<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 28 1998
REGISTRATION NO. 333-59389
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HEADHUNTER.NET, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
GEORGIA 7310 58-2403177
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification Number)
</TABLE>
WARREN L. BARE
CHIEF EXECUTIVE OFFICER
HEADHUNTER.NET, INC.
6410 ATLANTIC BOULEVARD
SUITE 160
NORCROSS, GEORGIA 30071
TELEPHONE: (770) 300-9272
FACSIMILE: (770) 300-9298
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices and agent for service)
COPIES TO:
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<S> <C>
JOEL J. HUGHEY, ESQ. GLENN W. STURM, ESQ.
ALSTON & BIRD LLP NELSON MULLINS RILEY
ONE ATLANTIC CENTER & SCARBOROUGH, L.L.P.
1201 WEST PEACHTREE STREET FIRST UNION PLAZA
ATLANTA, GEORGIA 30309-3424 999 PEACHTREE STREET, N.E.
TELEPHONE: (404) 881-7000 SUITE 1400
FACSIMILE: (404) 881-7777 ATLANTA, GEORGIA 30309
TELEPHONE: (404) 817-6000
FACSIMILE: (404) 817-6050
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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, check the following box. [ ]
If this Form is filed to register additional securities for any offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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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 OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A)
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JULY 28, 1998
PROSPECTUS
SHARES
HEADHUNTER.NET, INC.
COMMON STOCK
All of the shares of Common Stock offered hereby (the "Offering")
are being offered by HeadHunter.NET, Inc. (the "Company" or "HeadHunter.NET").
Prior to the Offering there has been no public market for the Common Stock.
It is currently anticipated that the initial public offering price for the
Common Stock will be between $ and $ per share. See "Underwriting"
for information relating to the determination of the initial public offering
price. The Company has applied for listing of the Common Stock on the Nasdaq
National Market under the symbol "HNET."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share......................... $ $ $
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Total(3).......................... $ $ $
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</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated Offering expenses of $ payable by the
Company.
(3) The Company has granted the Underwriters a 30-day over-allotment option to
purchase up to additional shares of Common Stock on the same terms
and conditions as set forth above. If all such shares are purchased by the
Underwriters, the total Price to Public will be $ , the total
Underwriting Discount will be $ and the total Proceeds to Company will
be $ . See "Underwriting."
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The shares of Common Stock are offered subject to receipt and acceptance by
the several Underwriters, to prior sale, and to the Underwriters' right to
reject orders in whole or in part and to withdraw, cancel or modify the offer
without notice. It is expected that certificates for the shares of Common Stock
will be available for delivery on or about , 1998.
WHEAT FIRST UNION
J.C. BRADFORD&CO.
INTERSTATE/JOHNSON LANE
CORPORATION
, 1998.
<PAGE> 3
[PICTURES OF HEADHUNTER.NET WEB PAGES APPEAR HERE]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements, the
notes thereto and the other financial and operating data contained elsewhere in
this Prospectus. Unless otherwise indicated, the information contained in this
Prospectus assumes (i) no exercise of the Underwriters' over-allotment option
and (ii) conversion of all of the Company's Class A Preferred Stock into Common
Stock. Unless otherwise indicated expressly or by context, references herein to
the "Company" or "HeadHunter.NET" refer to HeadHunter.NET, Inc. and its
subsidiaries, HeadHunters, L.L.C. ("LLC") and HNET, Inc. ("HNI").
THE COMPANY
HeadHunter.NET is an Internet-based interactive technology company that
provides a leading employment Web site at www.HeadHunter.NET. The Company's Web
site enables employers and recruiters ("job listers") to list job opportunities
and search for resumes, and enables job seekers to post resumes and search for
job opportunities using a wide array of search criteria, including keyword,
industry, job type, education, geographic location and salary range. Based on
Relevant Knowledge statistics for the second quarter of 1998, HeadHunter.NET
rated first in terms of return traffic, page views per user and time spent per
user on the site compared to the leading employment Web sites. The Company has
significantly increased traffic on its Web site from 170,000 average daily page
views during January 1998 to 375,000 average daily page views during June 1998.
HeadHunter.NET believes that this increase in traffic is due to the quality and
quantity of its content, the ease of use, search capabilities and overall
functionality of its Web site, and increased market awareness resulting from
enhanced marketing activities. The Company recently entered into strategic
relationships with Yahoo! Inc. ("Yahoo!"), WorkLife Solutions, Inc.
("WorkLife"), in conjunction with the AltaVista search engine ("AltaVista"),
GeoCities, Inc. ("GeoCities") and DoubleClick Inc. ("DoubleClick"), each of
which the Company believes will further increase traffic and market awareness of
its Web site.
HeadHunter.NET offers an effective Internet-based solution to meet the
hiring and job search needs of job listers and job seekers. All of the job
opportunities and resumes listed on the Company's Web site are original content
submitted by job listers and job seekers, and are not recycled from print or
other media. At June 30, 1998, approximately 165,000 job opportunities and
31,000 resumes were listed on the Company's Web site. HeadHunter.NET ensures the
quality of its content by enabling job listers and job seekers to continually
update their job opportunities and resumes and by removing outdated listings
from its Web site. The Company offers enhanced listing services to job listers
which are primarily intended to increase visibility of their job opportunities.
These enhanced listing services include: (i) preferential search result
ordering; (ii) automatic cross-posting of listings to Yahoo! Classifieds and
AltaVista's Career and Employer Zone (the "Careers Zone"); (iii) a link to a job
lister's Web site which allows job seekers to easily access additional
information about the job lister and its employment opportunities; and (iv)
access to an automated job posting system which allows job listers to bulk post
a large number of employment opportunities to the Company's Web site.
Jupiter Communications estimates that the total number of individual online
users in the United States will grow from approximately 49 million in 1997 to
116 million in 2002. The Company believes that this rapid increase has made and
will continue to make the Internet an attractive medium for online recruiting.
According to an industry report, the traditional place and search segment of the
staffing industry is expected to generate approximately $13 billion in revenues
in 1998, an increase of 19% from 1997. Total spending on online recruiting is
expected to grow from approximately $48 million in 1997 to $460 million in 2002,
according to Forrester Research. The Company believes that online recruiting has
a number of advantages over traditional means of hiring and job searching
because it is: (i) interactive, allowing immediate links to additional
information; (ii) more easily tailored to satisfy the users' needs; (iii) more
cost-effective; and (iv) more easily accessible.
The Company also believes that a significant opportunity exists to
capitalize on the growing use of the Internet as an advertising medium by
leveraging the traffic on its Web site to attract advertisers. According to
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Jupiter Communications, total spending for online advertising is expected to
grow from approximately $940 million in 1997 to $7.7 billion in 2002. The
Company believes that job seekers using its Web site present an attractive
target audience for advertising by existing job listers and companies such as
career consultants, resume consultants, benefits providers, recruiters, human
resource management companies, moving companies, insurance companies and others
whose services may be of interest to job seekers.
The Company derives its revenues from enhanced listing services fees and
the sale of advertising banners on its site. Job listers may choose to purchase
enhanced listing services to improve the placement and visibility of their job
opportunities. Advertisers may purchase banner advertisements that are displayed
randomly or based upon targeted search criteria. During June 1998, the Company
delivered, on average, over 375,000 advertising impressions per day from over 65
advertisers, including Fidelity Investments, HotMail Corporation, Powertel,
Inc., Ford Motor Company and InterCall, Inc.
The Company's objective is to provide the leading employment Web site by
offering an effective solution to meet the employment needs of job listers and
job seekers. The Company's strategy to accomplish this objective includes the
following key elements: (i) continue to facilitate successful employment
searches; (ii) increase market awareness and brand recognition of
HeadHunter.NET; (iii) establish additional strategic relationships; (iv)
implement an innovative pricing model; (v) continue to enhance site
functionality and features; and (vi) pursue strategic acquisitions of
complementary businesses and technologies.
Information contained on the Company's Web site is not a part of this
Prospectus and must not be relied upon in evaluating an investment in the Common
Stock offered hereby. This Prospectus contains trade names, service marks and
trademarks of the Company and others, all of which are the property of their
respective owners.
THE OFFERING
Common Stock offered by the
Company..................... shares
Common Stock to be outstanding
after the Offering............ shares(1)
Use of Proceeds............... Marketing and selling costs, including the
development of strategic relationships;
repayment of debt to a wholly-owned subsidiary
of one of the Company's principal shareholders;
and working capital and general corporate
purposes. See "Use of Proceeds" and "Certain
Transactions."
Proposed Nasdaq National
Market symbol................. HNET
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(1) Excludes (i) 500,000 shares of Common Stock reserved for issuance under the
HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan (the "Incentive Plan"),
(ii) 382,250 shares of Common Stock issuable upon the exercise of options
granted under the HeadHunters, L.L.C. Employee Common Unit Option Plan (the
"LLC Plan") as of the date of this Prospectus, none of which are currently
exercisable and (iii) shares of Common Stock (assuming an initial
public offering price of $ per share) issuable upon the exercise of a
warrant granted by the Company to ITC Service Company, a wholly-owned
subsidiary of one of the Company's principal shareholders, in connection
with the Company's $2.5 million credit facility. See
"Management -- HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan,"
"-- HeadHunters, L.L.C. Employee Common Unit Option Plan" and "Certain
Transactions."
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SUMMARY FINANCIAL AND OPERATING DATA
The summary financial and operating data set forth below should be read in
conjunction with "Company Organization," "Use of Proceeds," "Selected Financial
and Operating Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company's financial statements and
notes thereto, and the other financial and operating data included elsewhere in
this Prospectus. The financial and operating data for the periods after October
31, 1997 (the date the Company was organized) are not comparable to the
financial and operating data for prior periods as a result of the amortization
of acquired software rights. The financial data for the "Predecessor Company"
represent the financial results of HNI prior to October 31, 1997. The financial
and operating data for the "Successor Company" represent the financial results
and operating data of HeadHunter.NET, Inc. through June 30, 1998. See Notes 1
and 2 of notes to the Company's financial statements.
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<CAPTION>
SUCCESSOR PREDECESSOR SUCCESSOR
PREDECESSOR COMPANY COMPANY COMPANY COMPANY
----------------------------------------------- ------------ ----------- ------------
FROM INCEPTION YEAR TEN MONTHS TWO MONTHS SIX MONTHS SIX MONTHS
(OCTOBER 10, 1995) ENDED ENDED ENDED ENDED ENDED
TO DECEMBER 31, DECEMBER 31, OCTOBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1997 1997 1997 1998
------------------ ------------ ----------- ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.......................... $ 50,754 $ 190,146 $ 124,437 $ 29,591 $ 103,885 $ 278,051
Operating expenses................ 5,589 61,687 158,757 212,209 96,222 1,344,976
-------- --------- --------- --------- --------- ------------
Operating income (loss)........... 45,165 128,459 (34,320) (182,618) 7,663 (1,066,925)
Net income (loss)................. $ 45,165 $ 128,623 $ (35,163) $(176,392) $ 7,062 $ (1,059,381)
======== ========= ========= ========= ========= ============
LOSS PER SHARE:(1)
Basic............................. $ (0.08) $ (0.48)
Diluted........................... $ (0.08) $ (0.46)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic............................. 2,200,000 2,200,000
Diluted........................... 2,318,250 2,318,250
OPERATING DATA:
Jobs posted (at end of period).... 90,000 165,000
Resumes posted (at end of
period)......................... 20,000 31,000
Monthly page impressions(2)....... 2,500,000 11,400,000
</TABLE>
<TABLE>
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SUCCESSOR COMPANY
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AS OF JUNE 30, 1998
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ACTUAL AS ADJUSTED(3)
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(UNAUDITED) (UNAUDITED)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 196,366
Working capital............................................. (273,131)
Total assets................................................ 1,524,696
Total debt, including current maturities.................... 400,000
Total shareholders' equity.................................. 771,136
</TABLE>
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(1) Pursuant to Staff Accounting Bulletin ("SAB") No. 98, for all periods
presented, basic net loss per share is computed using the weighted average
number of shares of Common Stock outstanding during the period. Diluted net
loss per share is computed using the weighted average number of shares of
Common Stock outstanding during the period and nominal issuances of Common
Stock and Common Stock equivalents, regardless of whether they are
anti-dilutive. The Predecessor Company's per share data are not shown as
they are not comparable with the Successor Company's.
(2) Page impressions represent the number of Web pages delivered from the
Company's server to users. Monthly page impressions consist solely of
impressions delivered for the last month of the period.
(3) Adjusted to reflect the sale of shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$ per share and the application of the estimated net proceeds therefrom.
See "Use of Proceeds."
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RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition to the other information in this Prospectus, the
following factors should be considered carefully in evaluating an investment in
the Common Stock offered hereby. This Prospectus contains statements which
constitute "forward-looking statements" appearing throughout this Prospectus and
include all statements that are not historical statements of fact relating to,
without limitation, future economic performance, plans and objectives of
management for future operations and projections of revenues and other financial
items that are based on the beliefs of the Company's management, as well as
assumptions made by, and information currently available to, the Company's
management. The words "may," "would," "could," "expect," "estimate,"
"anticipate," "believe," "plan," "intend" and similar expressions and variations
thereof are intended to identify forward-looking statements. The cautionary
statements set forth in this "Risk Factors" section and elsewhere in this
Prospectus identify important factors with respect to such forward-looking
statements, including certain risks and uncertainties, many of which are beyond
the Company's ability to control, that could cause actual results to differ
materially from those in such forward-looking statements.
EXTREMELY LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT AND ANTICIPATION OF
CONTINUED LOSSES
The Company launched its Web site in October 1996. Accordingly, the Company
has an extremely limited operating history upon which an evaluation of the
Company and its current business can be based. The Company's business must be
considered in light of the risks, expenses and problems frequently encountered
by companies in their early stage of development, particularly companies in new
and rapidly evolving markets such as Internet services and Internet-based
advertising markets. Specifically, such risks include, without limitation, the
inability to achieve or, if achieved, to maintain, high volumes of traffic on
its Web site, the failure to anticipate and adapt to a developing market, the
rejection of the Company's services by job listers, job seekers, or advertisers,
current or additional competition, the failure of the marketplace to adopt the
Internet as an advertising medium, reductions in market prices for
Internet-based advertising as a result of competition or other factors, the
inability of the Company to establish additional or maintain existing strategic
relationships, the inability of the Company to identify, attract, retain and
motivate qualified personnel, and the inability of the Company to effectively
integrate the technology and operations of any subsequently acquired businesses
or technologies with its operations. There can be no assurance that the Company
will be successful in addressing such risks.
The Company has achieved only limited revenues to date, has incurred
significant operating and net losses since inception, and as of June 30, 1998,
had an accumulated deficit of approximately $1.2 million. The Company may
continue to experience significant increases in operating and net losses on an
annual and quarterly basis in the future. There can be no assurance that any
revenue growth the Company experiences will be indicative of future operating
results. In addition, the Company plans to significantly increase its operating
expenses in order to expand its sales and marketing efforts, and increase its
general and administrative costs to support an enlarged organization. To the
extent that revenues do not grow at anticipated rates or that increases in such
operating expenses precede or are not subsequently followed by commensurate
increases in revenues, or that the Company is unable to adjust operating expense
levels accordingly, the Company's business, results of operations and financial
condition will be materially and adversely affected. Given the level of planned
expenditures, the Company anticipates that it will continue to incur losses and
negative cash flow through at least the second quarter of 2000. The extent of
these losses and negative cash flow will be contingent on the amount of growth
in the Company's advertising and listing enhancement revenues which in turn
depends on the factors noted above. Although the Company does not anticipate
that its operating loss will continue to increase indefinitely, there can be no
assurance that operating losses will not increase in the future or that the
Company will ever achieve or maintain profitability.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS; UNPREDICTABILITY OF FUTURE REVENUES
As a result of the Company's extremely limited operating history and the
emerging nature of the Internet, the Company has no meaningful historical
financial data upon which to base planned operating expenses. Accordingly, the
Company's expense levels are based in part on its expectations as to future
revenues. There
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can be no assurance that the Company will be able to accurately predict the
levels of future revenues, particularly in light of the intense competition for
the sale of Internet-based advertisements and the uncertainty as to the
viability of the Internet as an advertising or recruiting medium, and the
failure to do so could have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, the Company derives
its revenues from the sale of advertising on its Web site pursuant to short-
term contracts and fees charged for enhanced listing services. As a result,
quarterly sales and operating results are and will continue to be entirely
dependent on such revenues received within the quarter, which are difficult to
forecast, and are also dependent on the Company's ability to adjust spending in
a timely manner to compensate for any unexpected revenue shortfall. The
cancellation or deferral of a small number of existing advertising contracts or
enhanced listing orders or the failure to obtain new advertising contracts and
enhanced listing orders in any quarter could have a material adverse effect on
the Company's business, results of operations and financial condition for such
quarter. Furthermore, the Company derives advertising revenue based on the
amount of traffic, or page views, on its Web site. Accordingly, any significant
shortfall of traffic on the Company's Web site in relation to the Company's
expectations, or the expectations of existing or potential advertisers, would
have an immediate material adverse effect on the Company's business, results of
operations and financial condition.
The Company expects operating results to vary significantly on a quarterly
basis. Such fluctuations may in the future be caused by numerous factors, many
of which are outside the Company's control, including, without limitation, (i)
specific economic conditions relating to the Internet, (ii) usage of the
Internet, (iii) demand for advertising on the Company's Web site as well as
demand for Internet-based advertising in general, (iv) changes in advertising
rates as a result of competition or other factors, (v) seasonal trends in
advertising sales, (vi) the advertising budgeting cycles of advertisers, (vii)
the hiring cycles of employers, (viii) demand for enhanced listing services on
the Company's Web site, (ix) incurrence of charges in connection with the
Company's distribution relationships with Internet service providers ("ISPs")
and online service providers ("OSPs") or other third parties, (x) demand for the
Company's services, (xi) incurrence of costs relating to acquisitions of
businesses or technologies, (xii) incurrence of charges in connection with the
establishment of strategic relationships, (xiii) introduction or enhancement of
services by the Company and its competitors, (xiv) market acceptance of new
services, (xv) delays in the introduction of services or enhancements by the
Company or its competitors, (xvi) changes in the Company's pricing policies or
those of its competitors, (xvii) capacity constraints and dependencies on
computer infrastructure and (xviii) general economic conditions. In order to
promote and maintain awareness of the Company's Web site, the Company may in the
future significantly increase its advertising and/or promotion budgets for a
particular quarter, which could have a material adverse effect on the Company's
business, results of operations and financial condition for such period. As a
strategic response to a changing competitive environment, the Company may elect
from time to time to make certain other pricing, service or marketing decisions
or acquisitions that could have a material adverse effect on the Company's
business, results of operations and financial condition. As a result, the
Company believes that period-to-period comparisons of its results of operations
will not necessarily be meaningful and should not be relied upon as an
indication of future performance. Due to all of the foregoing factors, it is
likely that in some future quarter or quarters the Company's operating results
will be below the expectations of management or public market analysts and
investors. In such event, the price of the Company's capital stock could drop
significantly.
UNCERTAIN ACCEPTANCE OF THE INTERNET AS AN EFFECTIVE ADVERTISING MEDIUM OR
SEARCH TOOL FOR CAREER AND EMPLOYMENT NEEDS
The Company's current business model is based on deriving its revenues from
selling advertising space on its Web site and charging fees for enhanced listing
services. Because the market for the Company's services has recently begun to
develop and is rapidly evolving, there is a lack of proven business models for
companies like the Company which rely on such sources of revenue. In particular,
the Internet is an unproven medium for advertising and for the fulfillment of
job listers' and job seekers' needs as compared to traditional advertising media
and job search and placement services. No standards have been widely accepted
for the measurement of the effectiveness of Internet-based advertising, and
there can be no assurance that such standards will ever develop sufficiently to
support the Internet as an effective advertising medium. In addition, there is
intense
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competition in the sale of advertising on the Internet, resulting in a wide
range of rates quoted and a variety of pricing models offered by different
vendors for a variety of advertising services which makes it difficult to
project future levels of advertising revenues and rates. It is also difficult to
predict which pricing models will be adopted by the industry or advertisers. For
example, advertising rates based on the number of "click throughs" from the
Company's Web site to the advertiser's pages, instead of rates based solely on
the number of impressions or other factors, could have a material adverse effect
on the Company's advertising revenues. Moreover, "filter" software programs that
limit or remove advertising from an Internet user's desktop are publicly
available. Widespread adoption of such software by users could have a material
adverse effect upon the viability of advertising on the Internet. Moreover,
critical issues concerning the commercial use of the Internet (including
security, reliability, cost, ease of use, access, quality of service and
acceptance of advertising) remain unresolved and may impact the growth of the
Internet. The Company's future operating results depend upon the increased use
of the Internet for information, publication, distribution and commerce, and on
the emergence of the Internet as an effective advertising medium and a useful
tool for job listers and job seekers. If widespread commercial use of the
Internet does not develop, or if the Internet does not develop as an effective
advertising medium or search tool for job listers and job seekers, such factors
could have a material adverse effect on the Company's business, results of
operations and financial condition.
A majority of the Company's current and targeted advertising customers have
only limited experience with the Internet as an advertising medium and may not
find such advertising to be effective for promoting their products or services
relative to traditional methods of advertising. As a result, many current and
targeted advertisers have not yet devoted a significant portion of their
advertising expenditures to Internet-based advertising, and purchase
advertisements only on a short-term basis. There can be no assurance that such
advertisers will perceive that the value obtained by advertising on the
Company's Web site outweighs the value obtained from traditional advertising or
by advertising on other Web sites, or that such advertisers will continue or
increase the level of, or that potential new advertisers will purchase,
advertisements on the Company's Web site. The Company's ability to generate
significant advertising revenues will also depend on, among other factors, the
development of a large base of users of the Company's services possessing
demographic characteristics attractive to advertisers, and the ability of the
Company to develop and update effective advertising delivery and measurement
systems. The Company believes that establishing and maintaining brand
recognition of HeadHunter.NET is a critical aspect of developing a large user
base and that the importance of brand recognition will increase as competition
increases. The inability of the Company to develop an attractive audience for
advertisers or to satisfactorily deliver such advertising could have a material
adverse effect on the Company's business, results of operations and financial
condition.
Similarly, a majority of the Company's current job listers that elect
optional enhancements to their employment listings have limited experience with
the Internet as a tool for fulfilling their employment needs and may find that
listing on the Internet is not as effective in fulfilling employment needs as
traditional recruiting methods and media. The Company's ability to generate
significant listing enhancement revenues is dependent on, among other factors,
the satisfaction and success of job listers and job seekers utilizing the
Company's services, brand recognition of the Company's services, the perceived
value to job listers of listing enhancements, the successful implementation of
the Company's proprietary variable pricing program, and the incentive created by
the Company for job listers to enhance listings. The inability of the Company to
achieve user satisfaction and brand recognition, or to deliver valuable enhanced
services at rates desirable to job listers relative to traditional recruiting
methods, could have a material adverse effect on the Company's business, results
of operations and financial condition.
The Company has recently implemented a beta version of its proprietary
variable pricing program, AVILUS (Associated Value Internet Listing Upgrade
System), which will change its current flat-fee structure charged for
preferential search result ordering. The Company believes that a live version of
AVILUS will be operational in the third quarter of 1998. While the Company
believes that the implementation of AVILUS will increase listing enhancement
revenues, such a model has not been previously utilized on the Internet. There
can be no assurance that under AVILUS the Company will derive equal or higher
revenues from the sale of enhanced listing services than it previously did with
the flat-fee structure or that the Company will ever derive substantial revenues
from listing enhancements. For the six months ended June 30, 1998, fees
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from enhanced listing services accounted for approximately 27.3% of the
Company's revenues. The inability of the Company to significantly increase the
number of job listers electing to enhance their listings and the revenues
generated from such enhancements could have a material adverse effect on the
Company's business, results of operations and financial condition.
INTENSE COMPETITION
The market for advertising and employment listing services on the Internet
is highly fragmented and intensely competitive. The Company believes that the
principal competitive factors in these markets are user traffic, establishment
of strategic relationships, name recognition, pricing, user satisfaction,
performance, ease of use and functionality. The Company competes against other
online recruiting Web sites such as The Monster Board, Career Path, Career
Mosaic and Online Career Center. In addition, the Company also competes with
ISPs, OSPs, owners of Web browsers and other Internet content providers for the
sale of advertisements and for traffic searching for employment listings. The
Company believes that the number of companies relying on fees from
Internet-based advertising has increased substantially during the past year.
Accordingly, the Company may face increased pricing pressure for the sale of
advertisements on its Web site, which could have a material adverse effect on
the Company's business, results of operations and financial condition. In
addition, in order to make their sites more attractive to advertisers, many Web
site operators have been entering into distribution arrangements, co-branding
arrangements, content arrangements and other strategic relationships with ISPs,
OSPs, owners of Web browsers, operators of high traffic Web sites and other
businesses in an attempt to increase traffic and page views. If direct
competitors or other Web site operators are able to enter into strategic
relationships and increase their traffic and page views, their Web sites could
appear more attractive to advertisers, which would have a material adverse
effect on the amount of advertisements and enhanced listing services sold on the
Company's Web site and on the Company's business, results of operations and
financial condition.
Certain of the Company's existing competitors, as well as a number of
potential new competitors, have longer operating histories in the online
recruiting market, greater name recognition, larger user bases and databases,
and significantly greater financial, technical and marketing resources than the
Company. Such competitors may be able to undertake more extensive marketing
efforts, adopt more aggressive pricing policies and make more attractive offers
to potential employees, distribution partners, advertisers and content
providers. Further, there can be no assurance that the Company's competitors
will not develop online employment listing services that achieve greater market
acceptance than the Company's services in the area of name recognition,
performance, ease of use and functionality. There can also be no assurance that
ISPs, OSPs, owners of Web browsers and other Internet content providers will not
be perceived by advertisers as having more desirable Web sites for placement of
advertisements. In addition, certain of the Company's current and targeted
advertising customers and strategic partners may have established collaborative
relationships with certain of the Company's competitors, and a number of the
Company's competitors have established collaborative relationships with ISPs,
OSPs and other Internet content providers. Accordingly, there can be no
assurance that the Company will be able to retain advertisers and job listers,
maintain or increase traffic on its Web site, or that competitors will not
experience greater growth in traffic than the Company as a result of such
relationships, or that strategic partners will not sever or will elect not to
renew their agreements with the Company.
The Internet, in general, and the Company, specifically, also must compete
with traditional advertising media such as print, radio and television for a
share of advertisers' total advertising budgets. To the extent that the Internet
is not perceived as an effective advertising medium, advertisers may be
reluctant to devote a significant portion of their advertising budget to the
Internet. See "-- Uncertain Acceptance of the Internet as an Advertising Medium
or Search Tool for Career and Employment Needs."
LOW BARRIERS TO ENTRY
The market for Internet content and services is relatively new, intensely
competitive and rapidly evolving. There are minimal barriers to entry, and
current and new competitors can launch new Internet sites and add substantial
content available on such sites at a relatively low cost within a relatively
short time period. In
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addition, the Company competes for the time and attention of Internet users with
numerous not-for-profit Internet sites operated by individuals and government
and educational institutions. Existing and potential competitors also include
magazine and newspaper publishers, cable television companies and start-up
ventures attracted to the Internet market. Accordingly, the Company expects
competition to persist and intensify and the number of competitors to increase
significantly in the future. Should the Company attempt in the future to expand
the scope of its Web site, it will compete with a greater number of Web sites
and other media companies. Because the operations and strategic plans of
existing and future competitors are undergoing rapid change, it is extremely
difficult for the Company to anticipate which companies are likely to offer
competitive content and services in the future. See "-- Intense Competition."
DEPENDENCE ON STRATEGIC AND OTHER RELATIONSHIPS
The Company has entered into and continually evaluates strategic
relationships. The Company depends on its strategic relationships to increase
(i) traffic and content on its Web site, (ii) visibility of job listers'
employment opportunities, (iii) brand recognition, and (iv) advertising
revenues. The Company has only recently entered into strategic relationships
with Yahoo!, WorkLife (in conjunction with AltaVista), GeoCities and
DoubleClick. Each of these relationships is short-term and generally
non-exclusive. There can be no assurance that any such relationships will
continue in the future or generate substantial benefits or revenues for the
Company. The inability of the Company to maintain existing and enter into
additional strategic relationships, or the failure to complete any projects
related to any strategic relationship could have a material adverse effect on
the Company's business, results of operations and financial condition. In
addition, the Company depends on advertising agreements with Internet companies
such as America Online, Inc. ("AOL") and Yahoo! to increase content and traffic
on its Web site and to increase users' awareness of the Company's Web site.
There can be no assurance that such agreements will be renewed on terms
acceptable to the Company. Such companies may also enter into arrangements with
the Company's competitors which may substantially reduce the effectiveness of
the Company's advertising or eliminate the Company's ability to advertise on
such companies' Web sites. See "Business -- Marketing and Promotion -- Strategic
Relationships."
The Company is also generally dependent on other Web site operators that
provide links to the Company's Web site. Most of these arrangements are not
exclusive and are short-term or may be terminated at the convenience of the
other party. Moreover, many Web site operators provide links to the Company's
Web site on an informal basis, and such Web site operators may terminate such
links at any time without notice to the Company. In addition, there can be no
assurance that such third parties will not develop their own competitive
services, either during their relationship with the Company or after their
relationship with the Company expires. Further, there can be no assurance that
the services of those Web site operators that provide access or links to the
Company's Web site will achieve market acceptance or commercial success.
Accordingly, there can be no assurance that the Company's existing relationships
will result in sustained business partnerships, successful service offerings, or
the generation of significant traffic and content on the Company's Web site or
significant revenues for the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the performance of
Warren L. Bare and other executive officers and key employees. Given the
Company's early stage of development, the Company is dependent on its ability to
attract, retain and motivate high quality personnel, especially its management
and development teams. The Company has obtained a "key person" life insurance
policy on Mr. Bare in the amount of $2.0 million and the Company has made
application to increase the amount of this policy to $4.0 million. The loss of
the services of Mr. Bare or any of its other executive officers or key employees
could have a material adverse effect on the business, results of operations or
financial condition of the Company. The Company's future success also depends on
its continuing ability to identify, hire, train and retain other highly
qualified technical and managerial personnel. Competition for such personnel is
intense, and there can be no assurance that the Company will be able to
identify, attract, assimilate or retain other highly qualified technical and
managerial personnel in the future and the failure to do so could have a
material adverse effect on the Company's business, results of operations and
financial condition. See "Management."
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FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
The Company currently believes that cash on hand and the net proceeds from
the Offering will be sufficient to fund its working capital, anticipated
operating cash flow deficit and capital expenditure requirements for the 12
months following completion of the Offering. Thereafter, the Company may need to
raise additional funds. The Company's ability to grow will depend in part on the
Company's ability to expand and improve its Internet operations, expand its
advertising and marketing efforts, expand and improve its Internet user support
capabilities and increase content on its Web site. In connection therewith, the
Company may need to raise additional capital in the foreseeable future from
public or private equity or debt sources in order to finance such possible
growth. In addition, the Company may need to raise additional funds in order to
take advantage of unanticipated opportunities (such as acquisitions of
complementary businesses or the development of new products or services), to
react to unforeseen difficulties (such as the loss of key personnel or the
rejection by Internet users or potential advertisers of the Company's Internet
content) or to otherwise respond to unanticipated competitive pressures. If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of the Company's then existing shareholders
will be reduced, shareholders may experience additional dilution and such
securities may have rights, preferences or privileges senior to those of the
Company's Common Stock. There can be no assurance that additional financing will
be available on terms favorable to the Company or at all. If adequate funds are
not available on acceptable terms, the Company may not be able to fund its
expansion, take advantage of unanticipated acquisition opportunities, develop or
enhance service offerings or respond to competitive pressures. Such inability
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
CONFUSINGLY SIMILAR DOMAIN NAMES
The Company has registered with Network Solutions, Inc. the Internet domain
names Headhunter.net and Headhunters.net, and has recently completed
negotiations to acquire the domain name "Headhunter.com." However, there are
other substantially similar domain names (including Headhunters.com,
Headhunter.org and Headhunters.org), which are registered by companies which
compete with the Company. In addition, new top level domains may be added in the
future, allowing such combinations as Headhunter.firm, Headhunter.shop and other
similar domains, which may not be controlled by the Company. There can be no
assurance that potential users and advertisers will not confuse the Company's
domain name with other similar domain names. In situations in which such
confusion occurs, the Company may lose business to a competitor, advertising
rates and enhanced listing service fees may be driven down due to lower traffic,
and some users of the Company's services may have negative experiences with the
other companies on their Web sites that such users erroneously associate with
the Company. See "Business -- Intellectual Property."
BROAD DISCRETION OF MANAGEMENT OVER USE OF PROCEEDS
The primary purpose of the Offering is to raise funds to be used to expand
the Company's marketing efforts and to position the Company to develop
additional strategic relationships. Assuming an initial public offering price of
$ per share, approximately % of the net proceeds of the Offering have
been allocated to expand the Company's marketing and advertising efforts,
including the development of additional strategic relationships. The remainder
of the net proceeds of the Offering have been allocated for repayment of debt to
the Company's majority shareholder and for working capital and other general
corporate purposes, which may include capital expenditures, expansion of
facilities, personnel, general and administrative expenses, and acquisitions.
The proposed allocation of the net proceeds of the Offering represents the
Company's best estimate based on the expected utilization of funds necessary to
finance the Company's activities in accordance with management's current
objectives and market conditions. The amounts actually expended by the Company
for each purpose may vary significantly depending on a number of factors, such
as the amount of cash used or generated by the Company's operations and
management's assessment of the Company's specific needs. Accordingly, management
of the Company has significant flexibility in applying the net proceeds of the
Offering. See "Use of Proceeds" and "Certain Transactions."
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MANAGEMENT OF GROWTH; RISKS ASSOCIATED WITH FUTURE ACQUISITIONS
The Company's planned growth is expected to place a significant strain on
its managerial, operational and financial resources. The Company expects that
the number of its employees will significantly increase over the next 12 months.
Since October 1997, the Company has hired substantially all of its employees.
The Company's financial and managerial controls, reporting systems and
procedures are also very limited. The Company plans to continue to improve its
financial and management controls, reporting systems and procedures and expand,
train and manage its work force. The Company also is required to manage multiple
relationships with various customers, strategic partners and other third
parties. There can be no assurance that the Company's systems, procedures or
controls will be adequate to support the Company's operations or that Company
management will be able to achieve the rapid execution necessary to successfully
offer its services and implement its business plan. The Company's future
operating results will also depend on its ability to expand its sales and
marketing organization and expand its support organization commensurate with the
growth of its business and the Internet. The inability of the Company to manage
growth effectively could have a material adverse effect on the Company's
business, results of operations and financial condition.
In addition, the Company may, in the future, acquire businesses,
technologies, services, product lines, content databases, or access to content
databases that are complementary to the Company's business. Future acquisitions
by the Company, if any, may involve a number of risks. For example, the
assimilation of a target company's and the Company's operations may require,
among other things, the integration of service offerings, coordination of
departmental efforts of the two companies, the assumption by the Company of
substantial liabilities, the addition of numerous personnel and the diversion of
management's attention from the day-to-day operations of the Company. There can
also be no assurance that a given acquisition, if consummated, would not have a
material adverse effect on the Company's business, results of operations and
financial condition.
RISK OF CAPACITY CONSTRAINTS; DEPENDENCE ON COMPUTER INFRASTRUCTURE; DEPENDENCE
ON INTERNET
INFRASTRUCTURE; TECHNOLOGICAL RISKS
The Company depends on its ability to generate a high volume of traffic to
and content on its Web site. Accordingly, the Company depends upon ISPs, OSPs
and other Web site operators, which have experienced significant outages in the
past, for access to its Web site, and users may experience difficulties due to
system failures unrelated to the Company's services. The Company currently uses
ITC'DeltaCom, Inc. ("ITC'DeltaCom") as its ISP. Any system failure that causes
an interruption in service or a decrease in responsiveness of the Company's Web
site could result in less traffic, and if sustained or repeated, could impair
the reputation and perception of the Company's Web site. Any failure by
ITC'DeltaCom to handle current or increased volumes of traffic would have a
material adverse effect on the Company's business, results of operations and
financial condition.
In addition, the Company may have to make substantial investments in
equipment and other technology in order to improve performance of its Web site,
including the establishment of new co-location facilities. The success of the
Company depends in large part upon the development of the Internet's
infrastructure as a reliable network backbone with the necessary speed, data
capacity and security, or timely development of complementary products, such as
high-speed modems, for providing reliable Internet access and services. Because
global commerce and online exchange of information on the Internet and other
similar open wide-area networks are new and evolving, it is difficult to predict
with any assurance whether the Internet will prove to be a viable commercial
marketplace. The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and amount of traffic.
There can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by such growth or that the performance
or reliability of the Internet will not be adversely affected by this continued
growth. In addition, the Internet could lose its viability due to delays in the
development or adoption of new standards and protocols to handle increased
levels of activity or due to increased governmental regulation. There can be no
assurance that the infrastructure or complementary products or services
necessary to make the Internet a viable commercial marketplace will be
developed. If the necessary infrastructure standards or protocols or
complementary products, services or facilities are not developed, the Company's
business, results of operations
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and financial condition will be materially adversely affected. The market in
which the Company competes is characterized by rapidly changing technology,
evolving industry standards, frequent new service and product announcements,
introductions and enhancements, and changing customer demands. These market
characteristics are exacerbated by the emerging nature of the Internet.
Accordingly, the Company's future success will depend on its ability to adapt to
rapidly changing technologies and to adapt its services to evolving industry
standards. The failure of the Company to adapt to such changes could have a
material adverse effect on the Company's business, results of operations and
financial condition.
RISKS OF BUSINESS INTERRUPTION; NEW FACILITY
The Company's operations are dependent upon its ability to protect its
computer and telecommunications equipment and software systems against damage
from fire, power loss, telecommunications interruption or failure, natural
disaster and other similar events. In the fourth quarter of 1998, the Company
expects to move its corporate offices into a new facility. In the event the
Company experiences a temporary or permanent interruption of its business,
through casualty or operating malfunction, as a result of the move or otherwise,
the Company's business, results of operations or financial condition could be
materially adversely affected. The Company's property and business interruption
insurance may not adequately compensate the Company for all losses that it may
incur.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
The Company is not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally, and there are
currently few laws or regulations directly applicable to access to or commerce
on the Internet. However, due to the increasing popularity and use of the
Internet, it is possible that a number of laws and regulations may be adopted
with respect to the Internet, covering issues such as user privacy, pricing,
characteristics and quality of products and services. Such laws and regulations
could dampen the growth in use of the Internet generally and decrease the
acceptance of the Internet as a communications and commercial medium, and could
thereby have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, several telecommunications
carriers are seeking to have telecommunications over the Internet regulated by
the Federal Communications Commission (the "FCC") in the same manner as other
telecommunications services. Because the growing popularity and use of the
Internet has burdened the existing telecommunications infrastructure and many
areas with high Internet use have begun to experience interruptions in phone
service, local telephone carriers, such as Pacific Bell, have petitioned the FCC
to regulate ISPs and OSPs in a manner similar to long distance telephone
carriers and to impose higher access fees on the ISPs and OSPs. The costs of
communicating on the Internet could increase substantially as a result of any
such regulation, potentially slowing the growth in use of the Internet.
INTELLECTUAL PROPERTY
The Company's success and ability to compete are dependent to a significant
degree upon its internally developed proprietary technology and on its brand and
marks. The Company relies on trademark, patent and other intellectual property
laws, and on confidentiality and non-disclosure agreements with its employees
and third parties to establish and protect its proprietary rights. The Company
has obtained a federally registered mark ("HeadHunters(R)"), has a pending
federal trademark application for "HeadHunter.NET," and is in the process of
applying for patents on various proprietary systems that it has developed,
including AVILUS. There can be no assurance that the steps taken by the Company
to protect its proprietary rights will be adequate or that the Company will be
able to defend its marks or obtain patents for any of the Company's internally
developed systems. The inability of the Company to secure or protect the
Company's marks and systems could have a material adverse effect on the Company.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries are
uncertain and still evolving, and there can be no assurance as to the future
viability or value of any proprietary rights of the Company or other companies
within the industry. There also can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate or
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that third parties will not infringe or misappropriate the Company's proprietary
rights. Any such infringement or misappropriation could have a material adverse
effect on the Company's business, results of operations and financial condition.
Furthermore, there can be no assurance that the Company's business activities
will not infringe upon the proprietary rights of others, or that other parties
will not assert infringement claims against the Company. From time to time the
Company has been, and expects to continue to be, subject to claims in the
ordinary course of its business, including claims of alleged infringement of the
trademarks and other intellectual property rights of third parties by the
Company. Although such claims have not had a material adverse effect on the
Company's business, results of operations or financial condition, such claims
could subject the Company to significant liability for damages and could result
in invalidation of the Company's proprietary rights, could be time-consuming and
expensive to defend, and could result in a diversion of management's time and
attention, any of which could have a material adverse effect on the Company's
business, results of operations and financial condition.
CONTROL BY CERTAIN SHAREHOLDERS
Upon completion of the Offering and conversion of all outstanding shares of
Class A Preferred Stock, ITC Holding Company, Inc. ("ITC") and Mr. Bare will
beneficially own % and % (assuming an initial public offering price of
$ per share), respectively, of the outstanding Common Stock of the Company.
As a result, these shareholders, voting together, will possess the ability,
among other things, to elect all of the members of the Company's Board of
Directors and to approve significant corporate transactions. Such control or
share ownership may also have the effect of delaying or preventing a change in
control of the Company, impede a merger, consolidation, takeover or other
business combination involving the Company or discourage a potential acquiror
from making a tender offer or otherwise attempting to obtain control of the
Company. See "Principal Shareholders" and "Description of Capital Stock."
ANTITAKEOVER EFFECTS OF ARTICLES OF INCORPORATION, BYLAWS AND GEORGIA LAW
Upon completion of the Offering, the Company's Board of Directors will have
the authority to issue up to 5,000,000 shares of Class B Serial Preferred Stock
without any further vote of the Company's shareholders. The rights of the
holders of Common Stock will be subject to, and may be adversely affected by,
the rights of the holders of Class B Serial Preferred Stock that may be issued
in the future. Under the Company's Articles of Incorporation, the terms of the
Class B Serial Preferred Stock may provide for liquidation and dividend rights
senior to those of the Common Stock. The issuance of any shares of Class B
Serial Preferred Stock could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no current intention or plan to issue any of such
shares of Class B Serial Preferred Stock in the immediate future. Further,
certain provisions of Georgia law could delay, prevent or make more difficult a
merger, tender offer or proxy contest involving the Company. In addition, the
Company has adopted the fair price requirements and the business combination
provisions of the Georgia Business Corporation Code. See "Description of Capital
Stock."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for any of the
Company's capital stock, and there can be no assurance that an active trading
market will develop or be sustained for the Company's Common Stock. The initial
public offering price for the Common Stock has been determined through
negotiations between the Company and the Underwriters. Among the factors
considered in determining the initial public offering price were prevailing
market and economic conditions, revenues, the market valuations of other
companies engaged in activities similar to those of the Company, estimates of
the business potential and prospects of the Company, the present state of the
Company's business operations, the Company's management and other factors deemed
relevant. These factors may not be indicative of the market price of the Common
Stock after the Offering. In addition, the stock markets in general, and the
market prices for Internet-related companies in particular, have historically
experienced extreme volatility that at times have been unrelated to the
operating performance of such companies. The trading price of the Common Stock
could also be subject to significant fluctuations in response to variations in
quarterly results of operations,
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announcements of acquisitions by the Company or its competitors, governmental
regulatory actions, other developments or disputes with respect to proprietary
rights, general trends in the industry and overall market conditions and other
factors. These broad market and industry fluctuations may adversely affect the
market price of the Common Stock regardless of the Company's operating
performance. See "Underwriting."
DILUTION
Purchasers in the Offering will suffer an immediate and substantial
dilution in the net tangible book value of the Common Stock from the initial
public offering price. Purchasers of shares of Common Stock in the Offering will
experience an immediate dilution in the net tangible book value of $ per
share, representing an immediate dilution of approximately % from the
initial public offering price per share. See "Dilution."
DIVIDEND POLICY
Except for a distribution of $100,000 made by LLC to Mr. Bare, the Company
has not declared or paid any dividends on its capital stock and does not expect
to declare or pay dividends for the foreseeable future. The Company currently
intends to retain future earnings, if any, to finance the development and
operation of its business. Any future declarations and payments of dividends
shall be at the sole discretion of the Company's Board of Directors. Payment of
dividends on the Common Stock would be subject to the prior payment of all
accrued and unpaid dividends on any shares of Class B Serial Preferred Stock the
Company may issue in the future at its sole discretion and may be subject to
certain restrictions in any future credit facilities. See "Dividend Policy,"
"Certain Transactions" and "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding an
aggregate of shares of Common Stock, assuming no exercise of any
portion of the Underwriters' over-allotment option. Of these shares, the
shares to be sold in the Offering will be freely tradable without
restriction or further registration under the Securities Act, except that any
shares purchased by "affiliates" of the Company, as that term is defined in Rule
144 under the Securities Act, may generally only be sold in compliance with the
limitations of Rule 144. The remaining outstanding shares of
Common Stock held by ITC and Mr. Bare are "restricted securities" as that term
is defined in Rule 144 ("Restricted Shares"). Restricted Shares may be sold in
the public market only if registered or if they qualify for an exemption from
registration. Restricted Shares will not be eligible for immediate sale until
they have been held for at least one year and the other requirements of Rule 144
are met. In addition, the Company, ITC, ITC Service Company and Mr. Bare have
agreed not to, directly or indirectly, without the prior written consent of the
Underwriters, offer, sell or otherwise dispose of any shares of Common Stock,
options or warrants to acquire shares of Common Stock, or any securities
exercisable for or convertible into shares of Common Stock owned by them for a
period of 180 days following completion of the Offering.
As of the date of this Prospectus, options to purchase an aggregate of
382,250 shares of Common Stock had been granted, none of which will become
exercisable within 180 days following the date of this Prospectus. An additional
500,000 shares of Common Stock are available for future grants under the
Incentive Plan. The Company intends to file one or more registration statements
on Form S-8 under the Securities Act to register all shares of Common Stock
subject to outstanding stock options and Common Stock issuable under the
Incentive Plan. The Company expects to file these registration statements within
a reasonable time after the date of this Prospectus, and such registration
statements are expected to become effective upon filing. Shares covered by these
registration statements will thereupon be eligible for sale in the public
markets, subject to the lock-up agreements, to the extent applicable. See
"Shares Eligible for Future Sale."
In connection with the extension of the credit facility, the Company
granted ITC Service Company a warrant to purchase shares of
Common Stock (assuming an initial public offering price of $ per share) at
an exercise price per share equal to the price per share to public in the
Offering. Neither the warrant nor the underlying shares have been
registered by the Company. The shares of Common Stock issuable upon exercise of
this warrant would be deemed restricted shares under Rule 144 and the resale
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thereof would either have to be registered or comply with the requirements of an
exemption from registration. See "Principal Shareholders," "Certain
Transactions" and "Underwriting."
YEAR 2000 COMPLIANCE
The Year 2000 issue refers to the potential failures that computer systems
may incur as a result of the date change from 1999 to 2000, such as the
inability of such computer systems to properly recognize date-sensitive data
resulting in the creation of erroneous information or system failure. The
Company has assessed the extent to which the Year 2000 issue affects its
internal systems and has implemented a remediation program to correct any
problems. The Company does not anticipate that it will incur any material costs
in connection with its remediation program. The Company is currently unable to
predict the extent to which the Year 2000 issue will affect the systems of
companies upon which the Company relies or with which the Company has strategic
relationships. Any failure by such companies to resolve any Year 2000 issues on
a timely basis, or in a manner that is compatible with the Company's systems,
could have a material adverse effect on the Company. Although the Company may
incur costs in correcting these Year 2000 issues, such costs cannot currently be
estimated.
Virtually every computer operation will be affected in some way by the Year
2000 issue. The impact that the Year 2000 issue will have on the Internet and
the Web over the next few years is a material uncertainty. The inability of
users of the Company's Web site to fully utilize its services could have a
material adverse effect on the Company's business, results of operations and
financial condition.
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COMPANY ORGANIZATION
The Company was founded in October 1995 as Software Technology Corporation,
now known as HNET, Inc. ("HNI"). From its inception until late 1996, all of the
Company's revenues were derived from Web site development consulting services.
As a result of the experience gained during this period, the Company identified
online recruiting as an emerging industry and launched www.HeadHunter.NET in
October 1996. From October 1996 until October 1997, the Company shifted its
focus from providing consulting services to attracting content and traffic to
its Web site. In October 1997, HNI contributed all of its assets and liabilities
related to the Web site to the LLC in exchange for a 45% equity interest in the
LLC and ITC contributed $1,100,000 in cash in exchange for a 55% equity interest
in the LLC, pursuant to an Investment Agreement dated October 30, 1997 between
HNI, ITC and Mr. Bare. In July 1998 pursuant to the Contribution Agreement
between LLC, ITC and Mr. Bare, Mr. Bare contributed all of the outstanding
capital stock of HNI to the Company in exchange for 2,200,000 shares of Common
Stock and 50,000 shares of the Company's Class A Preferred Stock, and ITC
contributed its 55% equity interest in LLC to the Company in exchange for
2,750,000 shares of the Company's Class A Preferred Stock. The shares of Class A
Preferred Stock will convert into an equal number of shares of Common Stock upon
consummation of the Offering. See "Description of Capital Stock - Preferred
Stock."
The address of the Company's principal executive offices is 6410 Atlantic
Boulevard, Suite 160, Norcross, Georgia 30071 and the telephone number is (770)
300-9272.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the
shares of Common Stock in this Offering are estimated to be
approximately $ million (approximately $ million if the
Underwriters' over-allotment option is exercised in full), after deducting the
underwriting discount and other estimated Offering expenses payable by the
Company.
The Company intends to use the net proceeds of this Offering as follows:
(i) approximately $ million to expand the Company's marketing and
selling efforts, including the development of additional strategic
relationships; (ii) approximately $ million to repay the outstanding
principal balance on the Company's amended and restated credit facility with ITC
Service Company; and (iii) the balance of the net proceeds for working capital
and general corporate purposes, which may include capital expenditures,
expansion of facilities, general and administrative expenses, and acquisitions
of complementary businesses, products and technologies. Pending application of
the net proceeds as described above, the Company intends to invest the net
proceeds in short-term, interest-bearing, investment grade securities.
The amended and restated credit facility with ITC Service Company provides
for advances to the Company of up to $2.5 million and is payable in full on the
earlier of (i) December 31, 1998 or (ii) the closing of this Offering. Amounts
outstanding under the credit facility accrue interest at an annual rate equal to
ITC Service Company's cost of debt capital as reasonably determined, from time
to time, by ITC Service Company (currently 8.6%) on the first $1.0 million and
at a fixed rate of 14% per annum on the remaining $1.5 million. Proceeds from
the credit facility were used for working capital and other general corporate
purposes.
DIVIDEND POLICY
In November 1997, LLC made a distribution to Mr. Bare in the amount of
$100,000. See "Certain Transactions." The Company does not anticipate paying any
cash dividends on its Common Stock in the foreseeable future because it intends
to retain its earnings, if any, to finance the expansion of its business and for
general corporate purposes. Any payment of future dividends will be at the
discretion of the Board of Directors and will depend upon, among other things,
the Company's earnings, financial condition, capital requirements, level of
indebtedness, contractual restrictions with respect to the payment of dividends
and other factors that the Company's Board of Directors deems relevant. The
terms of the credit facility with ITC Service Company, which will be repaid with
a portion of the proceeds of the Offering, currently restrict the Company's
payment of dividends.
17
<PAGE> 19
DILUTION
The net tangible book value of the Company at June 30, 1998 was
approximately $(77,000) or $(0.04) per share. The net tangible book value per
share represents the amount by which the Company's net tangible assets exceed
all liabilities, divided by the number of outstanding shares of Common Stock.
After giving effect to the conversion of all outstanding shares of Class A
Preferred Stock and the sale of the shares of Common Stock
offered hereby at an assumed initial public offering price of $ per share
and the application of the net proceeds as set forth under "Use of Proceeds,"
the Company's net tangible book value as of June 30, 1998 would have been
approximately $ million, or $ per share, representing an immediate
increase of $ in net tangible book value per share to existing
shareholders and an immediate dilution of $ in net tangible book value
per share to investors in the Offering. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price............. $
Net tangible book value at June 30, 1998.......... $ 0.04
Increase attributable to the sale of shares
offered hereby..................................
----------
Pro forma net tangible book value after the
Offering........................................
----------
Dilution per share to new investors(1)............ $
==========
</TABLE>
- ---------------
(1) If the Underwriters' over-allotment option is exercised in full, pro forma
net tangible book value of the Company would be $ per share,
representing an increase in pro forma net tangible book value of $ per
share and dilution to new investors of $ per share.
The following table sets forth the number of shares of Common Stock
purchased from the Company, the total consideration paid and the average price
per share paid by the Company's existing shareholders and to be paid by new
investors in the Offering.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- -------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders......................... 5,000,000 $2,000,000 $0.40
New investors.................................
Total............................... 100% 100%
========= === ========== ===
</TABLE>
The foregoing tables assume no exercise of outstanding stock options or
warrants and no exercise of the Underwriters' over-allotment option. As of the
date of this Prospectus, there were outstanding options to purchase 382,250
shares of Common Stock at a weighted average exercise price of $0.63 per share
and an outstanding warrant to purchase shares of Common Stock (assuming an
initial public offering price of $ per share) at an exercise price per share
equal to the initial public offering price.
18
<PAGE> 20
CAPITALIZATION
The following table sets forth the Company's capitalization at June 30,
1998: (i) on a historical basis and (ii) as adjusted to give effect to the sale
by the Company of shares of Common Stock offered hereby (assuming an
initial public offering price of $ per share) and the application of the net
proceeds therefrom. See "Use of Proceeds." This table should be read in
conjunction with the Company's financial statements and the notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the other financial and operating data appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------------------
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Short term borrowings....................................... $ 400,000 $
=========== ========
Shareholders' equity:
Class A Preferred Stock, $0.01 par value, 2,800,000 shares
authorized, issued and outstanding (actual),
outstanding (as adjusted).............................. 28,000
Class B Serial Preferred Stock, $0.01 par value, 5,000,000
shares authorized, none issued and outstanding......... --
Common Stock $0.01 par value, 50,200,000 shares
authorized, 2,200,000 shares issued and outstanding
(actual), shares issued and outstanding (as
adjusted)(1)........................................... 22,000
Paid-in capital........................................... 1,956,909
Retained earnings (accumulated deficit)................... (1,235,773)
----------- --------
Total shareholders' equity........................ 771,136
----------- --------
Total capitalization.............................. $ 771,136 $
=========== ========
</TABLE>
- ---------------
(1) Excludes 382,250 shares of Common Stock that were subject to outstanding
options and warrants at June 30, 1998 at a weighted average exercise price
of $0.63 per share. See "Management -- HeadHunters, L.L.C. Employee Common
Unit Option Plan" and "Shares Eligible for Future Sale."
19
<PAGE> 21
SELECTED FINANCIAL AND OPERATING DATA
The following table sets forth selected financial and operating data for
the Company as of and for the Inception Period, the year ended December 31,
1996, the ten months ended October 31, 1997, and as of and for the two months
ended December 31, 1997 which have been derived from the audited financial
statements of the Predecessor Company and the Successor Company. The selected
financial and operating data as of and for the six months ended June 30, 1997
and 1998 have been derived from the unaudited financial statements of the
Company and, in the opinion of management, include all adjustments, consisting
of normal recurring accruals, necessary for a fair presentation of such
information. Operating results for the six months ended June 30, 1998 are not
necessarily indicative of the results that may be expected for the entire year.
The selected financial and operating data set forth below should be read in
conjunction with "Company Organization," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Company's financial statements and the notes thereto and the other financial and
operating data included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR SUCCESSOR
PREDECESSOR COMPANY COMPANY COMPANY COMPANY
----------------------------------------------- ------------ ----------- ------------
FROM INCEPTION YEAR TEN MONTHS TWO MONTHS SIX MONTHS SIX MONTHS
(OCTOBER 10, 1995) ENDED ENDED ENDED ENDED ENDED
TO DECEMBER 31, DECEMBER 31, OCTOBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1997 1997 1997 1998
------------------ ------------ ----------- ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues.......................... $ 50,754 $ 190,146 $ 124,437 $ 29,591 $ 103,885 $ 278,051
Operating expenses................ 5,589 61,687 158,757 212,209 96,222 1,344,976
-------- --------- --------- --------- --------- ------------
Operating income (loss)........... 45,165 128,459 (34,320) (182,618) 7,663 (1,066,925)
Net income (loss)................. $ 45,165 $ 128,623 $ (35,163) $(176,392) $ 7,062 $ (1,059,381)
======== ========= ========= ========= ========= ============
LOSS PER SHARE:(1)
Basic............................. $ (0.08) $ (0.48)
Diluted........................... $ (0.08) $ (0.46)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic............................. 2,200,000 2,200,000
Diluted........................... 2,318,250 2,318,250
OPERATING DATA:
Jobs posted (at end of period).... 90,000 165,000
Resumes posted (at end of
period)......................... 20,000 31,000
Monthly page impressions(2)....... 2,500,000 11,400,000
</TABLE>
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR SUCCESSOR
PREDECESSOR COMPANY COMPANY COMPANY COMPANY
--------------------------- ------------ ----------- ------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 14,326 $ 25,973 $ 853,989 $ 13,981 $ 196,366
Working capital....................... 31,214 33,706 788,976 20,638 (273,131)
Total assets.......................... 43,030 58,550 1,922,915 52,853 1,524,696
Total debt, including current
maturities.......................... -- -- -- -- 400,000
Total shareholders' equity............ 42,865 55,500 1,830,517 44,376 771,136
</TABLE>
- ---------------
(1) Pursuant to SAB No. 98, for all periods presented, basic net loss per share
is computed using the weighted average number of shares of Common Stock
outstanding during the period. Diluted net loss per share is computed using
the weighted average number of shares of Common Stock outstanding during the
period and nominal issuances of Common Stock and Common Stock equivalents,
regardless of whether they are anti-dilutive. The Predecessor Company's per
share data are not shown, as they are not comparable with the Successor
Company's.
(2) Page impressions represent the number of Web pages delivered from the
Company's server to users. Monthly page impressions consist solely of
impressions delivered for the last month of the period.
20
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Prospectus contains "forward-looking statements" relating to, without
limitation, the Company's future economic performance, plans and objectives of
management for future operations, projections of revenue mix and other financial
items that are based on the beliefs of, as well as assumptions made by and
information currently known to, the Company's management. The words "may,"
"could," "would," "will," "expect," "estimate," "anticipate," "believe,"
"intends," "plans" and similar expressions and variations thereof are intended
to identify forward-looking statements. The cautionary statements set forth in
this section, in "Risk Factors" and elsewhere in this Prospectus identify
important factors with respect to such forward-looking statements, including
certain risks and uncertainties, that could cause actual results to differ
materially from those in such forward-looking statements. The following
discussion should be read in conjunction with the Company's financial statements
and the notes thereto and other financial information appearing elsewhere in
this Prospectus. The dollar amounts and percentages provided below have been
rounded to simplify presentations.
OVERVIEW
HeadHunter.NET is an Internet-based interactive technology company that
provides a leading employment Web site at www.HeadHunter.NET. The Company's Web
site enables job listers to list employment opportunities and search for resumes
and enables job seekers to post resumes and search for employment using a wide
array of search criteria, including keyword, industry, job type, education,
geographic location and salary range. At June 30, 1998, the Company had
approximately 165,000 job opportunities and 31,000 resumes listed on its Web
site, an increase of 83.3% and 106.7%, respectively, from approximately 90,000
job opportunities and 15,000 resumes listed as of December 31, 1997. Traffic on
the Company's Web site grew 660% from approximately 2.5 million Web page
impressions viewed during the month of December 1997 to 11.4 million impressions
viewed during the month of June 1998.
The Company was founded in October 1995 and from its inception until late
1996, all of its revenues were derived from Web site development consulting
services. As a result of the experience gained during this period, the Company
identified online recruiting as an emerging industry. The Company launched
www.HeadHunter.NET in October 1996. From October 1996 until October 1997, the
Company shifted its focus from providing consulting services to attracting
content and traffic to its Web site. In October 1997, the Company entered into
an investment agreement with ITC Holding Company, Inc. ("ITC") to form
HeadHunters, L.L.C. ("LLC"), and to fund continued growth of the Company and its
Web site. Since late 1997, the Company has hired substantially all of its
employees and has continued to focus on building site content, traffic and its
revenues. In July 1998 pursuant to a Contribution Agreement between LLC, ITC and
Mr. Bare, Mr. Bare contributed all of the outstanding capital stock of HNI to
the Company in exchange for 2,200,000 shares of Common Stock and 50,000 shares
of the Company's Class A Preferred Stock, and ITC contributed its 55% equity
interest in LLC to the Company in exchange for 2,750,000 shares of the Company's
Class A Preferred Stock. The shares of Class A Preferred Stock will convert into
an equal number of shares of Common Stock upon consummation of the Offering.
The Company derives all of its revenues from the sale of enhanced listing
services and advertising banners on its Web site. To date, a majority of the
Company's revenues have been derived from the sale of advertisements.
Advertising sales constituted 72.7% of revenues for the six months ended June
30, 1998, and 53.9% of revenues for the two months ended December 31, 1997.
Advertising rates vary depending upon whether the impressions delivered are
targeted to a specific audience based on keyword or other targeting criteria, or
placed in general rotation for display throughout the Company's Web site.
Although the Company does not charge job listers for the basic listing
services provided on its Web site, the Company does charge fees for its enhanced
listing services. Historically, the Company has charged a flat fee for the
package of available enhanced listing services. Effective in August 1998,
however, the Company intends to unbundle its enhanced listing services and allow
job listers to purchase such services individually on a daily fee basis. See
"Business -- Pricing Strategy and Service Offerings." Enhanced listing revenue
21
<PAGE> 23
constituted 27.3% of revenues for the six months ended June 30, 1998, and 46.1%
of revenues for the two months ended December 31, 1997. Enhanced listing
services include: (i) preferential search result ordering; (ii) automatic
cross-posting of listings to Yahoo! Classifieds and AltaVista's Careers Zone;
(iii) a link to a job lister's Web site to allow job seekers to easily access
additional information about the job lister and its employment opportunities;
and (iv) access to an automated job posting system which allows job listers to
bulk post a large number of employment opportunities to the Company's Web site.
The Company believes its enhanced listing services will represent an increasing
percentage of revenues in the future.
Advertising and enhanced listing revenues are recognized ratably in the
period in which the advertisement is displayed or the enhanced listing service
is delivered. The Company is generally obligated to provide its advertisers with
a guaranteed minimum number of "impressions," or times that an advertisement
appears in pages viewed by users of the Company's Web site. Payments received
prior to the display of an advertisement or the delivery of an enhanced listing
service are recorded as deferred revenues and are recognized as revenue ratably
when the advertisements are displayed or the enhanced listing services are
delivered. At June 30, 1998, the Company had deferred revenues of approximately
$109,000.
The Company's principal costs and operating expenses consist of costs of
revenues, marketing and selling expenses, general and administrative expenses,
and depreciation and amortization. Costs of revenues consist primarily of
Internet connection charges and co-location costs. Marketing and selling
expenses consist primarily of salaries of sales and marketing personnel,
commissions, advertising and other marketing related expenses, including
development of strategic relationships. General and administrative expenses
consist primarily of salaries and related costs for general corporate functions,
including finance, accounting, facilities, and fees for professional services.
Depreciation and amortization includes depreciation of the Company's computer
hardware and related equipment and amortization of acquired software rights.
The Company launched its Web site in October 1996 and accordingly has an
extremely limited operating history upon which to base an evaluation of the
Company. Thus, the Company believes that period-to-period comparisons of its
operating results are not meaningful and that the results for any period should
not be relied upon as an indication of future performance. In addition, the
Company has incurred significant losses since its inception and, as of June 30,
1998, had an accumulated deficit of approximately $1.2 million. To foster its
growth, the Company expects to continue to significantly increase its operating
expenses in the areas of marketing, sales and technology. The Company faces
additional uncertainties, such as the lack of a proven business model similar to
the Company's and intense competition for the sale of enhanced listing services,
advertising and for the attention of job listers and job seekers. As a result of
these factors, the Company expects to incur losses and negative cash flow in the
near term and there can be no assurance that the Company will be profitable on a
quarterly and annual basis for the foreseeable future, if at all. See "Risk
Factors."
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997
Revenues. The Company's revenues increased $174,000, or 167.3%, from
$104,000 for the six months ended June 30, 1997 to $278,000 for the six months
ended June 30, 1998. The Company generated advertising revenues of $202,000 and
enhanced listing fees of $76,000 for the six months ended June 30, 1998, as
compared to $69,000 in advertising revenues and $35,000 in enhanced listing fees
for the six months ended June 30, 1997. The increase in advertising revenues and
enhanced listing fees resulted primarily from the addition of 10 sales personnel
in the first six months of 1998.
Costs of Revenues. The Company's costs of revenues increased $22,000, or
137.5%, from $16,000 for the six months ended June 30, 1997 to $38,000 for the
six months ended June 30, 1998. The increase in costs of revenues was primarily
due to co-location and Internet connectivity fees related to the growth in
content and traffic on the Company's Web site. The Company anticipates that
these expenses will continue to grow ratably with the Company's Web site traffic
for the foreseeable future.
22
<PAGE> 24
Marketing and Selling Expenses. Marketing and selling expenses increased
$499,000, from $9,000 for the six months ended June 30, 1997 to $508,000 for the
six months ended June 30, 1998. The increase in marketing and selling expenses
was primarily due to an increase in advertising and public relations expenses
and the addition of 10 sales personnel in the first six months of 1998. The
Company expects that marketing and selling expenses will grow significantly in
the foreseeable future as it pursues a more aggressive advertising and branding
strategy and hires additional sales and marketing personnel.
General and Administrative Expenses. General and administrative expenses
increased $615,000, from $66,000 for the six months ended June 30, 1997 to
$681,000 for the six months ended June 30, 1998. The increase in general and
administrative expenses was primarily due to the hiring of additional personnel
as well as professional fees incurred in connection with the Company's
reorganization. The Company expects that general and administrative expenses
will continue to grow as it hires additional personnel and incurs additional
expenses related to the growth of its operations, including additional expenses
related to its status as a public company.
Depreciation and Amortization. Depreciation and amortization increased
$113,000, from $5,000 for the six months ended June 30, 1997 to $118,000 for the
six months ended June 30, 1998. The increase was primarily a result of
amortization related to the acquisition of software rights of approximately $1.0
million from HNI.
RESULTS FOR THE TWO MONTHS ENDED DECEMBER 31, 1997, TEN MONTHS ENDED OCTOBER 31,
1997,
YEAR ENDED DECEMBER 31, 1996, AND THE INCEPTION PERIOD ENDED DECEMBER 31, 1995
Revenues. The Company generated revenues of $30,000 for the two months
ended December 31, 1997, $124,000 for the ten months ended October 31, 1997,
$190,000 for the year ended December 31, 1996, and $51,000 for the Inception
Period ended December 31, 1995. The Company generated advertising revenues of
$16,000, $9,000, $0, and $0, enhanced listing fees of $14,000, $42,000, $0, and
$0, and consulting revenues of $0, $52,000, $184,000, and $51,000, respectively
for such periods. HNI's revenues were primarily generated from consulting
services, and comparison of those operating results to current operations is not
meaningful.
Operating Expenses. The Company's operating expenses for the two months
ended December 31, 1997 were $212,000, for the ten months ended October 31, 1997
were $159,000, for the year ended December 31, 1996 were $62,000, and for the
Inception Period ended December 31, 1995 were $6,000. Costs of revenues were
$3,000, $29,000, $0, and $0; marketing and selling expenses were $41,000,
$23,000, $3,000, and $0; general and administrative expenses were $126,000,
$96,000, $52,000, and $5,000; and depreciation and amortization expenses were
$42,000, $10,000, $7,000, and $500, respectively for such periods.
LIQUIDITY AND CAPITAL RESOURCES
From its inception until November 1997, the Company financed its operations
primarily through revenue generated from providing Web site development
consulting services. Since November 1997, the Company has financed its
operations primarily through an equity investment by ITC and borrowings from ITC
Service Company.
Net cash used in operating activities was $957,000 and $72,000 for the six
months ended June 30, 1998 and for the two months ended December 31, 1997,
respectively. Net cash used in operating activities for the six months ended
June 30, 1998 and the two months ended December 31, 1997 primarily consisted of
the net loss for such periods.
Capital expenditures were approximately $101,000 for the six months ended
June 30, 1998, and $74,000 for the two months ended December 31, 1997. The
Company has no material commitments for capital expenditures other than $105,000
relating to the purchase of furniture as the result of the addition of
personnel. In order to accommodate its growth, the Company has recently entered
into a lease for its new principal offices for a term of 10 years commencing
November 1, 1998, with annual rents ranging from approximately $297,000 to
$424,000.
23
<PAGE> 25
On July 16, 1998, the Company, ITC Service Company and ITC entered into an
amended and restated credit facility under which ITC Service Company made
available to the Company a revolving line of credit of up to $2.5 million.
Amounts outstanding under the credit facility accrue interest at an annual rate
equal to ITC Service Company's cost of debt capital as reasonably determined,
from time to time, by ITC Service Company (currently 8.6%) on the first $1.0
million and a fixed rate of 14% per annum on the remaining $1.5 million. This
credit facility replaced a prior credit facility between the Company and ITC
under which, at June 30, 1998, the Company had borrowed $400,000. The Company
intends to utilize a portion of the net proceeds of the Offering to repay the
outstanding balance under this credit facility, which will then terminate. See
"Use of Proceeds" and "Certain Transactions."
The Company believes that cash on hand and the net proceeds from the
Offering will be sufficient to fund its working capital, anticipated operating
cash flow deficit and capital expenditure requirements for the 12 months
following completion of the Offering. Thereafter, the Company may need to raise
additional funds. The Company's ability to grow will depend in part on its
ability to expand and improve its Internet operations, its advertising and
marketing efforts, Internet user support capabilities and increase content on
its Web site. In connection therewith, the Company may need to raise additional
capital in the foreseeable future from public or private equity or debt sources
in order to finance such possible growth. In addition, the Company may need to
raise additional funds in order to take advantage of unanticipated opportunities
(such as acquisitions of complementary businesses or the development of new
products or services), to react to unforeseen difficulties (such as the loss of
key personnel or the rejection by Internet users or potential advertisers of the
Company's Internet content) or to otherwise respond to unanticipated competitive
pressures. If additional funds are raised through the issuance of equity or
convertible debt securities, the percentage ownership of the Company's then
existing shareholders will be reduced, shareholders may experience additional
dilution and such securities may have rights, preferences or privileges senior
to those of the Company's Common Stock. There can be no assurance that
additional financing will be available on terms favorable to the Company or at
all. If adequate funds are not available on acceptable terms, the Company may
not be able to fund its expansion, take advantage of unanticipated acquisition
opportunities, develop or enhance service offerings or respond to competitive
pressures. Such inability could have a material adverse effect on the Company's
business, financial condition and operating results. See "Risk Factors -- Future
Capital Needs; Uncertainty of Additional Financing."
YEAR 2000 COMPLIANCE
The Company has assessed the extent to which the Year 2000 issue will
affect its internal systems and has implemented a remediation program to correct
any problems. The Company does not anticipate that it will incur any material
costs in connection with its remediation program. Notwithstanding the above, the
Company is currently unable to predict the extent to which the Year 2000 issue
will affect the systems of companies upon which the Company relies or with which
the Company has strategic relationships. Any failure by such companies to
resolve any Year 2000 issues on a timely basis, or in a manner that is
compatible with the Company's systems, could have a material adverse effect on
the Company. Although the Company may incur costs in correcting Year 2000
issues, such costs cannot currently be estimated. Any costs related to Year 2000
compliance will be expensed as incurred, which will have a negative effect on
current operating results.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share," which
establishes new guidelines for the calculation and presentation of earnings per
share. In February 1998, the Commission issued SAB No. 98, on computations of
earnings per share in an initial public offering. SAB No. 98 revised prior
Commission guidance including earnings per share computations in periods prior
to an initial public offering, to reflect the requirements of SFAS No. 128. The
Company has calculated earnings per share for periods prior to its initial
public offering under SAB No. 98.
24
<PAGE> 26
BUSINESS
GENERAL
HeadHunter.NET is an Internet-based interactive technology company that
provides a leading employment Web site at www.HeadHunter.NET. The Company's Web
site enables job listers to list job opportunities and search for resumes, and
enables job seekers to post resumes and search for job opportunities using a
wide array of search criteria, including keyword, industry, job type, education,
geographic location and salary range. Based on Relevant Knowledge statistics for
the second quarter of 1998, HeadHunter.NET rated first in terms of return
traffic, page views per user and time spent per user on the site, compared to
the leading employment Web sites. The Company has significantly increased
traffic on its Web site from 170,000 average daily page views during January
1998 to 375,000 average daily page views during June 1998. HeadHunter.NET
believes that this increase in traffic is due to the quality and quantity of its
content, the ease of use, search capabilities and overall functionality of its
Web site, and increased market awareness resulting from enhanced marketing
activities. The Company recently entered into strategic relationships with
Yahoo!, WorkLife (in conjunction with AltaVista), GeoCities and DoubleClick,
each of which the Company believes will further increase traffic and market
awareness of its Web site.
HeadHunter.NET offers an effective Internet-based solution to meet the
hiring and job search needs of job listers and job seekers. All of the job
opportunities and resumes listed on the Company's Web site are original content
submitted by job listers and job seekers, and are not recycled from print or
other media. At June 30, 1998, approximately 165,000 job opportunities and
31,000 resumes were listed on the Company's Web site. HeadHunter.NET ensures the
quality of its content by enabling job listers and job seekers to continually
update their job opportunities and resumes and by removing outdated listings
from its Web site. The Company offers enhanced listing services to job listers
which are primarily intended to increase visibility of their job opportunities.
These enhanced listing services include: (i) preferential search result
ordering; (ii) automatic cross-posting of listings to Yahoo! Classifieds and
AltaVista's Careers Zone; (iii) a link to a job lister's Web site which allows
job seekers to easily access additional information about the job lister and its
employment opportunities; and (iv) access to an automated job posting system
which allows job listers to bulk post a large number of employment opportunities
to the Company's Web site.
The Company derives its revenues from enhanced listing services fees and
the sale of advertising banners on its Web site. Job listers may choose to
purchase enhanced listing services to improve the placement and visibility of
their job opportunities. Advertisers may purchase banner advertisements that are
displayed randomly or based upon targeted search criteria. During June 1998, the
Company delivered, on average, over 375,000 advertising impressions per day from
over 65 advertisers, including Fidelity Investments, HotMail Corporation,
Powertel, Inc., Ford Motor Company and InterCall, Inc.
THE INTERNET INDUSTRY
Growth of the Internet
The Internet has emerged as a mass communications medium enabling millions
of people worldwide to share information, communicate and conduct business
electronically. Jupiter Communications estimates that the number of
Internet-connected households in the United States will grow from approximately
22 million in 1997 to 57 million in 2002 and that the total number of individual
users online in the United States will grow from approximately 49 million in
1997 to 116 million in 2002. The increasing functionality, accessibility and
overall usage of the Internet has been driven by a number of factors, including
the large and growing base of personal computers in the workplace and home,
advances in the performance and speed of personal computers and modems,
improvements in network infrastructure, easier and cheaper access to the
Internet and increased awareness of the Internet among businesses and
individuals.
Online Recruiting
The Company believes that the rapid increase in online users has made the
Internet an attractive medium for online recruiting. According to an industry
report, the traditional place and search segment of the staffing
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industry is expected to generate approximately $13 billion in revenues in 1998,
an increase of 19% from 1997. The total dollars spent on online recruiting is
expected to grow from approximately $48 million in 1997 to $460 million in 2002,
according to Forrester Research. The Company believes that online recruiting has
a number of advantages over traditional means of hiring and job searching
because it is: (i) interactive, allowing immediate links to additional
information; (ii) more easily tailored to satisfy the user's needs; (iii) more
cost effective; and (iv) more easily accessible.
Online Advertising
The Internet is emerging as an attractive new medium for advertisers due to
the growth in the number of Internet users, the amount of time such users spend
on the Internet, the increase in electronic commerce, the interactive nature of
the Internet, the Internet's global reach, the ability to reach highly targeted
audiences and a variety of other factors. Jupiter Communications estimates that
total spending on online advertising will grow from approximately $940 million
in 1997 to $7.7 billion in 2002. Many of the largest advertisers in traditional
media, including consumer products companies, automobile manufacturers and
others, have expanded their use of Internet advertising, and the Company
believes that Internet advertising will become an increasing component of their
total advertising budgets. The Company believes that the leading Internet
content providers will benefit from the increasing number of Internet users
since advertisers will more likely advertise on Web sites that demonstrate a
high volume of traffic and provide advertising programs allowing them to target
specific demographic groups.
THE HEADHUNTER.NET SOLUTION
Many of the leading online recruiting Web sites are owned and operated by
traditional recruiting and recruitment advertising companies. The Company
believes that such companies offer their Web sites as a complement to their
pre-existing businesses and in response to the emergence of the Internet. The
Company also believes that, as a result, these competitors have extended their
pre-existing pricing models to their Web sites by charging significant up-front
fees for each job listed.
HeadHunter.NET established its Web site solely to capitalize on the
potential of the online recruiting market instead of as an extension of a
pre-existing business. As a result, the Company has concentrated its efforts on
developing a Web site predicated on facilitating successful employment searches
by its users. The Company believes that the quality and quantity of content on
its Web site, coupled with its ease of use, search capabilities and overall
functionality, are critical to users' success. In order to attract quality
content to its Web site, the Company offers its basic listing service at no
charge to users, as opposed to the predominant competitive practice of charging
up-front fees for each job listed. The Company believes that by providing free
basic services it is able to more effectively attract job listers and job
seekers, including small to midsize job listers, who may be less willing to pay
up-front fees.
The Company believes that its rapid growth to date has resulted from and
its future growth will depend upon its ability to leverage its base of content
and traffic, which will generate increased revenues from enhanced listing
services and advertising. The Company believes that its approach has allowed it
to differentiate itself from its competitors and to quickly establish a leading
position among online recruiting Web sites without significant marketing
expenditures. Accordingly, the Company believes it is uniquely positioned to
capitalize on the continued growth of the Internet as a medium for commerce.
STRATEGY
The Company's objective is to provide the leading employment Web site by
offering an effective solution to meet the employment needs of job listers and
job seekers. The Company's strategy to accomplish this objective includes the
following key elements:
Continue to Facilitate Successful Employment Searches. HeadHunter.NET
believes that users of its Web site have been and will continue to be successful
in their employment searches. The Company also believes that these successful
searches have led and will continue to lead to increased traffic on its Web
site, which in turn will encourage current and potential users to post a greater
number of job opportunities and
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resumes. The Company intends to continue to facilitate successful employment
searches and further enhance this growth cycle by maintaining the content
quality, search capabilities and functionality of its Web site.
Increase Market Awareness and Brand Recognition of HeadHunter.NET. By
increasing awareness of the Company's brand through referrals from satisfied
users and strategic marketing campaigns aimed at potential job listers and
advertisers, the Company believes that the content and traffic on its Web site
will increase and thereby result in greater revenues. The Company plans to
continue to increase and reinforce market awareness of the HeadHunter.NET brand
name through a more aggressive marketing campaign using a combination of online
and traditional advertising and direct marketing.
Establish Additional Strategic Relationships. The Company has formed a
number of strategic relationships, including agreements with Yahoo!, WorkLife
(in conjunction with AltaVista), GeoCities and DoubleClick, as a means to
increase traffic and content on its Web site, enhance visibility of its job
listers employment opportunities, increase awareness of the HeadHunter.NET brand
and provide marketing and cross-promotional opportunities. The Company intends
to seek additional strategic relationships, including with Internet-based
companies, that will increase traffic, content and brand recognition. See
"-- Marketing and Promotion -- Strategic Relationships."
Implement an Innovative Pricing Model. The Company believes that it will
attract a greater number of job listings and gain a competitive advantage over
other recruiting Web sites by offering unbundled services on a daily fee basis
and variable pricing of preferential search result ordering. The Company is
currently beta testing and plans to fully implement in August 1998 an innovative
pricing model. This model will provide users maximum flexibility to choose only
those enhanced listing services which they desire to purchase and to control
search result placement of their employment listings through the Company's
proprietary variable pricing program, AVILUS (Associated Value Internet Listing
Upgrade System). This model differs from the industry standard of a uniform flat
monthly fee for services which do not include preferential search result
ordering. The Company expects that unbundled and variable pricing of services
will attract job listers because of their need for greater flexibility in how
they target their recruiting spending.
Continue to Enhance Site Functionality and Features. The Company believes
that the current functionality and features of its Web site have been essential
to building and maintaining its leadership among online recruiting companies.
The Company intends to continue to make its user interface more friendly and
intuitive and add technology-driven enhancements that increase the functionality
of the Web site. In addition, the Company may also include certain additional
features to the Web site, such as salary surveys, relocation information,
electronic magazines (e-zines), virtual job fairs, employer profiles, and other
services of interest to job listers, job seekers and advertisers, as a means to
increase interest in and traffic to the Web site.
Pursue Strategic Acquisitions of Complementary Businesses and
Technologies. From time to time, the Company evaluates possible acquisitions
of, or investments in, businesses, products and technologies that complement
those of the Company. The Company will explore those acquisition opportunities
which may accelerate its growth, add new content and advertisers, develop new
technologies or penetrate new markets. The Company presently has no commitments
or understandings for such acquisitions and is not presently engaged in any
negotiations for any such acquisitions.
MARKETING AND PROMOTION
The Company's marketing and promotion strategy is designed to establish
www.HeadHunter.NET as the leading employment Web site. The Company utilizes
multiple channels to market and promote its Web site, including strategic
relationships, online and traditional advertising and direct marketing.
Strategic Relationships
The Company has entered into and continuously evaluates strategic
relationships as a means to increase traffic to and content on its Web site,
enhance visibility of its users' listings, increase awareness of the
HeadHunter.NET brand, and provide marketing and cross-promotional opportunities.
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GeoCities. GeoCities has developed and operates an Internet community
which consists of its home page and themed "neighborhoods." These neighborhoods
provide content, chat rooms, message boards, and are populated by Internet users
with their own Web sites and e-mail addresses called "homesteaders." According
to Relevant Knowledge, the GeoCities community was the sixth most frequently
visited Web site during the first quarter of 1998. The Company and GeoCities
recently entered into a co-marketing agreement under which the Company will
sponsor a career center within the GeoCities community called the "GeoCities
Career Center sponsored by HeadHunter.NET" (the "Career Center"). The Company
expects the Career Center to be operational in the third quarter of 1998. The
Career Center will enable users to list job opportunities and resumes, and a
networking center will include chat rooms, message boards and forum events.
HeadHunter.NET will have a link on all pages in the Career Center directly to
its Web site. HeadHunter.NET is guaranteed a minimum number of advertising
impressions per month under this agreement. The term of this agreement expires
on June 30, 1999, although HeadHunter.NET has the right to renew the agreement
for an additional one-year term.
DoubleClick. Based on information reported by DoubleClick, DoubleClick is
a global Internet advertising network with approximately 230 high-traffic Web
sites on which it currently delivers an estimated 1.5 billion advertisements
each month to approximately 35 million people. DoubleClick's proprietary
technology enables advertisers to target their audience based on precise
profiling criteria. For April 1998, Media Metrix rated the DoubleClick network
as having the third largest audience reach on the Internet behind AOL and
Yahoo!. The Company recently entered into an advertising agreement with
DoubleClick under which the Company will purchase over 400 million advertising
impressions over two years. This agreement allows the Company, through the
DoubleClick network, to target Internet users conducting employment related
keyword searches on AltaVista and to target other users and Web sites within the
DoubleClick network. This agreement also makes the Company a sponsor of
AltaVista's Careers Zone and the Fast Company Career Center. Each sponsored Web
site will display the Company's name with a link to its Web site.
Yahoo! In April 1998, the Company entered into a non-exclusive agreement
with Yahoo! under which the Company has the right to post job opportunities and
resumes from the Company's Web site on the Yahoo! Classifieds Web site. Relevant
Knowledge rated Yahoo! as having the largest audience reach on the Internet
during June 1998. All HeadHunter.NET job opportunities and resumes posted on the
Yahoo! Classifieds Web site contain a link to the Company's Web site for further
information. This arrangement provides additional traffic because many Internet
users who link to the Company's Web site from the Yahoo! Classifieds choose to
stay and search additional listings on the Company's Web site. The initial term
of this agreement expires on April 13, 1999, and is automatically renewed
annually, unless either party provides notice of termination.
Worklife. Worklife, in conjunction with AltaVista, will install, manage
and market the Careers Zone to store, classify and categorize career and
employment related content from the Internet. Relevant Knowledge rated Alta
Vista as having the tenth largest audience reach on the Internet during June
1998. The Careers Zone is currently in beta test. Alta Vista will provide its
customers with continuous access to the Careers Zone. HeadHunter.NET and
Worklife recently entered into a non-exclusive agreement under which the Company
has the right to post job and resume listings on the Careers Zone. When an
AltaVista user's search identifies jobs cross-posted from HeadHunter.NET, the
user may only learn details of the job listing by linking directly to the
Company's Web site. The Company expects that this agreement will provide
additional traffic because many users who link to the Company's Web site from
the Careers Zone will choose to stay and search additional listings on the
Company's Web site. The term of this agreement is for four years, although it
may be terminated by either party on 30 days notice after the first year.
Online and Traditional Advertising
The Company promotes its Web site through an aggressive marketing campaign
using a combination of online and traditional advertising. The Company
advertises on Web sites of major Internet content and service providers,
including Yahoo!, AOL, GeoCities and Lycos, Inc. The Company generally purchases
banner advertisements on Web sites that enable it to target potential users of
its Web site and allow them to click through to www.HeadHunter.NET.
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HeadHunter.NET also believes that traditional advertising is important to
building brand recognition and promoting the benefits of online recruiting.
Traditional advertising can be an effective means of promoting brand awareness
and attracting job listers and job seekers who use traditional means to satisfy
their employment needs. HeadHunter.NET's traditional advertising efforts have
included: (i) advertising in the employment classifieds of national and local
newspapers; (ii) advertising in recruitment magazines and information technology
consumer magazines; and (iii) out of home advertisements such as on billboards
and truck and bus exteriors. The Company also plans to advertise on television
and radio in select markets. From time to time, HeadHunter.NET also plans to
design contests and promotions to build brand awareness for its Web site.
Direct Marketing
The Company also attends human resource trade shows and job seminars and
plans to attend college career fairs to reach job listers and inform them of the
benefits of the Company's Web site. In the future, the Company's marketing
efforts will also include direct mail, fax and e-mail campaigns aimed at human
resources executives, recruiters, outsourcing companies and college career
placement offices.
PRICING STRATEGY AND SERVICE OFFERINGS
On the Company's Web site, job listers may list employment opportunities
and search for resumes, and job seekers may post resumes and search for
employment opportunities free of charge. Due to the large number of employment
opportunities listed on the Company's Web site, job listers may choose to
purchase enhanced listing services to improve the placement and visibility of
their employment opportunities. The Company has historically offered all of its
enhanced listing services at a single flat rate. The Company is currently beta
testing, and plans to fully implement in August 1998 an innovative pricing
model. This model will provide users maximum flexibility to choose only those
enhanced listing services which they desire to purchase and to control search
result placement of their employment listings through its proprietary pricing
program, AVILUS. Once this pricing model is fully implemented, job listers will
generally pay a separate daily fee for each enhanced listing service.
Enhanced listing services offered by the Company include:
Preferential Search Result Ordering. The Company enables job listers to
have their job opportunities positioned above non-enhanced listings in a search
result. Once the unbundled pricing model is fully implemented, job listers will
compete for preferential search result ordering. Each job lister will pay a
daily fee (or bid) for each employment opportunity it posts on the Company's Web
site. Amounts that job listers have paid for placement can be viewed on a search
result page. Job listers may bid based on where they want their job opportunity
to be placed in a specified search and may change such bid at any time in
response to competitive bids.
Cross-Posting. Job listers can have their job opportunities automatically
cross-posted to Yahoo! Classifieds and AltaVista's Careers Zone. Users who
search these sites are linked to HeadHunter.NET when their search identifies a
job or resume submitted by the Company. The Company plans to increase the cross-
posting opportunities to include cross-posting to university employment related
Web sites and other targeted locations.
Links to Job Lister's Web Site. Job listers can also have a link to their
Web site added to their job listings on the Company's Web site. This link allows
job seekers to easily access additional information about the job lister and its
employment opportunities.
Automated Job Posting System. The Company also makes available an
automated job posting system which allows job listers to post large databases of
jobs at once, expediting the listing process.
SALES
The Company currently employs a direct sales staff of eight full-time and
two part-time employees who are dedicated to establishing relationships with
potential job listers and advertisers and maintaining existing
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relationships with current purchasers of enhanced listing services and
advertisers. The Company intends to significantly increase its sales staff with
a portion of the net proceeds from the Offering. See "Use of Proceeds."
Advertising Sales. HeadHunter.NET believes that job seekers using its Web
site present an attractive target audience for existing job listers and
companies such as career consultants, resume consultants, benefits providers,
recruiters, human resource management companies, moving companies, insurance
companies and others whose services or products may be of interest to job
seekers. The Company's sales staff focuses specifically on such companies as
potential advertisers on its Web site. The Company also intends to pursue
relationships with more non-employment related advertisers as well as with
advertising agencies. In addition, the Company sells banner advertisements to
its job listers which increase their visibility on its Web site by enabling job
seekers to link to the job lister's entire job bank on its Web site. In order to
maintain existing advertising relationships, the Company's sales staff consults
regularly with its advertisers on advertisement design, provides advertisers
with advertising measurement analysis and focuses on providing a high level of
customer service and satisfaction.
Currently, advertisers enter into short term contracts with the Company
under which they may elect random banner display advertising or keyword and
other targeted advertising. From time to time, the Company may offer discounts
to first time advertisers or for high volume, long-term advertising contracts.
During June 1998, the Company delivered, on average, over 375,000 advertisement
impressions each day on its Web site for over 65 advertisers including, Fidelity
Investments, HotMail Corporation, Powertel, Inc., Ford Motor Company and
InterCall, Inc.
Listing Enhancement Sales. The Company's sales staff currently consults
with existing job listers to advise them on improving the visibility of their
listings based on an evaluation of their online recruiting needs. The Company
plans to hire additional listing enhancement sales personnel to proactively call
on Fortune 1000 companies.
SUPPORT SERVICES
HeadHunter.NET believes that support services are important to its ability
to attract and retain traffic on its Web site and to make each user's experience
easy and productive. The Company posts answers to frequently asked questions
under the "Answers" icon on its Web site. The Company also solicits questions
and feedback from users on its Web site, and the Company's support staff
responds by e-mail to inquiries concerning technical aspects of the Company's
Web site, advertising on the Web site and enhanced listing services available
from the Company. The Company also provides direct telephone support to job
listers purchasing enhanced listing services. The Company does not charge for
its support services.
TECHNOLOGY
The software system developed by the Company is specifically designed to
support a high volume of Web site traffic and searches, as well as immediate
additions, modifications and deletions of job listings and resumes. In addition,
the system has been designed to allow scalability as the traffic to its Web site
increases.
Job and Resume Distribution. The Company has developed a proprietary
distribution system to replicate job listings and resumes from a single update
server to multiple query servers. This distribution system can be configured to
support any number of query servers in one or more locations. If any query
server is unable to receive a replicated job listing or resume, the distribution
system is able to queue that job listing or resume until the affected server can
be contacted. The distribution system is being enhanced to reduce the time it
takes for a job listing or resume to be distributed and made available for
viewing from a few minutes to a few seconds. The Company expects to have this
enhancement in place during the third quarter of 1998.
Fault Tolerance and Scalability. The Company's online systems support
operations of the Company's Web site on a 24-hour-a-day, seven-day-a-week basis.
Using Pentium-based hardware, the system's scalable design has redundant and
fault tolerant features that allow system maintenance and upgrades without
impacting the Web site's performance. The Company maintains a DS-3 connection
with redundant lines to
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the Internet. In the third quarter of 1998, the Company will establish two
co-location facilities to house its servers and will expand to a third
co-location facility in the fourth quarter of 1998. The co-location facilities
are being established through an agreement with Frontier GlobalCenter, Inc.,
which supports some of the largest Web sites on the Internet. The Company
expects that the capacity provided by these multiple co-location facilities will
support the significant growth in content and traffic on its Web site for the
next 12 months. Included in this design is load balancing architecture and
sufficient redundancy to permit any single co-location facility to lose its
connection to the Internet without impacting the Web site's performance.
Commercially available software is used to monitor and manage the Company's
systems with minimal operator participation.
Content Searching. The Company has developed advanced proprietary meta
tags for its content. These meta tags provide classification information that
allows a user to perform very specific searches that surpass traditional keyword
searches. In particular, one meta tag contains a geographic location identifier
that allows proximity searching across a spatially indexed continuum rather than
treating geographic locations as simply another keyword. The identifier not only
applies to locations in the U.S., but to more than 240,000 cities and towns
throughout the world. The Company's Web site is effectively "pre-wired" for
global use as Internet usage increases internationally.
INTELLECTUAL PROPERTY
The Company's success and ability to compete depends significantly on its
internally developed proprietary technology and on its brand and marks. The
Company relies upon trademark, patent and other intellectual property laws, and
on confidentiality and non-disclosure agreements with its employees and third
parties, to establish and protect its proprietary rights. The Company has
obtained a federal registered mark ("HeadHunters(R)"), has a pending federal
trademark application for "HeadHunter.NET," and is in the process of applying
for patents on various proprietary systems that it has developed, including
AVILUS. There can be no assurance that any of the Company's trademark
registrations or patent applications will be approved or granted or, if granted,
that they will not be successfully challenged by others or invalidated through
administrative process or litigation. Further, if the Company's registration of
HeadHunter.NET is not approved or granted due to the prior issuance of
trademarks to third parties or for other reasons, there can be no assurance that
the Company would be able to enter into arrangements with such third parties on
commercially reasonable terms to allow the Company to continue to use such
trademark. In addition, the Company seeks to protect its proprietary rights
through the use of confidentiality agreements with employees, consultants,
advisors and others. There can be no assurance that such agreements will provide
adequate protection for the Company's proprietary rights in the event of any
unauthorized use or disclosure, that employees of the Company, consultants,
advisors or others will maintain the confidentiality of such proprietary
information, or that such proprietary information will not otherwise become
known, or be independently developed, by competitors. In addition, the Company
has licensed in the past, and expects that it may license in the future,
elements of its trademarks and other proprietary rights to third parties. While
the Company attempts to ensure that the quality of its brand is maintained by
such third parties, there can be no assurance that such parties will not take
actions that could materially and adversely affect the value of the Company's
proprietary rights or the reputation of its brand.
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries are
uncertain and still evolving, and there can be no assurance as to the future
viability or value of any proprietary rights of the Company or other companies
within the industry. There also can be no assurance that the steps taken by the
Company to protect its proprietary rights will be adequate or that third parties
will not infringe or misappropriate the Company's proprietary rights. Any such
infringement or misappropriation, should it occur, could have a material adverse
effect on the Company's business, results of operations and financial condition.
Furthermore, there can be no assurance that the Company's business activities
will not infringe upon the proprietary rights of others, or that other parties
will not assert infringement claims against the Company. From time to time the
Company has been, and expects to continue to be, subject to claims in the
ordinary course of its business, as well as claims of alleged infringement of
the trademarks and other intellectual property rights of third parties by the
Company. Although such claims have
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not had a material adverse effect on the Company's business, results of
operations or financial condition, such claims could subject the Company to
significant liability for damages and could result in invalidation of the
Company's proprietary rights and, even if not meritorious, could be
time-consuming and expensive to defend, and could result in a diversion of
management's time and attention, any of which could have a material adverse
effect on the Company's business, results of operations and financial condition.
COMPETITION
The Company competes with other Internet sites for the time and attention
of users and for advertising and other revenues. Competition among Internet
sites is intense and is expected to increase significantly in the future. The
Company's Web site competes against a variety of companies that provide similar
content through one or more media, such as print, radio, television and the
Internet. To compete successfully, the Company must deliver informative and
useful content to attract more job listers and job seekers, generate fees from
enhanced listing services and sell advertising. In addition to such general
media competition, the Company competes against other online recruiting Web
sites such as The Monster Board, Career Path, Career Mosaic and Online Career
Center. Such competitor's services may be sufficiently attractive to users to
dissuade them from accessing and using the Company's Web site. If the Company is
unable to attract a significant number of users to its Web site, the Company's
business, financial condition and results of operations be materially adversely
affected and the Company may cease to be a commercially viable enterprise.
The market for Internet content and services, including career and
employment services, is relatively new, intensely competitive and rapidly
evolving. There are minimal barriers to entry, and current and new competitors
can launch new Internet sites and add content at relatively low costs within
relatively short time periods. In addition, the Company competes for the time
and attention of Internet users with not-for-profit Web sites operated by, among
others, individuals, governments and educational institutions. Accordingly, the
Company expects competition to persist and intensify and the number of
competitors to increase significantly in the future. There can be no assurance
that the Company's Web site will compete successfully.
The Company believes that the competitive factors attracting Internet users
include the quality of presentation and the relevance, timeliness, depth and
breadth of employment information and services offered by the Company. With
respect to attracting advertisers, the Company believes that the competitive
factors include, among others, the volume of traffic on the Company's Web site,
the demographics of such user base, the Company's ability to deliver focused
advertising and interactivity through its Web site and the overall value to the
advertiser of advertising offered by the Company. With respect to attracting
listing enhancements, the Company believes that the competitive factors include,
among others, the fees charged for fees for enhanced listing services and the
cost and accessibility of similar services through the Internet or competing
media. Given the intense competition among other Internet employment sites and
other media, there can be no assurance that the Company will be able to compete
successfully with respect to any of these factors.
Many of the Company's current and potential competitors have significantly
greater financial, technical and marketing resources, longer operating
histories, greater name recognition and greater experience than the Company, and
also have established relationships with advertisers, employers, recruiters and
other listers. Many of such competitors may be able to undertake more extensive
marketing efforts and adopt more aggressive advertising and listing enhancement
pricing policies. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that the
competitive pressures faced by the Company will not have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, in response to competitive pressures, the Company may make certain
pricing, content and/or marketing decisions or enter into acquisitions or new
ventures that could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Risk Factors -- Intense
Competition" and "-- Low Barriers to Entry."
EMPLOYEES
As of June 30, 1998, the Company had a total of 24 full-time and three
part-time employees, all of whom are based at the Company's executive offices in
Norcross, Georgia. Of the 27 employees, 13 are in sales and
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marketing, seven are in technology and seven are performing general and
administrative functions. None of the Company's employees are represented by a
labor union and the Company considers its employee relations to be good. In
addition to its full-time employees, the Company also utilizes an independent
marketing and publicity consultant, and periodically provides internships for
talented students interested in commerce on the Internet.
FACILITIES
The Company's current executive offices are located in Norcross, Georgia at
6410 Atlantic Boulevard. In order to accommodate its growth, the Company has
recently entered into a lease for its executive offices comprised of
approximately 26,775 square feet located at 2469 Satellite Boulevard,
Lawrenceville, Georgia for a term which expires in 2008. The Company anticipates
that it will relocate to these offices in the fourth quarter of 1998. The
Company believes that its new office space will be adequate for its needs for
the present and the immediate future.
LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings.
From time to time, the Company may be subject to legal proceedings and claims in
the ordinary course of business, as well as claims of alleged infringement of
trademarks and other intellectual property of third parties by the Company. Such
claims, even if not meritorious, could result in the expenditure of significant
financial and managerial resources.
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MANAGEMENT
The executive officers, key employees and directors of the Company and
their ages and positions as of the date of this Prospectus are as follows:
<TABLE>
<CAPTION>
NAME AGE CLASS(1) POSITION
- ---- --- -------- --------
<S> <C> <C> <C>
William H. Scott, III. 51 III Chairman of the Board and Director
Warren L. Bare........ 32 III President, Chief Executive Officer and Director
Kenneth E. Dopher..... 38 -- Chief Financial Officer and Secretary
Judith G. Hackett..... 38 -- Senior Vice President -- Marketing
Todd A. Lundberg...... 34 -- Vice President -- Sales
C. Eric Presley....... 31 -- Director of Technology
Mark W. Fouraker...... 36 -- Director of Operations
Robert M. Montgomery.. 40 I Director
Burton B. Goldstein, Jr 50 I Director
Donald W. Weber....... 61 II Director
J. Douglas Cox........ 47 II Director
</TABLE>
- ---------------
(1) Class I term expires at the annual meeting of shareholders in 1999, Class II
term expires at the annual meeting of shareholders in 2000, and Class III
term expires at the annual meeting of shareholders in 2001.
William H. Scott, III has served as a director of the Company since October
1997 and became Chairman of the Board of Directors in July 1998. Since December
1991, Mr. Scott has served as President of ITC, a diversified telecommunications
and technology holding company and principal shareholder of the Company, and has
served on the Board of Directors of ITC since May 1989. From 1989 to 1991, Mr.
Scott served as Executive Vice President of ITC. Between 1984 and 1988, Mr.
Scott held several offices with SouthernNet, Inc., a regional long distance
company, including Chief Operating Officer, Chief Financial Officer and Vice
President -- Administration. From 1984 to 1987, he served as a director of
SouthernNet, Inc. Currently, Mr. Scott serves as a director of Powertel, Inc., a
wireless telecommunications services company, AvData Systems, Inc., a data
network management services company, KNOLOGY Holdings, Inc., a broadband
telecommunications services company, Mindspring Enterprises, Inc., an Internet
service provider, ITC'DeltaCom, Inc., a regional telecommunications services
provider, and Innotrac Corporation, a provider of customized marketing and
support services.
Warren L. Bare founded the Company in October 1995 and has been its
President, Chief Executive Officer and a member of its Board of Directors since
its inception. From October 1995 to October 1996, Mr. Bare provided Web site
development consulting services with the Company. From 1992 to October 1995, Mr.
Bare served as the Director of Technology at United Systems, Inc., an
Atlanta-based software development and consulting company. Prior to 1992, Mr.
Bare held management and technical positions at Progress Software Corporation
and Computer Advisory Services. Mr. Bare received finance and economics degrees
from the University of South Florida.
Kenneth E. Dopher joined the Company in January 1998 as its Chief Financial
Officer and also became its Secretary in July 1998. From 1994 to 1998, Mr.
Dopher served as a Director of Finance and Operations with Walt Disney Feature
Animation, a division of The Walt Disney Company ("Disney"). From 1990 to 1994,
Mr. Dopher held several positions in the Creative Content division of Disney,
including Senior Manager of Finance for Feature Animation, Manager of Capital
Planning, and Senior Business Planner. From 1985 to 1988, Mr. Dopher worked as a
controller for House Corporation, a holding company of real estate and computer
services companies. Mr. Dopher is a CPA and received a M.B.A. in finance from
Indiana University.
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<PAGE> 36
Judith G. Hackett joined the Company in May 1998 as its Senior Vice
President -- Marketing. From 1995 to 1998, Ms. Hackett was the Senior Vice
President -- Advertising and Marketing with TBS Superstation, Inc., a national
cable network. From 1994 to 1995, Ms. Hackett was General Marketing Manager and
Creative Director of a CBS affiliate television station, WOIO in Cleveland, and
from 1988 to 1994 she served as its Creative Services Director while it was part
of the FOX broadcasting network. Ms. Hackett received a degree in journalism
from Kent State University.
Todd A. Lundberg joined the Company in January 1998 as its Vice
President -- Sales. From 1987 to 1997, Mr. Lundberg held various positions with
CAD ONE, Inc., a computer graphics company, including Account Executive,
Southeast Regional Manager, Regional Sales Director and Director of Sales. Mr.
Lundberg received degrees in marketing and management from Valdosta State
University.
C. Eric Presley joined the Company in December 1997 as the Manager of
Technology and has been the Director of Technology since April 1998. From 1993
to 1997, Mr. Presley held several positions at Advanced Technology Corporation
("ATC"), a technology solutions provider, including Senior Consultant and System
Architect. From 1988 to 1993, Mr. Presley was Lead Developer at Northern Telecom
Limited, a global communications network solutions provider. Mr. Presley
received a degree in information and computer science from the Georgia Institute
of Technology and a Masters in computer engineering from North Carolina State
University.
Mark W. Fouraker joined the Company in April 1998 as the Director of
Operations. In 1989, Mr. Fouraker co-founded ATC and, from that time until April
1998, he held several positions with ATC including Director of Systems
Architecture, Vice President of Operations and Director of Information
Technology. From 1988 to 1989, Mr. Fouraker served as Manager of Technical
Services for Canada Dry/ Sunkist, a diversified soft drink company. From 1985 to
1988, Mr. Fouraker was an Information Systems Coordinator with the Georgia
Institute of Technology.
Robert M. Montgomery has served as a director of the Company since January
1998. Since 1992, Mr. Montgomery has served as a Vice President of ITC. In 1991,
Mr. Montgomery founded InterCall, Inc. ("InterCall"), a teleconferencing company
and a wholly-owned subsidiary of ITC, and since then has been its President and
Chief Executive Officer. Since 1993, Mr. Montgomery has served as Chairman of
the Board and a director of InterCall's United Kingdom division. From 1986 to
1991, Mr. Montgomery served in various capacities with Telecom USA (which was
purchased by MCI Communications Corp.), including President of the Conference
Calling Division.
Burton B. Goldstein, Jr. has served as a director of the Company since July
1998. Mr. Goldstein is currently a private investor. Mr. Goldstein co-founded
Information America, Inc., an online information services company in 1982, and
served as its President from November 1982 to June 1998. From 1996 until June
1998, Mr. Goldstein served on the executive committee of West Group, a division
of The Thomson Corporation, an information and publishing company.
Donald W. Weber has served as a director of the Company since July 1998.
Since 1997, Mr. Weber has been a consultant and private investor. Since 1995,
Mr. Weber has served as a director of ITC. From 1993 to 1997, Mr. Weber served
as President and Chief Executive Officer of ViewStar Entertainment Services,
Inc. ("ViewStar"), a DBS satellite services company. From 1987 to 1991, Mr.
Weber held various executive positions, including President and Chief Executive
Offices, at and served as a director of Contel Corporation, a telecommunications
company. Currently, Mr. Weber serves as a director of Powertel, ViewStar,
Pegasus Communications Corporation, a media and communications company, and
Healthdyne Information Enterprise, Inc., a clinical information solutions
company.
J. Douglas Cox has served as a director of the Company since October 1997.
Since September 1997, Mr. Cox has served as Senior Vice President (Corporate
Development) of ITC, and he has also served as Chief Financial Officer and Vice
President (Finance) of ITC (or its predecessor companies) and several other
subsidiaries of ITC beginning in March 1987. From 1980 to 1987, Mr. Cox was a
partner in the accounting firm of Cox & Rumsey, Certified Public Accountants.
From 1972 to 1979, Mr. Cox was employed by Arthur Andersen & Co., specializing
in regulated industries.
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<PAGE> 37
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has established a Compensation Committee and an Audit
Committee. The Compensation Committee is currently comprised of Messrs.
Goldstein, Scott and Montgomery and is responsible for reviewing and approving
all compensation arrangements with executive officers of the Company and will
also be responsible for administering the Company's incentive and stock option
plans. See "-- HeadHunters, L.L.C. Common Unit Option Plan" and
"-- HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan."
The Audit Committee is currently comprised of Messrs. Goldstein, Cox and
Weber and is responsible for recommending to the Board of Directors the
engagement of the independent auditors of the Company and reviewing with the
independent auditors the scope and results of the audits, the internal
accounting controls of the Company, audit practices and the professional
services furnished by the independent auditors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company did not have a Compensation Committee until July 15, 1998.
Prior to such date, the Company's Board of Directors or Board of Managers, as
the case may be, determined executive compensation. Except for Mr. Scott, no
executive officer of the Company serves as a member of the Compensation
Committee or as a director of any entity of which any of the Company's directors
serve as an executive officer. Mr. Scott is a director of ITC for which Messrs.
Cox and Montgomery are executive officers.
DIRECTOR COMPENSATION
The Company's Bylaws allow the Company's Board of Directors to determine
from time to time the compensation that directors may receive for their services
as directors. However, since inception, the Company's directors have served
without compensation except for reimbursement of out-of-pocket expenses for each
meeting attended. Concurrently with their respective elections to the Board of
Directors, Messrs. Scott, Montgomery, Cox, Weber and Goldstein were granted
options to purchase 10,000 shares of Common Stock at exercise prices of $0.40,
$0.40, $0.40, $1.40 and $1.40, respectively. The Company has adopted the
HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan pursuant to which
non-employee directors are eligible to receive options and awards to purchase
shares of Common Stock. See "HeadHunters, L.L.C. Employee Common Unit Option
Plan" and "-- HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan."
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by the Company to its
Chief Executive Officer for the year ended December 31, 1997. No other executive
officer's salary and bonus exceeded $100,000 during the year ended December 31,
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)
- --------------------------- ---- --------- --------
<S> <C> <C> <C>
Warren L. Bare.............................................. 1997 $57,205 $ --
President and Chief
Executive Officer
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into letter agreements with Messrs. Bare, Dopher,
Fouraker, Lundberg, Presley and Ms. Hackett providing for (i) annual base
salaries of $75,600, $90,000, $70,000, $85,000, $75,000 and $125,000,
respectively, and (ii) eligibility for annual performance based bonuses of up to
$22,680, $13,500, $5,000, $15,000, $10,000 and $20,000, respectively. In
addition, these letter agreements provide for the grant of options for the
purchase of common units of LLC to each of Messrs. Dopher, Fouraker, Lundberg,
Presley and Ms. Hackett for 100,000, 7,500, 50,000, 50,000 and 50,000 common
units, respectively,
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<PAGE> 38
which converted into options to purchase equal numbers of shares of Common
Stock. The exercise price per share for each of the above options, after
conversion is $0.40, $1.40, $0.40, $0.40 and $1.40, respectively. Pursuant to
the terms of the option agreements, each of the above options vests 40% on the
second anniversary of the grant date and 20% on each of the next three
anniversary dates thereafter.
HEADHUNTERS, L.L.C. EMPLOYEE COMMON UNIT OPTION PLAN
The Company has assumed certain options ("LLC Options") that had been
granted by LLC to purchase common units of LLC under the HeadHunters, L.L.C.
Employee Common Unit Option Plan (the "HH LLC Plan"). Such LLC Options have been
converted into options (the "Converted Options") to purchase an equal number of
shares of Common Stock of the Company. The Converted Options will be
administered by the Company's Board of Directors or the Compensation Committee
substantially in accordance with the terms of the assumed HH LLC Plan. As of the
date of this Prospectus, 29 persons hold outstanding Converted Options to
purchase a total of 382,250 shares of the Company's Common Stock. Mr. Dopher
holds a Converted Option to purchase 100,000 shares of Common Stock at an
exercise price of $0.40 per share, Ms. Hackett holds a Converted Option to
purchase 50,000 shares of Common Stock at an exercise price of $1.40 per share,
and Messrs. Scott, Montgomery, Goldstein, Weber and Cox each hold a Converted
Option to purchase 10,000 shares of Common Stock at exercise prices of $0.40,
$0.40, $0.40, $1.40 and $1.40, respectively. See "-- Employment Agreements" and
"-- Director Compensation." The Company does not intend to grant any additional
options pursuant to the HH LLC Plan after consummation of the Offering.
HEADHUNTER.NET, INC. 1998 LONG-TERM INCENTIVE PLAN
On July 15, 1998, the Company's Board of Directors adopted the
HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan (the "Incentive Plan") and on
, 1998, the Company's shareholders approved the Incentive Plan. The
Company has reserved 500,000 shares of its Common Stock for issuance in
connection with options and awards granted under the Incentive Plan. The Company
may grant options and awards to officers and employees of the Company, a parent
or a subsidiary, and to non-employee directors and consultants to the Company.
As of the date hereof, there are 29 persons eligible to participate in the
Incentive Plan. The Incentive Plan authorizes the granting of awards to eligible
participants in the form of (i) options to purchase shares of the Company's
Common Stock, which may be incentive stock options or non-qualified stock
options, (ii) stock appreciation rights, (iii) performance shares, (iv)
restricted stock awards, (v) dividend equivalents or (vi) other stock-based
awards. The Incentive Plan is administered by the Company's Board of Directors
or the Compensation Committee in accordance with its terms. As of the date of
this Prospectus, the Company has not granted any awards or options pursuant to
the Incentive Plan.
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<PAGE> 39
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the date of this Prospectus and as
adjusted to reflect the sale of the Common Stock offered hereby with respect to:
(i) each of the Company's directors and its Chief Executive Officer; (ii) all
executive officers and directors of the Company as a group; and (iii) each
person known by the Company to own beneficially more than 5% of the Common
Stock. The table assumes full conversion of the Class A Preferred Stock prior to
and after the Offering.
<TABLE>
<CAPTION>
SHARES OF COMMON PERCENTAGE BENEFICIALLY OWNED
STOCK BENEFICIALLY --------------------------------
NAME OWNED BEFORE OFFERING AFTER OFFERING
- ---- ------------------ --------------- --------------
<S> <C> <C> <C>
ITC Holding Company, Inc.(1).......................
Warren L. Bare(2)..................................
William H. Scott, III(3)...........................
J. Douglas Cox(3)..................................
Robert M. Montgomery(3)............................
Burton B. Goldstein, Jr............................
Donald W. Weber(3).................................
All directors and executive officers as a group
(8 persons)......................................
</TABLE>
- ---------------
* Less than 1%
(1) ITC's address is 1239 O.G. Skinner Drive, West Point, Georgia 31833.
Includes shares of Common Stock (assuming an initial public
offering price of $ per share) subject to a warrant held by ITC Service
Company, a wholly-owned subsidiary of ITC, exercisable within 60 days of the
date of this Prospectus.
(2) Mr. Bare's address is 6410 Atlantic Boulevard, Suite 160, Norcross, Georgia
30071.
(3) Consists of shares beneficially owned by ITC, with respect to
which Messrs. Scott, Cox, Montgomery and Weber as officers and/or directors
of ITC, may be deemed to be the beneficial owner. Messrs. Scott, Cox,
Montgomery and Weber disclaim beneficial ownership of all such shares. The
address for Messrs. Scott, Cox, Montgomery and Weber is 1239 O.G. Skinner
Drive, West Point, Georgia 31833.
CERTAIN TRANSACTIONS
In October 1997, HNI contributed all of its assets and liabilities related
to the Web site to the LLC in exchange for a 45% equity interest in the LLC and
ITC contributed $1,100,000 in cash in exchange for a 55% equity interest in the
LLC, pursuant to an Investment Agreement dated October 30, 1997 between HNI, ITC
and Mr. Bare.
In January 1998, the Company entered into an agreement with ITC'DeltaCom,
Inc. pursuant to which ITC'DeltaCom, Inc. serves as the Company's ISP.
ITC'DeltaCom, Inc. is related to ITC through both common ownership and board
membership.
On November 1, 1997, the LLC paid a dividend of $100,000 to Warren L. Bare,
which was included in the initial equity contribution under the terms of the
Investment Agreement.
On July 16, 1998, the Company, ITC and ITC Service Company, an affiliate of
ITC, entered into an amended and restated credit facility pursuant to which ITC
Service Company made available to the Company a revolving line of credit of up
to $2.5 million. Principal amounts outstanding under the credit facility bear
interest at an annual rate equal to ITC Service Company's cost of debt capital
as reasonably determined, from time to time, by ITC Service Company (currently
8.6%) on the first $1.0 million and at a fixed rate of 14% per annum on the
remaining $1.5 million. In connection with this credit facility, the Company
issued a warrant to ITC Service Company to purchase $375,000 of Common Stock at
a price per share equal to the initial public offering price. This warrant
vested upon issuance and is exercisable for a term of 10 years.
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<PAGE> 40
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 50,200,000 shares
of Common Stock, $0.01 par value per share, 2,800,000 shares of Class A
Preferred Stock, $0.01 par value per share, and 5,000,000 shares of Class B
Serial Preferred Stock, $0.01 par value per share. The following description of
the terms and provisions of the shares of stock of the Company and certain other
matters does not purport to be complete and is subject to and qualified in its
entirety by reference to the applicable provisions of the Georgia Business
Corporation Code, as amended (the "Georgia Code"), and the Company's Articles of
Incorporation and Bylaws.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share owned of record
on all matters upon which such holders are entitled to vote. Subject to any
preferential rights of holders of Class B Serial Preferred Stock that may
adversely affect the rights, preferences and privileges of holders of Common
Stock, the holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Company's Board of Directors, in its sole
discretion, out of funds legally available therefor, and are further entitled to
share ratably in any distribution of the Company's assets, after payment of all
debts and other liabilities of the Company, upon liquidation, dissolution or
winding up of the Company. The holders of Common Stock have no preemptive
rights, rights to cumulative voting, rights to redeem such shares or to convert
such shares into other securities of the Company. All outstanding shares of the
Common Stock are, and the shares of Common Stock to be sold by the Company in
this Offering will be, upon issuance and delivery, validly issued, fully paid
and nonassessable.
PREFERRED STOCK
Class A Preferred Stock. Upon consummation of the Offering and pursuant to
the Company's Articles of Incorporation, each share of Class A Preferred Stock
shall automatically convert into one share of Common Stock. Immediately prior to
the Offering, there were shares of Class A Preferred Stock outstanding
held by two holders of record, ITC and Mr. Bare. Prior to the Offering, holders
of Class A Preferred Stock are entitled to one vote per share owned of record on
all matters upon which such holders are entitled to vote.
Class B Serial Preferred Stock. The Company's Board of Directors has the
authority, without further shareholder approval, to issue up to 5,000,000 shares
of Class B Serial Preferred Stock in one or more series and to fix the relative
rights, preferences, privileges, qualifications, limitations and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and the
number of shares constituting any series or the designation of such series. The
issuance of Class B Serial Preferred Stock could have the effect of delaying,
deferring or preventing a change in control of the Company, may discourage bids
for the Company's Common Stock at a premium over the market price of the Common
Stock and may adversely affect the market price and the voting and other rights
of holders of the Common Stock. The Company has no present plans to issue any
shares of Class B Serial Preferred Stock.
CERTAIN PROVISIONS OF THE ARTICLES OF INCORPORATION, BYLAWS AND GEORGIA LAW
Shareholders' rights and related matters are governed by the Georgia Code
and the Company's Articles of Incorporation and Bylaws. Certain provisions of
the Articles of Incorporation and Bylaws summarized below could have the effect
of preventing, hindering, or delaying a change in control of the Company or a
change in management.
Classified Board of Directors; Removal of Directors
The Company's Bylaws provide that the Board of Directors shall consist of
not less than three nor more than 11 members. The Company's Board of Directors
is divided into three classes serving staggered three-year
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<PAGE> 41
terms. The Company's Articles of Incorporation provide that each class shall be
comprised of substantially equal numbers of directors. In addition, members of
the Board of Directors may only be removed for cause and then only at a special
meeting of shareholders called for such purpose by the affirmative vote of at
least two-thirds of the then outstanding shares of capital stock entitled to
vote. The classification of directors, together with other provisions in the
Articles of Incorporation and Bylaws that limit the removal of directors and
permit the remaining directors to fill any vacancies on the Board of Directors,
has the effect of making it more difficult for shareholders to change the
composition of the Board of Directors. As a result, at least two annual meetings
of shareholders may be required for the shareholders to change a majority of the
directors, whether or not such change in the Board of Directors would be
beneficial to the Company and its shareholders and whether or not a majority of
the Company's shareholders believes that such a change would be desirable. The
Company believes, however, that the longer time required to elect a majority of
a classified Board of Directors will help to ensure the continuity and stability
of the Company's management and policies. Currently, the terms of Class I
directors expire in 1999, the terms of Class II directors expire in 2000 and the
terms of Class III directors expire in 2001.
Advance Notice of New Business and Director Nominations
The Company's Bylaws provide that any shareholder proposals or director
nominations must be provided to the Company in writing at least 120 days before
the date of an annual meeting of shareholders or, in the case of a special
meeting of shareholders, within 10 days after notice of such special
shareholders' meeting was sent by the Company to the shareholders. Such
provision may preclude shareholders from bringing matters before the
shareholders at an annual meeting or from making nominations for directors at an
annual meeting.
Issuance of Blank Check Preferred Stock
The Board of Directors has the power to issue 5,000,000 shares of Class B
Serial Preferred Stock, in one or more classes or series and with such rights
and preferences as determined by the Board of Directors, all without shareholder
approval. Because the Board of Directors has the power to establish the
preferences and rights of each class or series of Class B Serial Preferred
Stock, it may afford the holders in any series of Class B Serial Preferred Stock
preferences, powers and rights, voting or otherwise, senior to the rights of
holders of Common Stock. The Board of Directors has no present plans to issue
any shares of Class B Serial Preferred Stock.
Anti-Takeover Provisions and Georgia Law
The Georgia Code generally restricts a company from entering into certain
business combinations with an interested shareholder (which is defined as any
person or entity that is the beneficial owner of at least 10% of a company's
voting stock) or its affiliates for a period of five years after the date on
which such shareholder became an interested shareholder, unless (i) the
transaction is approved by the board of directors of the company prior to the
date such person became an interested shareholder, (ii) the interested
shareholder acquires 90% of the company's voting stock in the same transaction
in which it exceeds 10%, or (iii) subsequent to becoming an interested
shareholder, such shareholder acquires 90% of the company's voting stock and the
business combination is approved by the holders of a majority of the voting
stock entitled to vote thereon (the "Business Combination Statute"). The Georgia
Code provides that the Business Combination Statute does not apply unless the
bylaws of the corporation specifically provide that the Business Combination
Statute is applicable to the corporation. The Company has elected to be covered
by the Business Combination Statute.
The Georgia Code also contains provisions that impose certain fair price
and other procedural requirements applicable to certain business combinations
(the "Fair Price Statute") with any person who owns 10% or more of the common
stock (an "interested shareholder"). These statutory requirements restrict
business combinations with, and accumulations of shares of voting stock of,
certain Georgia corporations. The Fair Price Statute applies to a company only
if the company elects to be covered by the restrictions imposed by these
statutes. The Company has elected to be covered by the Fair Price Statute.
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<PAGE> 42
Ability to Consider Other Constituencies
The Articles of Incorporation permit the Board of Directors, in determining
what is believed to be in the best interest of the Company, to consider the
interests of the employees, customers, suppliers and creditors of the Company,
the communities in which offices or other establishments of the Company are
located and all other factors the directors consider pertinent, in addition to
considering the effects of any actions on the Company and its shareholders.
Pursuant to this provision, the Board of Directors may consider numerous
judgmental or subjective factors affecting a proposal, including certain
non-financial matters, and on the basis of these considerations may oppose a
business combination or other transaction which, viewed exclusively from a
financial perspective, might be attractive to some, or even a majority, of the
Company's shareholders.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Articles of Incorporation eliminate, subject to certain exceptions, the
personal liability of a director to the Company or its shareholders for monetary
damage for breaches of such director's duty of care or other duties as a
director. The Articles do not provide for the elimination of or any limitation
on the personal liability of a director for (i) any appropriation, in violation
of the director's duties, of any business opportunity of the Company, (ii) acts
or omissions that involve intentional misconduct or a knowing violation of law,
(iii) unlawful corporate distributions as set forth in Section 14-2-832 of the
Georgia Code, or (iv) any transactions from which the director derived an
improper personal benefit. The Articles of Incorporation of the Company further
provide that if the Georgia Code is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Company shall be eliminated or limited to the
fullest extent permitted by the Georgia Code, as amended, without further action
by the shareholders. These provisions of the Articles of Incorporation will
limit the remedies available to a shareholder in the event of breaches of any
director's duties to such shareholder or the Company.
The Company's Bylaws require the Company to indemnify and hold harmless any
director or officer who was or is a party or is threatened to be made a party,
to any threatened, pending or completed action, suit or proceeding whether
civil, criminal, administrative or investigative (including any action or suit
by or in the right of the Company) because such person is or was a director or
officer of the Company, against liability incurred in such proceeding except for
any liability incurred in a proceeding in which the director or officer is
adjudged liable to the Company or is subjected to injunctive relief in favor of
the Company for (i) any appropriation, in violation of such director's or
officer's duties, of any business opportunity of the Company, (ii) acts or
omissions which involve intentional misconduct or a knowing violation of law,
(iii) types of liability set forth in Section 14-2-832 of the Georgia Code, or
(iv) any transaction from which such officer or director received an improper
personal benefit. In addition, the Bylaws provide that the Company (i) must
advance funds to pay or reimburse the reasonable expenses incurred by a director
or officer who is a party to a proceeding because such person is a director or
officer if such director or officer satisfies certain conditions, and (ii) may
indemnify and advance expenses to an employee or agent of the Company who is not
a director or officer to the same extent and subject to the same conditions that
the Company could without shareholder approval under the Georgia Code indemnify
and advance expenses to a director.
The Company has entered into separate indemnity agreements with each of its
directors and executive officers, whereby the Company agreed, among other
things, to provide for indemnification and advancement of expenses in a manner
and subject to terms and conditions similar to those set forth in the Articles
and Bylaws. There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company as to which indemnification is
being sought, nor is the Company aware of any pending or threatened litigation
that may result in claims for indemnification by any director, officer, employee
or other agent.
REGISTRATION RIGHTS
Pursuant to that Contribution Agreement dated July 15, 1998, ITC and Mr.
Bare have certain registration rights regarding their shares of Common Stock in
the Company. If the Company undertakes any registered public offering of the
Company's Common Stock, other than the Offering or an offering registered on
Form S-8 or S-4, the Company must provide written notice to ITC and Mr. Bare not
less than 30 days prior
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<PAGE> 43
to the proposed filing date of such registration statement. At the written
request of ITC or Mr. Bare, the Company shall include in such registered
offering, all shares of Common Stock as are set forth in the written request
provided by ITC or Mr. Bare within 15 days after receipt of the written notice
from the Company; provided, however, that if the managing underwriters advise
the Company in writing that, in their opinion, the number of shares of Common
Stock requested to be included in such registered offering exceeds the number
which can be sold in such offering without adversely affecting the marketability
of such offering, the Company shall include in such registered offering (i)
first, the primary shares of Common Stock that the Company proposes to sell, and
(ii) second, the shares of Common Stock requested to be included in such
offering, pro rata between ITC and Mr. Bare on the basis of the number of shares
of Common Stock requested to be included by each. ITC and Mr. Bare have waived
any and all registration rights each may have in connection with the Offering.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is .
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have shares of
Common Stock outstanding, assuming no exercise of the Underwriters'
over-allotment option. The shares sold in the Offering ( shares if
the Underwriters over-allotment option is exercised in full) will be freely
tradable by persons other than affiliates of the Company, without restriction.
The remaining shares of Common Stock outstanding will be "restricted"
securities within the meaning of Rule 144 under the Securities Act and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available, including the safe harbor provisions
set forth in Rule 144. The Company, ITC, ITC Service Company and Mr. Bare,
however, have agreed not to sell or otherwise dispose of any shares of Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of Wheat First Securities, Inc., except that the Company
may issue shares of Common Stock in connection with acquisitions. See
"Underwriting."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her shares of
Common Stock for at least one year (including the prior holding period of any
prior owner other than an affiliate) is entitled to sell within any three-month
period that number of shares which does not exceed the greater of 1% of the
outstanding shares of Common Stock and the average weekly trading volume during
the four calendar weeks preceding each such sale. Sales under Rule 144 are also
subject to certain manner of sale provisions, notice requirements and the
availability of current public information about the Company. A person (or
persons whose shares are aggregated) who is not deemed an "affiliate" of the
Company for at least three months and who has beneficially owned shares for at
least two years (including the holding period of any prior owner other than an
affiliate) would be entitled to sell such shares under Rule 144 without regard
to the limitations described above. Rule 144 defines "affiliate" of a company as
a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such company.
Affiliates of a company generally include its directors, officers and principal
shareholders and, as of the date of this Prospectus, specifically include ITC
and Mr. Bare. As of the date of this Prospectus, all of the restricted shares
are held by affiliates of the Company and 90 days after the Offering, all
5,000,000 shares would become eligible for resale pursuant to Rule 144, subject
to the volume limitations and other restrictions of Rule 144 and the 180 day
lock-up agreements.
The Company has outstanding options to purchase up to an aggregate of
382,250 shares of Common Stock held by certain employees of the Company. The
Company intends to file registration statements on Form S-8 to register the
shares issuable upon exercise of such options and options and awards granted in
the future under its stock plans. Upon such registration, such shares will be
eligible for resale in the public market without restrictions by persons who are
not affiliates of the Company, and to the extent they are held by affiliates,
pursuant to Rule 144 without observance of the holding period requirements.
42
<PAGE> 44
ITC and Mr. Bare have certain registration rights regarding the 2,750,000
and 2,250,000 shares of Common Stock held by each, respectively. See
"Description of Capital Stock -- Registration Rights."
In connection with the $2.5 million credit facility provided by ITC Service
Company to the Company, on July 16, 1998 the Company granted ITC Service Company
a warrant to purchase shares of Common Stock (assuming an initial public
offering price of $ per share) at an exercise price per share equal to the
initial public offering price. The warrant vested upon issuance and is
exercisable for a term of 10 years. Neither the warrant nor the underlying
shares have been registered by the Company. The shares of Common Stock issuable
upon exercise of this warrant would be deemed restricted shares under Rule 144
and the resale thereof would either have to be registered or comply with the
requirements of an exemption from registration.
Prior to the Offering, there has been no public market for the Common
Stock, and no prediction can be made as to the effect, if any, that the sale of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of
Common Stock in the public market could adversely affect prevailing market
prices and the ability of the Company to raise equity capital in the future.
43
<PAGE> 45
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Company and Wheat First Union, a division of Wheat First Securities, Inc., J.C.
Bradford & Co. and Interstate/Johnson Lane Corporation, as representatives of
the Underwriters (the "Representatives"), the Underwriters have severally agreed
to purchase from the Company, and the Company has agreed to sell to each of the
Underwriters, the respective number of shares of Common Stock set forth opposite
their names below:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
Wheat First Securities, Inc.................................
J.C. Bradford & Co..........................................
Interstate/Johnson Lane Corporation.........................
--------
Total.............................................
========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions. The nature of the Underwriters'
obligations is such that they are committed to purchase and pay for all the
above shares of Common Stock if any are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the public offering price set forth on the cover page of this
Prospectus and to selected dealers at such price less a concession not in excess
of $ per share of Common Stock. The Underwriters may allow, and such
selected dealers may reallow, a concession not in excess of $ per share of
Common Stock to certain brokers and dealers. After the initial offering to the
public, the price to public, concessions and reallowances to dealers may be
changed by the Representatives.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to an
additional shares of Common Stock to cover over-allotments, if any, at
the public offering price, less the underwriting discount, as set forth on the
cover page of this Prospectus. To the extent that the Underwriters exercise this
option, each of the Underwriters will be committed, subject to certain
conditions, to purchase such additional shares in approximately the same
proportion as set forth in the above table. The Underwriters may purchase such
shares only to cover over-allotments made in connection with the Offering.
ITC, Mr. Bare, ITC Service Company and the Company have agreed not to
offer, sell or contract to sell or otherwise dispose of, directly or indirectly,
or announce an offering of, any Common Stock of the Company, with certain
exceptions, for a period of 180 days after the date hereof without the written
consent of Wheat First Securities, Inc.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments that the Underwriters may be required to make in respect
thereof.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
Prior to the Offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price was determined through
negotiations between the Company and the Representatives. Among the factors that
were considered in making such determination were prevailing market conditions,
the Company's financial and operating history and condition, its prospects and
prospects for the industry in general, the management of the Company and the
market prices of securities for companies in business similar to that of the
Company.
In connection with the Offering, certain Underwriters and selling group
members (if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with
44
<PAGE> 46
Rule 104 of Regulation M of the Securities and Exchange Commission (the
"Commission"), pursuant to which such persons may bid for or purchase Common
Stock for the purpose of stabilizing its market price. The Underwriters also may
create a short position for the account of the Underwriters by selling more
Common Stock in connection with the Offering than they are committed to purchase
from the Company and in such case may purchase Common Stock in the open market
following completion of the Offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position, up to shares of Common Stock, by exercising the Underwriters
over-allotment option. In addition, Wheat First Securities, Inc., on behalf of
the Underwriters, may impose penalty bids under contractual arrangements with
the Underwriters whereby it may reclaim from an Underwriter (or dealer
participating in the Offering), for the account of the other Underwriters, the
selling concession with respect to the Common Stock that is distributed in the
Offering but subsequently purchased for the account of the Underwriters in the
open market. Any of the transactions described in this paragraph may result in
the maintenance of the price of the Common Stock at a level above that which
might otherwise prevail in the open market. None of the transactions described
in this paragraph is required, and if any is undertaken, it may be discontinued
at any time.
LEGAL MATTERS
The validity of shares of Common Stock offered hereby is being passed upon
for the Company by Alston & Bird LLP, Atlanta, Georgia. Certain legal matters
related to this Offering will be passed upon for the Underwriters by Nelson
Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia.
EXPERTS
The consolidated financial statements of HeadHunter.Net.Inc. and
subsidiaries (Successor Company) and HNET, Inc., (Predecessor Company) for the
years ended December 31, 1995 and 1996, the ten months ended October 31, 1997
and the two months ended December 31, 1997 included elsewhere in this Prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving such reports.
AVAILABLE INFORMATION
The Company has filed with the Commission through the Electronic Data
Gathering and Retrieval ("EDGAR") system a registration statement on Form S-1
(together with all amendments, exhibits and schedules thereto, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered by
this Prospectus. This Prospectus does not contain all of the information set
forth in such Registration Statement, certain parts of which have been omitted
in accordance with the rules and regulations of the Commission. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement of which this Prospectus forms a part. For further
information, reference is made to the Registration Statement, including the
exhibits thereto, which may be inspected without charge at the Commission's
principal office at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549;
and at the following Regional Offices of the Commission, except that copies of
the exhibits may not be available at certain of the Regional Offices: Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
and New York Regional Office, 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of all or any part of such material may be obtained from the
Commission at 450 Fifth Street, N.W. Room 1024, Washington, D.C. 20549, upon
payment of certain fees prescribed by the Commission. The Commission maintains a
World Wide Web site on the Internet at http://www.sec.gov that contains reports,
proxy, information statements, and registration statements and other information
filed with the Commission through the EDGAR system.
45
<PAGE> 47
The Company is not presently a reporting company and does not file reports
or other information with the Commission. On the effective date of the
Registration Statement, however, the Company will become a reporting company
under the Exchange Act. Accordingly, the Company will become subject to the
informational and periodic reporting requirements of the Exchange Act and in
accordance therewith will file reports, proxy statements and other information
with the Commission. In addition, after completion of the Offering, the Company
intends to furnish its shareholders with annual reports containing audited
financial statements and with quarterly reports containing unaudited summary
financial information for each of the first three quarters of each fiscal year.
46
<PAGE> 48
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HEADHUNTER.NET, INC. AND SUBSIDIARIES (SUCCESSOR COMPANY)
AND HNET, INC. (PREDECESSOR COMPANY)
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets -- December 31, 1996 and 1997
and June 30, 1998 (unaudited)............................. F-3
Consolidated Statements of Operations for the Period From
Inception (October 10, 1995) to December 31, 1995, the
Year Ended December 31, 1996, the Ten Months Ended October
31, 1997, the Two Months Ended December 31, 1997, and the
Six Months Ended June 30, 1997 and 1998 (unaudited)....... F-4
Consolidated Statements of Shareholders' Equity for the
Period From Inception (October 10, 1995) to December 31,
1995, the Year Ended December 31, 1996, the Ten Months
Ended October 31, 1997, the Two Months Ended December 31,
1997, and the Six Months Ended June 30, 1998
(unaudited)............................................... F-5
Consolidated Statements of Cash Flows for the Period From
Inception (October 10, 1995) to December 31, 1995, the
Year Ended December 31, 1996, the Ten Months Ended October
31, 1997, and the Two Months Ended December 31, 1997, and
the Six Months Ended June 30, 1997 and 1998 (unaudited)... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 49
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To HeadHunter.NET, Inc.:
We have audited the accompanying consolidated balance sheets of
HEADHUNTER.NET, INC. AND SUBSIDIARIES (Successor Company) and HNET, INC.
(Predecessor Company) as of December 31, 1996 and 1997 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the period from inception (October 10, 1995) to December 31, 1995, the year
ended December 31, 1996, the ten months ended October 31, 1997, and the two
months ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of HeadHunter.NET, Inc. and
subsidiaries (Successor Company) and HNET, Inc. (Predecessor Company) as of
December 31, 1996 and 1997 and the results of their operations and their cash
flows for the period from inception (October 10, 1995) to December 31, 1995, the
year ended December 31, 1996, the ten months ended October 31, 1997, and the two
months ended December 31, 1997 in conformity with generally accepted accounting
principles. As discussed in Note 1 to the financial statements, effective
October 31, 1997, ITC Holding Company, Inc. acquired a majority ownership
interest in HeadHunter.NET, Inc. in a business combination accounted for as a
purchase. As a result of this acquisition, the financial information for the
periods after the acquisition is presented on a different cost basis than for
periods before the acquisition and, therefore, is not comparable.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
July 16, 1998
F-2
<PAGE> 50
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY SUCCESSOR COMPANY
------------ --------------------------
DECEMBER 31, DECEMBER 31, JUNE 30,
1996 1997 1998
------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $25,973 $ 853,989 $ 196,366
Accounts receivable:
Trade, net of allowance for doubtful accounts of $0 at
December 31, 1996 and 1997 and $32,249 at June 30,
1998.................................................. 10,783 8,865 123,116
Affiliates (Note 3)..................................... -- 5,100 --
Prepaid expenses.......................................... -- 13,420 160,947
------- ---------- -----------
Total current assets................................ 36,756 881,374 480,429
------- ---------- -----------
PROPERTY AND EQUIPMENT:
Furniture and fixtures.................................... 800 28,664 64,717
Leasehold improvements.................................... 10,809 -- --
Hardware and related equipment............................ 17,543 66,082 130,638
------- ---------- -----------
29,152 94,746 195,355
Accumulated depreciation and amortization................. (7,358) (3,778) (23,965)
------- ---------- -----------
Total property and equipment, net................... 21,794 90,968 171,390
------- ---------- -----------
ACQUIRED SOFTWARE RIGHTS, net of accumulated amortization of
$32,633 and $130,529 at December 31, 1997 and June 30,
1998, respectively........................................ -- 946,343 848,447
------- ---------- -----------
OTHER ASSETS................................................ -- 4,230 24,430
------- ---------- -----------
Total assets........................................ $58,550 $1,922,915 $ 1,524,696
======= ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade................................................... $ 3,050 $ 20,326 $ 172,575
Affiliates (Note 3)..................................... -- 23,843 --
Employees............................................... -- 36,454 --
Short-term borrowings -- affiliates (Note 3).............. -- -- 400,000
Accrued compensation...................................... -- -- 13,583
Other accrued expenses.................................... -- -- 58,387
Deferred revenue.......................................... -- 11,775 109,015
------- ---------- -----------
Total current liabilities........................... 3,050 92,398 753,560
------- ---------- -----------
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' EQUITY:
Class A Preferred Stock, $0.01 par value; 2,800,000 shares
authorized, issued and outstanding at December 31, 1997
and June 30, 1998....................................... -- 28,000 28,000
Class B Serial Preferred Stock, $0.01 par value; 5,000,000
shares authorized, none issued and outstanding at
December 31, 1997 and June 30, 1998..................... -- -- --
Common stock, $0.01 par value; 50,200,000 shares
authorized, 2,200,000 shares issued and outstanding at
December 31, 1997 and June 30, 1998..................... -- 22,000 22,000
Capital stock............................................. 260 -- --
Paid-in capital........................................... 5,040 1,956,909 1,956,909
Retained earnings (accumulated deficit)................... 50,200 (176,392) (1,235,773)
------- ---------- -----------
Total shareholders' equity.......................... 55,500 1,830,517 771,136
------- ---------- -----------
Total liabilities and shareholders' equity.......... $58,550 $1,922,915 $ 1,524,696
======= ========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 51
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR SUCCESSOR
PREDECESSOR COMPANY COMPANY COMPANY COMPANY
----------------------------------------- ------------ ----------- -----------
FROM
INCEPTION TEN
(OCTOBER 10, MONTHS TWO MONTHS SIX MONTHS SIX MONTHS
1995) TO YEAR ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1997 1997 1997 1998
------------ ------------ ----------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES.................................. $50,754 $190,146 $124,437 $ 29,591 $103,885 $ 278,051
------- -------- -------- ---------- -------- -----------
OPERATING EXPENSES:
Costs of revenues....................... -- -- 29,390 2,906 15,540 37,539
Marketing and selling................... -- 2,740 23,301 41,123 8,920 508,380
General and administrative.............. 5,073 52,105 95,967 126,268 66,281 680,974
Depreciation and amortization........... 516 6,842 10,099 41,912 5,481 118,083
------- -------- -------- ---------- -------- -----------
Total operating expenses......... 5,589 61,687 158,757 212,209 96,222 1,344,976
------- -------- -------- ---------- -------- -----------
OPERATING INCOME (LOSS)................... 45,165 128,459 (34,320) (182,618) 7,663 (1,066,925)
OTHER INCOME (EXPENSE).................... -- 164 (843) 6,226 (601) 7,544
------- -------- -------- ---------- -------- -----------
NET INCOME (LOSS)......................... $45,165 $128,623 $(35,163) $ (176,392) $ 7,062 $(1,059,381)
======= ======== ======== ========== ======== ===========
LOSS PER SHARE:
Basic................................... $ (0.08) $ (0.48)
Diluted................................. $ (0.08) $ (0.46)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic................................... 2,200,000 2,200,000
Diluted................................. 2,318,250 2,318,250
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 52
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS A RETAINED
PREFERRED STOCK COMMON STOCK EARNINGS
------------------- ------------------- PAID-IN (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT) TOTAL
--------- ------- --------- ------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY:
Inception, October 10,
1995..................... -- $ -- -- $ -- $ -- $ -- $ --
Issuance of capital
stock.................. -- -- 260 260 5,040 -- 5,300
Dividends................ -- -- -- -- -- (7,600) (7,600)
Net income............... -- -- -- -- -- 45,165 45,165
--------- ------- --------- ------- ---------- ----------- -----------
Balance, December 31,
1995..................... -- -- 260 260 5,040 37,565 42,865
Dividends................ -- -- -- -- -- (115,988) (115,988)
Net income............... -- -- -- -- -- 128,623 128,623
--------- ------- --------- ------- ---------- ----------- -----------
Balance, December 31,
1996..................... -- -- 260 260 5,040 50,200 55,500
Capital contribution..... -- -- -- -- 30,000 -- 30,000
Dividends................ -- -- -- -- -- (121,941) (121,941)
Net loss................. -- -- -- -- -- (35,163) (35,163)
--------- ------- --------- ------- ---------- ----------- -----------
Balance, October 31,
1997..................... -- $ -- 260 $ 260 $ 35,040 $ (106,904) $ (71,604)
========= ======= ========= ======= ========== =========== ===========
- ------------------------------------------------------------------------------------------------------------------
SUCCESSOR COMPANY:
Initial capitalization of
HeadHunters, L.L.C....... -- $ -- -- $ -- $2,000,000 $ -- $ 2,000,000
Acquisition of
Predecessor Company.... -- -- (260) (260) (35,040) 106,904 71,604
Reorganization (Note
5)..................... 2,800,000 28,000 2,200,000 22,000 (43,091) -- 6,909
Net loss................. -- -- -- -- -- (176,392) (176,392)
--------- ------- --------- ------- ---------- ----------- -----------
Balance, December 31,
1997..................... 2,800,000 28,000 2,200,000 22,000 1,956,909 (176,392) 1,830,517
Net loss................. -- -- -- -- -- (1,059,381) (1,059,381)
--------- ------- --------- ------- ---------- ----------- -----------
Balance, June 30, 1998
(unaudited).............. 2,800,000 $28,000 2,200,000 $22,000 $1,956,909 $(1,235,773) $ 771,136
========= ======= ========= ======= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 53
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR SUCCESSOR
PREDECESSOR COMPANY COMPANY COMPANY COMPANY
----------------------------------------------- ------------ ----------- -----------
FROM INCEPTION TEN MONTHS TWO MONTHS SIX MONTHS SIX MONTHS
(OCTOBER 10, 1995) YEAR ENDED ENDED ENDED ENDED ENDED
TO DECEMBER 31, DECEMBER 31, OCTOBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1997 1997 1997 1998
------------------ ------------ ----------- ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)............... $ 45,165 $ 128,623 $(35,163) $ (176,392) $ 7,062 $(1,059,381)
-------- --------- -------- ---------- -------- -----------
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities:
Depreciation and
amortization................ 516 6,842 10,099 41,912 5,481 118,083
Changes in current operating
assets and liabilities:
Accounts receivable......... (17,053) 6,270 10,783 (3,182) (4,351) (109,151)
Prepaid expenses............ -- -- -- (13,420) -- (15,260)
Other assets................ -- -- -- (4,230) -- (152,467)
Accounts payable............ 165 2,885 741 71,248 5,427 91,952
Accrued expenses............ -- -- 2,548 0 -- 71,970
Deferred revenue............ -- -- -- 11,775 -- 97,240
-------- --------- -------- ---------- -------- -----------
Total adjustments......... (16,372) 15,997 24,171 104,103 6,557 102,367
-------- --------- -------- ---------- -------- -----------
Net cash provided by (used
in) operating
activities.............. 28,793 144,620 (10,992) (72,289) 13,619 (957,014)
-------- --------- -------- ---------- -------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment..................... (6,867) (16,985) (14,830) (73,722) (7,425) (100,609)
-------- --------- -------- ---------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Equity contribution............. -- -- 30,000 1,100,000 -- --
Proceeds from short-term
borrowings.................... -- -- -- -- -- 400,000
Dividends paid (Note 3)......... (7,600) (115,988) (21,941) (100,000) (18,186) --
-------- --------- -------- ---------- -------- -----------
Net cash (used in)
provided by financing
activities.............. (7,600) (115,988) 8,059 1,000,000 (18,186) 400,000
-------- --------- -------- ---------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............ 14,326 11,647 (17,763) 853,989 (11,992) (657,623)
CASH AND CASH EQUIVALENTS,
beginning of period............. -- 14,326 25,973 -- 25,973 853,989
-------- --------- -------- ---------- -------- -----------
CASH AND CASH EQUIVALENTS, end of
period.......................... $ 14,326 $ 25,973 $ 8,210 $ 853,989 $ 13,981 $ 196,366
======== ========= ======== ========== ======== ===========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Initial noncash equity
contributions (Note 1)........ $ 5,300 $ -- $ -- $ 900,000 $ -- $ --
======== ========= ======== ========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 54
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
ORGANIZATION
On October 10, 1995, HNET, Inc. ("HNI" or the "Predecessor Company"), a
Georgia S corporation, was established as a web site development consulting
firm. In October 1996, the HeadHunter.NET web site was launched.
On October 31, 1997, HeadHunters, L.L.C. ("LLC") was organized. Effective
November 1, 1997, in a transaction accounted for as a purchase, ITC Holding
Company, Inc. ("ITC"), contributed $1,100,000 in cash in exchange for a 55%
equity interest in LLC. HNI contributed all of its assets and liabilities,
including the right to use the name "HeadHunter.NET," in exchange for the
remaining 45% equity interest. The total fair market value of HNI's equity
contribution to LLC was $900,000.
On July 15, 1998, HNI's sole shareholder and ITC formed HeadHunter.NET,
Inc. (the "Company" or the "Successor Company"), a Georgia corporation, and
reorganized LLC and HNI as follows (the "Reorganization") for the purpose of
completing the initial public offering (the "Offering") of the Company's common
stock, as more fully described in Note 5.
a. ITC contributed its 55% ownership interest in LLC to the Company.
b. HNI's sole shareholder contributed 100% of HNI to the Company.
As a result of the Reorganization, LLC and HNI are now wholly owned
subsidiaries of the Company.
NATURE OF BUSINESS
HeadHunter.NET is an Internet-based interactive technology company that
provides a leading employment web site at www.HeadHunter.NET. The Company's web
site enables job listers to list job opportunities and search for resumes, and
enables job seekers to post their resumes and search for job opportunities using
a wide array of search criteria, including keyword, industry, job type,
education, geographic location, and salary range. The Company also offers banner
advertising on its web page for companies who wish to target users of its
services.
The Company has experienced operating losses and negative cash flows from
operations as a result of efforts to build out its network infrastructure,
increase internal staffing, and develop its systems. The Company expects to
continue to focus on increasing its customer base and expanding its operations.
Accordingly, the Company expects that its cost of revenues, marketing and
selling expenses, general and administrative expenses and capital expenditures
will continue to increase significantly, all of which will have a negative
impact on short-term operating results. The Company has entered into an
agreement for a $2,500,000 line of credit which expires the earlier of (i)
December 31, 1998 or (ii) the closing of the Offering (Notes 3 and 5). The
Company also plans to complete an Offering of its common stock in the third
quarter of 1998 (Note 5) to provide additional funds for its expansion plans. In
the event this proposed equity offering is unsuccessful in the opinion of
management, the Company's current cash position and available line of credit
will be sufficient to meet the capital and operating needs of the Company
through at least 1998. However, there can be no assurance that growth in the
Company's revenues or customer base will continue or that the Company will be
able to achieve or sustain profitability and/or positive cash flow.
F-7
<PAGE> 55
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION
The accompanying consolidated financial statements have been prepared on
the accrual basis of accounting. The consolidated financial statements reflect
the Reorganization in a manner similar to a pooling of interests and include the
accounts of the Company and its wholly owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain prior year amounts have been reclassified to conform to the current year
presentation.
As a result of ITC's acquisition of a majority interest in the Company as
discussed in Note 1, the capital structure of and the basis of accounting for
the Company differs from that of the Predecessor Company prior to ITC's
acquisition and the Reorganization. Financial data of the Company with respect
to all reporting periods subsequent to November 1, 1997 (the "Successor Period")
reflect ITC's acquisition under the purchase method. Therefore, financial data
with respect to HNI prior to the acquisition (the "Predecessor Period")
generally will not be comparable to that of the Company with respect to the
items described below.
As a result of ITC's acquisition of a majority interest in LLC, the
statements of operations for the Successor Period include amortization of the
software rights acquired. Also as a result of purchase accounting, the fair
values of the property and equipment at the date of their acquisition became
their new "cost" bases with respect to the Company. Accordingly, the
depreciation of property and equipment for the Successor Period is based on the
newly established cost bases of these assets. Other effects of purchase
accounting in the Successor Period are not significant.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company earns enhanced listing revenues by providing enhanced listing
services for the users of the Company's recruiting web site and recognizes these
revenues when the services are provided. The Company also earns advertising
revenues by providing web advertisers access to users of the Company's web site
and recognizes these revenues when earned.
CASH AND CASH EQUIVALENTS
The Company considers all short-term, highly liquid investments with an
original maturity date of three months or less to be a cash equivalent. Cash and
cash equivalents are stated at cost, which approximates fair value.
F-8
<PAGE> 56
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of the respective assets
for financial reporting purposes. Major additions and improvements are charged
to the property accounts while maintenance and repairs which do not improve or
extend the lives of the respective assets are expensed in the current period.
Estimated useful lives for the Company's assets are as follows:
<TABLE>
<S> <C>
Furniture and fixtures................................. Three to five years
Hardware and equipment................................. Three years
</TABLE>
Leasehold improvements are amortized using the straight-line method over
the shorter of the service lives of the improvements or the remaining term of
the lease.
ACQUIRED SOFTWARE RIGHTS
Acquired software rights were recorded at their fair market value and are
being amortized on a straight-line basis over a period of five years.
LONG-LIVED ASSETS
The Company periodically reviews the values assigned to long-lived assets,
such as property and equipment and other long-term assets, to determine whether
any impairments are other than temporary. Management believes that the
long-lived assets in the accompanying consolidated balance sheets are
appropriately valued.
INCOME TAXES
The sole shareholder of HNI elected for the Predecessor Company to be taxed
under S corporation status of the Internal Revenue Code (the "Code") as amended.
The Code and certain applicable state statutes provide that the income and
expenses of an S corporation are not taxable separately to the corporation but
rather accrue directly to the shareholders. Accordingly, no provision for income
taxes has been reflected in the accompanying financial statements of the
Predecessor Company.
Prior to the Reorganization (Note 1), LLC, as a limited liability company,
was treated as a partnership for tax purposes. Therefore, the income tax
benefits generated by LLC were recorded by its members.
Following the Reorganization (Note 1), the Successor Company will utilize
the liability method of accounting for income taxes. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. At the date of the Reorganization (Note 1), there were no
material effects on the Company's financial statements related to tax
consequences of the Reorganization.
ADVERTISING COSTS
The Company expenses the cost of advertising as incurred. Advertising
expenses included in marketing and selling expenses were $0 for the period from
inception (October 10, 1995) to December 31, 1995 and the
F-9
<PAGE> 57
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
year ended December 31, 1996, $2,632 for the ten months ended October 31, 1997,
and $28,240 for the two months ended December 31, 1997.
Advertising expenses included in marketing and selling expenses were $0 and
$462,608 for the six months ended June 30, 1997 and 1998, respectively
(unaudited).
SOURCES OF SUPPLIES
The Company relies on local telephone companies and other companies to
provide data communications capacity. Although management feels alternative
telecommunications facilities could be found in a timely manner, disruption of
these services for more than a brief period would have an adverse effect on
operating results.
Although the Company attempts to maintain multiple vendors for each
required product, its property and equipment, which are important components of
its operations, are each currently acquired from only a few sources. In
addition, some of the Company's suppliers have limited resources and production
capacity. If the suppliers are unable to meet the Company's needs as it builds
out its network infrastructure and sell services, then delays and increased
costs in the expansion of the Company's network infrastructure or losses of
potential customers could result, which would adversely affect operating
results.
NET LOSS PER SHARE
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 98, for periods prior to the Company's initial public offering (Note 5),
basic net loss per share is computed using the weighted average number of shares
of common stock outstanding during the period. Diluted net loss per share is
computed using the weighted average number of shares of common stock outstanding
during the period and, nominal issuances of common stock and common stock
equivalents, regardless of whether they are antidilutive. Net loss per share is
not shown for the Predecessor Company, as it is not comparable.
3. RELATED-PARTY TRANSACTIONS
On October 31, 1997, the Company entered into a revolving credit agreement
(the "Credit Agreement") which has been amended and restated (Note 5) with ITC
and ITC Service Company, an affiliate of ITC, which allows the Company to draw
up to $1,000,000 at an interest rate approximating ITC's cost of debt capital.
ITC shall have the right to convert any outstanding balance at the end of the
term into a fully paid and nonassessable equity interest in the Company equal to
1% for each $40,000 of the unpaid balance, including interest and penalties.
Short-term borrowings under the Credit Agreement were $0 during the two months
ended December 31, 1997 and $400,000 for the six months ended June 30, 1998
(unaudited).
On November 1, 1997, the Company paid $100,000 in satisfaction of a
dividend payable to the sole shareholder of HNI, which was included in the
initial equity contribution under the organization of the LLC.
As of December 31, 1997, approximately 40% of the Company's deferred
revenue was related to subscription sales to affiliates of ITC. Outstanding
receivables and payables for services provided to and rendered from ITC and its
affiliates were $5,100 and $20,000, respectively, at December 31, 1997.
Beginning in January 1998, the Company entered into an agreement with
ITC'DeltaCom, Inc. ("ITC'DeltaCom") to serve as the Company's Internet service
provider and host of the Company's web site. ITC'DeltaCom is related to ITC
through both common ownership and board membership.
F-10
<PAGE> 58
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Lease expense relates to the lease of office space. At December 31, 1997,
future minimum lease payments under this noncancelable operating lease, which
expires August 31, 1998, totaled $24,000. Rental expense under the operating
lease amounted to $3,000 for the two months ended December 31, 1997.
Rental expense under the operating lease amounted to $18,000 for the six
months ended June 30, 1998 (unaudited).
PURCHASE COMMITMENTS
The Company has entered into an agreement with an Internet company to
purchase a minimum of $60,000 in banner advertising on the advertiser's web page
by April 1998.
The Company has entered into various agreements with Internet companies to
purchase a minimum of $432,000 and $206,000 in banner advertisements in 1998 and
1999, respectively (unaudited).
LEGAL PROCEEDINGS
The Company is not currently a party to any material legal proceedings.
From time to time, the Company may be subject to legal proceedings and claims in
the ordinary course of business, as well as claims of alleged infringement of
trademarks and other intellectual property of third parties by the Company. Such
claims, even if not meritorious, could result in the expenditure of significant
financial and managerial resources.
DEPENDENCE ON STRATEGIC AND OTHER RELATIONSHIPS
The Company has entered into and continually evaluates strategic
relationships. The Company depends on its strategic relationships to increase
(i) traffic and content on its web site, (ii) visibility of job listers'
employment opportunities, (iii) brand recognition, and (iv) advertising
revenues. The Company has only recently entered into strategic relationships
with Yahoo!, WorkLife (in conjunction with AltaVista), GeoCities and
DoubleClick. Each of these relationships is short-term and generally
non-exclusive. There can be no assurance that any such relationships will
continue in the future or generate substantial benefits or revenues for the
Company. The inability of the Company to maintain existing and enter into
additional strategic relationships, or the failure to complete any projects
related to any strategic relationship could have a material adverse effect on
the Company's business, results of operations and financial condition. In
addition, the Company depends on advertising agreements with Internet companies
such as America Online, Inc. and Yahoo! to increase content and traffic on its
web site and to increase users' awareness of the Company's web site. There can
be no assurance that such agreements will be renewed on terms acceptable to the
Company. Such companies may also enter into arrangements with the Company's
competitors which may substantially reduce the effectiveness of the Company's
advertising or eliminate the Company's ability to advertise on such companies'
web sites.
The Company is also generally dependent on other web site operators that
provide links to the Company's web site. Most of these arrangements are not
exclusive and are short-term or may be terminated at the convenience of the
other party. Moreover, many web site operators provide links to the Company's
web site on an informal basis, and such web site operators may terminate such
links at any time without notice to the Company. In addition, there can be no
assurance that such third parties will not develop their own competitive
services, either during their relationship with the Company or after their
relationship with the Company
F-11
<PAGE> 59
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
expires. Further, there can be no assurance that the services of those web site
operators that provide access or links to the Company's web site will achieve
market acceptance or commercial success. Accordingly, there can be no assurance
that the Company's existing relationships will result in sustained business
partnerships, successful service offerings, or the generation of significant
traffic and content on the Company's web site or significant revenues for the
Company.
RISK OF CAPACITY CONSTRAINTS; DEPENDENCE ON COMPUTER INFRASTRUCTURE; DEPENDENCE
ON INTERNET INFRASTRUCTURE; TECHNOLOGICAL RISKS
The Company depends on its ability to generate a high volume of traffic to
and content on its Web site. Accordingly, the Company depends upon ISPs, OSPs
and other Web site operators, which have experienced significant outages in the
past, for access to its Web site, and users may experience difficulties due to
system failures unrelated to the Company's services. The Company currently uses
ITC'DeltaCom, Inc. ("ITC'DeltaCom") as its ISP. Any system failure that causes
an interruption in service or a decrease in responsiveness of the Company's Web
site could result in less traffic, and if sustained or repeated, could impair
the reputation and perception of the Company's Web site. Any failure by
ITC'DeltaCom to handle current or increased volumes of traffic would have a
material adverse effect on the Company's business, results of operations and
financial condition.
In addition, the Company may have to make substantial investments in
equipment and other technology in order to improve performance of its Web site,
including the establishment of new co-location facilities. The success of the
Company depends in large part upon the development of the Internet's
infrastructure as a reliable network backbone with the necessary speed, data
capacity and security, or timely development of complementary products, such as
high-speed modems, for providing reliable Internet access and services. Because
global commerce and online exchange of information on the Internet and other
similar open wide-area networks are new and evolving, it is difficult to predict
with any assurance whether the Internet will prove to be a viable commercial
marketplace. The Internet has experienced, and is expected to continue to
experience, significant growth in the number of users and amount of traffic.
There can be no assurance that the Internet infrastructure will continue to be
able to support the demands placed on it by such growth or that the performance
or reliability of the Internet will not be adversely affected by this continued
growth. In addition, the Internet could lose its viability due to delays in the
development or adoption of new standards and protocols to handle increased
levels of activity or due to increased governmental regulation. There can be no
assurance that the infrastructure or complementary products or services
necessary to make the Internet a viable commercial marketplace will be
developed. If the necessary infrastructure standards or protocols or
complementary products, services or facilities are not developed, the Company's
business, results of operations and financial condition will be materially
adversely affected. The market in which the Company competes is characterized by
rapidly changing technology, evolving industry standards, frequent new service
and product announcements, introductions and enhancements, and changing customer
demands. These market characteristics are exacerbated by the emerging nature of
the Internet. Accordingly, the Company's future success will depend on its
ability to adapt to rapidly changing technologies and to adapt its services to
evolving industry standards. The failure of the Company to adapt to such changes
could have a material adverse effect on the Company's business, results of
operations and financial condition.
F-12
<PAGE> 60
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. SUBSEQUENT EVENTS
COMMON UNIT OPTION PLAN
In January 1998, LLC's board of managers approved the formation of an
incentive unit option plan and allocated 500,000 shares of common units to the
plan. Through June 30, 1998, the board of managers has granted 382,250 of these
options to various employees of the Company. All options were granted with an
exercise price between $0.40 and $1.40 per share, which represents the estimated
fair value of 264,000 of the common units granted as determined by the board of
managers at the dates of grant. The remaining 118,250 common units granted had
an estimated fair value in excess of the grant price due to an increase in value
related to the contemplated initial public offering (Note 5). The Company
recorded approximately $14,000 in compensation expense during the six months
ended June 30, 1998. The options vest over a five-year period as follows: 40% at
the second anniversary of the dates of grant and an additional 20% at each of
the next three anniversary dates. The options expire ten years from the date of
grant.
OPERATING LEASE
In April 1998, the Company entered into a ten-year operating lease
agreement for office space to begin November 1, 1998. Future minimum lease
payments as of June 30, 1998 are as follows (unaudited):
<TABLE>
<S> <C>
1998........................................................ $ 46,374
1999........................................................ 310,129
2000........................................................ 357,723
2001........................................................ 364,875
2002........................................................ 372,171
Thereafter.................................................. 2,642,015
----------
$4,093,287
==========
</TABLE>
FORMATION OF THE COMPANY AND COMPLETION OF THE REORGANIZATION
On July 15, 1998, the Company was incorporated under the laws of the State
of Georgia. The Company has authorized 50,200,000 shares of common stock, par
value $0.01, and 2,800,000 shares of Class A Preferred Stock, par value $0.01,
and 5,000,000 shares of Class B Serial Preferred Stock. Upon consummation of the
proposed initial public offering discussed later, each share of Class A
Preferred Stock will automatically convert into one share of common stock. The
Company's board of directors has the authority to issue up to 5,000,000 shares
of Class B Serial Preferred Stock in one or more series. There are no shares of
Class B Serial Preferred Stock currently outstanding.
As discussed in Note 1, the purpose of incorporating the Company was to
enable ITC and STC's sole shareholder to complete a reorganization of LLC and
HNI. In return for the contribution of its 55% interest in LLC to the Company,
ITC received 2,750,000 shares of the Company's Class A Preferred Stock. The sole
shareholder of HNI received 2,200,000 shares of the Company's common stock,
$0.01 par value and 50,000 shares of the Company's Class A Preferred Stock in
return for the contribution of 100% of HNI.
In connection with the Reorganization, the Company also assumed LLC's
Common Unit Option Plan and has issued replacement options with identical terms.
F-13
<PAGE> 61
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
AMENDMENT TO CREDIT FACILITY
On July 16, 1998, the Company, ITC and ITC Service Company, an affiliate of
ITC, entered into an amended and restated the Credit Agreement (Note 3),
pursuant to which ITC Service Company made available to the Company a revolving
line of credit of up to $2.5 million and is payable in full the earlier of (i)
December 31, 1998 or (ii) the closing of this Offering. Principal amounts
outstanding under the credit facility bear interest at annual rate equal to ITC
Service Company's cost of debt capital as reasonably determined, from time to
time by ITC Service Company (currently 8.6%) on the first $1 million and at a
fixed rate of 14% per annum on the remaining $1.5 million. In connection with
the amendments to the Credit Agreement, the Company issued to ITC Service
Company a warrant to purchase $375,000 of common stock at a price per share
equal to the initial public offering price per share. This warrant vested upon
issuance and is exercisable for a term of ten years.
1998 LONG-TERM INCENTIVE PLAN
On July 15, 1998, the Company's board of directors adopted the Company's
1998 Long-Term Incentive Plan (the "Incentive Plan"). The Company has reserved
500,000 shares of its common stock for issuance in connection with options and
awards granted under the Incentive Plan. The Company may grant options and
awards to officers and employees of the Company, a parent or a subsidiary, and
to nonemployee directors and consultants to the Company. The Incentive Plan
authorizes the granting of awards to eligible participants in the form of (i)
options to purchase shares of the Company's common stock, which may be incentive
stock options or nonqualified stock options, (ii) stock appreciation rights,
(iii) performance shares, (iv) restricted stock awards, (v) dividend equivalents
or (vi) other stock-based awards. The Incentive Plan is administered by the
Company's board of directors or the Compensation Committee in accordance with
its term. No awards or options pursuant to the Incentive Plan have been granted.
PROPOSED INITIAL PUBLIC OFFERING
The Company is in the process of registering with the Securities and
Exchange Commission shares of its common stock. There can be no assurance that
this Offering will be completed.
F-14
<PAGE> 62
------------------------------------------------------
------------------------------------------------------
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED HEREBY, NOR
DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Company Organization.................. 17
Use of Proceeds....................... 17
Dividend Policy....................... 17
Dilution.............................. 18
Capitalization........................ 19
Selected Financial and Operating
Data................................ 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 25
Management............................ 34
Principal Shareholders................ 38
Certain Transactions.................. 38
Description of Capital Stock.......... 39
Shares Eligible for Future Sale....... 42
Underwriting.......................... 44
Legal Matters......................... 45
Experts............................... 45
Available Information................. 45
Index to Financial Statements......... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
SHARES
HEADHUNTER.NET, INC.
COMMON STOCK
------------------------
PROSPECTUS
------------------------
WHEAT FIRST UNION
J.C. BRADFORD&CO.
INTERSTATE/JOHNSON LANE
CORPORATION
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 63
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses in connection with
the Offering described in the Registration Statement:
<TABLE>
<S> <C>
SEC Registration Fee........................................ $11,026.00
NASD Fees................................................... 4,238.00
Nasdaq Fees................................................. **
Blue Sky Fees and Expenses.................................. **
Printing and Engraving...................................... **
Legal Fees and Expenses..................................... **
Accounting Fees and Expenses................................ **
Transfer Agent Fees......................................... **
Miscellaneous Expenses...................................... **
----------
Total............................................. $ *
==========
</TABLE>
- ---------------
* All amounts other than the SEC Registration Fee and NASD Fees reflect Company
estimates.
** To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation eliminate, subject to certain
limited exceptions, the personal liability of a director to the Company or its
shareholders for monetary damage for any breach of duty as a director. There is
no elimination of liability for (i) a breach of duty involving appropriation of
a business opportunity of the Company; (ii) an act or omission which involves
intentional misconduct or a knowing violation of law; (iii) any transaction from
which the director derives an improper personal benefit; or (iv) as to any
payments of a dividend or any other type of distribution that is illegal under
Section 14-2-832 of the Georgia Business Corporation Code (the "GBCC"). In
addition, if at any time the GBCC is amended to authorize further elimination or
limitation of the personal liability of a director, then the liability of each
director of the Company shall be eliminated or limited to the fullest extent
permitted by such provisions, as so amended, without further action by the
shareholders, unless the provisions of the GBCC require such action. The
provision does not limit the right of the Company or its shareholders to seek
injunctive or other equitable relief not involving payments in the nature of
monetary damages.
The indemnification provisions in the Company's Bylaws require the Company
to indemnify and hold harmless any director or officer who was or is a party or
is threatened to be made a party, to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative (including any action or suit by or in the right of the Company)
because such person is or was a director or officer of the Company, against
liability incurred in such proceeding except for any liability incurred in a
proceeding in which the director or officer is adjudged liable to the Company or
is subjected to injunctive relief in favor of the Company for (i) any
appropriation, in violation of such director's or officer's duties, of any
business opportunity of the Company, (ii) acts or omissions which involve
intentional misconduct or a knowing violation of law, (iii) types of liability
set forth in Section 14-2-832 of the GBCC or (iv) any transaction from which
such officer or director received an improper personal benefit. The Board of
Directors of the Company also has the authority to extend to employees and
agents the same indemnification rights held by directors, subject to all the
accompanying conditions and obligations. Indemnified persons would also be
entitled to have the Company advance expenses prior to the final disposition of
the proceeding. If it is ultimately determined that they are not entitled to
indemnification, however, such amounts would be repaid. Insofar as
indemnification for liability arising under the Securities Act may be permitted
to officers and directors of the Company pursuant to the foregoing provisions,
the Company has been informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.
II-1
<PAGE> 64
The Company has entered into separate indemnification agreements with each
of its directors and executive officers, whereby the Company agreed, among other
things, to provide for indemnification and advancement of expenses in a manner
and subject to terms and conditions similar to those set forth in the Articles
of Incorporation and Bylaws. There is no pending litigation or proceeding
involving a director, officer, employee or other agent of the Company as to
which indemnification is being sought, nor is the Company aware of any pending
or threatened litigation that may result in claims for indemnification by any
director, officer, employee or other agent.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
No securities which were not registered under the Securities Act have been
sold by HeadHunter.NET, Inc. within the past three years except for (i) the
sales made by the Company to Mr. Bare and ITC pursuant to that certain
Contribution Agreement dated July 15, 1998 and (ii) the issuance to ITC Service
Company of a warrant to purchase shares of Common Stock (assuming an
Offering price of $ per share) in connection with the Company's $2.5
million credit facility with ITC Service Company. Pursuant to Contribution
Agreement, Mr. Bare received 2,200,000 shares of Common Stock and 50,000 shares
of Class A Preferred Stock and ITC received 2,750,000 shares of Class A
Preferred Stock in exchange for all of the outstanding capital stock of HNI held
by Mr. Bare and ITC's 55% equity interest in LLC.
The issuances of securities described above were made in reliance on one or
more of the exemptions from registration under the Securities Act, including
those provided for by Section 4(2) and Regulation D thereunder. The recipients
of the securities in the above transactions represented their intention to
acquire the securities for investment purposes only and not with a view to or
for the sale in connection with any distribution thereof, and appropriate
legends were affixed to the share certificates issued in such transactions. The
recipients of these securities had adequate access, through their relationship
with the Company, to information about the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement*
3.1 -- Articles of Incorporation of the Company++
3.2 -- Bylaws of the Company++
4.1 -- Specimen Common Stock Certificate*
4.2 -- Article II of the Company's Articles of Incorporation (filed
as part of Exhibit 3.1)++
5.1 -- Opinion of Alston & Bird LLP*
10.1 -- HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan++
10.2 -- HeadHunters, L.L.C. Employee Common Unit Option Plan dated
January 14, 1998++
10.3 -- Amended and Restated Loan and Security Agreement dated July
16, 1998 among ITC Holding Company, Inc., ITC Service
Company and the Company**++
10.4 -- Form of Indemnity Agreement between directors/executive
officers and the Company++
10.5 -- Contribution Agreement dated July 15, 1998 by and among ITC
Holding Company, Inc., Warren L. Bare and the Company++
10.6 -- GeoCities and HeadHunter.NET Co-Marketing Agreement dated
July 2, 1998 between GeoCities, Inc. and the Company+
10.7 -- WorkLife's Internet Content Partners Agreement by and
between WorkLife Solutions, Inc. and the Company++
10.8 -- Yahoo! Inc. Content License Agreement dated as of April 15,
1998 between Yahoo! Inc. and the Company++
10.9 -- Letter Agreement dated October 29, 1997 between Warren L.
Bare and ITC Holding Company, Inc.++
</TABLE>
II-2
<PAGE> 65
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.10 -- Letter Agreement dated November 13, 1997 between Kenneth E.
Dopher and the Company++
10.11 -- Letter Agreement dated May 18, 1998 between Judith G.
Hackett and the Company++
10.12 -- Lease dated June 4, 1998 between Michael G. Perkins and the
Company, as amended by that First Amendment to Lease dated
June 4, 1998++
10.13 -- Yahoo! Advertising Insertion Order dated March 24, 1998+
10.14 -- AOL Insertion Order dated March 5, 1998 between America
Online, Inc. and the Company+
10.15 -- Classifieds2000 Advertising Agreement dated April 2, 1998
between Classifieds2000 and the Company+
10.16 -- Agreement dated July 16, 1998 between DoubleClick Inc. and
the Company+
10.17 -- Stock Purchase Warrant dated July 16, 1998 in favor of ITC
Service Company++
10.18 -- Investment Agreement dated October 30, 1997 by and among ITC
Holding Company, Inc., Software Technology Corporation and
Warren L. Bare*
21.1 -- Subsidiaries of the Company++
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Alston & Bird LLP (filed as part of Exhibit 5.1)*
24.1 -- Power of Attorney++
27.1 -- Financial Data Schedule (for SEC use only)++
</TABLE>
- ---------------
* To be filed by amendment
** The Company agrees to furnish supplementally a copy of any omitted schedule
or exhibit to the Securities and Exchange Commission upon request, as
provided in Item 601(b)(2) of Regulation S-K.
+ Portions of this exhibit are the subject of a request for confidential
treatment. The copy filed as an exhibit omits the information subject to such
confidentiality request. The omitted information has been filed separately
with the Commission. Such portions are marked by brackets [***] and the pages
on which they appear contain an asterisk(*) in the upper right corner.
++ Previously filed.
(b) Financial Schedules
None.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
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.
The Company 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
II-3
<PAGE> 66
430A and contained in a form of prospectus filed by the Company pursuant to
Rule 424(b)(1) or (4), or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act 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.
II-4
<PAGE> 67
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON JULY 28, 1998.
HEADHUNTER.NET, INC.
By: /s/ WARREN L. BARE
------------------------------------
Warren L. Bare
Chief Executive Officer and
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES LISTED AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ WARREN L. BARE Chief Executive Officer, July 28, 1998
- ----------------------------------------------------- President and Director
Warren L. Bare (Principal Executive Officer)
/s/ KENNETH E. DOPHER Chief Financial Officer and July 28, 1998
- ----------------------------------------------------- Secretary (Principal Financial
Kenneth E. Dopher and Accounting Officer)
/s/ WILLIAM H. SCOTT, III* Chairman of the Board and July 28, 1998
- ----------------------------------------------------- Director
William H. Scott, III
/s/ ROBERT M. MONTGOMERY* Director July 28, 1998
- -----------------------------------------------------
Robert M. Montgomery
/s/ BURTON B. GOLDSTEIN, JR.* Director July 28, 1998
- -----------------------------------------------------
Burton B. Goldstein, Jr.
/s/ DONALD W. WEBER* Director July 28, 1998
- -----------------------------------------------------
Donald W. Weber
/s/ J. DOUGLAS COX* Director July 28, 1998
- -----------------------------------------------------
J. Douglas Cox
*By: /s/ WARREN L. BARE
------------------------------------------------
Warren L. Bare, Attorney-in-fact
</TABLE>
II-5
<PAGE> 68
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement*
3.1 -- Articles of Incorporation of the Company++
3.2 -- Bylaws of the Company++
4.1 -- Specimen Common Stock Certificate*
4.2 -- Article II of the Company's Articles of Incorporation (filed
as part of Exhibit 3.1)++
5.1 -- Opinion of Alston & Bird LLP*
10.1 -- HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan++
10.2 -- HeadHunters, L.L.C. Employee Common Unit Option Plan dated
January 14, 1998++
10.3 -- Amended and Restated Loan and Security Agreement dated July
16, 1998 among ITC Holding Company, Inc., ITC Service
Company and the Company**++
10.4 -- Form of Indemnity Agreement between directors/executive
officers and the Company++
10.5 -- Contribution Agreement dated July 15, 1998 by and among ITC
Holding Company, Inc., Warren L. Bare and the Company++
10.6 -- GeoCities and HeadHunter.NET Co-Marketing Agreement dated
July 2, 1998 between GeoCities Inc. and the Company+
10.7 -- WorkLife's Internet Content Partners Agreement by and
between WorkLife Solutions, Inc. and the Company++
10.8 -- Yahoo! Inc. Content License Agreement dated as of April 15,
1998 between Yahoo! Inc. and the Company++
10.9 -- Letter Agreement dated October 29, 1997 between Warren L.
Bare and ITC Holding Company, Inc.++
10.10 -- Letter Agreement dated November 13, 1997 between Kenneth E.
Dopher and the Company++
10.11 -- Letter Agreement dated May 18, 1998 between Judith G.
Hackett and the Company++
10.12 -- Lease dated June 4, 1998 between Michael G. Perkins and the
Company, as amended by that First Amendment to Lease dated
June 4, 1998++
10.13 -- Yahoo! Advertising Insertion Order dated March 24, 1998+
10.14 -- AOL Insertion Order dated March 5, 1998 between America
Online, Inc. and the Company+
10.15 -- Classifieds2000 Advertising Agreement dated April 2, 1998
between Classifieds2000 and the Company+
10.16 -- Agreement dated July 16, 1998 between DoubleClick Inc. and
the Company+
10.17 -- Stock Purchase Warrant dated July 16, 1998 in favor of ITC
Service Company++
10.18 -- Investment Agreement dated October 30, 1997 by and among ITC
Holding Company, Inc., Software Technology Corporation and
Warren L. Bare*
21.1 -- Subsidiaries++
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Alston & Bird LLP (filed as part of Exhibit 5.1)*
24.1 -- Power of Attorney++
27.1 -- Financial Data Schedule (for SEC use only)++
</TABLE>
- ---------------
* To be filed by amendment
** The Company agrees to furnish supplementally a copy of any omitted schedule
or exhibit to the Securities and Exchange Commission upon request, as
provided in Item 601(b)(2) of Regulation S-K.
+ Portions of this exhibit are the subject of a request for confidential
treatment. The copy filed as an exhibit omits the information subject to such
confidentiality request. The omitted information has been filed separately
with the Commission. Such portions are marked by brackets [***] and the pages
on which they appear contain an asterisk (*) in the upper right corner.
++ Previously filed.
<PAGE> 1
Portions of this Exhibit are the subject of a request for confidential
treatment. The copy filed as an exhibit omits the information subject to such
confidentiality request. The omitted information has been filed separately with
the Commission. Such portions are marked by brackets [***] and the page on the
which they appear contain an asterisk (*) in the upper right corner.
EXHIBIT 10.6*
GEOCITIES AND HEADHUNTER.NET CO-MARKETING AGREEMENT
Co-Marketing Arrangement
1) GeoCities will create a Career Center to be permanently featured on a
new Careers sub-avenue page. HeadHunter.NET will be the presenting
sponsor of the Career Center and will receive attribution as follows:
GeoCities Career Center sponsored by HeadHunter.NET.
2) The Careers sub-avenue page will be placed in the Business & Money
Avenue and will permanently be featured on the homepage of the
GeoCities site as a sub-Avenue listing under the Business & Money
Avenue.
At the sole discretion of GeoCities, additional careers topic pages may
be incorporated into other Avenues.
3) The GeoCities Career Center sponsored by HeadHunter.NET will include,
but not be limited to, the following features: a career center where
visitors can submit a resume or search job listings and a networking
center that will include career advise as well as chat, forums and
message boards.
Advertising & Media Commitment
1) HeadHunter.NET will have a permanent graphic on all pages within the
Careers Center, which will link directly to the HeadHunter.NET site.
2) GeoCities will run [***] banners, buttons, text mentions and e-mail
impressions over 12 months promoting the Careers Center. Every
impression will include a reference to the HeadHunter.NET sponsorship.
GeoCities agrees that no fewer than [***] impressions will be run each
month.
3) GeoCities will include a mention of the Careers Center sponsored by
HeadHunter.NET in 14 World Report e-mails over 12 months.
4) GeoCities will run [***] run of site HeadHunter.NET banner impressions
each month, which will link directly to the HeadHunter.NET site.
Terms & Exclusivity
1) HeadHunter.NET will sponsor the GeoCities Career Center for a period of
1 year beginning July 1, 1998.
<PAGE> 2
*
2) HeadHunter.NET will be the exclusive Internet recruiting company
featured in the Careers Center and on the Careers sub-avenue and
Careers topic pages.
3) In addition, no internet recruiting company may engage in content
related integrated programs with GeoCities that will appear within any
avenue, sub-avenue or topic pages.
4) HeadHunter.NET will have first right of refusal on renewal of this
agreement for an additional period of 12 months.
HeadHunter.NET must decide whether or not they wish to renew this
agreement 60 days before the expiration date of the 1-year term.
The cost of the renewed program for the second year of the contract
will reflect any increase in the total number of GeoCities Homesteaders
with a maximum yearly price increase of [***]%.
For purposes of this agreement, the Homestead population on 7/1/98 will
be used as the base number.
Payment Terms
1) HeadHunter.NET will pay GeoCities [***] for the 12-month
sponsorship. Payment will be made in [***] monthly payments, to be
sent on the first of each month, beginning July 1, 1998.
Other Obligations
1) HeadHunter.NET will participate in an "associates program," whereby an
incentive will be created by HeadHunter.NET for GeoCities Homesteaders
to put a link on their web sites to the HeadHunter.NET site. GeoCities
and HeadHunter.NET will work together on the graphics and details of
the incentive program.
HeadHunter.NET GeoCities
By: /s/ Judith G. Hackett By: /s/ M. Barrett
--------------------------- -----------------------
Name: Judith G. Hackett Name: Michael Barrett
Title: SVP Marketing Title: VP Advertising
Date: 7/2/98 Date: July 2, 1998
-2-
<PAGE> 1
Portions of this Exhibit are the subject of a request for confidential
treatment. The copy filed as an exhibit omits the information subject to such
confidential request. The omitted information has been filed separately with
the Commission. Such portions are marked by brackets [***] and the page on
which they appear contain an asterisk (*) in the upper right corner.
EXHIBIT 10.13*
YAHOO! ADVERTISING INSERTION ORDER
HTTP://WWW.YAHOO.COM
<TABLE>
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ORDER # 13282 SALES CONTACT Matt LeBlanc
REVISION 0 PHONE (408) 731-3467
TYPE EMAIL [email protected]
DATE 3/24/98
ADVERTISER HEADHUNTER.NET
CAMPAIGN
URL AGENCY
ADDRESS 6410 Atlantic Blvd. ADDRESS
Suite 160
Norcross, GA 30071
CONTACT Linda Marquis CONTACT
PHONE (603)881-5358 FAX (603)881-7916 PHONE FAX
EMAIL [email protected] EMAIL
START DATE: 5/1/98 END DATE: 4/30/99 CONTRACT LENGTH: 365 days BILL TO: Advertiser
- -----------------------------------------------------------------------------------------------------
POSITION Total Page Total Amount
Views
CLASSIFIEDS COST: [***] $240,000.00
CATEGORIES [***] $240,000.00
5/1/98 - 4/30/99 classifieds_employment
ORDER TOTAL GROSS COST: [***] $240,000.00
---------- -----------
GROSS COST: $240,000.00
===========
- ------------------------------------------------------------------------------------------------------
Other Instructions: TERMS: Net 30 days
BILLING: Monthly
</TABLE>
MATERIALS: Banners: Banner requirements are posted at
http://www.yahoo.com/docs/advertising. DELIVERY: ALL MATERIALS AND ANY CHANGES
MUST BE DELIVERED AT LEAST 4 BUSINESS DAYS IN ADVANCE TO THE EMAIL ADDRESS
SPECIFIED FOR YOUR REGION AT: HTTP://WWW.YAHOO.COM/DOCS/ADVERTISING/SUBMIT.HTML.
A Yahoo! insertion order number and flight dates must be referenced in all
correspondence. Yahoo! will not issue any credit or makegood due to late or
incorrectly submitted banners and/or late or incomplete information.
TERMS AND CONDITIONS: This insertion order is subject to the terms and
conditions ("Standard Terms") attached hereto as Exhibit A of this Insertion
Order, and such Standard Terms are made a part of this insertion order by
reference. The signatory of this Insertion Order represents that he has read and
agrees to such Standard Terms.
This insertion order is valid for three (3) business days from the date of this
order. This agreement is non-cancelable.
<TABLE>
<S> <C> <C>
Authorized by: /s/ Jesse Retchko Phone (770) 300-9272 Date: 3/24/98
---------------------- --------------------- ----------------------
Production Contact: Jesse Retchko Phone: (770)300-9272 Email: Jesse.Retchko@
---------------------
HeadHunter.NET
<CAPTION>
<S> <C> <C>
- -------------------------------------------------- ---------------------
PLEASE RETURN TO YAHOO SALES OPERATIONS DEPT. FAX# (408) 616-3751 YAHOO! INC.
- -------------------------------------------------- ---------------------
3400 CENTRAL EXPRESSWAY, SUITE 201
SANTA CLARA, CA 95051
</TABLE>
<PAGE> 2
EXHIBIT A
YAHOO!INC.
Standard Terms and Conditions for Yahoo! Advertising
The following terms and conditions (the "Standard Terms") shall be deemed to be
incorporated into the attached insertion order the ("Insertion Order"):
1. TERMS OF PAYMENT. Advertiser will be invoiced on the first day of the
contract period set forth on the Insertion Order. Payment shall be made to
Yahoo!Inc. ("Yahoo") within thirty (30) days from the date of invoice, which
date shall be no earlier than the advertisement date specified in the Insertion
Order. Amounts paid after such date shall bear interest at the rate of one
percent (1%) per month (or the highest rate permitted by law, if less). In the
event of any failure by Advertiser to make payment, Advertiser will be
responsible for all reasonable expenses (including attorneys' fees) incurred by
Yahoo in collecting such amounts.
2. POSITIONING. Except as otherwise expressly provided in the Insertion Order,
positioning of advertisements within the Yahoo Guide or on any page is at the
sole discretion of Yahoo. Advertiser acknowledges that Yahoo has not made any
guarantees with respect to usage statistics or levels of impressions for any
advertisement. Yahoo provides Advertiser with estimated usage statistics only as
a courtesy to the Advertiser and shall not be held liable for any claims
relating to said usage statistics.
3. RENEWAL. Except as expressly set forth in the Insertion Order, any renewal of
the Insertion Order and acceptance of any additional advertising order shall be
at Yahoo's sole discretion. Pricing for any renewal period is subject to change
by Yahoo from time to time.
4. NO ASSIGNMENT OR RESALE OF AD SPACE. Advertiser may not recall, assign or
transfer any of its rights hereunder, and any attempt to resell, assign or
transfer such rights shall result in immediate termination of this contract,
without liability to Yahoo.
5. LIMITATION OF THE LIABILITY. In the event that Yahoo fails to publish an
advertisement in accordance with the schedule agreed upon pursuant to this
Agreement (or in the event of any other failure, technical or otherwise, of such
advertisement to appear as provided in the Insertion Order), the sole liability
of Yahoo to the Advertiser shall be limited to either a refund of the
advertising fee or placement of the advertisement at a later time in a
comparable position. In no event shall Yahoo be responsible for any
consequential, special, lost profits or other damages arising from any failure
to timely publish any advertisement in accordance with the Insertion Order.
Without limiting the foregoing, Yahoo shall have no liability for any failure or
delay resulting from any governmental action, fire, flood, insurrection,
earthquake, power failure, riot, explosion, embargo, strikes whether legal or
illegal, labor or material shortage, transportation interruption of any kind,
work slowdown or any other condition beyond the control of Yahoo affecting
production or delivery in any manner.
6. ADVERTISERS REPRESENTATIONS; INDEMNIFICATION. Advertisements are accepted
upon the representation that Advertiser has the right to publish the contents of
the advertisement, without infringement of any rights of any third party. In
consideration of such publication, Advertiser agrees to indemnify and hold Yahoo
harmless against any and all expenses and losses of any kind (including
reasonable attorneys' fees and cost) incurred by Yahoo in connection with any
claims of any kind arising out of publication of the advertisement (including,
without limitation, any claim of trademark or copyright infringement, libel,
defamation, breach of confidentiality, false or deceptive advertising or sales
practices) and/or any material of Advertiser to which users can link through the
advertisement.
7. PROVISION OF ADVERTISING MATERIALS. Advertisers will provide all materials
for the advertisement (including GIF files), in accordance with Yahoo's policies
in effect from time to time, including (without limitation) the manner of
transmission to Yahoo and the time prior to publication of the advertisement.
Yahoo shall not be required to publish any advertisement that is not received in
accordance with such policies.
-2-
<PAGE> 3
8. RIGHT TO REJECT ADVERTISEMENT. All contents of advertisements are subject to
Yahoo's approval. Yahoo reserves the right to reject or cancel any
advertisement, insertion order, space reservation or position commitment at any
time. In addition, Yahoo shall have the absolute right to reject any URL link
embodied within any advertisement.
9. CANCELLATIONS. Except as otherwise provided in the Insertion Order, the
Insertion Order is non-cancelable by Advertiser.
10. CONSTRUCTION. No conditions other than those set forth in the Insertion
Order or these Standard Terms shall be binding on Yahoo unless expressly agreed
to in writing by Yahoo. In the event of any inconsistency between the Insertion
Order and the Standard Terms, the Standard Terms shall control.
11. MISCELLANEOUS. These Standard Terms, together with the Insertion Order, (i)
shall be governed by and construed in accordance with, the laws of the State of
California, without giving effort to principles of conflicts of law; (i) may be
amended only by a written agreement executed by an authorized representative of
each party; and (iii) constitute the complete and entire expression of the
agreement between the parties, and shall supersede any and all other agreements,
whether written or oral, between the parties.
-3-
<PAGE> 1
Portions of this Exhibit are the subject of a request for confidential
treatment. The copy filed as an exhibit omits the information subject to such
confidentiality request. The omitted information has been filed separately with
the Commission. Such portions are marked by brackets [***] and the page on
which they appear contain an asterisk (*) in the upper right corner.
EXHIBIT 10.14*
AOL
INSERTION ORDER #:
DATE: MARCH 5, 1998
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------
ADVERTISER ADVERTISING AGENCY
- ----------------------------------------------------------------------------------------------------------
Contact Warren Bare
- ----------------------------------------------------------------------------------------------------------
Company Headhunter.net
- ----------------------------------------------------------------------------------------------------------
Address 6410 Atlantic Blvd., Suite 160
Norcross, GA 30071
- ----------------------------------------------------------------------------------------------------------
Phone # 770-300-9272
- ----------------------------------------------------------------------------------------------------------
Fax # 770-300-9298
- ----------------------------------------------------------------------------------------------------------
Email [email protected]
- ----------------------------------------------------------------------------------------------------------
Sales Person Joan Lockwood
- ----------------------------------------------------------------------------------------------------------
</TABLE>
Subject to the following, AOL shall display the Advertisement during the period
commencing on the Display Start Date and ending on the later of (a) the Display
Stop Date or (b) the date the Advertisement reaches the guaranteed number of
impressions listed below, if any, on the following page(s) and area(s) of the
AOL Service and at the following rates: provided that, in the event guaranteed
impressions are reached prior to the Display Stop Date. AOL may, at its option,
discontinue display at such earlier time. AOL reserves the right to alter
Advertiser flight dates to accommodate trafficking needs. In such cases, AOL
will offer Advertiser equivalent flight(s) upon mutual agreement.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
PLACEMENT DISPLAY DISPLAY AD # OF AD TOTAL GUARANTEED TOTAL
START STOP TYPE/SIZE SLOTS IMPRESSIONS* GROSS
DATE DATE PURCHASED COST
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Classifieds 4/1/98 3/31/99 Banner
Channel: 120x60 [***] [***]
Employment
Screen**
- ----------------------------------------------------------------------------------------------------------
Classifieds 9/30/98 3/31/99 Banner
Channel: 234x60 [***]
Employment
Screen**
- ----------------------------------------------------------------------------------------------------------
TOTALS: [***] $300,000
----------------------------------------------------
---------------------------------------
TOTAL AMOUNT DUE: $300,000
---------------------------------------
</TABLE>
* Any guarantees are to impressions, not "click-throughs"
** Please refer to the attached spreadsheet on Classifieds:
Employment Placements.
AOL ART
- ------------------------------------------------------------------------
All necessary artwork and active URLs must be provided by advertiser 5
business days prior to start date.
Artwork required:
- -------------------------------------------------------------------------------
X 234*60 IAB Standard 145*30 Old Standard
175*45 Chat 94*80 Games
234*60 CSS 42*42 Button
X 120*60 Custom
PLEASE SEND ARTWORK AND URL TO: [email protected]
- -------------------------------------------------------------------------------
THE HTTP/URL ADDRESS TO BE CONNECTED TO THE ADVERTISEMENT SHALL BE:
HTTP://WWW.HEADHUNTER.NET
DESCRIPTION: HEADHUNTER.NET IS AN ONLINE RECRUITING SITE; PROMOTING
THEMSELVES AS A JOB AND RESUME SOURCE ON THE INTERNET.
Any modifications to such materials (if AOL elects to make such modifications
for Advertiser) must be provided by Advertiser to AOL in conformity with AOL
standard art guidelines at least: 5 business days for AOL art and 7 business
days for NetFind art, prior to AOL making such modifications. AOL's approval of
such modifications will not be unreasonably withheld.
<PAGE> 2
BILLING PACKAGE OPTIONS
If the total payment due is less than or equal to $1,000, then payment is due
upon signing must be cleared by AOL prior to ad flight.
If the total payment due is greater than $1,000 and advertiser is new AOL
advertiser, then the advertiser must obtain a favorable D&B credit rating (as
determined by AOL). If not, payment is due in advance.
Given a favorable credit rating, then the advertiser will be billed in
accordance with whichever of the following options is applicable:
______ If the total payment due is less than or equal to $10,000 and the
display duration is less than three months, one bill will be sent upon launch
and is due net 30.
______ If the total payment due is great then $10,000 but less than or equal
to $50,000 and the display duration is less than three months, equal bills will
be sent at the beginning of each month, due net 30.
_____ If the total payment due is greater than $10,000 and less than or equal
to $50,000 and the display duration is longer than three months, equal bills
will be sent quarterly, sent on the first day of each quarter, due net 30.
X If the total payment due is greater than $50,000, equal bills will be sent
quarterly, on the first day of each quarter, due net 30.
STANDARD TERMS AND CONDITIONS
This Insertion Order incorporates by reference AOL's standard advertising terms
and conditions (the "Standard Terms") including terms related to advertising
material, payment modifications, usage data, limitations of liability,
disclaimers, indemnifications, use of AOL member information and miscellaneous
legal terms. The Standard Terms appear at keyword "Standard Ad Terms" on the
U.S. based America Online brand service. A hard copy of the Standard Terms will
be provided to advertiser upon request. Advertiser acknowledges that it has been
provided an opportunity to review the Standard Terms and agrees to be bound by
them.
AUTHORIZED SIGNATURES
In order to bind the parties to this Insertion Order Agreement, their duly
authorized representatives have signed their names below on the dates indicated.
This Agreement (including the Standard Terms incorporated by reference) shall be
binding on both parties when signed on behalf or each party and delivered to the
other party (which delivery may be accomplished by facsimile transmission of the
signature pages hereto).
AOL HEADHUNTER.NET
By: /s/ Richard Nagel By: /s/ Warren Bare
------------------------------- --------------------------------
(signature) (signature)
Print Name: Richard Nagel Print Name: Warren Bare
----------------------- ------------------------
Title: Director, Client Operations Title: President
---------------------------- -----------------------------
(Print or Type) (Print or Type)
Date: Date: 3/6/98
-2-
<PAGE> 1
Portions of this Exhibit are the subject of a request for confidential
treatment. The copy filed as an exhibit omits the information subject to such
confidentiality request. The omitted information has been filed separately with
the Commission. Such portions are marked by brackets [***] and the page on
which they appear contain an asterisk (*) in the upper right corner.
EXHIBIT 10.15*
CLASSIFIEDS2000
617 Palomar Avenue, Sunnyvale, CA 94086 Tel (408) 524-8615, Fax (408) 773-2001
http://www.classifieds2000.com email:[email protected]
- --------------------------------------------------------------------------------
April 2, 1998
Headhunter.net
Attn: Linda Marquis
430 Boundary Blvd.
Suwanee, GA 30024
Via Facsimile: 603-881-7916
RE: Twelve-Month Advertising Proposal for Headhunter.net
Dear Linda:
Thank you for renewing the advertising campaign for Headhunter.net within the
Classifieds2000 Employment Network. As per my discussion with Warren Bare, and
my subsequent accounting of our available inventory, following are details of
the proposed advertising agreement:
Term: 12 Months: April 2, 1998 - April 1, 1999
Guaranteed Minimum Number of Network Impressions: [***] Banner Impressions
per month in the Employment Category
Premium Benefit: Three Inline Text Advertisements to rotate on Employment
Search Results Pages
Investment: [***] CPM @ [***] discount = [***] CPM = [***] per month
Term of Offer: The terms contained within this advertising agreement are offered
until Thursday April 2, 1998.
Banner Specifications:
468 pixels x 60 pixels; 10K maximum file size; multiple banners encouraged; GIF
and JPEG formats; animated banners accepted; html file must not exceed 2.5Kb;
html file plus associated graphics must not exceed 10Kb; FORMS within html must
use METHOD-"POST", not "GET"; Alt-text specifications no greater than 100
characters long, including spaces and punctuation; Under-text specifications no
greater than 50 characters long, including spaces and punctuation. GIFs and
go-to URLs should be emailed to [email protected].
Ad Service & Reporting: Weekly reports will be emailed to Linda Marquis at
Headhunter.net for the previous week's rotation.
Payment: Classifieds2000 will invoice Headhunter.net on April 2, 1998, and on
the 2nd day of each successive month for the duration of this agreement.
Payment is due net 30 days.
<PAGE> 2
Payment can be mailed to:
Classifieds2000
617 Palomar Avenue
Sunnyvale, CA 94086
Attn: Accounts Receivable
To confirm your acceptance of the above banner advertising agreement with
Classifieds2000, please sign this letter below and return both pages to my
attention by facsimile at (408) 773-2001.
Thank you again. I look forward to working with you to ensure the continued
success of this promotion.
Sincerely,
/s/ Barry S. Ikemoto
- ------------------------
Barry Ikemoto
Sales Manager
AGREED AND ACCEPTED:
Authorized Individual: Linda Marquis
Title: Marketing Manager
Company: Headhunter.net
Signature: /s/ Linda Marquis
Date: 4/2/98
The Classifieds2000 Network is audited by ABC/ABVS.
- - Agreement subject to credit approval by Classifieds2000 accounting
department.
- - Space cannot be reserved without a signed advertising agreement.
- - Advertising agreements must be signed at least 3 days prior to desired
start date.
- - Electronic images and URLs must be submitted at least 3 days prior to
desired start date.
- - Advertising creative subject to approval by Classifieds2000.
- - Under delivery of impressions shall be compensated for by make-good
delivery in subsequent periods.
- - Classifieds2000 and its related parties reserve the right at any time and
for any reason in its sole discretion to decline any advertising and to
cease further publication of any advertising. Classifieds2000 shall not be
liable in any way providing that any amounts received for advertising that
is not published will be refunded.
- - In no event shall Classifieds2000 be liable for any special, indirect,
incidental or consequential damages (including but not limited to such
damages arising from breach of contract or warranty or from negligence or
strict liability), or for interrupted communications, lost data or lost
profits, arising out of or in connection with this agreement, even if
Classifieds2000 has been advised of (or should know of) the possibility of
such damages. Under no circumstance shall Classifieds2000 be liable to any
customer or any third parties for an amount greater than the amounts
received from customer hereunder damages. Under no circumstances shall
Classifieds2000 be liable to any customer or any third parties for an
amount greater than the amounts received from customer hereunder.
-2-
<PAGE> 1
Portions of this Exhibit are the subject of a request for confidential
treatment. The copy filed as an exhibit omits the information subject to such
confidentiality request. The omitted information has been filed separately
with the Commission. Such portions are marked by brackets [***] and the page
on which they appear contain an asterisk (*) in the upper right corner.
EXHIBIT 10.16*
Jeffrey Silverman Thursday, July 16, 1998
DoubleClick
245 Fifth Avenue
New York, N.Y. 10016
Re: Agreement between HeadHunter.NET ("HeadHunter") and
DoubleClick
Dear Jeff:
The purpose of this letter is to confirm our agreement and clarify the
points contained in the Letter of Intent between HeadHunter and DoubleClick. We
have attached the Letter of Intent for reference (the "Letter of Intent").
Following are certain points that we wanted to clarify:
1. The maximum amount payable by HeadHunter pursuant to the Letter of Intent
is [***]. As referenced in the Letter of Intent, [***] of such amount (the
"Deposit") will be paid by check and mailed from HeadHunter on Friday,
July 17th, 1998.
2. If HeadHunter does not close its initial public offering by October 31,
1998, HeadHunter may cancel the Letter of Intent by sixty days written
notice to Double Click with no further obligation, other than to pay for
impressions delivered prior to cancellation. If HeadHunter cancels the
Letter of Intent, the Deposit will be returned in full to HeadHunter
within ten days of cancellation.
3. The impressions delivered pursuant to the Letter of Intent will be
delivered in categories and via sites within the Double Click network
which are acceptable to HeadHunter. The charter sponsorship of AltaVista
Career Zone and the Fast Company Career Center and the sponsorship of the
Catbert Anti-Career Zone will generally consist of persistent banner ads,
buttons and other graphical displays on such sites which each provide a
hypertext link to HeadHunter.NET. The design and duration of all
sponsorships purchased by HeadHunter will be mutually agreed upon by
HeadHunter and DoubleClick.
4. All impressions delivered outside of the sponsorship sites will be
standard 468x60 pixel Internet advertising banner ads unless mutually
agreed to by both parties.
5. HeadHunter may request that ads be delivered on search results web pages
based on certain key word searches of the AltaVista and NorthernLight
sites. DoubleClick will use its best effort to fulfill that request by
placing
<PAGE> 2
HeadHunter ads on the requested pages that have not previously been
purchased by another advertiser at the time of the request, and on all
requested pages that come available as other purchase agreements expire.
6. From time to time HeadHunter will evaluate the performance of the ads
being delivered under the agreement. HeadHunter will have the right
adjust the placement and targeting any ads that it thinks may perform
better in another location or with different targeting.
7. In all other respects, HeadHunter will be given the rights and privileges
afforded to other DoubleClick advertisers.
There may be other details that we need to clarify, but we felt that it
was important to confirm these items in writing at this time. Please signify
your agreement to each of the foregoing by signing in the space provided below.
We look forward to working with you on our exciting strategic relationship.
Very truly yours,
Warren Bare
President & CEO
HeadHunter.NET
ACKNOWLEDGED AND AGREED to this 16 day of July, 1998 by
DOUBLE CLICK, INC.:
By: /s/ Jeff Silverman
---------------------------------
Title: Sponsor SV, Sales Exec.
------------------------------
<PAGE> 3
*
Click
DoubleClick
WWW.DOUBLECLICK.NET
LETTER OF INTENT
NEW YORK
Doubleclick agrees to provide Headhunter.net with 300,000,000
(three hundred million) impressions over the course of two
years, beginning July 15, 1999 to July 15, 2000.
LONDON
The Impressions can be placed towards any program within the
Doubleclick Network.
TOKYO The effective CPM of all combined campaigns during the
pre-Initial Public Offering period will be [***].
MADRID Headhunter.net will launch as a Charter Sponsor for the Alta
Vista Career Zone, a Charter Sponsor of the Fast Company
Career Center and a sponsor on the Catbert Anti-Career Zone.
SYDNEY
The remaining impressions, based upon availability, will be
placed throughout the two-year period on banner and keyword
programs across DCLK sites; Sponsorship programs
STOCKHOLM and on International sites. All requests for advertising
placements and changes to such placements must be supported by
a written authorization from Headhunter.net.
TORONTO
Headhunter.net will receive additional 120,000,000 (one
hundred and twenty million) banners after Headhunter.net
completes its initial public offering at no additional cost.
SAN FRANCISCO These additional impressions will lower the effective CPM of
all combined campaigns to [***] CPM.
LOS ANGELES In the case of a canceled initial public offering,
Headhunter.net will have the opportunity to cancel the
agreement with a 60 day written notice to Doubleclick.
ATLANTA Headhunter.net is required to pay [***] of the contract 14
days after signing the DCLK Letter of intent. The [***]
up-front fee shall be applied at the end of the
CHICAGO campaign to the final invoices.
Headhunter.net will pay on actual impression volume delivered
during each month.
BOSTON Effective CPM's may vary month to month, as multiple orders
with varying CPM's will be running throughout the two-year
campaign period. Payment will be due within 30 days from
invoice date and failure to pay such invoices within the
30-day period will result in a suspension of all ad campaigns
DALLAS until the account is made current.
/s/ Warren Bear
-----------------------------------
Warren Bear - President
Headhunter.net
245 FIFTH AVENUE, NEW YORK, NY 10018 TEL 212-683-0001 FAX 212655-4835
<PAGE> 1
Exhibit 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
and to all references to our firm included in or made part of this registration
statement.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
Atlanta, Georgia
July 28, 1998
