasanton, clients would have the ability
to process payroll checks based on the data they have on site if necessary. In
addition, the Company has developed business continuity plans for each of the
Company's mission critical business units. There can be no assurance that the
Company's disaster recovery procedures are sufficient or that the payroll data
recovered at the client site would be sufficient to allow the client to
calculate and produce payroll in a timely fashion.
The Company's operations are dependent on its ability to protect its
computer systems against damage from a major catastrophe (such as an earthquake
or other natural disaster), fire, power loss, security breach,
telecommunications failure or similar event. No assurance can be given that the
precautions that the Company has taken to protect itself from or minimize the
impact of such events will be adequate. Any damage to the Company's data
centers, failure of telecommunications links or breach of the security of the
Company's computer systems could result in an interruption of the Company's
operations or other loss which may not be covered by the Company's insurance.
Any such event could have a material adverse effect on the Company's business,
financial condition and results of operations.
DEPENDENCE ON KEY PERSONNEL. The Company's success will depend on the
performance of the Company's senior management and other key employees. The loss
of the services of any senior management or other key employee could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company generally does not enter into employment or
noncompetition agreements with its employees. If one or more of the Company's
key employees resigns from the Company to join a competitor or to form a
competitor, the loss of such personnel and any resulting loss of existing or
potential clients to any such competitor could have a material adverse effect on
the Company's business, financial condition and results of operations. In the
event of the loss of any key personnel, there can be no assurance that the
Company would be able to prevent the unauthorized disclosure or use of its
technical knowledge, practices, procedures or client lists by a former employee
or that such disclosure or use would not have a material adverse effect on the
Company's business, financial condition and results of operations.
NEED TO ATTRACT AND RETAIN EXPERIENCED PERSONNEL. The Company's success
depends to a significant degree on its ability to attract and retain experienced
employees. There is substantial competition for experienced personnel, which the
Company expects to continue. Many of the companies with which the Company
competes for experienced personnel have greater financial and other resources
than the Company. The Company has in the past and may in the future experience
difficulty in recruiting sufficient numbers of qualified personnel. In
particular, the Company's ability to find and train implementation employees is
critical to the Company's ability to achieve its growth objectives. The
inability to attract and retain experienced personnel as required could have a
material adverse effect on the Company's business, financial condition and
results of operations.
RISK ASSOCIATED WITH GEOGRAPHIC EXPANSION. A substantial majority of the
Company's revenue historically has been derived from clients located in the
western United States. The Company's ability to achieve significant future
revenue growth will in large part depend on its ability to gain new clients
throughout the United States. Growth and geographic expansion have resulted in
new and increased responsibilities for management personnel and have placed and
continue to place a strain on the Company's management and operating and
financial systems. The Company will be required to continue to implement and
improve its systems on a timely basis and in such a manner as is necessary to
accommodate the increased number of transactions and clients and the increased
size of the Company's
7
<PAGE>
operations. Any failure to implement and improve the Company's systems or to
hire and retain the appropriate personnel to manage its operations would have a
material adverse effect on the Company's business, financial condition and
results of operations.
YEAR 2000 COMPLIANCE. Many currently installed computer systems and
software products are coded to accept only two-digit entries in the date code
field. Beginning in 2000, these date code fields will need to accept four-digit
entries in order to distinguish 21st century dates from 20th century dates. As a
result, computer systems and/or software used by many companies will need to be
upgraded to comply with Year 2000 (Y2K) requirements by the end of 1999.
Significant uncertainty exists in the software industry concerning the potential
effects associated with such compliance issues. To address this issue we have a
Y2K project team to try to ensure that the daily operations and functionality of
the Company will not be adversely affected by the Y2K issue.
The Company believes that software applications used for providing payroll,
tax and HR services at the Company are Y2K compliant. Clients representing over
90% of the Company's revenue are currently processing on the Company's Y2K
compliant applications. All clients are expected to be processing on the
Company's Y2K compliant applications by fall of 1999. There can be no assurance
that Y2K errors or defects will not be discovered in the Company's current and
future products.
The Company has engaged a representative sample of its client base to
participate in the application testing process and validate the output; however,
the Company is not assessing the Y2K compliance of its clients' systems or the
possible effects on its operations of the Y2K compliance of its clients'
systems.
The Company is in the process of assessing Y2K compliance status with
regards to its internally developed software, third party software, hardware,
facilities, vendors and suppliers. All remediation efforts related to mission
critical software, hardware, vendors, suppliers and facilities are expected to
be completed by fall of 1999. The Company's reliance on third party suppliers
and subcontractors, and therefore, on the proper functioning of their
information systems and software, means that failure by such suppliers and
subcontractors to address Y2K issues could have a material adverse effect on the
Company's business, financial condition and results of operations.
Our Y2K compliance is dependent on key third parties also being Y2K
compliant on a timely basis; we cannot assure that the systems of certain of our
key third parties (for example, phone service providers, banks, etc.), upon
which we rely, will be converted in a timely manner, or that their failure to
convert would not have an adverse effect on our systems. In a worst-case
scenario, if one or more of our significant systems or key third parties were
not Y2K compliant by the end of 1999 this could potentially delay both clients'
payroll processing and transmission of tax payments to the local, state or
federal tax authorities. Failure by the Company to process payroll timely or
make timely or accurate tax return filings or pay tax liabilities when due on
behalf of clients may damage the Company's reputation and could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company has a business continuity plan in place in case of an event
(including disruption due to Y2K issues) that may affect our mission critical
operations. Like other businesses, many of our business processes are dependent
upon third-party providers. We have contracts in place with alternative vendors
for mission critical suppliers such as telecommunications, delivery services and
production supplies. In addition, the Company maintains a back-up generator in
case of disruption of electrical service and multiple fuel suppliers have been
contracted. There can be no assurance that the business continuity plans in
place will be adequate.
The costs for Y2K compliance have not been specifically identified within
the Company. However, the costs associated with Y2K compliance have not been,
and are not expected to be, material to our operations.
8
<PAGE>
LIMITATIONS ON PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY
RIGHTS. The Company's success is dependent in part upon its proprietary
software technology. The Company has no patents, patent applications or
registered copyrights. The Company relies on a combination of contract,
copyright and trade secret laws to establish and protect its proprietary
technology. The Company distributes its services under software license
agreements that grant clients licenses to use the Company's services and contain
various provisions protecting the Company's ownership and the confidentiality of
the underlying technology. The Company generally enters into confidentiality
and/or license agreements with its employees and existing and potential clients,
and limits access to and distribution of its software, documentation and other
proprietary information. There can be no assurance that the steps taken by the
Company in this regard will be adequate to deter misappropriation or independent
third-party development of the Company's technology. There can be no assurance
that the Company's services and technology do not infringe any existing patents,
copyrights or other proprietary rights of others, or that third parties will not
assert infringement claims in the future. If any such claims are asserted and
upheld, the costs of defense could be substantial and any resulting liability to
the Company could have a material adverse effect on the Company's business,
financial condition and results of operations.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Company's
common stock is likely to be highly volatile and could be subject to wide
fluctuations in response to quarterly variations in operating results,
announcements of technological innovations or new services by the Company or its
competitors, market conditions in the information services industry, changes in
financial estimates by securities analysts or other events or factors, many of
which are beyond the Company's control. In addition, the stock market has
experienced significant price and volume fluctuations that have particularly
affected the market prices of equity securities of many technology and services
companies and that often have been unrelated to the operating performance of
such companies. These broad market fluctuations may adversely affect the market
price of the Company's common stock.
9
<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our
common stock by the selling stockholders.
SELLING STOCKHOLDERS
The following table sets forth the names of the selling stockholders and the
number of shares being offered by each selling stockholder or his, her or its
assignees. See "Plan of Distribution."
The shares being offered by the selling stockholders were acquired from us
in a transaction exempt from the registration requirements of the Securities Act
by Section 4(2) thereof pursuant to the Agreement and Plan of Reorganization,
dated as of April 27, 1999, among us, Runway Acquisition Corp., Clemco, Inc. and
certain other parties. In connection with that transaction, we have filed with
the SEC, under the Securities Act, a Registration Statement on Form S-3, of
which this prospectus forms a part, with respect to the resale of the shares
from time to time in transactions on one or more exchanges, including the Nasdaq
National Market or in the over-the-counter market or otherwise or in negotiated
transactions, and have agreed to use commercially reasonable efforts to keep
such registration statement effective until the earlier of (i) the date all
shares offered hereby have been resold, (ii) the date when all shares offered
hereby can be sold within a given three-month period without compliance with the
registration requirements of the Securities Act pursuant to Rule 144 or other
applicable exemption, or (iii) April 27, 2001.
<TABLE>
<CAPTION>
SHARES SHARES PERCENTAGE OF TOTAL
BENEFICIALLY OFFERED BEFORE SALES OF SHARES
STOCKHOLDER OWNED (1) OFFERED HEREBY (2)
- ------------------------------------------------------------------ ----------- ---------- -----------------------
<S> <C> <C> <C>
Thomas J. Clements(3)............................................. 231,613 231,613 1.01%
Brad Zeitlin(4)................................................... 47,479 47,479 *
Gregory R. Palen.................................................. 109,000 109,000 *
D. Gordon Drake................................................... 57,125 57,125 *
Troy Kinnamon..................................................... 2,044 2,044 *
Estate of Theodore Sanborn........................................ 109,000 109,000 *
Noro-Moseley Partners III L.P.(5)................................. 448,142 448,142 1.95%
Wolvy, L.P........................................................ 64,118 64,118 *
Croft & Bender, LLC(6)............................................ 10,900 10,900 *
Samuel D. Holmes.................................................. 12,824 12,824 *
John D. Shlesinger................................................ 12,824 12,824 *
Nathan Lipson..................................................... 12,824 12,824 *
Daniel Lipson..................................................... 12,824 12,824 *
James Vincent..................................................... 6,412 6,412 *
Brad Smith........................................................ 6,412 6,412 *
Infinium Software, Inc............................................ 69,591 69,591 *
Entities affiliated with TL Ventures(7)........................... 310,254 310,254 1.35%
Cambridge Technology Capital Fund L.P............................. 101,147 101,147 *
Fidelity Investors II Ltd. Partnership............................ 63,217 63,217 *
Fidelity Ventures Limited......................................... 63,217 63,217 *
TOTAL............................................................. 1,750,967 1,750,967
</TABLE>
- ------------------------
* Less than 1%.
(1) The selling stockholders may sell from time to time all or a portion of the
shares being offered. The amounts shown assume the sale of all the shares
being offered by each selling stockholder or his, her or its assignees.
10
<PAGE>
(2) Based on an aggregate of 22,954,222 shares of our common stock outstanding
as of September 22, 1999.
(3) Includes 218 shares issuable upon the exercise of warrants.
(4) Includes 245 shares issuable upon the exercise of warrants.
(5) Includes 17,822 shares issuable upon the exercise of warrants.
(6) Represents shares issuable upon the exercise of warrants.
(7) Includes 244,322 shares held by TL Ventures III, L.P., 51,142 shares held by
TL Ventures III Offshore L.P. and 7,978 shares held by TL Ventures III
Interfund L.P. Also includes 6,812 shares issuable upon the exercise of
assumed warrants.
11
<PAGE>
PLAN OF DISTRIBUTION
The selling stockholders may sell all or a portion of the shares offered
hereby from time to time in transactions on one or more exchanges, including the
Nasdaq National Market, or in the over-the-counter market or otherwise, at
prices and at terms then prevailing or at prices related to the then current
market prices, or in negotiated transactions. The shares may be sold by one or
more of the following: (a) a block trade in which the broker or dealer engaged
will attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) an exchange distribution in accordance
with the rules of such exchange; and (d) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. In effecting sales,
brokers or dealers engaged by a selling stockholder may arrange for other
brokers or dealers to participate in the resales. The shares may be sold from
time to time by a selling stockholder, or by his, her or its assignees.
In connection with distributions of the shares or otherwise, a selling
stockholder may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the shares registered hereunder in the course of hedging the positions they
assume with a selling stockholder. A selling stockholder may also sell shares
short and redeliver the shares to close out such short positions. A selling
stockholder may also enter into option or other transactions with broker-dealers
which require the delivery to the broker-dealer of the shares registered
hereunder. A selling stockholder may also pledge the shares offered hereby to a
broker or dealer and upon a default the broker or dealer may effect sales of the
shares pursuant to this prospectus.
Brokers, dealers or agents may receive compensation in the form of
commissions, discounts or concessions from a selling stockholder in amounts to
be negotiated in connection with the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales, and any such
commission, discount or concession may be deemed to be underwriting discounts or
commissions under the Securities Act. In addition, any securities covered by
this prospectus which qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to this prospectus.
There can be no assurance that any selling stockholder will sell any or all
of the shares offered hereunder.
LEGAL MATTERS
The validity of the securities offered hereunder has been passed upon by
Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto, California.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements as of June 30, 1998 and 1999 and for the three years in the period
ended June 30, 1999 as set forth in their report. We have incorporated in this
prospectus by reference our Annual Report on Form 10-K for the year ended June
30, 1999. We have incorporated our Annual Report in reliance on Ernst & Young
LLP's report, given on the authority of said firm as experts in auditing and
accounting.
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses (other than underwriting
discounts and commissions), which, other than the SEC registration fee and the
Nasdaq listing fee, are estimates, payable by the Company in connection with the
sale and distribution of the securities registered hereby:
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee............................................... $ 13,082
Nasdaq listing fee................................................. $ 17,500
Accountants' fees and expenses..................................... $ 5,000
Legal fees and expenses............................................ $ 5,000
Miscellaneous...................................................... $ 4,418
---------
Total............................................................ $ 45,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Article Ninth of the Amended and Restated Certificate
of Incorporation of the Company incorporated by reference as Exhibit 3.1;
Article VI of the Bylaws of the Company, incorporated by reference as Exhibit
3.2; Section 145 of the Delaware General Corporation Law; and the form of
indemnification agreement filed incorporated by reference as Exhibit 10.14
which, among other things, and subject to certain conditions, authorize the
Company to indemnify, or indemnify by their terms, as the case may be, the
directors and officers of the Company against certain liabilities and expenses
incurred by such persons in connection with claims made by reason of their being
such a director or officer.
The Company has obtained directors and officers insurance providing
indemnification for certain of the Company's directors, officers, affiliates,
partners or employees for certain liabilities.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated as of April 27, 1999, among ProBusiness Services, Inc.,
Runway Acquisition Corp., Clemco, Inc. and certain other parties (incorporated by reference to
Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed with the SEC as of May 12, 1999).
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.1 Consent of Ernst & Young, LLP, Independent Auditors.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (see Exhibit 5.1).
24.1 Power of Attorney (see signature page).
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-1
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this registration statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this registration statement or any
material change to such information in this registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(6) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
II-2
<PAGE>
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(7) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pleasanton, State of California, on September 30,
1999.
<TABLE>
<S> <C> <C>
PROBUSINESS SERVICES, INC.
By: /s/ THOMAS H. SINTON
-----------------------------------------
Thomas H. Sinton
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned officers and directors
of ProBusiness Services, Inc., a Delaware corporation, do hereby constitute and
appoint Thomas H. Sinton and Steven E. Klei, and each of them, the lawful
attorneys and agents, with full power and authority to do any and all acts and
things and to execute any and all instruments which said attorneys and agents,
and any one of them, determine may be necessary or advisable or required to
enable said corporation to comply with the Securities Act of 1933, as amended,
and any rules or regulations or requirements of the SEC in connection with this
Registration Statement. Without limiting the generality of the foregoing power
and authority, the powers granted include the power and authority to sign the
names of the undersigned officers and directors in the capacities indicated
below to this Registration Statement, to any and all amendments, both
pre-effective and post-effective, and supplements to this Registration
Statement, and to any and all instruments or documents filed as part of or in
conjunction with this Registration Statement or amendments or supplements
thereof, and each of the undersigned hereby ratifies and confirms all that said
attorneys and agents, or any of them, shall do or cause to be done by virtue
hereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
President, Chief Executive
/s/ THOMAS H. SINTON Officer and Director
- ------------------------------ (Principal Executive September 30, 1999
Thomas H. Sinton Officer)
Senior Vice President,
/s/ STEVEN E. KLEI Finance, Chief Financial
- ------------------------------ Officer and Secretary September 30, 1999
Steven E. Klei (Principal Financial and
Accounting Officer)
/s/ WILLIAM T. CLIFFORD
- ------------------------------ Director September 30, 1999
William T. Clifford
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ DAVID C. HODGSON
- ------------------------------ Director September 30, 1999
David C. Hodgson
/s/ RONALD W. READMOND
- ------------------------------ Director September 30, 1999
Ronald W. Readmond
/s/ THOMAS P. RODDY
- ------------------------------ Director September 30, 1999
Thomas P. Roddy
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated as of April 27, 1999, among ProBusiness Services, Inc.,
Runway Acquisition Corp., Clemco, Inc. and certain other parties (incorporated by reference to
Exhibit 2.1 of the Registrant's Current Report on Form 8-K filed with the SEC as of May 12, 1999).
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.1 Consent of Ernst & Young, LLP, Independent Auditors.
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (see Exhibit 5.1).
24.1 Power of Attorney (see signature page).
</TABLE>
<PAGE>
EXHIBIT 5.1
[Letterhead of Wilson Sonsini Goodrich & Rosati]
September 30, 1999
ProBusiness Services, Inc.
4125 Hopyard Road
Pleasanton, CA 94588
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by you
with the Securities and Exchange Commission on or about September 30, 1999 (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of up to 1,750,967 shares of your Common
Stock (the "Shares"). As your legal counsel, we have examined the proceedings
taken by you in connection with the issuance and sale of the Shares.
It is our opinion that the Shares have been legally issued and are fully
paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of ProBusiness
Services, Inc. for the registration of 1,750,967 shares of its common stock and
to the incorporation by reference therein of our report dated July 29, 1999,
with respect to the consolidated financial statements of ProBusiness Services,
Inc. incorporated by reference in its Annual Report on Form 10-K for the year
ended June 30, 1999, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Walnut Creek, California
September 24, 1999
