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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 26, 1998
REGISTRATION NO. 333-59389
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
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 AUGUST 26, 1998
PROSPECTUS
2,500,000 SHARES
[LOGO]
COMMON STOCK
All of the 2,500,000 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 $11.00 and $13.00 per share. See "Underwriting" for
information relating to the determination of the initial public offering price.
The Company's Common Stock has been approved for listing 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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(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 $800,000 payable by the
Company.
(3) The Company has granted the Underwriters a 30-day over-allotment option to
purchase up to 375,000 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.
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[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..................... 2,500,000 shares
Common Stock to be outstanding
after the Offering............ 7,500,000 shares(1)
Use of Proceeds............... Marketing and selling costs, including the
development of strategic relationships;
repayment of debt to an affiliate of the
Company's majority shareholder; and working
capital and general corporate purposes. See
"Use of Proceeds" and "Certain Transactions."
Nasdaq National Market
Symbol........................ HNET
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(1) Excludes (i) 399,250 shares of Common Stock issuable upon the exercise of
outstanding options, none of which are currently exercisable and (ii) 31,250
shares of Common Stock (assuming an initial public offering price of $12.00
per share) issuable upon the exercise of a warrant granted by the Company to
ITC Service Company, an affiliate of the Company's majority shareholder, 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," "-- Director
Compensation" 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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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 1,364,098
-------- --------- --------- --------- --------- ------------
Operating income (loss)........... 45,165 128,459 (34,320) (182,618) 7,663 (1,086,047)
Net income (loss)................. $ 45,165 $ 128,623 $ (35,163) $(176,392) $ 7,062 $ (1,078,503)
======== ========= ========= ========= ========= ============
LOSS PER SHARE:(1)
Basic............................. $ (0.08) $ (0.49)
Diluted........................... $ (0.08) $ (0.47)
WEIGHTED AVERAGE SHARES OUTSTANDING(2):
Basic............................. 2,200,000 2,200,000
Diluted........................... 2,289,440 2,289,440
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(3)....... 2,500,000 11,400,000
</TABLE>
<TABLE>
<CAPTION>
SUCCESSOR COMPANY
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AS OF JUNE 30, 1998
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ACTUAL AS ADJUSTED(4)
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(UNAUDITED) (UNAUDITED)
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 196,366 26,896,366
Working capital............................................. (420,120) 26,679,880
Total assets................................................ 1,524,696 28,224,696
Total debt, including current maturities.................... 400,000 --
Total shareholders' equity.................................. 752,014 27,852,014
</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) Does not give effect to the conversion of the Company's Class A Preferred
Stock into Common Stock. See "Description of Capital Stock."
(3) 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.
(4) Adjusted to reflect the sale of 2,500,000 shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $12.00 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 $1.3 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 and user traffic, (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 historically offered all of its enhanced listing services
together at a single flat rate. Although the Company continues to offer these
services on a bundled basis, it recently began offering enhanced listing
services on an unbundled basis, allowing job listers to pay a separate daily fee
only for those services they desire to purchase. The Company also recently
implemented its proprietary variable pricing program for preferential search
result ordering, AVILUS (Associated Value Internet Listing Upgrade System). This
variable pricing program allows job listers to improve the placement of their
job listing in a search results page by changing the amount they pay for such
upgrade on a daily basis. While the Company believes that offering unbundled
services and the implementation of a variable pricing program in addition to
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the flat rate fee structure will increase listing enhancement revenues, such a
model has not been previously utilized on the Internet. There can be no
assurance that the use of such model will enable the Company to derive equal or
higher revenues from the sale of enhanced listing services than it previously
did or that the Company will ever derive substantial revenues from listing
enhancements. For the six months ended June 30, 1998, fees 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, the Company is generally aware that its customers
advertise on non-competing Web sites as well as competing Web sites. The Company
also believes that certain of the companies with which it has strategic
relationships have also established relationships with certain of the Company's
competitors. For example, the Company believes that The Monster Board, Online
Career Center and Career Mosaic have relationships with Yahoo! and AltaVista
which include advertising and cross-posting arrangements and may involve other
arrangements of which the Company has no knowledge. A number of the Company's
competitors may also have relationships with ISPs, OSPs and other Internet
content providers, of which the Company has no specific knowledge. 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
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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 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, its President and Chief Executive Officer. The Company has
obtained a "key person" life insurance policy on Mr. Bare in the amount of $3.5
million. The loss of the services of Mr. Bare could have a material adverse
effect on the business, results of operations or financial condition of the
Company. Given the Company's early stage of
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development, the Company is dependent on its ability to attract, retain and
motivate high quality personnel, especially its management and development
teams. 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."
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 acquired 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
$12.00 per share, approximately 71.6% 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
an affiliate of the Company's majority shareholder and for working capital and
other general corporate
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purposes, which may include capital expenditures, expansion of facilities,
personnel, general and administrative expenses, and acquisitions. The amount of
debt to be repaid to an affiliate of the Company's majority shareholder will be
approximately $2.3 million, comprised of outstanding principal and approximately
$19,125 of interest, assuming the Offering is consummated on September 30, 1998.
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."
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
its Web site. Accordingly, the Company depends upon ISPs, OSPs and other Web
site operators, which may experience Internet connectivity outages. Such an
outage may cause the Company's users to experience difficulties accessing the
Company's Web site. The Company currently uses Frontier GlobalCenter, Inc.
("Frontier GlobalCenter") as a co-location facility for substantially all of its
Web servers, and uses ITC'DeltaCom, Inc. ("ITC'DeltaCom") as the ISP for its
corporate headquarters. Any system failure at Frontier GlobalCenter or with
ITC'DeltaCom 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 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
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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.
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.
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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 has made application for
a patent for its proprietary variable pricing program, 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 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 36.9% and 23.5% (assuming an initial public offering price of
$12.00 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
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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, 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 $8.40 per
share, representing an immediate dilution of approximately 70.0% 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 7,500,000 shares of Common Stock, assuming no exercise of any
portion of the Underwriters' over-allotment option. Of these shares, the
2,500,000 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 5,000,000 outstanding shares of Common
Stock 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 Service Company and all current shareholders, including ITC and Mr.
Bare have agreed not to, directly or indirectly, without the prior written
consent of Wheat First Securities, Inc., offer, sell or otherwise dispose of any
shares of Common Stock, options or warrants to
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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
399,250 shares of Common Stock had been granted, none of which will become
exercisable within 180 days following the date of this Prospectus. An additional
483,000 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 31,250 shares of Common Stock
(assuming an initial public offering price of $12.00 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 31,250 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 and such shares would also be subject to the agreement by ITC
Service Company not to directly or indirectly, without the prior written consent
of Wheat First Securities, Inc., offer, sell or otherwise dispose of any shares
of the Company's Common Stock. 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 program to correct any problems. 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. To date, the Company has not incurred any material expenses in
connection with the assessment, remediation, testing or implementation of its
program to achieve Year 2000 readiness.
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.
16
<PAGE> 18
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 2,500,000 shares of
Common Stock in this Offering are estimated to be approximately $27.1 million
(approximately $31.3 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 $19.4 million to expand the Company's marketing and selling
efforts, including the development of additional strategic relationships; (ii)
approximately $2.3 million to repay the Company's amended and restated credit
facility with ITC Service Company, comprised of outstanding principal and
approximately $19,125 of interest (assuming the Offering is consummated on
September 30, 1998); 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 6.8%) 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.
17
<PAGE> 19
DILUTION
The net tangible book value of the Company at June 30, 1998 was
approximately $(96,000) 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 2,500,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $12.00 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 $27.0 million, or $3.60 per share, representing an immediate
increase of $3.64 in net tangible book value per share to existing shareholders
and an immediate dilution of $8.40 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.................... $12.00
Net tangible book value at June 30, 1998................. $(0.04)
Increase attributable to the sale of shares offered
hereby................................................. 3.64
------
Pro forma net tangible book value after the Offering..... 3.60
------
Dilution per share to new investors(1)................... $ 8.40
======
</TABLE>
- ---------------
(1) If the Underwriters' over-allotment option is exercised in full, pro forma
net tangible book value of the Company would be $3.96 per share,
representing an increase in pro forma net tangible book value of $4.00 per
share and dilution to new investors of $8.04 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 66.7% $ 2,000,000 6.3% $ 0.40
New investors............................ 2,500,000 33.3 30,000,000 93.7 12.00
--------- ---- ----------- ----
Total.......................... 7,500,000 100% 32,000,000 100%
========= ==== =========== ====
</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 399,250
shares of Common Stock at a weighted average exercise price of $0.70 per share
and an outstanding warrant to purchase 31,250 shares of Common Stock (assuming
an initial public offering price of $12.00 per share) at an exercise price per
share equal to the initial public offering price. The exercise of these options
and warrants would have the effect of increasing the dilution per share to new
investors in this Offering to $8.59.
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 2,500,000 shares of Common Stock offered hereby (assuming an
initial public offering price of $12.00 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), none
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), 7,500,000 shares issued and outstanding (as
adjusted)(1)........................................... 22,000 75,000
Paid-in capital........................................... 1,956,909 29,031,909
Retained earnings (accumulated deficit)................... (1,254,895) (1,254,895)
----------- -----------
Total shareholders' equity........................ 752,014 27,852,014
----------- -----------
Total capitalization.............................. $ 752,014 $27,852,014
=========== ===========
</TABLE>
- ---------------
(1) Excludes 361,750 shares of Common Stock that were subject to outstanding
options at June 30, 1998 at a weighted average exercise price of $0.58 per
share. See "Management -- HeadHunters, L.L.C. Employee Common Unit Option
Plan, "-- HeadHunter.NET 1998 Long-Term Incentive Plan," "-- Director
Compensation" 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 1,364,098
-------- --------- --------- --------- --------- ------------
Operating income (loss)........... 45,165 128,459 (34,320) (182,618) 7,663 (1,086,047)
Net income (loss)................. $ 45,165 $ 128,623 $ (35,163) $(176,392) $ 7,062 $ (1,078,503)
======== ========= ========= ========= ========= ============
LOSS PER SHARE:(1)
Basic............................. $ (0.08) $ (0.49)
Diluted........................... $ (0.08) $ (0.47)
WEIGHTED AVERAGE SHARES OUTSTANDING(2):
Basic............................. 2,200,000 2,200,000
Diluted........................... 2,289,440 2,289,440
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(3)....... 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 (420,120)
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 44,376 752,014
</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) Does not give effect to the conversion of the Company's Class A Preferred
Stock into Common Stock. See "Description of Capital Stock."
(3) 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 356% 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. Until August 1, 1998, the Company charged a single flat rate
for all of the enhanced listing services together, which included improved
placement of job listings. This simple flat rate structure covered enhanced
listing services provided on a monthly basis, with discounts offered for
prepayments on a quarterly or annual basis. Effective August 1, 1998 the Company
began
21
<PAGE> 23
offering enhanced listing services on an unbundled basis, allowing job listers
to pay a separate daily fee only for those services they desire to purchase.
Also on August 1, 1998, the Company implemented its proprietary variable pricing
program, AVILUS. This variable pricing program allows job listers to improve the
placement of their job listings on a search results page by changing the amount
they pay for such upgrades on a daily basis. The Company continues to offer its
enhanced listing services together for a monthly flat rate, which it believes
are attractive to high volume job listers. The Company believes that the
implementation of the unbundled enhanced listing services and AVILUS will
provide a cost effective means for lower volume job listers to enhance their
employment opportunities, thereby creating increased revenue opportunities for
the Company.
The Company has only recently offered unbundled enhanced listing services
and implemented AVILUS. There can be no assurance that the Company will derive
equal or greater revenues from the sale of enhanced listing services than it
previously did with the flat rate structure or that the Company will ever derive
substantial revenues from the sale of such services. Enhanced listing revenue
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
post large databases of employment opportunities to the Company's Web site at
once. 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. The Company has
experienced, and expects to continue to experience, seasonality in its business,
with user traffic on its Web site being lower during the summer and year-end
vacation and holiday periods. In addition, the Company has incurred significant
losses since its inception and, as of June 30, 1998, had an accumulated deficit
of approximately $1.3 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."
22
<PAGE> 24
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.
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 $634,000, from $66,000 for the six months ended June 30, 1997 to
$700,000 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.
23
<PAGE> 25
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
and 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.
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 6.8%) 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 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. These
problems generally arise from the fact that most of the world's computer
hardware and software has historically used only two
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digits to identify the year in a date, often meaning that the computer will
recognize a code of "00" as the year 1900 rather than the year 2000.
The Company's overall plan to achieve Year 2000 readiness includes the
following phases: (i) assessment of repair requirements, which includes creating
awareness of the issue throughout the Company and assessment of all systems,
significant business processes and external interfaces and dependencies; (ii)
remediation, which includes updating or modifying systems which are identified
as critical to the Company's efforts to become Year 2000 ready; (iii) testing,
which includes the testing of systems which have been altered or replaced as
part of the Company's efforts to become Year 2000 ready; (iv) implementation,
which includes the implementation of tested systems which have been altered or
replaced as part of the Company's efforts to become Year 2000 ready; and (v)
contingency planning.
The Company's assessment phase is substantially complete and included the
determination of whether the system being reviewed was: (i) internally
developed; (ii) a third party system critical to the Company's operations or
(iii) a non-critical system or piece of software or hardware. All internally
developed systems have been developed and tested to ensure Year 2000 compliance.
The Company has confirmed that most of its critical third party products or
services are either Year 2000 compliant or that information and assistance is
available to ensure compliance, which the Company intends to test and complete
by the first quarter of 1999. The Company believes that none of its non-critical
systems or software provide a material risk of significant Year 2000 related
disruptions, but will continue to review and update these systems and software
as additional information becomes available or as revisions are distributed. In
conducting this review, the Company was aware and took into account that some of
its hardware contains embedded processors. As a general matter, the Company is
vulnerable to a significant supplier's or vendor's inability to remedy its own
Year 2000 issues. There can be no assurance that the software and hardware
provided by third parties will be Year 2000 ready.
In order for persons to utilize the Company's services through the
Internet, the Company is dependent upon ISPs, providers of telecommunication and
data services, government agencies, utility companies, and other third party
service providers ("External Providers"), over which it can assert little
control. If the inability of any of these entities to correct their Year 2000
issues results in a failure to provide the Company services or prevents persons
from being able to access the Company's services, the Company's operations may
be materially adversely impacted and may result in a material adverse effect on
the Company's business, results of operations and financial condition. The
Company depends upon ISPs and other telecommunications and data carriers to
conduct its business and is heavily dependent upon their ability to correctly
fix their Year 2000 issues. If ISPs and other telecommunications and data
carriers and other External Providers do not appropriately rectify their Year
2000 issues, the Company's ability to conduct its business may be materially
impacted, which could result in a material adverse effect on the Company's
business, results of operations and financial condition.
To date, the Company has not incurred any material expenses in connection
with the assessment, remediation, testing, or implementation of its program to
achieve Year 2000 readiness. Nor has the Company identified any business
activity that it believes will suffer a material disruption as a result of Year
2000 related events. All costs associated with Year 2000 compliance are being
expensed as incurred.
The Company intends to develop contingency plans for significant business
risks that might result from Year 2000 related events. As noted above, the
Company has not identified any specific business activity that it believes will
be materially at risk of significant Year 2000 related disruptions. Also, the
remediation, testing and implementation phases are not yet complete. Therefore,
the Company has not yet developed specific contingency plans for Year 2000
related events. The Company is aware of the possibility, however, that certain
business activities may be hereafter identified as at risk and will develop
contingency plans if and when such risks are identified.
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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.
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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 companies have extended their
pre-existing pricing models to their Web sites by charging job listers
significant up-front fees for each job listed and that by charging such fees
these companies have effectively limited the number of jobs listed on their Web
sites.
Since job seekers have equal access to all of the competing online
recruiting Web sites, the Company believes job seekers will be most attracted to
the Web site with the largest number of jobs listed and the search capabilities
and overall functionality to effectively search the database. With the objective
of having the most comprehensive database of jobs on the Internet, the Company
offers its basic listing service at no charge to users, as opposed to the
predominant competitive practice of charging job listers up-front fees for each
job listed. By offering its basic listing services free of charge, the Company
is able to more effectively attract job listers who may be less willing to pay
up-front fees, including small to midsize job listers and smaller traditional
recruiting companies.
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 has historically
offered all of its enhanced listing services together at a single flat rate.
Although the Company continues to offer these services on a bundled basis, it
recently began offering enhanced listing services on an unbundled basis,
providing users maximum flexibility to choose only those enhanced listing
services which they desire to purchase and allowing them to pay a separate daily
fee only for those services they desire to purchase. The Company also recently
implemented its proprietary variable pricing program for preferential search
result ordering, AVILUS (Associated Value Internet Listing Upgrade System). 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 in addition to its flat monthly rate. The Company's pricing 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. See " -- Pricing Strategy and Service Offerings."
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.
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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.
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 second 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 (the "Career Center").
The Career Center became operational in the third quarter of 1998. The Career
Center enables users to list job opportunities and resumes, and a networking
center will include chat rooms, message boards and forum events. HeadHunter.NET
has 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 170 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. 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. AltaVista's
Careers Zone displays the Company's name with a link to its Web site and the
Fast Company Career Center will display the Company's name with a link to its
Web site when it becomes operational.
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 July 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 AltaVista
as having the eleventh largest audience reach on the Internet during July 1998.
AltaVista provides its customers with continuous access to the Careers Zone.
HeadHunter.NET and WorkLife recently entered into a non-exclusive agreement
under which the Company posts 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 believes that this agreement provides additional
traffic because many users who link to the Company's Web site from the Careers
Zone 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
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providers, including AOL, Classifieds2000 Inc., DoubleClick, GeoCities, Lycos,
Inc. and Yahoo!. The Company's agreements to purchase advertising from these
providers are generally short-term, ranging from six months to two years,
pursuant to which it generally receives a guaranteed number of impressions for a
fixed fee. The Company is currently obligated to purchase a minimum of $2.1
million and $2.8 million in Internet advertisements in 1998 and 1999,
respectively. 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.
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 its
enhanced listing services together at a single flat rate. Although the Company
continues to offer these services on a bundled basis, it recently began offering
enhanced listing services on an unbundled basis, allowing job listers to pay a
separate daily fee only for those services they desire to purchase. The Company
also recently implemented its proprietary variable pricing program for
preferential search result ordering, AVILUS. This model will provide maximum
flexibility to choose only those enhanced listing services which they desire to
purchase and to control search result placement of their employment listings.
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 an
employment search result. Job listers compete for preferential search result
ordering using the Company's proprietary variable pricing program, AVILUS. Using
AVILUS each job lister who desires preferential search result ordering pays a
daily fee (or bid) for each employment opportunity it posts on the Company's Web
site. Each job lister can view the amounts that other job listers have paid (or
bid) for placement on a search result page. Job listers may then change their
daily fee (or 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 by other job listers.
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. Although job listers may list their job
opportunities directly on Yahoo! Classifieds and AltaVista's Careers Zone
without charge, the Company believes that job listers are willing to purchase
this listing service
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because of the convenience it provides by allowing job listers to post and
maintain job opportunities in one location (the Company's Web site) and gain
greater visibility through a broader distribution.
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 12 full-time
employees who are dedicated to establishing relationships with potential job
listers and advertisers and maintaining existing 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
recently hired an additional listing enhancement sales person 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.
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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.
Distribution and Fault Tolerance. The Company's Web content is delivered
to the Internet from a collection of parallel Pentium-based servers installed in
computer racks at co-location facilities in Herndon, Virginia and Sunnyvale,
California. The Company plans to install additional servers in New York City in
the fourth quarter of 1998. The co-location services are contracted from
Frontier GlobalCenter, which also provides co-location services for other large
Web sites such as Yahoo! and Netscape Communications Corporation.
When a user requests information from HeadHunter.NET, the request is routed
over the Internet, using proprietary third party hardware, to the closest rack
of servers having available capacity. This architecture balances the user load
across diverse geographic locations and provides fault tolerance, rerouting
requests away from any location that may be suffering from a network outage.
This architecture also allows the Company's Web site to remain available
24-hours-a-day, seven-days-a-week. If a server or servers need routine
maintenance, user requests can be temporarily routed to alternate servers.
When a job listing or resume is submitted to HeadHunter.NET, the job
listing or resume is distributed simultaneously to all HeadHunter.NET servers
using an internally developed proprietary technology called Q-Blast(TM). Q-Blast
allows a single copy of any listing to be sent to each rack, then in turn to all
of the servers in the rack. Additionally, Q-Blast records listing transactions
and allows any given rack or server to go off-line (as in the case of a system
reboot), then come back online and automatically begin receiving listings where
it left off. This proprietary technology is essential to maintaining consistency
across a collection of geographically dispersed parallel servers while still
providing users with immediate access to new and changing job listings or
resumes.
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 has made application for a
patent on its proprietary variable pricing program, 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
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proprietary rights to third parties; however, the Company has not in the past,
and does not expect in the future, to receive a material amount of revenues from
such licensing. 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 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.
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<PAGE> 36
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 August 24, 1998, the Company had a total of 31 full-time employees
and one part-time employee, all of whom are based at the Company's executive
offices in Norcross, Georgia. Of the 32 employees, 16 are in sales and
marketing, seven are in technology and nine 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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<PAGE> 37
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 an M.B.A. in finance from
Indiana University.
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<PAGE> 38
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> 39
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 upon listing on Nasdaq's National Market. In addition,
Messr. Goldstein and Weber were granted options by the Board of Directors
outside of either plan. 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
accordance with their letter agreements, the Company granted options for the
purchase of common units of LLC to each of Messrs. Dopher, Fouraker,
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<PAGE> 40
Lundberg, Presley and Ms. Hackett for 100,000, 7,500, 50,000, 50,000 and 50,000
common units, respectively, on January 14, May 22, January 14, January 14, May
22, 1998, respectively. On July 15, 1998 all such options were 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, 24 persons hold outstanding Converted Options to
purchase a total of 361,750 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 and Cox each hold a Converted Option to purchase
10,000 shares of Common Stock at exercise prices of $0.40. See "-- Employment
Agreements" and "-- Director Compensation." The Company does not intend to grant
any additional options pursuant to the HH LLC Plan.
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
July 16, 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
after the Company's Common Stock is listed on the Nasdaq National Market. As of
the date hereof, there are 31 persons eligible to participate in the Incentive
Plan and there are seven persons holding outstanding options to purchase 17,500
shares of Common Stock that were granted under 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.
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<PAGE> 41
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)....................... 2,781,250 55.3% 36.9%
Warren L. Bare(2).................................. 1,760,000 35.2 23.5
William H. Scott, III(3)........................... 2,781,250 55.3 36.9
J. Douglas Cox(3).................................. 2,781,250 55.3 36.9
Robert M. Montgomery(3)............................ 2,781,250 55.3 36.9
Burton B. Goldstein, Jr............................ -- -- --
Donald W. Weber(3)................................. 2,781,250 55.3 36.9
All directors and executive officers as a group
(8 persons)...................................... 4,541,250 90.3 60.3
</TABLE>
- ---------------
(1) ITC's address is 1239 O.G. Skinner Drive, West Point, Georgia 31833.
Includes 31,250 shares of Common Stock (assuming an initial public offering
price of $12.00 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 2,781,250 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
6.8%) on the first $1.0 million and at a fixed rate of 14% per annum on the
remaining $1.5 million. Upon consummation of the Offering (assumed to be
September 30, 1998), the Company will use a portion of the net proceeds to repay
the outstanding principal balance and interest of approximately $2.3 million at
which time such credit facility will terminate. The total amount of
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<PAGE> 42
interest paid over the assumed term of this credit facility will be
approximately $41,000. 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.
Pursuant to a Contribution Agreement dated July 15, 1998, ITC and Mr. Bare
were granted certain registration rights regarding their shares of Class A
Preferred Stock and Common Stock in the Company. For a complete description of
such registration rights, see "Description of Capital Stock -- Registration
Rights."
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 2,800,000 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.
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<PAGE> 43
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 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
42
<PAGE> 44
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.
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
43
<PAGE> 45
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 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 American Stock
Transfer & Trust.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 7,500,000 shares of
Common Stock outstanding, assuming no exercise of the Underwriters'
over-allotment option. The 2,500,000 shares sold in the Offering (2,875,000
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 5,000,000 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 Service Company and all of
its shareholders, including ITC 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
44
<PAGE> 46
Mr. Bare. As of the date of this Prospectus, substantially all of the restricted
shares are held by affiliates of the Company and 90 days after the Offering, all
restricted 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
399,250 shares of Common Stock held by certain employees, officers and directors
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.
ITC and Mr. Bare have certain registration rights regarding the 2,750,000
and 1,760,000 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 31,250 shares of Common Stock (assuming an initial public
offering price of $12.00 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.
45
<PAGE> 47
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............................................. 2,500,000
=========
</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 375,000 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.
The Company, ITC Service Company and all current shareholders of the
Company, including ITC and Mr. Bare 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
46
<PAGE> 48
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 375,000 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.
47
<PAGE> 49
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.
48
<PAGE> 50
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> 51
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> 52
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 $34,249 at June 30,
1998.................................................. 10,783 8,865 123,116
Affiliates (Note 3)..................................... -- 5,100 --
Prepaid expenses.......................................... -- 13,420 33,080
------- ---------- -----------
Total current assets................................ 36,756 881,374 352,562
------- ---------- -----------
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 (Note 2)....................................... -- 4,230 152,297
------- ---------- -----------
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...................................... -- -- 32,705
Other accrued expenses.................................... -- -- 58,387
Deferred revenue.......................................... -- 11,775 109,015
------- ---------- -----------
Total current liabilities........................... 3,050 92,398 772,682
------- ---------- -----------
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) (1,254,895)
------- ---------- -----------
Total shareholders' equity.......................... 55,500 1,830,517 752,014
------- ---------- -----------
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> 53
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 66,281 700,096
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 1,364,098
------- -------- -------- ---------- -------- -----------
OPERATING INCOME (LOSS)................... 45,165 128,459 (34,320) (182,618) 7,663 (1,086,047)
OTHER INCOME (EXPENSE).................... -- 164 (843) 6,226 (601) 7,544
------- -------- -------- ---------- -------- -----------
NET INCOME (LOSS)......................... $45,165 $128,623 $(35,163) $ (176,392) $ 7,062 $(1,078,503)
======= ======== ======== ========== ======== ===========
LOSS PER SHARE:
Basic................................... $ (0.08) $ (0.49)
Diluted................................. $ (0.08) $ (0.47)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic................................... 2,200,000 2,200,000
Diluted................................. 2,289,440 2,289,440
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 54
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................. -- -- -- -- -- (1,078,503) (1,078,503)
--------- ------- --------- ------- ---------- ----------- -----------
Balance, June 30, 1998
(unaudited).............. 2,800,000 $28,000 2,200,000 $22,000 $1,956,909 $(1,254,895) $ 752,014
========= ======= ========= ======= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 55
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 $(1,078,503)
-------- --------- -------- ---------- -------- -----------
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 -- 91,092
Deferred revenue............ -- -- -- 11,775 -- 97,240
-------- --------- -------- ---------- -------- -----------
Total adjustments......... (16,372) 15,997 24,171 104,103 6,557 121,489
-------- --------- -------- ---------- -------- -----------
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> 56
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, including $21,000 in furniture and fixtures,
$979,000 in acquired software rights and $100,000 in dividends payable.
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. The transaction has been accounted for in a manner
similar to a pooling of interest (Note 2).
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> 57
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 in the month impressions are delivered.
DEFERRED REVENUE
Deferred revenues represent the liability for advance billings to
customers, primarily related to enhanced listing services. Such amounts are
recognized as revenues when the related services are performed.
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> 58
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 include all rights to the HeadHunter.NET web site
and 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.
OTHER ASSETS
Other assets consist of the following at June 30, 1998 (unaudited):
<TABLE>
<S> <C>
Deposit on office furniture................................. $104,209
Other deposits.............................................. 48,088
--------
$152,297
========
</TABLE>
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
F-9
<PAGE> 59
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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.
F-10
<PAGE> 60
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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 entered into an agreement with an Internet company to purchase
a minimum of $60,000 in banner advertising on the advertiser's web site by April
1998, which commitment was completed at the minimum purchase amount in April
1998.
The Company has entered into various agreements with Internet companies to
purchase a minimum of $496,000 and $229,000 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
F-11
<PAGE> 61
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 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 may experience Internet connectivity
outages. Such an outage may cause the Company's users to experience difficulties
accessing the Company's web site. The Company currently uses Frontier
GlobalCenter, Inc. ("Frontier GlobalCenter") as a co-location facility for
substantially all of its web servers, and uses ITC'DeltaCom, Inc.
("ITC'DeltaCom") as its ISP for its corporate headquarters. Any system failure
at Frontier GlobalCenter or with ITC'DeltaCom 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 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 character-
F-12
<PAGE> 62
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
istics 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.
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 361,750 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 262,500 of the common units granted as determined by the board of
managers at the dates of grant. The remaining 99,250 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 $33,000 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 13, 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.
F-13
<PAGE> 63
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the Reorganization, the Company also assumed options to
purchase 361,750 common units that were granted under LLC's Common Unit Option
Plan and has converted such options into options to purchase an equal number of
shares of common stock on identical terms.
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 6.8%) 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 after the Company's
common stock is listed on the Nasdaq National Market. 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.
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> 64
------------------------------------------------------
------------------------------------------------------
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.............................. 27
Management............................ 36
Principal Shareholders................ 40
Certain Transactions.................. 40
Description of Capital Stock.......... 41
Shares Eligible for Future Sale....... 44
Underwriting.......................... 46
Legal Matters......................... 47
Experts............................... 47
Available Information................. 47
Index to Financial Statements......... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,500,000 SHARES
[LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
WHEAT FIRST UNION
J.C. BRADFORD&CO.
INTERSTATE/JOHNSON LANE
CORPORATION
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 65
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
NASD Fees................................................... 4,238
Nasdaq Fees................................................. 69,375
Blue Sky Fees and Expenses.................................. 5,000
Printing and Engraving...................................... 100,000
Legal Fees and Expenses..................................... 210,000
Accounting Fees and Expenses................................ 110,000
Transfer Agent Fees......................................... 5,000
Miscellaneous Expenses...................................... 285,361
--------
Total............................................. $800,000
========
</TABLE>
- ---------------
* All amounts other than the SEC Registration Fee and NASD Fees reflect Company
estimates.
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> 66
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.
The Company maintains a standard form of officers' and directors' liability
insurance policy which provides coverage to the officers and directors of the
Company for certain liabilities, including certain liabilities which may arise
out of this registration statement.
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; (ii) the issuance to ITC Service
Company of a warrant to purchase 31,250 shares of Common Stock (assuming an
Offering price of $12.00 per share) in connection with the Company's $2.5
million credit facility with ITC Service Company; (iii) the LLC granted
non-qualified stock options to purchase 361,750 common units of the LLC under
the HeadHunters, L.L.C. Employee Common Unit Option Plan and in connection with
the reorganization of the Company in July 1998, all of the options to purchase
shares of the LLC common units were assumed by the Company and converted into
options to purchase an equal number of shares of Common Stock; and (iv) since
July 15, 1998, the Company has issued non-qualified stock options to purchase
37,500 shares of Common Stock under individual stock option agreements and the
HeadHunter.NET, Inc. 1998 Long Term Incentive Plan. 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 and Form
of Non-Qualified Stock Option Agreement
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**++
</TABLE>
II-2
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
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 between ITC
Service Company and the Company++
10.18 -- Investment Agreement dated October 30, 1997 by and among ITC
Holding Company, Inc., Software Technology Corporation and
Warren L. Bare**
10.19 -- Form of Non-Employee Director Non-Qualified Stock Option
Agreement
10.20 -- Lycos, Inc. Advertising Contract dated April 1, 1998
10.21 -- Master Service Agreement dated June 23, 1998 between the
Company and Frontier Global Center, Inc.
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>
- ---------------
** 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.
II-3
<PAGE> 68
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 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> 69
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
ATLANTA, STATE OF GEORGIA, ON AUGUST 25, 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. 2 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, August 25, 1998
- ----------------------------------------------------- President and Director
Warren L. Bare (Principal Executive Officer)
/s/ KENNETH E. DOPHER Chief Financial Officer and August 25, 1998
- ----------------------------------------------------- Secretary (Principal
Kenneth E. Dopher Financial and Accounting
Officer)
/s/ WILLIAM H. SCOTT, III* Chairman of the Board and August 25, 1998
- ----------------------------------------------------- Director
William H. Scott, III
/s/ ROBERT M. MONTGOMERY* Director August 25, 1998
- -----------------------------------------------------
Robert M. Montgomery
/s/ BURTON B. GOLDSTEIN, JR.* Director August 25, 1998
- -----------------------------------------------------
Burton B. Goldstein, Jr.
/s/ DONALD W. WEBER* Director August 25, 1998
- -----------------------------------------------------
Donald W. Weber
/s/ J. DOUGLAS COX* Director August 25, 1998
- -----------------------------------------------------
J. Douglas Cox
/s/ WARREN L. BARE
*By:-------------------------------------------------
Warren L. Bare, Attorney-in-fact
</TABLE>
II-5
<PAGE> 70
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 and Form
of Non-Qualified Stock Option Agreement
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 between ITC
Service Company and the Company++
10.18 -- Investment Agreement dated October 30, 1997 by and among ITC
Holding Company, Inc., Software Technology Corporation and
Warren L. Bare**
10.19 -- Form of Non-Employee Director Non-Qualified Stock Option
Agreement
10.20 -- Lycos, Inc. Advertising Contract dated April 1, 1998
10.21 -- Master Service Agreement dated June 23, 1998 between the
Company and Frontier GlobalCenter, Inc.
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>
- ---------------
** 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
EXHIBIT 1.1
2,500,000 SHARES
HEADHUNTER.NET, INC.
COMMON STOCK
------------------------------
UNDERWRITING AGREEMENT
------------------------------
WHEAT FIRST SECURITIES, INC.
J.C. BRADFORD & CO.
INTERSTATE/JOHNSON LANE CORPORATION
As Representatives of the Several
Underwriters Named in Schedule I
hereto
c/o Wheat First Securities, Inc.
Riverfront Plaza
901 East Byrd Street
Richmond, Virginia 23219 , 1998
---------------
Dear Sirs:
HeadHunter.NET, Inc., a Georgia corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
underwriters named in Schedule I hereto (the "Underwriters"), for whom you are
acting as the representatives (the "Representatives"), an aggregate of 2,500,000
shares of Common Stock, $0.01 par value per share ("Common Stock"), of the
Company (the "Firm Shares") and, at the election of the Underwriters, up to an
aggregate of 375,000 additional shares of Common Stock (the "Optional Shares")
solely to cover over-allotments, if any. The Firm Shares and the Optional Shares
that the Underwriters elect to purchase pursuant to Section 2 hereof are
collectively called the "Shares."
<PAGE> 2
1. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to,
and agrees with, the Underwriters that:
(i) The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form
S-1 (File No. 333-59389) under the Securities Act of 1933, as amended
(the "Act"), and as a part thereof a preliminary prospectus, in respect
of the Shares, and has filed one or more amendments thereto. Such
registration statement, as amended, has been declared effective by the
Commission, and no stop order suspending the effectiveness of such
registration statement has been issued, and no proceeding for that
purpose has been instituted or threatened by the Commission. Copies of
such registration statement and any amendments, including any
post-effective amendments, and all forms of the related prospectuses
contained therein and any supplements thereto, have been delivered to
you. Such registration statement, together with any registration
statement filed by the Company pursuant to Rule 462(b) of the Act,
including the prospectus, Part II, all financial schedules and exhibits
thereto, and all information deemed to be a part of such registration
statement pursuant to Rule 430A under the Act at the time when it
became effective, is herein referred to as the "Registration
Statement." The form of final prospectus that discloses all the
information that was omitted from the prospectus contained in the
Registration Statement on the effective date pursuant to Rule 430A of
the rules and regulations of the Commission under the Act and in the
form filed pursuant to Rule 424(b) under the Act is herein referred to
as the "Prospectus." The prospectus included in the Registration
Statement, and each prospectus included in any amendment thereto, prior
to the effective date of the Registration Statement, is referred to
herein as a "Preliminary Prospectus."
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued or is threatened, to the
Company's knowledge, by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations
of the Commission thereunder, and did not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by the
Underwriters through you expressly for use therein therein.
(iii) The Registration Statement conforms, and the
Prospectus and any amendments or supplements thereto will conform, in
all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and do not and will not, as of
the applicable effective date as to the Registration Statement and any
amendment thereto and as of the applicable filing date as to the
Prospectus and any amendment or supplement thereto, contain any untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein (in
the light of the circumstances under which they were made, in the case
of the Prospectus and any amendments or supplements thereto) not
misleading;
-2-
<PAGE> 3
provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by the
Underwriters through you expressly for use therein. The Company
acknowledges that the only information relating to the Underwriters
furnished in writing to the Company by the Representatives specifically
for inclusion in the Registration Statement, any Preliminary Prospectus
and the Prospectus is the information in the last paragraph on the
cover page, the paragraph relating to stabilization on the inside front
cover page and the first, second, third, seventh, eighth and ninth
paragraphs under the heading "Underwriting."
(iv) Neither the Company nor any of its subsidiaries
included on Exhibit 21.1 to the Registration Statement (the
"Subsidiaries") has sustained since the date of the latest audited
financial statements included in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
outstanding capital stock or long-term debt of the Company or any of
the Subsidiaries, or any issuance of options, warrants or rights to
purchase capital stock of the Company, or any material adverse change,
or any development involving a prospective material adverse change, in
or affecting the general affairs, management, business, condition
(financial or otherwise) or results of operations of the Company and
the Subsidiaries, taken as a whole, otherwise than as set forth or
contemplated in the Prospectus.
(v) The Company and each of its Subsidiaries have good
and marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which is
material to the business of the Company, in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made
of such property by the Company and the Subsidiaries; and any real
property and buildings held under lease by the Company or any of the
Subsidiaries are held by it under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and
buildings by the Company or such Subsidiaries.
(vi) The Company and each of its Subsidiaries have been
duly incorporated or organized and are validly existing as a
corporation or other entity in good standing under the laws of their
respective jurisdictions of incorporation or organization, with
corporate or other organizational power and authority to own or lease
their respective properties and conduct their respective businesses as
described in the Prospectus, and each has been duly qualified as a
foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, except where the failure to so qualify would not result
in a material adverse effect on the business, condition (financial or
otherwise) or results of operations of the Company or the Company and
the Subsidiaries taken as a whole.
-3-
<PAGE> 4
(vii) The Company has authorized and issued capital stock
as set forth in the Prospectus under the heading "Capitalization;" all
of the issued shares of capital stock of the Company have been duly and
validly authorized and issued, are fully paid and nonassessable and
conform to the description of the capital stock of the Company
contained in the Prospectus; there are no preemptive or other similar
rights to subscribe for or to purchase any securities of the Company;
except as described in the Prospectus, the Company has issued no
warrants, options or other rights to purchase any securities of the
Company; and except as disclosed in the Prospectus, neither the filing
of the Registration Statement nor the offering or sale of the Shares as
contemplated by this Agreement gives rise to any rights for or relating
to the registration of any securities of the Company with respect to
such filing, offering or sale. All offers and sales of securities of
the Company and its Subsidiaries have been at all relevant times duly
registered under or exempt from the registration requirements of the
Act and were duly registered or exempt from the registration
requirements of all applicable state securities or Blue Sky laws.
(viii) All of the issued and outstanding shares of, or
membership or other ownership interests in, capital stock of each of
the Subsidiaries have been duly and validly authorized and issued and
are fully paid and nonassessable; and except as otherwise set forth in
the Prospectus, all outstanding shares of capital stock of each of the
Subsidiaries are owned directly or indirectly, through a wholly-owned
subsidiary, by the Company free and clear of any perfected security
interest and any other security interests, claims, liens or
encumbrances.
(ix) The Shares have been duly and validly authorized and,
when issued and delivered against payment therefor as provided herein,
will be duly and validly issued and fully paid and nonassessable and
will conform to the description of the Shares contained in the
Prospectus as amended or supplemented.
(x) The Company has full legal right, power and authority
to enter into this Agreement and to issue, sell and deliver the Shares
to the Underwriters as provided herein, and this Agreement has been
duly authorized, executed and delivered by the Company and constitutes
a valid and binding agreement of the Company enforceable against the
Company in accordance with its terms. The issue and sale of the Shares
by the Company and the performance of this Agreement and the
consummation by the Company of the other transactions herein
contemplated will not conflict with or result in a breach or violation
of any terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which the Company or any of the Subsidiaries is a
party or is otherwise bound or to which any of the property or assets
of the Company or any of the Subsidiaries is subject. To the knowledge
of the Company and each Subsidiary, as of the date of this Agreement,
no other party under any contract or other instrument to which it is a
party is in material
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<PAGE> 5
default thereunder. The issue and sale of the shares by the Company and
the performance of this Agreement will not result in any violation of
the provisions of the articles of incorporation or bylaws of the
Company (each as amended to date the "Articles" and "Bylaws,"
respectively) or the articles of incorporation, bylaws or other
organizational documents of any of the Subsidiaries or any statute or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of the Subsidiaries or
any of its or their properties or assets; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required for the issue and sale
of the Shares or the consummation by the Company of the transactions
contemplated by this Agreement, except such as may be required under
the Act and under state securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters and the
clearance of such offering with the National Association of Securities
Dealers, Inc. (the "NASD").
(xi) There are no legal or governmental proceedings
pending to which the Company or any of its Subsidiaries is a party or
of which any property or assets of the Company or any of its
Subsidiaries is the subject, which, if determined adversely to the
Company or any of the Subsidiaries, would individually or in the
aggregate, have a material adverse effect on the business, condition
(financial or otherwise), or results of operations of the Company or of
the Company and the Subsidiaries taken as a whole and, to the best of
the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or by others.
(xii) Arthur Andersen LLP, who have certified certain
financial statements of the Company and the Subsidiaries, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.
(xiii) All employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) established, maintained or contributed to by the Company or
any of the Subsidiaries comply in all material respects with the
requirements of ERISA and no employee pension benefit plan (as defined
in Section 3(2) of ERISA) has incurred or assumed an "accumulated
funding deficiency" within the meaning of Section 302 of ERISA or has
incurred or assumed any material liability (other than for the payment
of premiums) to the Pension Benefit Guaranty Corporation.
(xiv) The consolidated financial statements of the Company
and the Subsidiaries, together with the related notes, as set forth in
the Registration Statement present fairly the consolidated financial
position and the results of operations of the Company and the
Subsidiaries at the indicated dates and for the indicated periods; such
financial statements have been prepared in accordance with generally
accepted accounting principles, consistently applied throughout the
periods presented except as noted in the notes thereon, and all
adjustments necessary for a fair presentation of results for such
periods have been made. The financial and statistical information
included in
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<PAGE> 6
the Prospectus under the headings "Summary Financial and Operating
Data," "Use of Proceeds," "Capitalization," "Selected Financial and
Operating Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," and "Management,"
presents fairly the information shown therein and has been compiled on
a basis consistent with the financial statements presented therein.
(xv) Neither the Company nor any of the Subsidiaries is in
violation of any international, federal, state or local law,
regulation, or treaty relating to the storage, handling,
transportation, treatment or disposal of hazardous substances (as
defined in 42 U.S.C. Section 9601) or hazardous materials (as defined
by any international, federal, state or local law or regulation) or
other waste products, which violation is reasonably likely to result in
a material adverse effect on the financial condition, business
operations or properties of the Company and the Subsidiaries taken as a
whole, and the Company and each of the Subsidiaries have received all
material permits, licenses or other approvals as may be required of
them under applicable international, federal, state or local
environmental laws and regulations to conduct their business as
described in the Prospectus; and the Company and each of the
Subsidiaries are in compliance in all material respects with the terms
and conditions of any such permit, license or approval; neither the
Company nor any of the Subsidiaries has received any notices or claims
that it is a responsible party or a potentially responsible party in
connection with any claim or notice asserted pursuant to 42 U.S.C.
Section 9601 et seq. or any state superfund law; and the disposal by
the Company or any Subsidiary of any of the Company's and each
Subsidiary's hazardous substances, hazardous materials and other waste
products, if any, has been lawful.
(xvi) No relationship, direct or indirect, exists between
or among the Company or any of the Subsidiaries, on the one hand, and
the directors, officers, shareholders, customers or suppliers of the
Company or any of the Subsidiaries on the other hand, that is required
by the Act or by the rules and regulations under the Act to be
described in the Registration Statement and the Prospectus.
(xvii) The Company and each of the Subsidiaries have filed all
federal, state, local and foreign income, franchise and excise tax
returns which have been required to be filed (or have received an
extension with respect thereto), and have paid or made adequate
reserves for, all taxes indicated by said returns and all assessments
received by them to the extent that such taxes have become due and are
not being contested in good faith; to the best knowledge of the Company
there is no tax deficiency that has been or might be asserted against
the Company that would have a material adverse effect on the business,
properties, financial condition, or results of operations of the
Company and the Subsidiaries taken as a whole.
(xviii) Neither the Company nor any of the Subsidiaries has
taken and none of such entities will take, directly or indirectly, any
action that is designed to or that has constituted or that might
reasonably be expected to cause or result in stabilization or
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<PAGE> 7
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares;
(xix) The Shares have been approved for listing, subject to
notice of issuance, on the Nasdaq Stock Market's National Market (the
"Nasdaq National Market").
(xx) The Company operates its business in each
jurisdiction in which it is doing business in conformity with all
applicable statutes, ordinances, decrees, orders, rules and regulations
of all applicable governmental bodies, including federal, state and
local governing bodies in the United States and all foreign governments
in areas outside of the United States. The Company and each of the
Subsidiaries holds and are operating in compliance, in all material
respects, with all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates and orders of any
governmental or self-regulatory body required for the conduct of their
respective businesses as presently being conducted ("licenses"), and
the Company, and each of the Subsidiaries are in compliance, in all
material respects, with all laws, regulations, orders and decrees
applicable to them except where the failure to be in compliance would
not have a material adverse effect on the Company and the Subsidiaries,
taken as a whole.
(xxi) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary, to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; and (iii) assets are properly accounted for and safeguarded
against errors or loss from unauthorized use. Neither the Company nor
any director, officer, agent, employee or other person acting, with the
Company's knowledge, on behalf of the Company has, directly or
indirectly, used any funds of the Company for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political
activity, made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or
campaigns from funds of the Company, violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or made any bribe,
rebate, payoff, influence payment, kickback or other payment, or
received or retained any funds, in violation of any law, rule or
regulation.
(xxii) The Company has filed with or submitted to the
applicable regulatory authorities each statement, report, information
or form required by any applicable law, regulation or order; all such
filings or submissions were in compliance with applicable laws when
filed and no deficiencies have been asserted by any regulatory
commission, agency or authority with respect to such filings or
submissions. The Company maintains in full force and effect all
licenses and permits necessary for the conduct of its business and has
not received any notification that any revocation or limitation thereof
is threatened or pending. To the knowledge of the Company, there is not
pending any change under any law, regulation, license or permit which
could have a material adverse effect on the business, condition
(financial or otherwise) or results of operations of the
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<PAGE> 8
Company. The Company has not received any notice of violation of or
been threatened with a charge of violating and, to the knowledge of the
Company, is not under investigation with respect to a possible
violation of any provision of any law, regulation or order.
(xxiii) There is no document or contract of a character
required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
which is not described or filed as required. All documents or contracts
required to be filed as exhibits to the Registration Statement to which
the Company or any Subsidiary is a party have been filed as exhibits to
the Registration Statement and have been duly authorized, executed and
delivered by the Company or such Subsidiary, constitute valid and
binding agreements of the Company or such Subsidiary and are
enforceable against the Company or such Subsidiary in accordance with
the terms thereof, except where the lack of authorization, execution,
delivery or enforceability of any such contract would not materially
and adversely affect the Company, the Subsidiaries or their business,
condition (financial or otherwise) or results of operations or prevent
or materially hinder the consummation of this Agreement.
(xxiv) No labor dispute exists with the Company's employees
or is imminent which could have a material adverse effect on the
business, (financial or otherwise) condition or results of operations
of the Company. The Company is not aware of any existing or imminent
labor disturbance by its employees which could be expected to have a
material adverse effect on the business, condition (financial or
otherwise) or results of operations of the Company.
(xxvii) The Company is not, will not become as a result of
the transactions contemplated hereby, and does not intend to conduct
its business in a manner that would cause it to become, an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended (the
"1940 Act");
(xxviii) The Company has not violated any applicable laws
relating to immigration and has employed only individuals authorized to
work in the United States and has never been the subject of any
inspection or investigation relating to its compliance with or
violation of the Immigration Reform and Control Act of 1986 and all
Regulations promulgated thereunder.
(xxix) Other than as set forth in the Prospectus, the
Company's internal systems and software and the network connections it
maintains are adequately programmed to address the Year 2000 issue.
(xxx) The Company has not received any communication
(written or oral) relating to the termination or modification or
threatened termination or modification of any of the agreements named
or referred to in the Prospectus, nor has it received any communication
(written or oral) relating to any determination not to renew or extend
any
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<PAGE> 9
such agreement at the end of the current term of any such agreement,
except where any such termination, modification, non-renewal or
non-extension would not have a material adverse effect on the business,
condition (financial or otherwise) or results of operations of the
Company.
(xxxi) Any certificate signed by any officer of the Company
and delivered to the Representatives or counsel for the Underwriters
shall be deemed to be a representation and warranty by the Company to
each Underwriter as to the matters covered thereby.
(xxv) The filing of the Registration Statement has been
duly authorized by the Board of Directors of the Company. This
Agreement has been duly authorized, executed and delivered by the
Company.
(xxvi) There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of
business) or guarantees of indebtedness by the Company to or for the
benefit of any of the officers or directors of the Company or any of
the members of the families of any of them, except as disclosed in the
Registration Statement and the Prospectus.
(xxvii) The Company and the Subsidiaries own or possess
adequate rights to use all patents, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names and
copyrights which are necessary to conduct their businesses as described
in the Registration Statement and Prospectus; neither the Company nor
the Subsidiaries have received any notice of, and have no knowledge of,
any infringement of or conflict with asserted rights of the Company of
the Subsidiaries by others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade
names of copyrights, and the Company and the Subsidiaries have not
received any notice of, and have no knowledge of, any infringement of
or conflict with asserted rights of others with respect to any patent,
patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names or copyrights owned or used by the Company or the
Subsidiaries, which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, could have a material adverse
effect on the business, condition (financial or otherwise) or results
of operations of the Company and the Subsidiaries taken as a whole.
(xxviii)The Company and the Subsidiaries maintain insurance
with insurers of recognized financial responsibility against such
losses and risks and in such amounts as management believes it
appropriate to the business of the Company and all such policies are in
full force and effect. The Company has no reason to believe that it
will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that
would not materially and adversely affect the business, condition
(financial or otherwise) or results of operations of the Company and
its Subsidiaries taken as a whole.
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<PAGE> 10
(xxix) The Company has not distributed and will not
distribute prior to the later of (i) the First Delivery Date or the
Second Delivery Date, as the case may be, or (ii) completion of the
distribution of the Shares, any offering material in connection with
the offering and sale of the Shares other than any preliminary
prospectuses, the Prospectus, the Registration Statement and other
materials, if any, permitted by the Act.
2. PURCHASE AND SALE.
Subject to the terms and conditions herein set forth, (a) the Company
agrees to sell to the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company at a purchase price of
$_______ per share, the number of Firm Shares to be purchased by such
Underwriter as set forth opposite the name of such Underwriter in Schedule I
hereto and (b) in the event and to the extent that the Underwriters shall
exercise the election to purchase the Optional Shares as provided below, the
Company agrees to sell to each of the Underwriters, and each of the Underwriters
agrees, severally and not jointly, to purchase from the Company, at the purchase
price set forth in clause (a) of this Section 2, that portion of the number of
Optional Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional securities) determined by
multiplying such number of Optional Shares by a fraction, the numerator of which
is the maximum number of Optional Shares that such Underwriter is entitled to
purchase as set forth opposite the name of such Underwriter in Schedule I
hereto, and the denominator of which is the maximum number of the Optional
Shares that all of the Underwriters are entitled to purchase.
The Company hereby grants to the Underwriters the right to purchase at
their election up to 375,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
over-allotments in the sale of the Firm Shares. Any Optional Shares purchased by
the Underwriters shall be purchased from the Company. Any such election to
purchase Optional Shares may be exercised no more than once by written notice
from you to the Company, given within a period of 30 days after the date of this
Agreement, setting forth the aggregate amount of Optional Shares to be purchased
and the date on which such Optional Shares are to be delivered, as determined by
you but in no event earlier than the First Delivery Date (as defined in Section
4 hereof) or, unless you otherwise agree in writing, earlier than two or later
than 10 business days after the date of such notice.
3. OFFERING BY THE UNDERWRITERS.
Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. DELIVERY AND PAYMENT.
Certificates in definitive form for the Shares to be purchased by each
Underwriter hereunder, and in such denominations and registered in such names as
Wheat First Securities, Inc. may request upon at least two business days prior
notice to the Company shall be delivered by or on behalf of the Company to you
for the account of each Underwriter, against payment by
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<PAGE> 11
such Underwriter or on its behalf of the purchase price therefor. Payment of the
purchase price for the Shares shall be made by wire transfer of immediately
available funds, all at the offices of Wheat First Securities, Inc., Riverfront
Plaza, 901 E. Byrd Street, Richmond, Virginia 23219. The time and date of such
delivery and payment shall be, with respect to the Firm Shares, 10:00 a.m.,
Richmond, Virginia time, on ___________, 1998 or at such other time and date as
you and the Company may agree upon in writing, and, with respect to the Optional
Shares, 10:00 a.m., Richmond, Virginia time, on the date specified by you in the
written notice given by you (consistent with Section 2 hereof) of the
Underwriters' election to purchase such Optional Shares, or at such other time
and date as you and the Company may agree upon in writing. Such time and date
for delivery of the Firm Shares is herein called the "First Delivery Date," such
time and date for delivery of the Optional Shares, if not the First Delivery
Date, is herein called the "Second Delivery Date," and each such time and date
for delivery is herein called a "Delivery Date." Such certificates will be made
available for checking and packaging at least 24 hours prior to each Delivery
Date at the offices of Wheat First Securities, Inc., Riverfront Plaza, 901 E.
Byrd Street, Richmond, Virginia 23219 or such other location designated by the
Underwriters to the Company.
5. AGREEMENTS OF THE COMPANY.
The Company agrees with the Underwriters:
(a) To prepare the Prospectus in a form reasonably approved by you and
to file such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement or, if applicable, such earlier time as
may be required by Rule 430A under the Act; to make no amendment or supplement
to the Registration Statement or Prospectus prior to any Delivery Date which
shall be reasonably disapproved by you promptly after reasonable notice thereof;
to advise you, promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has been filed and to
furnish you with copies thereof; to file promptly all reports and any definitive
proxy or information statements required to be filed by the Company with the
Commission subsequent to the date of the Prospectus and for so long as the
delivery of a Prospectus is required in connection with the offering or sale of
the Shares; to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus, of the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, of any request by the Commission for the amending or supplementing of
the Registration Statement or Prospectus or for additional information and, in
the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or suspending
any such qualification, to use promptly its best efforts to obtain its
withdrawal.
(b) Promptly from time to time to take such actions as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings
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<PAGE> 12
therein in such jurisdictions for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction.
(c) To furnish the Underwriters with copies of the Registration
Statement and the Prospectus in such quantities as you may from time to time
reasonably request during such period following the date hereof that a
prospectus is required to be delivered in connection with offers or sales of
Shares, and, if the delivery of a prospectus is required during this period and
if at such time any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made when such Prospectus is delivered, not misleading, or, if for any other
reason it shall be necessary during such period to amend or supplement the
Prospectus to comply with the Act, to notify you and upon your request to file
such document and to prepare and furnish without charge to you and to any dealer
in securities as many copies as you may from time to time reasonably request of
an amended Prospectus or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance.
(d) To make generally available to its shareholders and to deliver to
you, an earnings statement of the Company, conforming with the requirements of
Section 11(a) of the Act and Rule 158 under the Act, covering a period of at
least 12 months beginning after the effective date of the Registration
Statement;
(e) For a period of 180 days from the date of the Prospectus, not to
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than the Shares or pursuant to employee stock option plans or
pursuant to options, warrants or rights outstanding on the date of this
Agreement or pursuant to bona fide gifts to persons who agree in writing with
the donor to be bound by this restriction), without your prior written consent.
(f) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to shareholders, and deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission, the Nasdaq Stock Market or
any national securities exchange on which any class of securities of the Company
is listed; and (ii) such additional information concerning the business and
financial condition of the Company as you may from time to time reasonably
request.
(g) To apply the net proceeds from the sale of the Shares for the
purposes set forth in the Prospectus and report the use of such proceeds in
accordance with Rule 463 under the Act.
(h) The Company will comply with all of the provisions of any
undertakings contained in the Registration Statement. The Company will, from
time to time, after the effective date of the Registration Statement file with
the Commission such reports as are required by the Act, the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of
the Commission thereunder, and shall also file with state securities commissions
in states where the Shares have been sold by you (as you shall have advised us
in writing) any such reports as are required to be filed by the securities acts
and the regulations of those states.
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<PAGE> 13
(i) If at any time during the 25 day period after the Registration
Statement is declared effective, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which, in your opinion, the
market price for the Common Stock has been or is likely to be materially
affected (regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising it to do so, prepare, consult with you concerning the
substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such rumor,
publication or event.
(j) Neither the Company nor any of its officers, directors or
affiliates will take, directly or indirectly, any action designed to cause or
result in, or which might constitute or be expected to constitute, stabilization
or manipulation of the price of the Common Stock.
(k) The Company will cause the Shares to be listed on the Nasdaq Stock
Market's National Market (or such other trading market as shall be approved by
you) at each Delivery Date and will use its best efforts to cause the Shares to
be so listed for at least three years from the date hereof.
(l) The Company will not invest or otherwise use the proceeds received
by the Company from its sale of the Shares in such a manner as would require the
Company to register as an investment company under the 1940 Act.
(m) The Company will maintain a transfer agent and, if necessary under
the laws of the State of Georgia, a registrar for the Common Stock.
(n) Prior to the Closing Date (and, if applicable, the Option Closing
Date), the Company will furnish to you, as soon as they have been prepared,
copies of any unaudited interim consolidated financial statements of the Company
and its Subsidiaries for any periods subsequent to the periods covered by the
financial statements appearing in the Registration Statement and the Prospectus.
(o) The Company will file a registration statement on Form 8-A with the
Commission providing for the registration of the Shares under the Exchange Act.
6. PAYMENT OF EXPENSES.
The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses in connection
with the preparation, printing and filing of the Registration Statement, any
Preliminary Prospectus and the Prospectus and amendments and supplements thereto
and the mailing and delivering of copies thereof to the Underwriters and
dealers; (ii) the cost of printing or reproducing any Agreement Among
Underwriters, Selected Dealers
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<PAGE> 14
Agreement, this Agreement, Blue Sky Memoranda and any other documents in
connection with the offering, purchase, sale and delivery of the Shares; (iii)
all expenses in connection with the qualification of the Shares for offering and
sale under state securities laws as provided in Section 5(b) hereof, including
the fees and disbursements of counsel for the Underwriters in connection
therewith; (iv) filing fees paid or incurred by the Underwriters and related
reasonable fees and expenses of counsel to the Underwriters in connection with
filings with the NASD; (v) the cost of preparing stock certificates; (vi) the
costs or expenses of any transfer agent or registrar; (vii) any expenses for
travel, lodging and meals incurred by the Company in connection with marketing,
dealer and other meetings attended by the Company and the Underwriters in
marketing the Shares; (viii) the quotation of the Shares on the Nasdaq National
Market and (ix) all other costs and expenses incident to the performance of its
obligations hereunder which are not otherwise specifically provided for in this
Section. It is understood, however, that except as provided in this Section,
Section 8 and Section 11 hereof, the Underwriters will pay all of their own
costs and expenses, including the fees of their counsel, stock transfer taxes on
resale of any of the Shares by them, and any advertising expenses connected with
any offers they may make.
7. CONDITIONS TO OBLIGATIONS OF UNDERWRITERS.
The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Delivery Date, shall be subject, in their discretion, to the
condition that all representations and warranties and other statements of the
Company herein are, at and as of such Delivery Date, true and correct, and the
condition that the Company shall have performed all of its respective
obligations hereunder theretofore to be performed, and the following additional
conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective not later than 4:00 p.m., Washington, D.C.
time, on the date of this Agreement, or such later time and date as shall have
been consented to by the Representatives, and all filings required by Rule 424,
Rule 430A, Rule 434 or Rule 462(b), if applicable, of the rules and regulations
of the Commission shall have been made; no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or, to the knowledge of
the Company, threatened by the Commission; and all requests for additional
information on the part of the Commission shall have been complied with to your
reasonable satisfaction and no Underwriter shall have advised the Company that
the Registration Statement or any amendment thereto contains an untrue statement
of fact which, in your judgment, is material or omits to state a fact which, in
your judgment, is material and is required to be stated therein or necessary to
make the statements therein not misleading, or that any Preliminary Prospectus,
the Prospectus or any supplement thereto contains an untrue statement of fact
which, in your judgment, is material, or omits to state a fact which, in your
judgment, is material and is required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading;
(b) Nelson Mullins Riley & Scarborough, L.L.P., counsel for the
Underwriters, shall have furnished to you such opinion or opinions, dated such
Delivery Date, with respect to the incorporation of the Company, the validity of
the Shares being issued at such Delivery Date, the Registration Statement, the
Prospectus, and other related matters as you may reasonably request, and such
counsel shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
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<PAGE> 15
(c) Alston & Bird LLP, counsel for the Company, shall have furnished to
you their written opinion, dated such Delivery Date, in form and substance
reasonably satisfactory to you, to the effect set forth in Exhibit A attached
hereto.
(d) At 10:00 a.m., Atlanta, Georgia time, on the date of this Agreement
and the effective date of the most recently filed post-effective amendment to
the Registration Statement and also at each Delivery Date, Arthur Andersen LLP
shall have furnished to you a letter or letters, dated the respective date of
delivery thereof, in form and substance reasonably satisfactory to you,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the financial
statements and certain financial information relating to the Company and its
Subsidiaries contained in the Registration Statement and the Prospectus;
(e) (i) Neither the Company nor any of the Subsidiaries shall have
sustained, since the date of the latest audited financial statements included in
the Prospectus, any loss or interference with their business taken as a whole
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as set forth or contemplated in the Prospectus, and (ii)
since the respective dates as of which information is given in the Prospectus
there shall not have been any change in the outstanding capital stock or
long-term debt of the Company or any of the Subsidiaries or any change, or any
development involving a prospective change, in or affecting the general affairs,
management, financial position, shareholders' equity or results of operations of
the Company and the Subsidiaries taken as a whole otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case described
in clause (i) or (ii) is in your reasonable judgment so material and adverse as
to make it impracticable or inadvisable to proceed with the public offering or
the delivery of the Shares being delivered at such Delivery Date on the terms
and in the manner contemplated by the Prospectus;
(f) On or after the date hereof there shall not have occurred any of
the following: (i) trading in securities of the Company shall have been
suspended (ii) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or the National Association of
Securities Dealers, Inc. Automated Quotation System; (iii) a general moratorium
on commercial banking activities in New York, Virginia or Georgia declared by
either federal or New York, Virginia or Georgia authorities; (iv) the outbreak
or escalation of hostilities involving the United States or the declaration by
the United States of a national emergency or war, if any such event specified in
this clause (iv) would have such a materially adverse effect, in your reasonable
judgment, as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Delivery Date on
the terms and in the manner contemplated in the Prospectus; or (v) such a
material adverse change in general economic, political, financial or
international conditions affecting financial markets in the United States having
a material adverse impact on trading prices of securities in general, as, in
your reasonable judgment, makes it inadvisable to proceed with the payment for
and delivery of the Shares;
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<PAGE> 16
(g) The Company shall have furnished to you copies of agreements
between the Company and the directors, executive officers and certain
shareholders of the Company specified by you, in form and content reasonably
satisfactory to you, pursuant to which such persons agree that for a period
beginning on the date of the Prospectus and ending 180 days thereafter, they
will not, except pursuant to this Agreement, directly or indirectly (i) make,
agree to or cause any offer, sale (including short sale), loan, pledge, or other
disposition of, or grant any options, rights or warrants to purchase with
respect to, or otherwise transfer or reduce any risk of ownership of, directly
or indirectly, any shares of Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock or other capital stock of the
Company or (ii) enter into any swap or other arrangement that transfers all or a
portion of the economic consequences associated with the ownership of the Common
Stock (regardless of whether any of the transactions described in clause (i) or
(ii) is to be settled by the delivery of Common Stock, or such other securities,
in cash or otherwise), or make any demand for or exercise any right with respect
to the registration of Common Stock or any securities convertible into or
exchangeable or exercisable for Common Stock, without the prior written consent
of Wheat First Securities, Inc.; provided, however, that nothing contained
therein shall prohibit (x) the exercise of stock options or other purchases of
Common Stock under stock option plans or other incentive compensation
arrangements for employees or directors previously approved by the Company's
Board of Directors or (y) the gift, pledge or assignment of any such securities
without the prior consent of Wheat First Securities, Inc. if the donee, pledgee
or assignee agrees, in writing delivered to Wheat First Securities, Inc. within
five days after such gift, pledge or assignment, to be bound by the terms of
such agreement;
(h) Each of the representations and warranties of the Company contained
herein shall be true and correct in all material respects at appropriate
Delivery Date, as if made at such Delivery Date, and all covenants and
agreements herein contained to be performed on the part of the Company and all
conditions herein contained to be fulfilled or compiled with by the Company at
or prior to the appropriate Delivery Date shall have been duly performed,
fulfilled or complied with.
(h) The Company shall have furnished or caused to be furnished to you
at such Delivery Date certificates of officers of the Company reasonably
satisfactory to you as to the accuracy of the representations and warranties of
the Company herein at and as of such Delivery Date, as to the performance by the
Company of all of its respective obligations hereunder to be performed at or
prior to such Delivery Date, as to the matters set forth in subsections (a) and
(g) of this Section and as to such other matters as you may reasonably request.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or
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<PAGE> 17
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will promptly
reimburse each Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating, preparing to defend or
defending, or appearing as a third-party witness in connection with, any such
action or claim; provided, however, that the Company shall not be liable in any
such case to the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by the Underwriters through you expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through you expressly
for use therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating, preparing
to defend or defending, or appearing as third-party witness in connection with,
any such action or claim. The Company acknowledges that the statements set forth
in the last paragraph on the inside front cover page and the first, second,
third, seventh, eighth and ninth paragraphs under the caption "Underwriting" in
the Preliminary Prospectus and the Prospectus constitute the only information
furnished in writing by or on behalf of the several Underwriters for inclusion
in the Preliminary Prospectus or the Prospectus, and you, as the
Representatives, confirm that such statements are correct.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; provided, however, that if the
defendants in any
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<PAGE> 18
such action include both the indemnified party and the indemnifying party and
the indemnified party shall have been advised by counsel that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select separate counsel to defend such
action on behalf of such indemnified party or parties. It is understood that the
indemnifying party shall, in connection with any such action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys together with appropriate
local counsel at any time for all indemnified parties unless such firm of
attorneys shall have reasonably concluded that one or more indemnified parties
has actual differing interests with any other indemnified party. Upon receipt of
notice from the indemnifying party to such indemnified party of its election so
to appoint counsel to defend such action and approval by the indemnified party
of such counsel, the indemnifying party will not be liable for any settlement
entered into without its written consent and will not be liable to such
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence, (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of commencement of the action or (iii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party; and except that, if clause (i) or (iii) is
applicable, such liability shall be only in respect of the counsel referred to
in such clause (i) or (iii). Notwithstanding the immediately preceding sentence
and the first sentence of this paragraph, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and the Underwriters on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof), as well as any other relevant
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<PAGE> 19
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (after deducting the
total underwriting discount, but before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Shares underwritten by it and distributed
to the public were offered to the public exceeds the amount of damages which
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations under this
subsection (d) are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer and director of the Company and to each person, if
any, who controls the Company within the meaning of the Act.
9. DEFAULT OF UNDERWRITERS.
(a) If any Underwriter shall default in its obligation to purchase the
Shares that it has agreed to purchase hereunder at a Delivery Date, you may in
your discretion arrange for you or another party or other parties to purchase
such Shares on the terms contained herein. If within 36 hours after such default
by any Underwriter you do not arrange for the purchase of such Shares, then the
Company shall be entitled to a further period of 36 hours within which to
procure another party or other parties satisfactory to you to purchase such
Shares on such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the purchase of
such Shares, or the Company notifies you that it has so arranged for
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<PAGE> 20
the purchase of such Shares, you or the Company shall have the right to postpone
such Delivery Date for a period of not more than seven days, in order to effect
whatever changes may thereby be made necessary in the Registration Statement or
the Prospectus, or in any other documents or arrangements, and the Company
agrees to file promptly any amendments to the Registration Statement or the
Prospectus which in your opinion, exercised in consultation with Nelson Mullins
Riley & Scarborough, L.L.P., may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person substituted
under this Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares that
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Delivery Date, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
Shares that such Underwriter agreed to purchase hereunder at such Delivery Date
and, in addition, to require each non-defaulting Underwriter to purchase its pro
rata share (based on the number of Shares that such Underwriter agreed to
purchase hereunder at such Delivery Date) of the share of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of the
Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Delivery Date, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Delivery Date, the
obligation of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriters or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE.
The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any termination
or cancellation of this Agreement or any investigation (or any statement as to
the results thereof) made by or on behalf of the Underwriters or any controlling
person of any Underwriter, or the Company, or any officer or director or
controlling person of the Company, and shall survive delivery of and payment for
the Shares.
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<PAGE> 21
11. TERMINATION AND PAYMENT OF EXPENSES.
If this Agreement shall be terminated pursuant to Section 9 hereof, the
Company shall not then be under any liability to any Underwriter except as
provided in Section 6 and Section 8 hereof; but if for any other reason any
Shares are not delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through you for all out-of-pocket
expenses, including fees and disbursements of counsel, reasonably incurred by
the Underwriters in making preparations for the purchase, sale and delivery of
the Shares not so delivered, but the Company shall then be under no further
liability to any Underwriter except as provided in Section 6 and Section 8
hereof.
12. NOTICES.
In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you.
All statements, requests, notices and agreements hereunder shall be in
writing or by telegram if promptly confirmed in writing, and if to the
Underwriters shall be sufficient in all respects if delivered or sent by
reliable courier, first-class mail, telex or facsimile transmission to Wheat
First Securities, Inc., at Riverfront Plaza, 901 East Byrd Street, Richmond,
Virginia 23219, Attention: Corporate Finance Department with a copy (which shall
not constitute notice) to Nelson Mullins Riley & Scarborough, L.L.P., counsel
for the Underwriters; if to the Company shall be sufficient in all respects if
delivered or sent by reliable courier, first-class mail, telex, or facsimile
transmission to the address of the Company set forth in the Registration
Statement, Attention: Warren L. Bare with a copy (which shall not constitute
notice) to Alston & Bird LLP; provided, however, that any notice to any
Underwriter pursuant to Section 8 hereof shall be delivered or sent by reliable
courier, first-class mail, telex or facsimile transmission to such Underwriter
at its address set forth in the Underwriters' Questionnaire, which address will
be supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. SUCCESSORS.
This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters and the Company and, to the extent provided in Sections 8
and 10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. TIME OF THE ESSENCE.
Time shall be of the essence in this Agreement.
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<PAGE> 22
15. BUSINESS DAY.
As used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
16. APPLICABLE LAW.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Virginia.
17. CAPTIONS.
The captions included in this Agreement are included solely for
convenience of reference and shall not be deemed to be a part of this Agreement.
18. COUNTERPARTS.
This Agreement may be executed by any one or more of the parties in any
number of counterparts, each of which shall be deemed to be an original, but all
such counterparts shall together constitute one and the same instrument.
19. PRONOUNS.
All pronouns used herein shall be deemed to refer to the masculine,
feminine or neuter gender as the context requires.
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<PAGE> 23
If the foregoing is in accordance with your understanding, please sign
and return to us four counterparts hereof, and upon the acceptance hereof by
you, this letter and such acceptance hereof shall constitute a binding agreement
among each of the Underwriters and the Company. It is understood that your
acceptance of this Agreement on behalf of each of the Underwriters is pursuant
to the authority set forth in a form of Agreement Among Underwriters, the form
of which will be submitted to the Company for examination, upon request, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
HEADHUNTER.NET, INC.
By:
----------------------
Name:
Title:
Accepted as of the date hereof at Richmond, Virginia:
WHEAT FIRST SECURITIES, INC.
J.C. BRADFORD & CO.
INTERSTATE/JOHNSON LANE CORPORATION
As Representatives of the several Underwriters
By: WHEAT FIRST SECURITIES, INC.
By:
--------------------------------
Name:
Title:
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<PAGE> 24
SCHEDULE I
<TABLE>
<CAPTION>
OPTIONAL
SECURITIES
TO BE PURCHASED
FIRM SHARES IF MAXIMUM
UNDERWRITER TO BE PURCHASED OPTION EXERCISED
- ----------- --------------- ----------------
<S> <C> <C>
Wheat First Securities, Inc................
J. C. Bradford & Co. ......................
Interstate/Johnson Lane Corporation........
</TABLE>
<PAGE> 25
EXHIBIT A
Opinion of Counsel for the Company
(i) The Company is a corporation in good standing under the
laws of the State of Georgia, with corporate power under such laws to
own, lease and operate its properties and conduct its business as
described in the Prospectus. The Company is qualified to transact
business as a foreign corporation in all states in which it is required
to be so qualified, except where the failure to be so qualified would
not have a material adverse effect on the Company and its Subsidiaries
taken as a whole.
(ii) Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, as the case may be; each Subsidiary has
the corporate power and authority to own its properties and conduct its
business as described in the Prospectus; and each Subsidiary is
qualified to do business as a foreign corporation in good standing in
each jurisdiction in which such qualification is required, except where
the failure to so qualify would not have a material adverse effect upon
the Company and its Subsidiaries taken as a whole.
(iii) As of the dates specified therein, the Company has
authorized and issued capital stock as set forth in the Prospectus.
(iv) All of the outstanding shares of capital stock of, or
membership or other ownership interests in, the Company and the
Subsidiaries have been duly authorized and validly issued and are fully
paid and nonassessable; and none of the outstanding shares of capital
stock were issued in violation of the preemptive rights of any
shareholder of the Company. All outstanding shares of capital stock of
each of the Subsidiaries are owned by the Company free and clear of any
perfected security interest and any other security interests, claims,
liens or encumbrances.
(v) The Shares have been duly authorized for issuance and sale
to the Underwriters pursuant to this Agreement and, when issued and
delivered by the Company against payment of the consideration set forth
herein, will be validly issued, fully paid and nonassessable and no
holder thereof will be subject to personal liability by reason of being
such a holder; and the Shares are not subject to the preemptive rights
of any shareholder of the Company.
(vi) Upon issuance and delivery of the Shares to or for the
account of the Underwriters and payment therefor as provided herein
(assuming the Underwriters are purchasing such Shares in good faith and
without notice of any adverse claim), the Underwriters will receive
good and marketable title to the Shares, free and clear of all liens,
pledges, charges, encumbrances, equities, claims, security interests,
restrictions, shareholders agreements and voting trusts whatsoever.
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<PAGE> 26
(vii) The Shares conform in all material respects as to legal
matters to the description thereof in the Prospectus under the caption
"Description of Capital Stock."
(viii) The form of certificate evidencing the Shares complies
in all material respects with all applicable statutory requirements,
any applicable requirements of the Articles and Bylaws of the Company
and the requirements of the Nasdaq Stock Market's National Market.
(ix) To the knowledge of such counsel, all sales of the
Company's securities prior to the date hereof were at all relevant
times duly registered under the Act or exempt from the registration
requirements of the Act, or if such securities were not registered or
exempt in compliance with the Act, any private rights of action for
rescission or damages arising from the failure to register any such
securities are time barred by applicable statutes of limitations or
equitable principles, including laches.
(x) To the knowledge of such counsel, neither the filing of
the Registration Statement nor the offer or sale of the Shares as
contemplated thereby gives rise to any rights for or related to the
registration of any shares of Common Stock or any other securities of
the Company which have not been waived by the holder or holders thereof
prior to the date of this Agreement.
(xi) The Company has duly authorized the execution and
delivery of this Agreement and the performance by the Company hereunder
and has duly executed and delivered this Agreement, and assuming the
due authorization, execution and delivery of this Agreement by the
other parties hereto, this Agreement is a valid and legally binding
obligation of the Company enforceable in accordance with its terms
except to the extent that (a) enforceability may be limited by
applicable bankruptcy, insolvency, liquidation, reorganization,
moratorium and other laws relating to or affecting the rights and
remedies of creditors generally, (b) the remedy of specific performance
and other forms of equitable relief may be subject to certain defenses
and to the discretion of the court before which a proceeding may be
brought, and (c) the enforcement of rights to indemnity and
contribution under this Agreement may be limited by federal and state
securities laws or principles of public policy underlying such laws.
(xii) The execution and delivery by the Company of this
Agreement did not, and the performance by the Company hereunder, the
consummation by the Company of the transactions contemplated hereby,
the issuance and sale of the Shares by the Company pursuant hereto and
the compliance by the Company with all of the provisions hereof will
not (with or without the giving of notice or the passage of time or
both), result in any violation by the Company of the Articles or Bylaws
of the Company or any breach of or default under any indenture,
mortgage, deed of trust, loan agreement, lease or other written
agreement or instrument to which the Company is a party or by which it
or any of its properties or assets is bound except for any such breach
or default which would not have a material adverse effect on the
business, condition (financial or otherwise) or results of operations
of the Company, and, to the knowledge of such counsel, will not
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<PAGE> 27
result in any creation or imposition of a contractual lien or security
interest in, on or against any property or assets of the Company or
violate in any material respect any existing federal or state
constitution, statute, regulation, rule, order or law (assuming
compliance with all applicable state securities or "blue sky" laws, as
to which such counsel need express no opinion), or any judicial or
administrative decree, writ, judgment or order to which, to the
knowledge of such counsel, the Company or any of its properties or
assets is subject.
(xiii) No consent, approval, authorization or other action by,
or filing with, any governmental authority of the United States or the
State of Georgia is required on the part of the Company for the
performance by the Company of this Agreement and the offering, issuance
and sale of the Shares, except such as have been obtained under the Act
and the Exchange Act and the rules and regulations of the Commission
thereunder and such as may be required under state securities or "blue
sky" laws in connection with the offer, sale and distribution of the
Shares by the Underwriters (as to which such counsel need express no
opinion).
(xiv) The Registration Statement and each amendment or
supplement to the Registration Statement and the Prospectus, as of
their respective effective or issue dates (other than the financial
statements and the notes thereto and the related schedules and other
financial and statistical data included therein or omitted therefrom
and the section therein captioned "Underwriting," as to all of which
such counsel need express no opinion), complied as to form in all
material respects with the applicable requirements of the Act and the
rules and regulations of the Commission thereunder. All required
filings pursuant to Rules 424 and 430A have been made in the manner and
within the time period required.
(xv) To the knowledge of such counsel, there is no litigation
or governmental proceeding pending or overtly threatened by a written
communication against the Company, or to which the Company or any of
its properties or assets is subject, that is required to be described
in the Prospectus but is not described as required.
(xvi) The Company is not in violation of its Articles of
Incorporation or Bylaws or, to the knowledge of such counsel, in
violation of any law, administrative rule or regulation or arbitrators'
or administrative or court decree, judgment or order or, to the
knowledge of such counsel, in violation or default (there being no
existing state of facts, to the knowledge of such counsel, which with
notice or lapse of time or both would constitute a default) in the
performance or observance of any obligation, agreement, covenant or
condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which the Company
is a party or to which the Company or its properties are subject and
that is an exhibit to the Registration Statement where such violation
or default could have a material adverse effect on the business,
financial condition or results of operations of the Company, taking
into account any enforceable and valid indemnity that the Company may
have from a third party.
A-3
<PAGE> 28
(xvii) Such counsel has reviewed all contracts and other
documents referred to in the Registration Statement and the Prospectus,
and the summaries of and other disclosures regarding such contracts and
other documents included in the Registration Statement and the
Prospectus fairly present the information required to be disclosed with
respect thereto; and, to the knowledge of such counsel, there are no
additional contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus which are not
filed or described as required.
(xviii) All descriptions in the Registration Statement and the
Prospectus of statutes, regulations or legal or governmental
proceedings are fair summaries thereof and fairly present the
information required to be shown with respect to such matters.
(xix) The Registration Statement has been declared effective
under the Act, and, to the knowledge of such counsel, no stop order
suspending the effectiveness of the Registration Statement has been
issued under the Act and no proceedings for that purpose have been
instituted or are pending or threatened by the Commission.
(xx) The Shares have been authorized for quotation on the
Nasdaq Stock Market's National Market, subject to notice of issuance;
and the Common Stock has been registered under the Exchange Act.
(xxi) The Company is not, and will not be as a result of the
consummation of the transactions contemplated by this Agreement, an
"investment company" or an entity "controlled" by an "investment
company" within the meaning of the 1940 Act.
In addition, such counsel shall state it has reviewed certain
corporate records and other documents of the Company and has
participated in conferences with officers and other representatives of
the Company, the Company's independent public accountants, and your
representatives and your counsel at which the contents of the
Registration Statement and the Prospectus were discussed and revised.
Such counsel shall state that although it has not independently
verified, is not passing upon and does not assume any responsibility
for the accuracy, completeness or fairness of the information and
statements contained in the Registration Statement and the Prospectus,
other than as mentioned in paragraphs (xvi) and (xvii) above, on the
basis of the foregoing, no facts have come to such counsel's attention
that lead such counsel to believe that the Registration Statement or
any amendment thereto, at the time such Registration Statement or any
such amendment became effective, contained any untrue statement of a
material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus or any amendment or supplement
thereto, at the time the Prospectus was issued, at the time any such
amended or supplemented prospectus was issued or on the date such
opinion is issued, included or includes any untrue statement of a
material fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that
such
A-4
<PAGE> 29
counsel need not express any belief regarding the financial statements
and notes thereto and the related schedules and other financial and
statistical data contained in or omitted from the Registration
Statement or the Prospectus or any amendment or supplement thereto.
Such opinion may be furnished subject to such stated assumptions,
limitations and qualifications as shall be acceptable to Nelson Mullins Riley &
Scarborough, L.L.P., counsel for the Underwriters.
A-5
<PAGE> 1
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
HNET- SHARES
HEADHUNTER.NET
INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA
CUSIP 422077 10 7
THIS CERTIFIES THAT SEE REVERSE FOR CERTAIN DEFINITIONS
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $0.01 PAR VALUE OF
HEADHUNTER.NET, INC.
transferable only on the books of the Corporation by the holder hereof or in
person or by duly authorized Attorney upon surrender of this certificate
properly endorsed. This certificate is not valid until countersigned by the
Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation the facsimile signatures of
its duly authorized officers
Dated:
/S/ HEADHUNTER.NET, INC. CORPORATE /S/
SEAL
GEORGIA
1998
Chief Financial Officer and Secretary President and Chief Executive Officer
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(New York, N.Y.)
By:
Authorized Officer
<PAGE> 2
HEADHUNTER.NET
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT-_____Custodian_______
(Cust) (Minor)
TEN ENT - as tenants by the entireties
under Uniform Gifts to Minors
JT TEN - as joint tenants with right
of survivorship and not as
tenants in common
Act
------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, __________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------------
- -------------------------------------------------------------------------------
1(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
- ------------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated,
-----------------------------
------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE,
IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR
ANY CHANGE WHATEVER.
SIGNATURE(S) GUARANTEED:
BY
---------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17AD-15.
<PAGE> 1
EXHIBIT 5.1
[ALSTON&BIRD LETTERHEAD]
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
404-881-7000
Fax: 404-881-7777
August 25, 1998
HeadHunter.NET, Inc.
6410 Atlantic Boulevard
Suite 160
Norcross, GA 30071
Re: Registration Statement on Form S-1 (No. 333-59389)
Ladies and Gentlemen:
We have acted as counsel to HeadHunter.NET, Inc., a Georgia corporation
(the "Company"), in connection with the filing of the above-referenced
Registration Statement (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") to register under the Securities Act of
1933, as amended (the "Act"), up to 2,875,000 shares of the Company's Common
Stock, par value $0.01 per share (the "Common Stock"), for issuance and sale by
the Company (the "Shares"). The Company intends, following the effectiveness of
the Registration Statement, to issue and sell the Shares to the several
underwriters (the "Underwriters") named in Schedule I to the Underwriting
Agreement (the "Underwriting Agreement") to be entered into by and among the
Company and the Underwriters.
We have examined the Articles of Incorporation of the Company, the Bylaws
of the Company, records of proceedings of the Board of Directors, or committees
thereof, and the shareholders of the Company deemed by us to be relevant to this
opinion letter, the Registration Statement and the proposed form of Underwriting
Agreement. We also have examined originals or copies, certified or otherwise
identified to our satisfaction, of such other corporate records of the Company,
such other agreements and instruments, such certificates of public officials,
officers of the Company and other persons, and such other documents as we have
deemed necessary or appropriate as a basis for the opinions hereinafter
expressed. In such examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity and
completeness of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified, conformed,
photostatic or facsimile copies, and the authenticity of the originals of such
copies, and we have assumed all certificates of public officials to have been
properly given and to be accurate.
<PAGE> 2
HeadHunter.NET, Inc.
August 25, 1998
Page 2
As to factual matters relevant to this opinion letter, we have relied upon
the representations and warranties as to factual matters contained in
certificates and statements of officers of the Company and certain public
officials. Except to the extent expressly set forth herein, we have made no
independent investigations with regard thereto, and, accordingly, we do not
express any opinion as to matters that might have been disclosed by independent
verification.
This opinion letter is limited by, and is in accordance with, the January
1, 1992 edition of the Interpretive Standards Applicable to Legal Opinions to
Third Parties in Corporate Transactions adopted by the Legal Opinion Committee
of the Corporate and Banking Law Section of the State Bar of Georgia, which
Interpretive Standards are incorporated in this opinion letter by this
reference. As a matter of preference, we have restated some of the assumptions
and qualifications of the Interpretive Standards in this opinion letter and not
others, but all of the assumptions and qualifications of the Interpretive
Standards are nevertheless incorporated by reference in this opinion letter,
subject to the modifications and additions set forth herein. In the event of any
inconsistency, the assumptions and qualifications set forth in this opinion
letter shall govern.
On the basis of the foregoing, and subject to the limitations set forth
herein, we are of the opinion that, upon due execution and delivery of the
Underwriting Agreement by the parties thereto and upon issuance and delivery of
the Shares against payment therefor as provided in the Underwriting Agreement,
the Shares will be validly issued, fully paid and nonassessable by the Company.
Members of this firm are licensed to practice law in the State of Georgia
and before the federal courts having jurisdiction in the State of Georgia, and
we express no opinion with regard to any law other than the laws of the State of
Georgia.
We consent to the filing of this opinion letter as an exhibit to the
Registration Statement and to the use of our name under the heading "Legal
Matters" in the Prospectus constituting a part thereof. In giving such consent,
we do not thereby admit that we are within the category of persons whose consent
is required under Section 7 of the Act or the rules and regulations of the
Commission thereunder.
This opinion letter is being furnished by us to the Company and the
Commission solely for the benefit of the Company and the Commission in
connection with the Registration Statement and is not to be used, circulated,
quoted or otherwise relied upon by any other person, or by the Company or the
Commission for any other purpose, without our express written consent. The only
opinion rendered by us consists of those matters set forth in the fifth
paragraph hereof, and no opinion may be implied or inferred
<PAGE> 3
HeadHunter.NET, Inc.
August 25, 1998
Page 3
beyond those expressly stated. This opinion letter is rendered as of the date
hereof, and we have no obligation to update this opinion letter.
Sincerely,
ALSTON & BIRD
By: /s/ Joel J. Hughey
--------------------
Partner
[AD982370.057]
<PAGE> 1
EXHIBIT 10.1
HEADHUNTER.NET, INC.
1998 LONG-TERM INCENTIVE PLAN
ARTICLE I
PURPOSE
1.1 GENERAL. The purpose of the HeadHunter.NET, Inc. 1998 Long-Term
Incentive Plan (the "Plan") is to promote the success, and enhance the value, of
HeadHunter.NET, Inc. (the "Corporation"), by linking the personal interests of
its employees, officers and directors to those of Corporation shareholders and
by providing such persons with an incentive for outstanding performance. The
Plan is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of persons upon whose judgment,
interest, and special effort the successful conduct of the Company's operation
is largely dependent. Accordingly, the Plan permits the grant of incentive
awards from time to time to selected employees and officers. From and after the
date, if any, upon which the Company's common stock shall be traded on a
national securities exchange or on the Nasdaq National Market, non-employee
directors and consultants of the Company will also be eligible to receive Awards
under the Plan.
ARTICLE 2
EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan shall be effective as of the date upon which
it shall be approved by the Board. However, the Plan shall be submitted to the
shareholders of the Company for approval within 12 months of the Board's
approval thereof. No Incentive Stock Options granted under the Plan may be
exercised prior to approval of the Plan by the shareholders and if the
shareholders fail to approve the Plan within 12 months of the Board's approval
thereof, any Incentive Stock Options previously granted hereunder shall be
automatically converted to Non-Qualified Stock Options without any further act.
In the discretion of the Committee, Awards may be made to Covered Employees
which are intended to constitute qualified performance-based compensation under
Code Section 162(m). Any such Awards shall be contingent upon the shareholders
having approved the Plan.
ARTICLE 3
DEFINITIONS
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Section 1.1 unless a clearly different meaning is required by the
context. The following words and phrases shall have the following meanings:
(a) "Award" means any Option, Stock Appreciation Right, Restricted
Stock Award, Performance Share Award, Dividend Equivalent Award, or Other
Stock-Based
<PAGE> 2
Award, or any other right or interest relating to Stock or cash, granted to
a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract, or
other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of 25% or more of the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (1), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition by a
Person who is on the Effective Date the beneficial owner of 25% or
more of the Outstanding Company Voting Securities, (ii) any
acquisition directly from the Company, including without limitation
a public offering of securities, (iii) any acquisition by the
Company, (iv) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (v) any acquisition by any
corporation pursuant to a transaction which complies with clauses
(i), (ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the Effective Date
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) Consummation of a reorganization, merger or consolidation to
which the Company is a party or a sale or other disposition of all
or substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners of the Outstanding Company
Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the
combined voting power of the then
- 2 -
<PAGE> 3
outstanding voting securities entitled to vote generally in the
election of directors of the Company resulting from such Business
Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Voting Securities, and (ii) no Person (excluding
any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 25% or more of the combined voting
power of the then outstanding voting securities of the Company
resulting from such Business Combination except to the extent that
such ownership existed prior to the Business Combination, and (iii)
at least a majority of the members of the board of directors of the
Company resulting from such Business Combination were members of the
Incumbent Board (including persons deemed to be members of the
Incumbent Board by reason of the proviso to subsection (2) of this
definition at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(f) "Committee" means the committee of the Board described in
Article 4.
(g) "Corporation" means HeadHunter.NET, Inc., a Georgia corporation.
(h) "Covered Employee" means a covered employee as defined in Code
Section 162(m)(3), provided that no employee shall be a Covered Employee
until the deduction limitations of Section 162(m) are applicable to the
Company and any reliance period under Section 162(m) has expired, as
described in Section 16.15.
(i) "Disability" shall mean any illness or other physical or mental
condition of a Participant that renders the Participant incapable of
performing his customary and usual duties for the Company, or any medically
determinable illness or other physical or mental condition resulting from a
bodily injury, disease or mental disorder which, in the judgment of the
Committee, is permanent and continuous in nature. The Committee may require
such medical or other evidence as it deems necessary to judge the nature
and permanency of the Participant's condition.
(j) "Dividend Equivalent" means a right granted to a Participant
under Article 11.
(k) "Effective Date" has the meaning assigned such term in Section
2.1.
- 3 -
<PAGE> 4
(l) "Fair Market Value," on any date, means (i) if the Stock is not
listed on a securities exchange or traded over the Nasdaq National Market
or otherwise publicly quoted or traded, Fair Market Value will be
determined by such method as the Committee determines in good faith to be
reasonable; (ii) if the Stock is listed on a securities exchange or is
traded over the Nasdaq National Market, the closing sales price on such
exchange or the last reported sale price over such system on such date or,
in the absence of reported sales on such date, the closing sales price or
last sale price, as applicable on the immediately preceding date on which
sales were reported; or (iii) if the Stock is not listed on a securities
exchange or traded over the Nasdaq National Market, the mean between the
bid and offered prices as quoted by Nasdaq or, if not quoted on Nasdaq,
other recognized quotations service selected by the Committee in good faith
for such date, provided that if it is determined that the fair market value
is not properly reflected by such Nasdaq quotations, Fair Market Value will
be determined by such other method as the Committee determines in good
faith to be reasonable.
(m) "Incentive Stock Option" means an Option that is intended to
meet the requirements of Section 422 of the Code or any successor provision
thereto.
(n) "Non-Qualified Stock Option" means an Option that is not an
Incentive Stock Option.
(o) "Option" means a right granted to a Participant under Article 7
of the Plan to purchase Stock at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a
Non-Qualified Stock Option.
(p) "Other Stock-Based Award" means a right, granted to a
Participant under Article 12, that relates to or is valued by reference to
Stock or other Awards relating to Stock.
(q) "Parent" means a corporation which owns or beneficially owns a
majority of the outstanding voting stock or voting power of the Company.
For Incentive Stock Options, the term shall have the same meaning as set
forth in Code Section 424(e).
(r) "Participant" means an eligible person who has been granted an
Award under the Plan.
(s) "Performance Share" means a right granted to a Participant under
Article 9, to receive cash, Stock, or other Awards, the payment of which is
contingent upon achieving certain performance goals established by the
Committee.
(t) "Plan" means the HeadHunter.NET, Inc. 1998 Long-Term Incentive
Plan, as amended from time to time.
(u) "Restricted Stock Award" means Stock granted to a Participant
under Article 10 that is subject to certain restrictions and to risk of
forfeiture.
- 4 -
<PAGE> 5
(v) "Retirement" means a Participant's termination of employment
with the Company, Parent or Subsidiary after attaining any normal or early
retirement age specified in any pension, profit sharing or other retirement
program sponsored by the Company, or, in the event of the inapplicability
thereof with respect to the person in question, as determined by the
Committee in its judgment.
(w) "Stock" means the $.01 par value Common Stock of the Company
and such other securities of the Company as may be substituted for Stock
pursuant to Article 14.
(x) "Stock Appreciation Right" or "SAR" means a right granted to a
Participant under Article 8 to receive a payment equal to the difference
between the Fair Market Value of a share of Stock as of the date of
exercise of the SAR over the grant price of the SAR, all as determined
pursuant to Article 8.
(y) "Subsidiary" means any corporation, limited liability company,
partnership or other entity of which a majority of the outstanding voting
stock or voting power is beneficially owned directly or indirectly by the
Company. For Incentive Stock Options, the term shall have the meaning set
forth in Code Section 424(f).
(z) "1933 Act" means the Securities Act of 1933, as amended from
time to time.
(aa) "1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by a committee (the
"Committee") appointed by the Board (which Committee shall consist of two or
more directors) or, at the discretion of the Board from time to time, the Plan
may be administered by the Board. It is intended that the directors appointed to
serve on the Committee shall be "non-employee directors" (within the meaning of
Rule 16b-3 promulgated under the 1934 Act) and "outside directors" (within the
meaning of Code Section 162(m) and the regulations thereunder) to the extent
that Rule 16b-3 and, if necessary for relief from the limitation under Code
Section 162(m) and such relief is sought by the Company, Code Section 162(m),
respectively, are applicable. However, the mere fact that a Committee member
shall fail to qualify under either of the foregoing requirements shall not
invalidate any Award made by the Committee which Award is otherwise validly made
under the Plan. The members of the Committee shall be appointed by, and may be
changed at any time and from time to time in the discretion of, the Board.
During any time that the Board is acting as administrator of the Plan, it shall
have all the powers of the Committee hereunder, and any reference herein to the
Committee (other than in this Section 4.1) shall include the Board.
- 5 -
<PAGE> 6
4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan, the
following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Company or any
Parent or Subsidiary, the Company's independent certified public accountants, or
any executive compensation consultant or other professional retained by the
Company to assist in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under
the Plan, including but not limited to, the exercise price, grant price, or
purchase price, any restrictions or limitations on the Award, any schedule
for lapse of forfeiture restrictions or restrictions on the exercisability
of an Award, and accelerations or waivers thereof, based in each case on
such considerations as the Committee in its sole discretion determines;
(e) Accelerate the vesting or lapse of restrictions of any
outstanding Award, based in each case on such considerations as the
Committee in its sole discretion determines;
(f) Determine whether, to what extent, and under what circumstances
an Award may be settled in, or the exercise price of an Award may be paid
in, cash, Stock, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(h) Decide all other matters that must be determined in connection
with an Award;
(i) Establish, adopt or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan; and
- 6 -
<PAGE> 7
(j) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to
administer the Plan, and
(k) Amend the Plan or any Award Agreement as provided herein.
4.4. DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section 14.1,
the aggregate number of shares of Stock reserved and available for Awards or
which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Share
Award) shall be 500,000, of which not more than 10% may be granted as Restricted
Stock Awards.
5.2. LAPSED AWARDS. To the extent that an Award is canceled, terminates,
expires or lapses for any reason, any shares of Stock subject to the Award will
again be available for the grant of an Award under the Plan and shares subject
to SARs or other Awards settled in cash will be available for the grant of an
Award under the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4. LIMITATION ON NUMBER OF SHARES SUBJECT TO AWARDS. Notwithstanding any
provision in the Plan to the contrary, the maximum number of shares of Stock
with respect to one or more Options and/or SARs that may be granted during any
one calendar year under the Plan to any one Covered Employee shall be 100,000.
The maximum fair market value of any Awards (other than Options and SARs) that
may be received by a Covered Employee (less any consideration paid by the
Participant for such Award) during any one calendar year under the Plan shall be
$1,000,000.
ARTICLE 6
ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who are employees
or officers of the Company or a Parent or Subsidiary; provided, however, that
from and after the date, if any, upon which the Stock shall be traded on a
national securities exchange or on the Nasdaq National Market, non-employee
directors and consultants of the Company will also be eligible to receive Awards
under the Plan.
- 7 -
<PAGE> 8
ARTICLE 7
STOCK OPTIONS
7.1. GENERAL. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an
Option shall be determined by the Committee.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine
the time or times at which an Option may be exercised in whole or in part.
The Committee also shall determine the performance or other conditions, if
any, that must be satisfied before all or part of an Option may be
exercised. The Committee may waive any exercise provisions at any time in
whole or in part based upon such factors as the Committee may determine in
its sole discretion so that the Option becomes exerciseable at an earlier
date.
(c) PAYMENT. The Committee shall determine the methods by which the
exercise price of an Option may be paid, the form of payment, including,
without limitation, cash, shares of Stock, or other property (including
"cashless exercise" arrangements), and the methods by which shares of Stock
shall be delivered or deemed to be delivered to Participants; provided,
however, that if shares of Stock are used to pay the exercise price of an
Option, such shares must have been held by the Participant for at least six
months.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a written
Award Agreement between the Company and the Participant. The Award
Agreement shall include such provisions, not inconsistent with the Plan, as
may be specified by the Committee.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock shall be
set by the Committee, provided that the exercise price for any Incentive
Stock Option shall not be less than the Fair Market Value as of the date of
the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under the
earliest of the following circumstances; provided, however, that the
Committee may, prior to the lapse of the Incentive Stock Option under the
circumstances described in paragraphs (3), (4) and (5) below, provide in
writing that the Option will extend until a later date, but if Option is
exercised after the dates specified in paragraphs (3), (4) and (5) above,
it will automatically become a Non-Qualified Stock Option:
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<PAGE> 9
(1) The Incentive Stock Option shall lapse as of the option
expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years after it is
granted, unless an earlier time is set in the Award Agreement.
(3) If the Participant terminates employment for any reason
other than as provided in paragraph (4) or (5) below, the Incentive
Stock Option shall lapse, unless it is previously exercised, three
months after the Participant's termination of employment; provided,
however, that if the Participant's employment is terminated by the
Company for cause or by the Participant without the consent of the
Company, the Incentive Stock Option shall (to the extent not
previously exercised) lapse immediately.
(4) If the Participant terminates employment by reason of his
Disability, the Incentive Stock Option shall lapse, unless it is
previously exercised, one year after the Participant's termination
of employment.
(5) If the Participant dies while employed, or during the
three-month period described in paragraph (3) or during the one-year
period described in paragraph (4) and before the Option otherwise
lapses, the Option shall lapse one year after the Participant's
death. Upon the Participant's death, any exercisable Incentive Stock
Options may be exercised by the Participant's beneficiary,
determined in accordance with Section 13.6.
Unless the exercisability of the Incentive Stock Option is
accelerated as provided in Article 13, if a Participant exercises an Option
after termination of employment, the Option may be exercised only with
respect to the shares that were otherwise vested on the Participant's
termination of employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted
to any individual who, at the date of grant, owns stock possessing more
than ten percent of the total combined voting power of all classes of stock
of the Company or any Subsidiary unless the exercise price per share of
such Option is at least 110% of the Fair Market Value per share of Stock at
the date of grant and the Option expires no later than five years after the
date of grant.
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<PAGE> 10
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an Incentive
Stock Option may be made pursuant to the Plan after the day immediately
prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an Incentive
Stock Option may be exercised only by the Participant or, in the case of
the Participant's Disability, by the Participant's guardian or legal
representative.
(h) DIRECTORS. The Committee may not grant an Incentive Stock Option
to a non-employee director. The Committee may grant an Incentive Stock
Option to a director who is also an employee of the Company or Parent or
Subsidiary but only in that individual's position as an employee and not as
a director.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation
Right, the Participant to whom it is granted has the right to receive the
excess, if any, of:
(1) The Fair Market Value of one share of Stock on the date of
exercise; over
(2) The grant price of the Stock Appreciation Right as
determined by the Committee, which shall not be less than the Fair
Market Value of one share of Stock on the date of grant in the case
of any SAR related to an Incentive Stock Option.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall be
evidenced by an Award Agreement. The terms, methods of exercise, methods of
settlement, form of consideration payable in settlement, and any other
terms and conditions of any Stock Appreciation Right shall be determined by
the Committee at the time of the grant of the Award and shall be reflected
in the Award Agreement.
ARTICLE 9
PERFORMANCE SHARES
9.1. GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant
Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.
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<PAGE> 11
9.2. RIGHT TO PAYMENT. A grant of Performance Shares gives the Participant
rights, valued as determined by the Committee, and payable to, or exercisable
by, the Participant to whom the Performance Shares are granted, in whole or in
part, as the Committee shall establish at grant or thereafter. The Committee
shall set performance goals and other terms or conditions to payment of the
Performance Shares in its discretion which, depending on the extent to which
they are met, will determine the number and value of Performance Shares that
will be paid to the Participant.
9.3. OTHER TERMS. Performance Shares may be payable in cash, Stock, or
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make Awards
of Restricted Stock to Participants in such amounts and subject to such terms
and conditions as may be selected by the Committee. All Awards of Restricted
Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to such
restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, upon the satisfaction of performance
goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter.
10.3. FORFEITURE. Except as otherwise determined by the Committee at the
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired by the
Company; provided, however, that the Committee may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in whole or in
part restrictions or forfeiture conditions relating to Restricted Stock.
10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock.
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<PAGE> 12
ARTICLE 11
DIVIDEND EQUIVALENTS
11.1 GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant
Dividend Equivalents to Participants subject to such terms and conditions as may
be selected by the Committee. Dividend Equivalents shall entitle the Participant
to receive payments equal to dividends with respect to all or a portion of the
number of shares of Stock subject to an Award, as determined by the Committee.
The Committee may provide that Dividend Equivalents be paid or distributed when
accrued or be deemed to have been reinvested in additional shares of Stock, or
otherwise reinvested.
ARTICLE 12
OTHER STOCK-BASED AWARDS
12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Stock, and Awards valued by reference
to book value of shares of Stock or the value of securities of or the
performance of specified Parents or Subsidiaries. The Committee shall determine
the terms and conditions of such Awards.
ARTICLE 13
PROVISIONS APPLICABLE TO AWARDS
13.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under the
Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
13.2. EXCHANGE PROVISIONS. The Committee may at any time offer to exchange
or buy out any previously granted Award for a payment in cash, Stock, or another
Award (subject to Section 14.1), based on the terms and conditions the Committee
determines and communicates to the Participant at the time the offer is made.
13.3. TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
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<PAGE> 13
13.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and any
applicable law or Award Agreement, payments or transfers to be made by the
Company or a Parent or Subsidiary on the grant or exercise of an Award may be
made in such form as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee.
13.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Company or a Parent or Subsidiary, or
shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Company or a Parent or Subsidiary. No unexercised
or restricted Award shall be assignable or transferable by a Participant other
than by will or the laws of descent and distribution or, except in the case of
an Incentive Stock Option, pursuant to a domestic relations order that would
satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award
under the Plan; provided, however, that the Committee may (but need not) permit
other transfers where the Committee concludes that such transferability (i) does
not result in accelerated taxation, (ii) does not cause any Option intended to
be an incentive stock option to fail to be described in Code Section 422(b), and
(iii) is otherwise appropriate and desirable, taking into account any factors
deemed relevant, including without limitation, state or federal tax or
securities laws applicable to transferable Awards.
13.6 BENEFICIARIES. Notwithstanding Section 13.5, a Participant may, in
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
Participant, payment shall be made to the Participant's estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.
13.7. STOCK CERTIFICATES. All Stock certificates delivered under the Plan
are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on which the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock.
13.8 ACCELERATION UPON DEATH OR DISABILITY. Notwithstanding any other
provision in the Plan or any Participant's Award Agreement to the contrary, upon
the Participant's death or Disability during his employment or service as a
director or consultant, all outstanding Options, Stock Appreciation Rights, and
other Awards in the nature of rights that
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<PAGE> 14
may be exercised shall become fully exercisable and all restrictions on
outstanding Awards shall lapse. Any Option or Stock Appreciation Rights Awards
shall thereafter continue or lapse in accordance with the other provisions of
the Plan and the Award Agreement. To the extent that this provision causes
Incentive Stock Options to exceed the dollar limitation set forth in Section
7.2(d), the excess Options shall be deemed to be Non-Qualified Stock Options.
13.9. ACCELERATION UPON A CHANGE IN CONTROL. Except as otherwise provided
in the Award Agreement, upon the occurrence of a Change in Control, all
outstanding Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully exercisable and all
restrictions on outstanding Awards shall lapse; provided, however that such
acceleration will not occur if, in the opinion of the Company's accountants,
such acceleration would preclude the use of "pooling of interest" accounting
treatment for a Change in Control transaction that (a) would otherwise qualify
for such accounting treatment, and (b) is contingent upon qualifying for such
accounting treatment. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.10. ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE IN
CONTROL. In the event of the occurrence of any circumstance, transaction or
event not constituting a Change in Control (as defined in Section 3.1) but which
the Board of Directors deems to be, or to be reasonably likely to lead to, an
effective change in control of the Company of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of the 1934 Act, the
Committee may in its sole discretion declare all outstanding Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be
exercised to be fully exercisable, and/or all restrictions on all outstanding
Awards to have lapsed, in each case, as of such date as the Committee may, in
its sole discretion, declare, which may be on or before the consummation of such
transaction or event. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
13.11. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an event
has occurred as described in Section 13.9 or 13.10 above, the Committee may in
its sole discretion at any time determine that all or a portion of a
Participant's Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully or partially exercisable,
and/or that all or a part of the restrictions on all or a portion of the
outstanding Awards shall lapse, in each case, as of such date as the Committee
may, in its sole discretion, declare. The Committee may discriminate among
Participants and among Awards granted to a Participant in exercising its
discretion pursuant to this Section 13.11.
13.12. EFFECT OF ACCELERATION. If an Award is accelerated under Section
13.9 or 13.10, the Committee may, in its sole discretion, provide (i) that the
Award will expire after a designated period of time after such acceleration to
the extent not then exercised, (ii) that the Award will be settled in cash
rather than Stock, (iii) that the Award will be assumed by another party to the
transaction giving rise to the acceleration or otherwise be equitably converted
in connection with such transaction, or (iv) any combination of the foregoing.
The Committee's
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<PAGE> 15
determination need not be uniform and may be different for different
Participants whether or not such Participants are similarly situated.
13.13. PERFORMANCE GOALS. The Committee may (but need not) determine that
any Award granted pursuant to this Plan to a Participant (including, but not
limited to, Participants who are Covered Employees) shall be determined solely
on the basis of (a) the achievement by the Company or a Parent or Subsidiary of
a specified target return, or target growth in return, on equity or assets, (b)
the Company's, Parent's or Subsidiary's stock price, (c) the achievement by a
business unit of the Company, Parent or Subsidiary of a specified target, or
target growth in, net income or earnings per share, or (d) any combination of
the goals set forth in (a) through (c) above. If an Award is made on such basis,
the Committee has the right for any reason to reduce (but not increase) the
Award, notwithstanding the achievement of a specified goal. If an Award is made
on such basis, the Committee shall establish goals prior to the beginning of the
period for which such performance goal relates (or such later date as may be
permitted under Code Section 162(m) or the regulations thereunder). Any payment
of an Award granted with performance goals shall be conditioned on the written
certification of the Committee in each case that the performance goals and any
other material conditions were satisfied.
13.14. TERMINATION OF EMPLOYMENT. Whether military, government or other
service or other leave of absence shall constitute a termination of employment
shall be determined in each case by the Committee at its discretion, and any
determination by the Committee shall be final and conclusive. A termination of
employment shall not occur in a circumstance in which a Participant transfers
from the Company to one of its Parents or Subsidiaries, transfers from a Parent
or Subsidiary to the Company, or transfers from one Parent or Subsidiary to
another Parent or Subsidiary.
13.15. REPURCHASE. The provisions of this Section 13.15 shall apply only
until such time, if any, as the Company's common stock shall be traded on a
national securities exchange or on the Nasdaq National Market. At any time
subsequent to the termination of a Participant's employment by the Company
(without regard to whether such termination is voluntary or involuntary, or for
cause or otherwise), the Company may repurchase, and the Participant (and any
transferee of Stock acquired pursuant to the Plan or any Awards granted
hereunder) shall be obligated to sell, all shares of Stock acquired pursuant to
the Plan or through exercise of any Award hereunder for a price equal to the
Fair Market Value of such Stock on the date of such repurchase. To exercise its
right to repurchase Stock hereunder, the Company shall give written notice to
the Participant of (i) its election to repurchase the Stock, (ii) the Fair
Market Value of the Stock to be repurchased, and (iii) the closing date for the
repurchase, which shall be not later than 60 days after the date of the notice
required hereunder. In the case of any repurchase by the Company of Stock under
this Section 13.15, at the option of the Company, the Company may pay the
purchase price to the Participant (or transferee of the Stock) in four or fewer
equal annual installments. Interest shall be credited on the installments at the
applicable federal rate (as determined for purposes of Section 1274 of the Code)
in effect on the date on which the purchase is made. The Company shall pay at
least one-fourth of the total purchase price each year, plus interest on the
unpaid balance, with the first installment being made on the closing date of the
purchase.
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ARTICLE 14
CHANGES IN CAPITAL STRUCTURE
14.1. GENERAL. In the event a stock dividend is declared upon the Stock,
the number of shares of Stock subject to grant pursuant to this Plan shall be
increased proportionately and the number of shares of Stock then subject to each
Award shall be increased proportionately without any change in the aggregate
purchase price therefor. In the event the Stock shall be changed into or
exchanged for a different number or class of shares of stock or securities of
the Company or of another corporation, whether through reorganization,
recapitalization, reclassification, stock split-up, combination of shares,
merger or consolidation, there shall be substituted for each such share of Stock
then subject to each Award the number and class of shares into which each
outstanding share of Stock shall be so exchanged, all without any change in the
aggregate purchase price for the shares then subject to each Award. In the event
the Stock shall be changed into or exchanged for cash or other property not
consisting of shares of stock or securities of the Company or of another
corporation, whether through reorganization, recapitalization, merger or
consolidation, the Committee may, in its sole discretion, provide (i) that the
Award will expire after a designated period of time to the extent not then
exercised, (ii) that the Award will be settled in cash rather than Stock, (iii)
that the Award will be assumed by another party to the transaction or otherwise
be equitably converted in connection with such transaction, or (iv) any
combination of the foregoing. The Committee's determination need not be uniform
and may be different for different Participants whether or not such Participants
are similarly situated.
ARTICLE 15
AMENDMENT, MODIFICATION AND TERMINATION
15.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee
may, at any time and from time to time, amend, modify or terminate the Plan
without shareholder approval; provided, however, that the Board or Committee may
condition any amendment or modification on the approval of shareholders of the
Company if such approval is necessary or deemed advisable with respect to tax,
securities or other applicable laws, policies or regulations.
15.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
Committee may amend, modify or terminate any outstanding Award without approval
of the Participant; provided, however, that such amendment, modification or
termination shall not, without the Participant's consent, reduce or diminish the
value of such Award determined as if the Award had been exercised, vested,
cashed in or otherwise settled on the date of such amendment or termination.
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ARTICLE 16
GENERAL PROVISIONS
16.1. NO RIGHTS TO AWARDS. No Participant or any eligible participant shall
have any claim to be granted any Award under the Plan, and neither the Company
nor the Committee is obligated to treat Participants or eligible participants
uniformly.
16.2. NO SHAREHOLDER RIGHTS. No Award gives the Participant any of the
rights of a shareholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.
16.3. WITHHOLDING. The Company or any Parent or Subsidiary shall have the
authority and the right to deduct or withhold, or require a Participant to remit
to the Company, an amount sufficient to satisfy federal, state, and local taxes
(including the Participant's FICA obligation) required by law to be withheld
with respect to any taxable event arising as a result of the Plan. With respect
to withholding required upon any taxable event under the Plan, the Committee
may, at the time the Award is granted or thereafter, require that any such
withholding requirement be satisfied, in whole or in part, by withholding shares
of Stock having a Fair Market Value on the date of withholding equal to the
amount to be withheld for tax purposes, all in accordance with such procedures
as the Committee establishes.
16.4. NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Parent or Subsidiary to terminate any Participant's employment or status as
an officer, director or consultant at any time, nor confer upon any Participant
any right to continue as an employee, officer, director or consultant of the
Company or any Parent or Subsidiary.
16.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an "unfunded"
plan for incentive and deferred compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Award Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Company or any Parent or Subsidiary.
16.6. INDEMNIFICATION. To the extent allowable under applicable law, each
member of the Committee shall be indemnified and held harmless by the Company
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by such member in connection with or resulting from any
claim, action, suit, or proceeding to which such member may be a party or in
which he may be involved by reason of any action or failure to act under the
Plan and against and from any and all amounts paid by such member in
satisfaction of judgment in such action, suit, or proceeding against him
provided he gives the Company an opportunity, at its own expense, to handle and
defend the same before he undertakes to handle and defend it on his own behalf.
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise,
or any power that the Company may have to indemnify them or hold them harmless.
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<PAGE> 18
16.7. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the Company
or any Parent or Subsidiary unless provided otherwise in such other plan.
16.8. EXPENSES. The expenses of administering the Plan shall be borne by
the Company and its Parents or Subsidiaries.
16.9. TITLES AND HEADINGS. The titles and headings of the Sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
16.10. GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
16.11. FRACTIONAL SHARES. No fractional shares of Stock shall be issued and
the Committee shall determine, in its discretion, whether cash shall be given in
lieu of fractional shares or whether such fractional shares shall be eliminated
by rounding up.
16.12. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to
make payment of awards in Stock or otherwise shall be subject to all applicable
laws, rules, and regulations, and to such approvals by government agencies as
may be required. The Company shall be under no obligation to register under the
1933 Act, or any state securities act, any of the shares of Stock paid under the
Plan. The shares paid under the Plan may in certain circumstances be exempt from
registration under the 1933 Act, and the Company may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
16.13. GOVERNING LAW. To the extent not governed by federal law, the Plan
and all Award Agreements shall be construed in accordance with and governed by
the laws of the State of Georgia.
16.14. ADDITIONAL PROVISIONS. Each Award Agreement may contain such other
terms and conditions as the Committee may determine; provided that such other
terms and conditions are not inconsistent with the provisions of this Plan.
16.15. CODE SECTION 162(m). The deduction limits of Code Section 162(m) and
the regulation thereunder do not apply to the Company until such time, if any,
as any class of the Company's common equity securities is registered under
Section 12 of the 1934 Act or the Company otherwise meets the definition of a
"publicly held corporation" under Treasury Regulation 1.162-27(c) or any
successor provision. Upon becoming a publicly held corporation, the deduction
limits of Code Section 162(m) and the regulations thereunder shall not apply to
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<PAGE> 19
compensation payable under this Plan until the expiration of the reliance period
described in Treasury Regulation 1.162-27(f) or any successor regulation.
The foregoing is hereby acknowledged as being the HeadHunter.NET, Inc. 1998
Long-Term Incentive Plan as adopted by the Board of Directors of the Company on
July 15, 1998.
HEADHUNTER.NET, INC.
By: /s/ Warren L. Bare
-------------------------------------
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<PAGE> 20
NON-QUALIFIED STOCK OPTION AGREEMENT
under the
HEADHUNTER.NET, INC.
1998 LONG-TERM INCENTIVE PLAN
Optionee:_________________________________________
Number Shares Subject to Option:__________________
Exercise Price per Share:_________________________
Date of Grant:____________________________________
1. Grant of Option. HeadHunter.NET, Inc. (the "Company") hereby grants
to the Optionee named above (the "Optionee"), under the HeadHunter.NET, Inc.
1998 Long-Term Incentive Plan (the "Plan"), a Non-Qualified Stock Option to
purchase, on the terms and conditions set forth in this agreement (this "Option
Agreement"), the number of shares indicated above of the Company's $.01 par
value common stock (the "Stock"), at the exercise price per share set forth
above (the "Option"). Capitalized terms used herein and not otherwise defined
shall have the meanings assigned such terms in the Plan.
2. Vesting of Option. Unless the exercisability of the Option is
accelerated in accordance with Article 13 of the Plan, the Option shall vest
(become exercisable) in accordance with the following schedule:
<TABLE>
<CAPTION>
Years of Service Percent of Option Shares
After Date of Grant Vested
------------------- ------------------------
<S> <C>
Less than 2 0%
2 40%
3 50%
4 60%
5 100%
</TABLE>
3. Period of Option and Limitations on Right to Exercise. The Option
will, to the extent not previously exercised, lapse under the earliest of the
following circumstances; provided, however, that the Committee may, prior to the
lapse of the Option under the circumstances described in paragraphs (b), (c) and
(d) below, provide in writing that the Option will extend until a later date:
(a) The Option shall lapse as of 5:00 p.m., Eastern Time, on
the day immediately prior to the tenth anniversary of the date of grant
(the "Expiration Date").
<PAGE> 21
(b) The Option shall lapse three months after the Optionee's
termination of employment for any reason other than the Optionee's
death or Disability; provided, however, that if the Optionee's
employment is terminated by the Company for cause or by the Optionee
without the consent of the Company, the Option shall lapse immediately.
(c) If the Optionee's employment terminates by reason of
Disability, the Option shall lapse one year after the date of the
Optionee's termination of employment.
(d) If the Optionee dies while employed, or during the
three-month period described in subsection (b) above or during the
one-year period described in subsection (c) above and before the Option
otherwise lapses, the Option shall lapse one year after the date of the
Optionee's death. Upon the Optionee's death, the Option may be
exercised by the Optionee's beneficiary.
If the Optionee or his beneficiary exercises an Option after
termination of employment, the Option may be exercised only with respect to the
shares that were otherwise vested on the Optionee's termination of employment
(including vesting by acceleration in accordance with Article 13 of the Plan).
4. Exercise of Option. The Option shall be exercised by written notice
directed to the Secretary of the Company at the principal executive offices of
the Company, in substantially the form attached hereto as Exhibit A, or such
other form as the Committee may approve. Such written notice shall be
accompanied by full payment in cash, shares of Stock previously acquired by the
Optionee, or any combination thereof, for the number of shares specified in such
written notice; provided, however, that if shares of Stock are used to pay the
exercise price, such shares must have been held by the Optionee for at least six
months. The Fair Market Value of the surrendered Stock as of the date of the
exercise shall be determined in valuing Stock used in payment of the exercise
price. To the extent permitted under Regulation T of the Federal Reserve Board,
and subject to applicable securities laws, the Option may be exercised through a
broker in a so-called "cashless exercise" whereby the broker sells the Option
shares and delivers cash sales proceeds to the Company in payment of the
exercise price.
Subject to the terms of this Option Agreement, the Option may be
exercised at any time and without regard to any other option held by the
Optionee to purchase stock of the Company.
5. Limitation of Rights. The Option does not confer to the Optionee or
the Optionee's personal representative any rights of a shareholder of the
Company unless and until shares of Stock are in fact issued to such person in
connection with the exercise of the Option. Nothing in this Option Agreement
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate the Optionee's employment at any time, nor confer upon
the Optionee any right to continue in the employ of the Company or any
Subsidiary.
-2-
<PAGE> 22
6. Stock Reserve. The Company shall at all times during the term of
this Option Agreement reserve and keep available such number of shares of Stock
as will be sufficient to satisfy the requirements of this Option Agreement.
7. Optionee's Covenant. The Optionee hereby agrees to use his best
efforts to provide services to the Company in a workmanlike manner and to
promote the Company's interests.
8. Restrictions on Transfer and Pledge. The Option may not be pledged,
encumbered, or hypothecated to or in favor of any party other than the Company
or a Parent or Subsidiary, or be subject to any lien, obligation, or liability
of the Optionee to any other party other than the Company or a Parent or
Subsidiary. The Option is not assignable or transferable by the Optionee other
than by will or the laws of descent and distribution; provided, however, that
the Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated taxation
and (ii) is otherwise appropriate and desirable, taking into account any factors
deemed relevant, including without limitation, state or federal tax or
securities laws applicable to transferable options. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or any permitted
transferee.
9. Restrictions on Issuance of Shares. If at any time the Board shall
determine in its discretion, that listing, registration or qualification of the
shares of Stock covered by the Option upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition to the exercise of the Option,
the Option may not be exercised in whole or in part unless and until such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
10. Plan Controls. The terms contained in the Plan are incorporated
into and made a part of this Option Agreement and this Option Agreement shall be
governed by and construed in accordance with the Plan. In the event of any
actual or alleged conflict between the provisions of the Plan and the provisions
of this Option Agreement, the provisions of the Plan shall be controlling and
determinative.
11. Successors. This Option Agreement shall be binding upon any
successor of the Company, in accordance with the terms of this Option Agreement
and the Plan.
12. Severability. If any one or more of the provisions contained in
this Option Agreement are invalid, illegal or unenforceable, the other
provisions of this Option Agreement will be construed and enforced as if the
invalid, illegal or unenforceable provision had never been included.
13. Notice. Notices and communications under this Option Agreement must
be in writing and either personally delivered or sent by registered or certified
United States mail, return receipt requested, postage prepaid. Notices to the
Company must be addressed to:
-3-
<PAGE> 23
HeadHunter.NET, Inc.
6410 Altantic Blvd.
Suite 160
Norcross, Georgia 30071
Attn: Mr. Ken Dopher
or any other address designated by the Company in a written notice to the
Optionee. Notices to the Optionee will be directed to the address of the
Optionee then currently on file with the Company, or at any other address given
by the Optionee in a written notice to the Company.
IN WITNESS WHEREOF, HeadHunter.NET, Inc., acting by and through its
duly authorized officers, has caused this Option Agreement to be executed, and
the Optionee has executed this Option Agreement, all as of the day and year
first above written.
HEADHUNTER.NET, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
OPTIONEE:
------------------------------
-4-
<PAGE> 24
EXHIBIT A
NOTICE OF EXERCISE OF OPTION TO PURCHASE
COMMON STOCK OF
HEADHUNTER.NET, INC.
Name _________________________________
Address:
______________________________________
______________________________________
Date _________________________________
HeadHunter.NET, Inc.
6410 Altantic Blvd.
Suite 160
Norcross, Georgia 30071
Attn: Mr. Ken Dopher
Re: Exercise of Non-Qualified Stock Option
I elect to purchase ______________ shares of Common Stock of
HeadHunter.NET, Inc. pursuant to the HeadHunter.NET, Inc. Non-Qualified Stock
Option Agreement dated ______________ and the HeadHunter.NET, Inc. 1998
Long-Term Incentive Plan. The purchase will take place on the Exercise Date
which will be as soon as practicable following the date this notice and all
other necessary forms and payments are received by HeadHunter.NET, unless I
specify a later date (not to exceed 30 days following the date of this notice).
On or before the Exercise Date, I will pay the full exercise price in
the form specified below (check one):
[ ] Cash Only: by delivering a check to HeadHunter.NET, Inc.
for $___________.
[ ] Cash and Shares: by delivering a check to HeadHunter.NET, Inc.
for $_________ for the part of the exercise price. I will pay
the balance of the exercise price by delivering to
HeadHunter.NET a stock certificate with my endorsement for
shares of HeadHunter.NET Stock that I have owned for at least
six months. If the number of shares of HeadHunter.NET Stock
represented by such stock certificate exceeds the number
needed to pay the exercise price, HeadHunter.NET will issue me
a new stock certificate for the excess.
<PAGE> 25
[ ] Shares Only: by delivering to HeadHunter.NET a stock
certificate with my endorsement for shares of HeadHunter.NET
Stock that I have owned for at least six months. If the number
of shares of HeadHunter.NET Stock represented by such stock
certificate exceeds the number needed to pay the exercise
price, HeadHunter.NET will issue me a new stock certificate
for the excess.
[ ] Cash From Broker: by delivering the purchase price from
_______________________, a broker, dealer or other "creditor"
as defined by Regulation T issued by the Board of Governors of
the Federal Reserve System (the "Broker"). I authorize
HeadHunter.NET to issue a stock certificate in the number of
shares indicated above in the name of the Broker in accordance
with instructions received by HeadHunter.NET from the Broker
and to deliver such stock certificate directly to the Broker
(or to any other party specified in the instructions from the
Broker) upon receiving the exercise price from the Broker.
Please deliver the stock certificate to me (unless I have chosen to pay
the purchase price through a broker).
Very truly yours,
---------------------------------------
AGREED TO AND ACCEPTED:
HEADHUNTER.NET, INC.
By: ___________________________________
Title: ________________________________
Number of Option Shares
Exercised: ____________________________
Number of Option Shares
Remaining: ____________________________
Date: _________________________________
-2-
<PAGE> 1
EXHIBIT 10.18
INVESTMENT AGREEMENT
AMONG
ITC HOLDING COMPANY, INC.,
HEADHUNTER.NET, INC.
AND
WARREN BARE
DATED AS OF OCTOBER 30, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C> <C> <C>
1. DEFINED TERMS...................................................................................5
2. CAPITAL CONTRIBUTIONS; LOAN COMMITMENT..........................................................5
2.1. Capital Contribution of ITC..........................................................5
2.2. Capital Contribution of HeadHunter...................................................5
2.3. Loan to LLC..........................................................................6
3. ADDITIONAL UNDERTAKINGS AND COVENANTS...........................................................6
3.1. Consents and Approvals...............................................................6
3.2. Access to Information; Confidentiality...............................................6
3.2.1. ITC Access to Information and Confidentiality Obligation..................6
3.2.2. HeadHunter and Shareholder Confidentiality Obligations....................7
3.2.3. Effect of Investigation...................................................7
3.3. Operation of Business of HeadHunter..................................................8
3.3.1. Preserve Business.........................................................8
3.3.2. Conduct Business in Ordinary Course.......................................8
3.3.3. Distribution to the Shareholder...........................................8
3.3.4. Notice of Adverse Change..................................................9
3.3.5. Books of Record and Account...............................................9
3.4. No Inconsistent Negotiations.........................................................9
3.5. News Releases........................................................................9
3.6. Subsequent Events....................................................................10
3.7. Employment of the Shareholder........................................................10
3.8. ITC Stock Options....................................................................10
4. REPRESENTATIONS AND WARRANTIES OF HEADHUNTER AND THE SHAREHOLDER................................11
4.1. Organization and Standing............................................................11
4.2. Subsidiaries.........................................................................11
4.3. Certificate or Articles of Incorporation and Bylaws..................................12
4.4. Ownership of HeadHunter..............................................................12
4.5. Directors, Officers and Employees....................................................12
4.6. Financial Statements.................................................................12
4.7. No Liabilities.......................................................................13
4.8. Accounts Receivable..................................................................13
4.9. Taxes................................................................................13
4.9.1. Filed Returns.............................................................13
4.9.2. Tax Liability.............................................................13
4.9.3. Tax Audits................................................................14
4.10. Conduct of Business; Absence of Material Adverse Change..............................14
4.11. Real Property........................................................................14
4.12. Assets...............................................................................14
4.13. Intellectual Property................................................................14
4.14. Debt Instruments.....................................................................15
4.15. Leases...............................................................................15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C> <C> <C>
4.16. Other Agreements.....................................................................16
4.17. Books and Records....................................................................16
4.18. Litigation; Disputes.................................................................16
4.19. Pension and Benefit Plans............................................................16
4.20. Environmental........................................................................17
4.21. Restrictions and Consents............................................................17
4.22. Authorization........................................................................17
4.23. Absence of Violation.................................................................17
4.24. Binding Obligation...................................................................18
4.25. Disclosure...........................................................................18
5. REPRESENTATIONS AND WARRANTIES OF ITC...........................................................18
5.1. Organization and Standing............................................................18
5.2. Authorization........................................................................19
5.3. Binding Obligation...................................................................19
6. RESTRICTED SECURITIES...........................................................................19
6.1. No Registration Under the Securities Act.............................................19
6.2. Acquisition for Investment...........................................................19
6.3. Evaluation of Merits and Risks of investment.........................................20
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF HEADHUNTER AND THE SHAREHOLDER...........................20
7.1. Representations, Warranties and Covenants............................................20
7.2. Legal Proceedings....................................................................20
7.3. Consents.............................................................................20
7.4. Business Plan........................................................................21
7.5. Documents at Closing.................................................................21
7.6. Formation of LLC.....................................................................21
7.7. Deliveries by LLC....................................................................21
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF ITC......................................................21
8.1. Representations, Warranties and Covenants............................................21
8.2. Absence of Material Adverse Changes..................................................22
8.3. Legal Proceedings....................................................................22
8.4. Consents.............................................................................22
8.4.1. ITC Consents..............................................................22
8.4.2. HeadHunter Consents.......................................................22
8.5. Board of Directors Approval..........................................................22
8.6. Business Plan........................................................................22
8.7. Documents at Closing.................................................................23
8.8. Formation of LLC.....................................................................23
8.9. Deliveries by LLC....................................................................23
9. CLOSING.........................................................................................23
9.1. Closing of LLC Investment............................................................23
9.2. Deliveries by HeadHunter on the Closing Date.........................................23
9.3. Deliveries by ITC on the Closing Date................................................24
9.4. Deliveries by the LLC................................................................24
9.5. Deliveries by the Shareholder........................................................24
</TABLE>
-3-
<PAGE> 4
<TABLE>
<S> <C> <C> <C> <C> <C>
10. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION;...................................................25
10.1. Survival of Representations and Warranties...........................................25
10.2. Agreement of HeadHunter and the Shareholder to Indemnify.............................25
10.3. Agreement of ITC to Indemnify........................................................25
10.4. Conditions of Indemnification........................................................26
10.4.1. Notice....................................................................26
10.4.2. Counsel...................................................................26
10.4.3. Joint Liability...........................................................26
10.5. Specific Performance.................................................................26
10.6. Remedies Cumulative..................................................................27
11. TERMINATION AND EFFECT THEREOF..................................................................27
11.1. Termination..........................................................................27
11.2. Effect of Termination................................................................27
12. MISCELLANEOUS...................................................................................28
12.1. Additional Actions and Documents.....................................................28
12.2. No Brokers...........................................................................28
12.3. Expenses.............................................................................28
12.4. Assignment...........................................................................29
12.5. Entire Agreement; Amendment..........................................................29
12.6. Waiver...............................................................................29
12.7. Severability.........................................................................29
12.8. Governing Law........................................................................29
12.9. Notices..............................................................................30
12.10. Headings.............................................................................31
12.11. Execution in Counterparts............................................................31
12.12. Limitation on Benefits...............................................................31
12.13. Binding Effect.......................................................................31
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS SECTION REFERENCES
<S> <C> <C>
Exhibit 1 Definitions.......................................................................... 1
Exhibit 2 Loan and Security Agreement..........................................................2.3
Exhibit 3 Employment Letter....................................................................3.7
</TABLE>
-4-
<PAGE> 5
INVESTMENT AGREEMENT
THIS INVESTMENT AGREEMENT is entered into as of October 30, 1997, by
and among ITC Holding Company, Inc., a Delaware corporation ("ITC")
HeadHunter.NET, Inc., a Georgia corporation ("HEADHUNTER") and Warren Bare, the
sole shareholder of HeadHunter (the "SHAREHOLDER").
WHEREAS, ITC and HeadHunter have agreed to form a limited liability
company pursuant to the provisions of the Delaware Limited Liability Act (the
"DELAWARE LLC ACT") under the name "HeadHunters, L.L.C." (the "LLC") pursuant to
a Certificate of Formation (the "LLC CERTIFICATE") and a Limited Liability
Company Agreement (the "LLC AGREEMENT") to be entered into by ITC and
HeadHunter;
WHEREAS, ITC believes that it is in its best interest to acquire an
ownership interest in the LLC (an "LLC INTEREST") on the terms and conditions
set forth herein; and
WHEREAS, HeadHunter believes that it is in its best interest to
contribute to the LLC all of its assets and certain liabilities in exchange for
an LLC Interest on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto hereby agree
as follows:
1. DEFINED TERMS
For all purposes of this Investment Agreement, all capitalized terms
used herein shall have the meanings specified in Exhibit 1, except as otherwise
expressly provided in this Investment Agreement.
2. CAPITAL CONTRIBUTIONS; LOAN COMMITMENT
2.1. CAPITAL CONTRIBUTION OF ITC
On the basis of the representations, warranties and agreements
contained herein, and subject to the terms and conditions hereof, ITC agrees to
contribute to the LLC $1,100,000 in cash (the "ITC CAPITAL CONTRIBUTION") in
exchange for its LLC Interest.
2.2. CAPITAL CONTRIBUTION OF HEADHUNTER
On the basis of the representations, warranties and agreements
contained herein, and subject to the terms and conditions hereof, HeadHunter
agrees to contribute to the LLC, in exchange for its LLC Interest, (i) all of
its Assets, including the right to use the name "HeadHunter.NET" (and all
variations thereof) and (ii) the Liabilities (collectively, the "HEADHUNTER
CAPITAL CONTRIBUTION").
-5-
<PAGE> 6
2.3. LOAN TO LLC
On the basis of the representations, warranties and agreements
contained herein, and subject to the terms and conditions hereof, ITC agrees to
enter into the Loan and Security Agreement substantially in the form attached
hereto as Exhibit 2 (the "LOAN AND SECURITY AGREEMENT") pursuant to which ITC
shall be obligated to make available to the LLC a revolving credit facility not
to exceed a maximum outstanding aggregate principal amount of $1,000,000, for
the three (3) year period beginning on the Closing Date, on the term and
conditions set forth in the Loan and Security Agreement (the "CREDIT FACILITY"),
which the LLC may convert to a term loan in accordance with the terms and
conditions of the Loan and Security Agreement (any such term loan is referred to
herein as the "Term Loan").
3. ADDITIONAL UNDERTAKINGS AND COVENANTS
ITC, HeadHunter and the Shareholder hereby covenant and agree with each
other as follows:
3.1. CONSENTS AND APPROVALS
Each of them shall take all measures reasonably necessary or advisable
to secure such consents, authorizations and approvals of governmental
authorities and of private persons or entities with respect to the transactions
contemplated by this Investment Agreement, and to the performance of all other
obligations of such parties hereunder, as may be required by any applicable
statute or regulation of the United States or any country, state or other
jurisdiction or by any Agreement of any kind whatsoever to which it is a party
or by which it is bound.
3.2. ACCESS TO INFORMATION; CONFIDENTIALITY
3.2.1. ITC ACCESS TO INFORMATION AND CONFIDENTIALITY
OBLIGATION
HeadHunter and Shareholder shall, through the Closing Date, provide to
representatives of ITC full access to the offices, books, agreements, records
(including, without limitation, tax returns and correspondence with
accountants), officers, directors, employees, consultants and contractors of
HeadHunter and will furnish representatives of ITC such financial and operating
data and other information with respect to the business and Assets and
Liabilities of HeadHunter as ITC may reasonably request, including, without
limitation, Agreements with clients, customers, vendors, lessors, licensors and
suppliers of HeadHunter. ITC agrees to use reasonable efforts, at least as
stringent as those employed by it with respect to its own confidential
information, (i) to keep confidential all such information of HeadHunter and/or
the Shareholder that is identified by HeadHunter or the Shareholder as being of
a confidential nature, (ii) not to use such confidential information on its own
behalf, except in connection with the transactions
-6-
<PAGE> 7
contemplated hereby, or on behalf of any other person, firm or entity, and (iii)
not to disclose such confidential information to any third party (other than to
ITC's counsel, accountants and other consultants in connection with the
transactions contemplated hereby) without HeadHunter's or the Shareholder's
advance written authorization; provided however that ITC shall have no such
obligations with respect to confidential information that (A) was lawfully
obtained by it not subject to restrictions of confidentiality; (B) is a matter
of public knowledge; or (C) has been or is hereafter publicly disclosed other
than by or through ITC. In the event of a breach or threatened breach by ITC of
the provisions of this Section, HeadHunter and the Shareholder shall be entitled
to an injunction restraining ITC from disclosing, in whole or in part, such
information, in addition to any other remedy to which ITC may be entitled in law
or in equity.
3.2.2. HEADHUNTER AND SHAREHOLDER CONFIDENTIALITY
OBLIGATIONS
HeadHunter and the Shareholder each hereby acknowledges that, as a
result of the transactions contemplated by this Investment Agreement, from time
to time it may obtain knowledge of and access to confidential and valuable
business information relating to ITC and its Affiliates not generally known by
or available to the general public. HeadHunter and the Shareholder each agrees
to use reasonable efforts, at least as stringent as those employed by it with
respect to its own confidential information, (i) to keep confidential all such
information of ITC that is identified by ITC as being of a confidential nature,
(ii) not to use such confidential information on its own behalf, except in
connection with the transactions contemplated hereby, or on behalf of any other
person, firm or entity, and (iii) not to disclose such confidential information
to any third party (other than to its counsel, accountants and other consultants
in connection with the transactions contemplated hereby) without ITC's advance
written authorization; provided, however that HeadHunter and the Shareholder
shall have no such obligations with respect to confidential information that:
(A) was lawfully obtained by them not subject to restrictions of
confidentiality; (B) is a matter of public knowledge; or (C) has been or is
hereafter publicly disclosed other than by or through it. In the event of a
breach or threatened breach by HeadHunter or the Shareholder of the provisions
of this Section, ITC shall be entitled to an injunction restraining HeadHunter
or the Shareholder, as the case may be, from disclosing, in whole or in part,
such information, in addition to any other remedy to which ITC may be entitled
in law or in equity.
3.2.3. EFFECT OF INVESTIGATION
ITC's investigation of the financial and operating data, Assets and
Liabilities, and other information with respect to the business of HeadHunter
shall in no way affect the obligations of HeadHunter or the Shareholder with
respect to the agreements, representations, warranties, covenants and
indemnification provisions set forth in this Investment Agreement.
-7-
<PAGE> 8
3.3. OPERATION OF BUSINESS OF HEADHUNTER
3.3.1. PRESERVE BUSINESS
HeadHunter shall through the Closing Date: (i) preserve its business
organization and present relationships with customers, suppliers, consultants,
employees and any other persons having business relations with it; and (ii)
maintain its Assets in customary repair and condition.
3.3.2. CONDUCT BUSINESS IN ORDINARY COURSE
Except as contemplated by this Investment Agreement or as reasonably
required to carry out its obligations hereunder, HeadHunter, through the Closing
Date, shall conduct its business only in the Ordinary Course of Business and, in
addition, shall not: (i) issue any capital stock or any options, warrants or
other rights to subscribe for or purchase any of its capital stock or any
securities convertible into or exchangeable for its capital stock; (ii) declare,
set aside or pay any dividend or distribution with respect to its capital stock
to its Shareholder other than distributions made to permit the Shareholder to
pay estimated taxes with respect to the taxable income of HeadHunter; (iii)
directly or indirectly redeem, purchase or otherwise acquire any of its capital
stock; (iv) effect a split, reclassification or other change in or of any of its
capital stock; (v) amend its certificate or articles of incorporation or its
bylaws (except for such changes and amendments in the certificate or articles of
incorporation of HeadHunter as may be required by or pursuant to this Investment
Agreement); (vi) grant any increase in the compensation payable or to become
payable by HeadHunter to officers or employees of HeadHunter, or enter into any
bonus, insurance, pension or other benefit plan, payment or arrangement for or
with any of such officers or employees other than in the Ordinary Course of
Business; (vii) borrow or agree to borrow any funds, or directly or indirectly
guarantee or agree to guarantee the obligations of others; (viii) enter into any
Agreement which may have a material effect on its business and operations; (ix)
place, or allow to be placed, an Encumbrance on any of its Assets; (x) cancel
any indebtedness owing to HeadHunter or any Claims which HeadHunter may possess,
or waive any rights of substantial value; (xi) sell, assign or transfer any
Intellectual Property; (xii) or otherwise dispose of any interest in any Asset
(other than in the Ordinary Course of Business); (xiii) violate any Law; (xiv)
commit any act or omit to do any act, or engage in any activity or transaction
or incur any obligation (by conduct or otherwise), which (individually or in the
aggregate) reasonably could be expected to have a material adverse effect on its
business or Assets; or (xv) make any loan or advance to any stockholder, officer
or director of HeadHunter or to any other person, firm or corporation.
3.3.3. DISTRIBUTION TO THE SHAREHOLDER
Notwithstanding SECTION 3.3.2., HeadHunter may borrow and distribute or
loan to the Shareholder up to $100,000 prior to the Closing Date. In the event
that ITC makes a loan to HeadHunter to fund all or any portion of such
distribution or loan prior to the
-8-
<PAGE> 9
Closing, the parties shall cause the LLC to assume the obligation to repay such
loan and to repay ITC's loan, together with all accrued but unpaid interest, at
the closing.
3.3.4. NOTICE OF ADVERSE CHANGE
HeadHunter and Shareholder shall notify ITC promptly of any adverse
change in the business, operations, prospects, condition (financial or
otherwise), Assets or liabilities of HeadHunter occurring at any time through
the Closing Date.
3.3.5. BOOKS OF RECORD AND ACCOUNT
HeadHunter shall keep proper books of record and account in which true
and complete entries will be made of all transactions.
3.4. NO INCONSISTENT NEGOTIATIONS
Subject to fiduciary obligations under law as advised by counsel in writing,
through the Closing Date, neither HeadHunter nor the Shareholder shall take any
of the following actions, or permit any agent of HeadHunter, directly or
indirectly, to take any of the following actions:
(i) take any action to solicit, initiate or encourage the
submission of a Proposal; or
(ii) participate in any negotiations regarding, or furnish to any
other person any non-public information with respect to, or
otherwise cooperate in any way with, or assist or participate
in, facilitate, or encourage, any effort or attempt by any
other person to do or seek any of the foregoing.
HeadHunter and the Shareholder shall notify ITC promptly if any Proposal, or any
inquiry or contact with any person with respect thereto, is made and shall, in
any such notice to ITC, indicate in reasonable detail the identity of the
offeror and the terms and conditions of the Proposal, including the proposed
financing for such Proposal. HeadHunter shall respond to any such Proposal only
to the extent required by fiduciary obligations under law, as advised by its
counsel in writing.
3.5. NEWS RELEASES
Except as may be otherwise required for compliance with securities
laws, neither ITC nor HeadHunter shall issue or approve any news release or
other public announcement concerning the transactions contemplated by this
Investment Agreement without the prior approval of ITC and HeadHunter.
-9-
<PAGE> 10
3.6. SUBSEQUENT EVENTS
Head-Hunter and the Shareholder shall notify ITC promptly in writing of
the occurrence of any event, or the failure of any event to occur, prior to the
Closing that results in an omission from, or breach of, any of the covenants,
representations or warranties made by HeadHunter or the Shareholder in this
Investment Agreement, the Disclosure Schedule or any other Document furnished in
connection with or pursuant to this Investment Agreement, but such notification
shall not excuse breaches of representations, warranties, covenants or
agreements disclosed in such notification.
3.7. EMPLOYMENT OF THE SHAREHOLDER
ITC and HeadHunter shall cause the LLC to employ the Shareholder, and
the Shareholder shall agree to serve, as the President and Chief Executive
Officer of the LLC pursuant to the terms of an Employment Letter substantially
in the form attached hereto as Exhibit 3 to be entered into by the LLC and the
Shareholder at the Closing.
3.8. ITC STOCK OPTIONS
As soon as practicable following the Closing, ITC will grant the
Shareholder options to purchase 5,000 shares of ITC's Common Stock (the "Option
Shares") at the fair market value of such shares on the date of grant, as
determined in good faith by ITC's Board of Directors. Shareholder acknowledges
that the options will not constitute qualified incentive stock options within
the meaning of Section 422 of the Code. The options will be evidenced by a
written option agreement containing general terms and conditions that are
consistent with the general terms and conditions of ITC's non-incentive stock
option agreements. The term of such options shall be ten (10) years from the
date of grant. The options shall be vest and become exercisable as follows:
(i) if at any time up to and including the third anniversary of
the Closing Date the LLC pays in full all amounts owed to LLC
under the Credit Facility and the Credit Facility is canceled
(either by the terms of such Credit Facility or by the LLC
providing ITC with written notice that it is canceling the
Credit Facility), options for 100% of the Option Shares shall
be exercisable at any time after the date of such repayment
and cancellation;
(ii) in the event ITC elects to convert the amount of indebtedness
outstanding under the Credit Facility on the third anniversary
of the Closing Date into an additional interest in the LLC in
accordance with the terms and conditions of the Loan and
Security Agreement, options for 100% of the Option Shares
shall be exercisable at any time after such conversion; or
(iii) if any amount of indebtedness remains outstanding under the
Credit Facility as of the third anniversary of the Closing
Date and ITC does not elect to convert such amount into an
additional interest in the LLC, the options
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shall be exercisable as of the third anniversary of the
Closing Date and as of each anniversary thereafter for that
number of Option Shares determined by multiplying the total
number of Option Shares (i.e., 5,000) by a fraction, the
numerator of which is equal to $1,000,000 less the principal
amount of the LLC indebtedness to ITC outstanding under the
Credit Facility or the Term Loan as of such anniversary, and
the denominator of which is equal to $1,000,000. For example,
if on the third anniversary of the Closing Date $500,000
remains outstanding under the Credit Facility and is to be
converted to the Term Loan, options for 50% of the Option
Shares would then be exercisable. If on the next anniversary
of the Closing Date the principal amount of indebtedness
outstanding under the Term Loan is reduced to $250,000,
options for 75% of the Option Shares (to the extent not
previously exercised) would then be exercisable.
4. REPRESENTATIONS AND WARRANTIES OF HEADHUNTER AND THE SHAREHOLDER
Except as specifically set forth in the Disclosure Schedule (with a
specific reference in the Disclosure Schedule to the Section of this Investment
Agreement to which each such disclosure applies), each of HeadHunter and the
Shareholder jointly and severally represents and warrants to ITC as follows:
4.1. ORGANIZATION AND STANDING
HeadHunter is a corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia, and has the full and
unrestricted corporate power and authority to own, operate and lease its Assets,
to carry on its business as currently conducted, to execute and deliver this
Investment Agreement and to carry out the transactions contemplated hereby.
HeadHunter is duly qualified to conduct business as a foreign corporation and is
in good standing in the states, countries and territories listed on the
Disclosure Schedule. HeadHunter is not qualified to conduct business in any
other jurisdiction, and neither the nature of the business conducted by
HeadHunter nor the character of the Assets owned, leased or otherwise held by it
make any such qualification necessary. To the best of HeadHunter's and the
Shareholder's knowledge after reasonable inquiry, there is no state, country or
territory wherein the absence of licensing or qualification as a foreign
corporation would have a material adverse effect upon the business of HeadHunter
as currently conducted.
4.2. SUBSIDIARIES
HeadHunter has no Subsidiaries and no equity investment or other
interest in, nor has HeadHunter made advances or loans to, any corporation,
association, partnership, joint venture or other entity.
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4.3. CERTIFICATE OR ARTICLES OF INCORPORATION AND BYLAWS
HeadHunter has furnished to ITC a true and complete copy of the
certificate or articles of incorporation of HeadHunter, as currently in effect,
and a true and complete copy of the bylaws of HeadHunter, as currently in
effect, which are attached as exhibits to, and are part of, the Disclosure
Schedule.
4.4. OWNERSHIP OF HEADHUNTER
As of the Closing Date, the Shareholder owns all of the issued and
outstanding shares of stock of HeadHunter and there are no outstanding
securities convertible into or exchangeable for, and no outstanding options,
rights (preemptive or otherwise), or warrants to purchase or to subscribe for,
any shares of stock or other securities of HeadHunter. There are no outstanding
agreements affecting or relating to the voting, issuance, purchase, redemption,
repurchase or transfer of shares of stock or any other securities of HeadHunter.
4.5. DIRECTORS, OFFICERS AND EMPLOYEES
The Disclosure Schedule lists all current directors, officers and
employees of HeadHunter, showing each such person's name, positions, and annual
remuneration.
4.6. FINANCIAL STATEMENTS
HeadHunter has prepared and Furnished to ITC and there are included as
exhibits that are part of the Disclosure Schedule, the balance sheets of
HeadHunter as of the end of the fiscal year ending in each of 1995 and 1996 and
the statements of income, shareholders' equity and changes in financial position
for each of such fiscal years. HeadHunter also has prepared and furnished to
ITC, and there are included as exhibits that are part of the Disclosure
Schedule, the unaudited balance sheets of HeadHunter as of the end of the fiscal
quarters ended March 31, 1997, June 30, 1997, September 30, 1997, and the
unaudited statements of income and shareholders' equity for the periods then
ended. All of the financial statements, including, without limitation, the notes
thereto, referred to in this Section or furnished to ITC after the date hereof
pursuant to this Investment Agreement: (a) are in accordance with the books and
records of HeadHunter, (b) present fairly the financial position of HeadHunter
as of the respective dates and the results of operations and changes in
financial position for the respective periods indicated, and (c) have been
prepared on a basis consistent with prior accounting periods except as specified
in the Disclosure Schedule. The Disclosure Schedule sets forth all changes in
accounting methods (for financial accounting purposes) at any time made, agreed
to, requested or required with respect to HeadHunter.
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4.7. NO LIABILITIES
Except as reflected in the financial statements furnished pursuant to
this Investment Agreement or as described on the Disclosure Schedule, to the
best of HeadHunter's and the Shareholder's knowledge, after reasonable inquiry,
there exist no liabilities (whether contingent or absolute, matured or
unmatured) of HeadHunter. Except as described in the Disclosure Schedule,
HeadHunter has not incurred any liabilities (whether contingent or absolute,
matured or unmatured) other than in the Ordinary Course of Business.
4.8. ACCOUNTS RECEIVABLE
The accounts receivable of Head-Hunter shown on the balance sheets
furnished pursuant to SECTION 4.6, or thereafter acquired by it, have been
collected or in the best judgment of HeadHunter and the Shareholder are
collectible in amounts not significantly less than the amounts thereof carried
on the books of HeadHunter, except to the extent of the allowance for doubtful
accounts shown on such, balance sheets.
4.9. TAXES
4.9.1. FILED RETURNS
HeadHunter has (or, in the case of returns becoming due after the date
hereof and on or before the Closing Date, will have prior to the Closing Date)
duly filed all HeadHunter Tax Returns required to be filed by HeadHunter on or
before the Closing Date with respect to all applicable Taxes to the best of
HeadHunter's and the Shareholder's knowledge, after reasonable inquiry. No
penalties or other charges of a material amount are or will become due with
respect to any of the HeadHunter Tax Returns as the result of the late filing
thereof. All of the HeadHunter Tax Returns are (or, in the case of returns
becoming due after the date hereof and on or before the Closing Date, will be)
true and complete in all material respects to the best of HeadHunter's and the
Shareholder's knowledge, after reasonable inquiry. HeadHunter has paid all Taxes
due or claimed to be due by any Taxing authority in connection with any of the
HeadHunter Tax Returns (without regard to whether or not such Taxes are shown as
due on such HeadHunter Tax Returns).
4.9.2. TAX LIABILITY
Other than as set forth in the Disclosure Schedule, to the best of
HeadHunter's and the Shareholder's knowledge, after reasonable inquiry,
HeadHunter, either in its own right or as a transferee, does not have, and on
the Closing Date will not have, any liability for Taxes payable for or with
respect to any periods prior to and including the Closing Date materially in
excess of the amounts actually paid prior to the Closing Date or reserved for in
financial statements furnished to ITC pursuant to SECTION 4.6.
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<PAGE> 14
4.9.3. TAX AUDITS
Other than as set forth in the Disclosure Schedule, there is no action,
suit, proceeding, audit, investigation or claim pending or, to the knowledge of
HeadHunter, threatened in respect of any Taxes for which HeadHunter is or may
become liable, nor has any deficiency or claim for any such Taxes been proposed,
asserted or, to the knowledge of HeadHunter, threatened.
4.10. CONDUCT OF BUSINESS; ABSENCE OF MATERIAL ADVERSE CHANGE
Other than as set forth in the Disclosure Schedule, there has been no
material adverse change, and no change except in the Ordinary Course of
Business, in the business, operations, prospects, condition (financial or
otherwise), Assets or Liabilities of HeadHunter since December 31, 1996. Except
as set forth in the Disclosure Schedule, HeadHunter has conducted its business
diligently and substantially in the manner heretofore conducted and only in the
Ordinary Course of Business.
4.11. REAL PROPERTY
HeadHunter owns no real property.
4.12. ASSETS
HeadHunter has good, valid and marketable title to all Assets owned by
it, including, without limitation, all Assets reflected in the most recent
balance sheet furnished pursuant to SECTION 4.6 and all Assets acquired by
HeadHunter since the date of that balance sheet (except for Assets which have
been sold or otherwise disposed of in the Ordinary Course of Business), free and
clear of all Encumbrances to the best of HeadHunter's and the Shareholder's
knowledge, after reasonable inquiry. All personal property of HeadHunter is in
good operating condition and repair and is suitable and adequate for the uses
for which it is intended or is being used.
4.13. INTELLECTUAL PROPERTY
The Disclosure Schedule lists all franchises, license, trademarks,
service marks, trade names, copyrights, patents and applications therefor owned
or licensed by or registered in the name of HeadHunter. Except as set forth in
the Disclosure Schedule, to the best of HeadHunter's and the Shareholder's
knowledge, after reasonable inquiry, HeadHunter owns all of the Intellectual
Property listed in the Disclosure Schedule purported to be owned by it, pays no
royalty to anyone with respect to any Intellectual Property, and has the right
to bring action for the infringement of such Intellectual Property. HeadHunter
owns or possesses adequate rights to use all Intellectual Property necessary to
the conduct of the present business of HeadHunter. Except as set forth in the
Disclosure Schedule, HeadHunter and the Shareholder have no knowledge and have
not received any notice to the effect, that any product HeadHunter sells or that
any service
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<PAGE> 15
HeadHunter renders, or that the marketing or use by HeadHunter or another of any
such product or service, may or is claimed to infringe any Intellectual Property
or legally protectable right of another person.
4.14. DEBT INSTRUMENTS
The Disclosure Schedule lists and briefly describes the material terms,
provisions and conditions of all mortgages, indentures, notes, guarantees and
other Agreements for or relating to borrowed money (including, without
limitation, conditional sales agreements and capital leases) to which HeadHunter
is a party or which have been assumed by HeadHunter or to which any Assets of
HeadHunter are subject. To the best of HeadHunter's and the Shareholder's
knowledge, after reasonable inquiry, HeadHunter has performed all the
obligations required to be performed by it to date and is not in default in any
material respect under any of the foregoing, and there has not occurred any
event which (whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute such a default.
4.15. LEASES
The Disclosure Schedule lists and briefly describes all leases and
other Agreements under which HeadHunter is lessee or lessor of any Asset, or
holds, manages or operates any Asset owned by any third party, or under which
any Asset owned by HeadHunter is held, operated or managed by a third party.
HeadHunter is the owner and holder of all leasehold estates purported to be
granted by the Documents described in the Disclosure Schedule to it, free and
dear of all Encumbrances. To the best of HeadHunter's and the Shareholder's
knowledge, after reasonable inquiry, each such lease and other Agreement is in
full force and effect and constitutes a legal, valid and binding obligation of,
and is legally enforceable against, the respective parties thereto and grants
the leasehold estate it purports to grant free and clear of all Encumbrances to
the extent described in such leases. To the best of HeadHunter's and the
Shareholder's knowledge, after reasonable inquiry, HeadHunter has obtained any
governmental approvals reasonably necessary with respect thereto, and has made
all reasonably necessary filings or registrations therefor that it is required
to make, and there have been no threatened cancellations thereof and are no
outstanding disputes thereunder. HeadHunter has in all material respects
performed all obligations thereunder reasonably necessary to be performed by it
to date. To the best of HeadHunter's and the Shareholder's knowledge, after
reasonable inquiry, no party is in default in any material respect under any of
the foregoing, and there has not occurred any event which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute such a default. To the best of HeadHunter's and the
Shareholder's knowledge, after reasonable inquiry, all of the Assets subject to
such leases are in good operating condition and repair.
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<PAGE> 16
4.16. OTHER AGREEMENTS
The Disclosure Schedule lists and briefly describes all significant
Agreements to which HeadHunter is a party or by which HeadHunter is bound at the
date hereof. To the best of HeadHunter's and the Shareholder's knowledge, after
reasonable inquiry, each such Agreement is in full force and effect and
constitutes a legal, valid and binding obligation of, and is legally enforceable
against, the respective parties thereto. To the best of HeadHunter's and the
Shareholder's knowledge, after reasonable inquiry, all reasonably necessary
governmental approvals with respect thereto have been obtained, all reasonably
necessary filings or registrations therefor have been made, and there have been
no threatened cancellations thereof and are no outstanding disputes thereunder.
HeadHunter has in all material respects performed all the obligations thereunder
reasonably necessary to be performed by it to date. To the best of HeadHunter's
and the Shareholder's knowledge, after reasonable inquiry, no party is in
default in any material respect under any of the Agreements described in the
Disclosure Schedule, and there has not occurred any event which (whether with or
without notice, lapse of time or the happening or occurrence of any other event)
would constitute such a default.
4.17. BOOKS AND RECORDS
The books of account, stock records, minute books and other records of
HeadHunter are true and complete and have been maintained in accordance with
good business practices.
4.18. LITIGATION; DISPUTES
There are no actions, suits, claims, arbitrations, proceedings or
investigations pending or, to the best of HeadHunter's and Shareholder's
knowledge after reasonable inquiry, threatened or reasonably anticipated
against, affecting or involving HeadHunter or its business or Assets, or the
transactions contemplated by this Agreement, at law or in equity or admiralty,
or before or by any court, arbitrator or governmental authority, domestic or
foreign. HeadHunter is not operating under, subsequent or in default with
respect to any order, award, writ, injunction, decree or judgment of any court,
arbitrator or governmental authority. HeadHunter is not currently involved in
and does not reasonably anticipate any dispute with any of its current or former
employees, agents, brokers, distributors, vendors, customers, business
consultants, franchisees, franchisors, representatives or independent
contractors (or any current or former employees of any of the foregoing persons
or entities) affecting the business or Assets of HeadHunter.
4.19. PENSION AND BENEFIT PLANS
Other than as set forth in the Disclosure Schedule, HeadHunter (i) does
not maintain and never has maintained any Plan or Other Arrangement, (ii) is not
and never has been a party to any Plan or Other Arrangement, and (iii) has no
obligations under any Plan or Other Arrangement.
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4.20. ENVIRONMENTAL
HeadHunter has complied and is in compliance with, all Environmental
Laws.
4.21. RESTRICTIONS AND CONSENTS
There are no Agreements, Laws or other restrictions of any kind to
which HeadHunter is party or subject that would prevent or restrict the
execution, delivery or performance of this Investment Agreement or result in any
penalty, forfeiture, Agreement termination, or restriction on business
operations of the LLC, ITC or HeadHunter as a result of the execution, delivery
or performance of this Investment Agreement. The Disclosure Schedule lists all
such Agreements and Laws that reasonably could be interpreted or expected to
require the consent or acquiescence of any person or entity not party to this
Investment Agreement with respect to any aspect of the execution, delivery or
performance of this Investment Agreement by HeadHunter and the Shareholder.
4.22. AUTHORIZATION
The execution, delivery and performance by HeadHunter and the
Shareholder of this Investment Agreement and all other Documents contemplated
hereby, the fulfillment of and compliance with the respective terms and
provisions hereof and thereof, and the consummation by HeadHunter and the
Shareholder of the transactions contemplated hereby and thereby have been duly
authorized by HeadHunter's Board of Directors (which authorization has not been
modified or rescinded and is in full force and effect), and do not and will not:
(a) require any consent or approval which has not been obtained; (b) conflict
with, or violate any provision of, any Law applicable to HeadHunter or the
Shareholder, or any provision of the certificate or articles of incorporation or
bylaws of HeadHunter; (c) conflict with, or result in any breach of, or
constitute a default under any Agreement to which HeadHunter or Shareholder is a
party or by which HeadHunter, the Shareholder, or any of the Assets may be
bound; or (d) result in or require the creation or imposition of or result in
the acceleration of any indebtedness, or of any Encumbrance of any nature upon,
or with respect to, HeadHunter or any of the Assets now owned or hereafter
acquired by HeadHunter. No other corporate action is necessary for HeadHunter to
enter into this Investment Agreement and all other Documents contemplated hereby
and to consummate the transactions contemplated hereby and thereby.
4.23. ABSENCE OF VIOLATION
HeadHunter is not in violation of or default under, nor has it
breached, any term or provision of its certificate or articles of incorporation
or bylaws or any Agreement or restriction to which it is a party or by which it
is bound or any Asset is affected. To the best of HeadHunter's and the
Shareholder's knowledge after reasonable inquiry, HeadHunter has complied and is
in full compliance with all Laws. Neither HeadHunter nor any of its officers,
directors, employees or agents (or stockholders, distributors,
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representatives or other persons acting on the express, implied or apparent
authority of HeadHunter) have paid, given or received or have offered or
promised to pay, give or receive, any bribe or other unlawful, questionable or
unusual payment of money or other thing of value, any extraordinary discount, or
any other unlawful or unusual inducement, to or from any person, business
association or governmental official or entity in the United States or elsewhere
in connection with or in furtherance of the business of HeadHunter (including,
without limitation, any offer, payment or promise to pay money or other thing of
value (i) to any foreign official or political party (or official thereof) for
the purposes of influencing any act, decision or omission in order to assist
HeadHunter in obtaining business for or with, or directing business to, any
person, or (ii) to any person, while knowing that all or a portion of such money
or other thing of value will be offered, given or promised to any such official
or party for such purposes). The business of HeadHunter is not in any manner
dependent upon the making or receipt of such payments, discounts or other
inducements.
4.24. BINDING OBLIGATION
This Investment Agreement constitutes a valid and binding obligation of
HeadHunter and the Shareholder, enforceable in accordance with its terms. Each
Document to be executed by HeadHunter and the Shareholder pursuant hereto, when
executed and delivered in accordance with the provisions hereof, shall be a
valid and binding obligation of HeadHunter and the Shareholder, enforceable in
accordance with its terms.
4.25. DISCLOSURE
All facts of importance to the business, operations, prospects,
condition (financial or otherwise), Assets or liabilities of HeadHunter have
been truthfully and completely disclosed to ITC in this Agreement. No
representation or warranty by HeadHunter or the Shareholder in this Agreement,
and no Document furnished or to be furnished to ITC pursuant to this Agreement,
or in connection herewith or with the transactions contemplated hereby, contains
or will contain any untrue or misleading statement or omits or win omit any fact
necessary to make the statements contained herein or therein, in light of the
circumstances under which made, not misleading in any material respect.
5. REPRESENTATIONS AND WARRANTIES OF ITC
ITC hereby represents and warrants to HeadHunter and the Shareholder as
follows:
5.1. ORGANIZATION AND STANDING
ITC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the full and
unrestricted corporate power and
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authority to carry on its business as currently conducted, to enter into this
Investment Agreement and to carry out the transactions contemplated hereby.
5.2. AUTHORIZATION
The execution, delivery and performance by ITC of this Investment
Agreement and all other Documents contemplated hereby, the fulfillment of and
the compliance with the respective terms and provisions hereof and thereof, and
the consummation by ITC of the transactions contemplated hereby and thereby have
been duly authorized by its Board of Directors (which authorization has not been
modified or rescinded and is in full force and effect), and do not and win not:
(a) conflict with, or violate any provision of, any term or provision of, any
law having applicability to ITC, or any provision of the certificate or articles
of incorporation or bylaws of ITC or (b) conflict with, or result in any breach
of, or constitute a default under, any Agreement to which ITC is a party or by
which ITC is bound. No other corporate action is necessary for ITC to enter into
this Investment Agreement and all other Documents contemplated hereby and to
consummate the transactions contemplated hereby and thereby.
5.3. BINDING OBLIGATION
This Investment Agreement constitutes a valid and binding obligation of
ITC, enforceable in accordance with its terms. Each Document to be executed by
ITC pursuant hereto, when executed and delivered in accordance with the
provisions hereof, shall be a valid and binding obligation of ITC, enforceable
in accordance with its terms.
6. RESTRICTED SECURITIES
ITC, HeadHunter, and the Shareholder hereby mutually represent, warrant
and covenant to each other as follows:
6.1. NO REGISTRATION UNDER THE SECURITIES ACT
Each party understands that the LLC Interests to be acquired by ITC and
HeadHunter pursuant to this Investment Agreement have not been registered under
the Securities Act, in reliance upon exemptions contained in the Securities Act
or interpretations thereof, and cannot be offered for sale, sold or otherwise
transferred unless such LLC Interests being acquired hereunder subsequently are
so registered or qualify for exemption from registration under the Securities
Act.
6.2. ACQUISITION FOR INVESTMENT
ITC and HeadHunter are acquiring the LLC Interests solely for their own
respective accounts, for investment and not with a view toward resale or other
distribution within the meaning of the Securities Act. ITC and HeadHunter will
not offer for sale, sell
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or otherwise transfer by their LLC Interests without either registration or
exemption from registration under the Securities Act.
6.3. EVALUATION OF MERITS AND RISKS OF INVESTMENT
ITC and HeadHunter, as the case may be, has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its investment in the LLC Interests it is acquiring. ITC
and HeadHunter, as the case may be, understands and is able to bear any economic
risks associated with such investment (including, without limitation, the
necessity of holding such LLC Interests for an indefinite period of time,
inasmuch as such LLC Interests have not been registered under the Securities
Act).
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF HEADHUNTER AND THE SHAREHOLDER
The obligations of HeadHunter and the Shareholder under this Investment
Agreement are subject to the fulfillment, at or prior to the Closing, of each of
the following conditions, and failure to satisfy any such condition shall excuse
and discharge all obligations of HeadHunter and the Shareholder to carry out the
provisions of this Agreement, unless such failure is agreed to in writing by
HeadHunter and the Shareholder:
7.1. REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties made by ITC in this Investment
Agreement or in any Document furnished by ITC pursuant to this Investment
Agreement shall be true and complete when made and on and as of the Closing Date
as though such representations and warranties were made on and as of such date,
except for any changes expressly permitted by this Agreement, and ITC shall have
performed and complied with all Agreements and conditions required by this
Investment Agreement to be performed or complied with by ITC prior to the
Closing Date, and HeadHunter shall have received a certificate from ITC to such
effect signed by a duly authorized officer thereof.
7.2. LEGAL PROCEEDINGS
No action or proceeding by or before any governmental authority shall
have been instituted or threatened (and not subsequently dismissed, settled or
otherwise terminated) which is reasonably expected to restrain, prohibit or
invalidate the transactions contemplated by this Agreement, other than an action
or proceeding instituted or threatened by HeadHunter or the Shareholder.
7.3. CONSENTS
HeadHunter shall have received all consents, authorizations and
approvals of governmental and private parties that are required to be obtained
in order for it to
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consummate the transactions contemplated hereby, and all such consents,
authorizations and approvals shall be in full force and effect on the Closing
Date.
7.4. BUSINESS PLAN
HeadHunter and ITC shall have developed a mutually acceptable five (5)
year business plan for the LLC.
7.5. DOCUMENTS AT CLOSING
All Documents required to be furnished by ITC to HeadHunter or the
Shareholder prior to or at the Closing shall have been so furnished.
7.6. FORMATION OF LLC
The LLC Certificate shall have been filed with the Office of the
Secretary of State of the State of Delaware.
7.7. DELIVERIES BY LLC
All Documents required to be furnished by the LLC to HeadHunter or the
Shareholder prior to or at the Closing shall have been so furnished.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF ITC
The obligations of ITC under this Investment Agreement are subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions, and failure to satisfy any such condition shall excuse and discharge
all obligations of ITC to carry out the provisions of this Agreement, unless
such failure is agreed to in writing by ITC:
8.1. REPRESENTATIONS, WARRANTIES AND COVENANTS
The representations and warranties made by HeadHunter and the
Shareholder in this Investment Agreement and the statements contained in the
Disclosure Schedule and Exhibits attached hereto or in any Document furnished by
HeadHunter or the Shareholder pursuant to this Investment Agreement shall be
true and complete when made, and on and as of the Closing Date as though such
representations and warranties were made on and as of such date, except for any
changes expressly permitted by this Agreement, and HeadHunter and the
Shareholder shall have performed and complied with all Agreements and conditions
required by this Investment Agreement to be performed or complied with by it
prior to the Closing Date, and ITC shall have received a certificate from
HeadHunter to such effect signed by a duly authorized officer thereof.
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8.2. ABSENCE OF MATERIAL ADVERSE CHANGES
There shall have been no material adverse changes in the business,
operations, prospects, condition (financial or otherwise), Assets or liabilities
of HeadHunter (regardless of whether or not such events or changes are
inconsistent with the representations and warranties given herein by
HeadHunter), except changes contemplated by this Investment Agreement.
8.3. LEGAL PROCEEDINGS
No action or proceeding by or before any governmental authority shall
have been instituted or threatened (and not subsequently settled, dismissed or
otherwise terminated) which is reasonably expected to restrain, prohibit or
invalidate the transactions contemplated by this Investment Agreement, other
than an action or proceeding instituted or threatened by ITC.
8.4. CONSENTS
8.4.1. ITC CONSENTS
ITC shall have received all consents, authorizations and approvals of
governmental and private parties that are required to be obtained in order for
it to consummate the transactions contemplated hereby shall be in full force and
effect on the Closing Date.
8.4.2. HEADHUNTER CONSENTS
HeadHunter shall have received all consents, authorizations and
approvals of governmental and private parties that are required to be obtained
in order for it to consummate the transactions contemplated hereby, and all such
consents, authorizations and approvals shall be in full force and effect on the
Closing Date.
8.5. BOARD OF DIRECTORS APPROVAL
The Board of Directors of ITC shall have approved the execution and
delivery of this Agreement and the other Documents to be executed and delivered
by ITC pursuant hereto and the consummation of the transactions contemplated
hereby and thereby.
8.6. BUSINESS PLAN
HeadHunter and ITC shall have developed a mutually acceptable five(5)
year business plan for the LLC.
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8.7. DOCUMENTS AT CLOSING
All Documents required to be furnished by HeadHunter or the Shareholder
to ITC prior to or at the Closing shall have been so furnished.
8.8. FORMATION OF LLC
The LLC Certificate shall have been filed with the Office of the
Secretary of State of the State of Delaware.
8.9. DELIVERIES BY LLC
All Documents (including, without limitation, a key man insurance
policy on the life of the Shareholder in the amount of at least $2,000,000 in a
form reasonably satisfactory to ITC (the "KEY MAN LIFE INSURANCE POLICY"))
required to be furnished by the LLC to ITC prior to or at the Closing shall have
been so furnished.
9. CLOSING
9.1. CLOSING OF LLC INVESTMENT
Subject to the terms and conditions of this Investment Agreement, the
Closing shall take place on the Closing Date.
9.2. DELIVERIES BY HEADHUNTER ON THE CLOSING DATE
At the Closing, HeadHunter shall deliver or shall cause to be delivered
to ITC the following:
(i) a certified copy of the resolutions adopted by the Board of
Directors of HeadHunter authorizing the execution and delivery of this Agreement
and the other Documents to be executed and delivered by it pursuant to this
Agreement and the consummation of the transactions contemplated hereby and
thereby;
(ii) executed copies of the LLC Agreement;
(iii) the Key Man Life Insurance Policy;
(iv) copies of all consents required pursuant to SECTION 8.4.2;
(v) executed copy of the officer's certificate required pursuant
to SECTION 8.1; and
(vi) such other Documents as ITC may reasonably request.
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At the Closing, HeadHunter shall deliver to the LLC the HeadHunter
Capital Contribution.
9.3. DELIVERIES BY ITC ON THE CLOSING DATE
At the Closing, ITC shall deliver to HeadHunter the following:
(i) a certified copy of the resolutions adopted by the Board of
Directors of ITC authorizing the execution and delivery of this Agreement and
the other Documents to be executed and delivered by it pursuant to this
Agreement and the consummation of the transactions contemplated by this hereby
and thereby;
(ii) executed copy of the LLC Agreement;
(iii) executed copy of the Loan and Security Agreement;
(iv) executed copy of the officer's certificate required pursuant
to SECTION 7.1; and
(v) such other Documents as HeadHunter may reasonably request.
At the Closing, ITC shall deliver to the LLC the ITC Capital Contribution.
9.4. DELIVERIES BY THE LLC
At the Closing, the parties shall cause the LLC to deliver the
following.
(i) the Employment Letter to the Shareholder;
(ii) the Loan and Security Agreement and the Promissory Note to
ITC; and
(iii) to any party hereto, such other Documents as such party
reasonably may request.
9.5. DELIVERIES BY THE SHAREHOLDER
At the Closing, the Shareholder shall execute and deliver to the LLC
the Employment Letter.
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10. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES
10.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties by any party to this Investment
Agreement herein or pursuant hereto also shall be deemed made on and as of the
Closing Date as though such representations and warranties were made on and as
of such date, and all such representations and warranties shall survive and
shall be unaffected by (and shall not be deemed waived by) any investigation,
audit or inspection at any time made by or on behalf of any party hereto.
10.2. AGREEMENT OF HEADHUNTER AND THE SHAREHOLDER TO INDEMNIFY
Subject to the conditions and provisions of this ARTICLE 10, HeadHunter
and the Shareholder jointly and severally agree to indemnify, defend and hold
harmless the ITC Indemnified Persons from and against and in any respect of all
Claims asserted against, resulting to, imposed upon or incurred by the ITC
Indemnified Persons (whether such Claims are by, against or relate to
HeadHunter, the Shareholder or any other party, including a governmental
entity), directly or indirectly, by reason of or resulting from any
misrepresentation or breach of any representation or warranty, or noncompliance
with any conditions or other Agreements, given or made by HeadHunter or the
Shareholder in this Investment Agreement or in the Disclosure Schedule or
Exhibits attached hereto or in any Document furnished by or on behalf of
HeadHunter or the Shareholder pursuant to this Investment Agreement.
Notwithstanding the foregoing, (i) HeadHunter and the Shareholder shall have no
liability for Claims made more than two (2) years following the Closing Date,
and (ii) the liability of HeadHunter and the Shareholder for Claims hereunder
shall not exceed, in the aggregate, One Million Dollars ($1,000,000.00).
10.3. AGREEMENT OF ITC TO INDEMNIFY
Subject to the conditions and provisions of this ARTICLE 10, ITC hereby
agrees to indemnify, defend and hold harmless the HeadHunter Indemnified Persons
from and against and in respect of all Claims asserted against, resulting to,
imposed upon or incurred by the HeadHunter Indemnified Persons (whether such
Claims are by, against or relate to ITC or any other party, including, without
limitation, a governmental entity), directly or indirectly, by reason of or
resulting from any misrepresentation or breach of any representation or
warranty, or noncompliance with any conditions or other Agreements, given or
made by ITC in this Investment Agreement or in the Exhibits or in any Document
furnished by or on behalf of the ITC pursuant to this Investment Agreement.
Notwithstanding the foregoing, (i) ITC shall have no liability for Claims made
more than two (2) years following the Closing Date, and (ii) the liability of
ITC for Claims hereunder shall not exceed, in the aggregate, One Million Dollars
($1,000,000.00).
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10.4. CONDITIONS OF INDEMNIFICATION
The obligations and liabilities of HeadHunter, the Shareholder and ITC
hereunder with respect to their respective indemnities pursuant to this ARTICLE
10, resulting from any Claim shall be subject to the following terms and
conditions:
10.4.1. NOTICE
The indemnified party shall give prompt written notice to the
indemnifying party of any Claim which is asserted against, resulting to, imposed
upon or incurred by such indemnified party and which may give rise to liability
of the indemnifying party pursuant to this Article 10, stating (to the extent
known or reasonably anticipated) the nature and basis of such Claim and the
amount thereof.
10.4.2. COUNSEL
The indemnified party may engage counsel or representatives of its own
choosing with respect to any such Claim, such representation (including the
compromise or settlement of any Claim) to be undertaken on behalf of and for the
account and risk of the indemnifying party. In the event the indemnified party
elects not to undertake such defense by its own representatives, the indemnified
party shall give prompt written notice of such election to the indemnifying
party, and the indemnifying party will undertake the defense thereof by counsel
or other representatives designated by it whom the indemnified party determines
in writing to be satisfactory for such purposes. The consent of the indemnified
party to the indemnifying party's choice of counsel or other representative
shall not be unreasonably withheld.
10.4.3. JOINT LIABILITY
In the event that any Claim shall arise out of a transaction or cover
any period or periods wherein HeadHunter or the Shareholder, on the one hand,
and ITC, on the other hand, shall each be liable hereunder for part of the
liability or obligation arising therefrom, then the parties shall, each choosing
its or his own counsel and bearing its or his own expense, defend such Claim,
and no settlement or compromise of such Claim may be made without the joint
consent or approval of HeadHunter, the Shareholder and ITC (which consent shall
not be unreasonably withheld), except where the respective liabilities and
obligations of HeadHunter, the Shareholder and ITC are dearly allocable or
attributable on the basis of objective facts.
10.5. SPECIFIC PERFORMANCE
In addition to any other remedies which a party hereto may have at law
or in equity, HeadHunter, the Shareholder and ITC each hereby acknowledges that
the LLC Interests and the LLC are unique, and that the harm to a party resulting
from breaches by the other of its obligations cannot be adequately compensated
by damages. Accordingly,
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HeadHunter, the Shareholder and ITC agree that each party shall have the right
to have all obligations, undertakings, Agreements, covenants and other
provisions of this Investment Agreement specifically performed by the other and
that each party shall have the right to obtain an order or decree of such
specific performance in any of the courts of the United States of America or of
any state or other political subdivision thereof.
10.6. REMEDIES CUMULATIVE
The remedies provided herein shall be cumulative and shall not preclude
the assertion by HeadHunter, the Shareholder or ITC of any other rights or the
seeking of any other remedies against the other, or their respective successors
or assigns.
11. TERMINATION AND EFFECT THEREOF
11.1. TERMINATION
This Investment Agreement may be terminated at any time before the
Closing Date under any one or more of the following circumstances:
(i) by the mutual consent of the parties hereto;
(ii) by ITC, by written notice of termination delivered to
HeadHunter and the Shareholder, if any of the conditions set
forth in ARTICLE 8 have not been fulfilled by the Closing
Date;
(iii) by HeadHunter or the Shareholder, by written notice of
termination delivered to ITC, if any of the conditions set
forth in ARTICLE 7 have not been fulfilled by the Closing
Date;
(iv) by ITC upon ITC's determination, at any time prior to the
Closing Date, in its sole discretion based on its
investigation and review of the business, operations,
prospects, condition (financial or otherwise), assets or
liabilities of HeadHunter that it is not in ITC's best
interest to proceed with the transactions contemplated by this
Investment Agreement; and
(v) by ITC, the Shareholder or HeadHunter, by written notice of
termination to the other parties hereto, if the Closing has
not occurred by December 31, 1997.
11.2. EFFECT OF TERMINATION
In the event this Investment Agreement is terminated as provided in
this ARTICLE 11, this Investment Agreement shall forthwith become wholly void
and of no effect, and the parties shall be released from all future obligations
hereunder; provided however that the obligations of ITC, the Shareholder and
HeadHunter as to confidentiality provided in
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SECTION 3.2, and the provisions of SECTION 12.3 relating to the payment of
expenses, shall not be extinguished but shall survive such termination. The
parties hereto shall have any and all remedies to enforce such obligations
provided at law or in equity (including, without limitation, specific
performance).
12. MISCELLANEOUS
12.1. ADDITIONAL ACTIONS AND DOCUMENTS
Each of the parties hereto hereby agrees to take or cause to be taken
such further actions, to execute, deliver and file or cause to be executed,
delivered and filed such further Documents, and will obtain such consents, as
may be necessary or as may be reasonably requested in order to fully effectuate
the purposes, terms and conditions of this Investment Agreement.
12.2. NO BROKERS
Each of the parties hereto represents and warrants to the other parties
(and to each of them) that such party has not engaged any broker, finder or
agent in connection with the transactions contemplated by this Investment
Agreement and has not incurred (and will not incur) any unpaid liability to any
broker, finder or agent for any brokerage fees, finders' fees or commissions,
with respect to the transactions contemplated by this Investment Agreement. Each
party agrees to indemnify, defend and hold harmless each of the other parties
from and against any and all claims asserted against such parties for any such
fees or commissions by any persons purporting to act or to have acted for or on
behalf of the indemnifying party.
12.3. EXPENSES
Each party hereto shall pay its own expenses incident to this
Investment Agreement and the transactions contemplated hereunder, including all
legal and accounting fees and disbursements. Notwithstanding the foregoing, the
parties agree to cause the LLC (i) to reimburse ITC up to $20,000 for fees and
expenses of Hogan & Hartson L.L.P. in connection with the formation and
organization of the LLC and the preparation of this Agreement, the Loan
Agreement, and the other legal documents contemplated hereby or thereby, (ii) to
reimburse HeadHunter up to $20,000 for fees and expenses incurred by HeadHunter
in connection with the formation and organization of the LLC and the preparation
of this Agreement, the Loan Agreement, and the other documents contemplated
hereby or thereby, and (iii) to bear the cost of all filings made in order to
obtain any regulatory approvals, or comply with any regulatory requirements, in
connection with the formation and organization of the LLC.
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12.4. ASSIGNMENT
No party hereto shall assign its or his rights and obligations under
this Investment Agreement, in whole or in part, whether by operation of law or
otherwise, without the prior written consent of the other parties hereto, and
any such assignment contrary to the terms hereof shall be null and void and of
no force and effect.
12.5. ENTIRE AGREEMENT; AMENDMENT
This Investment Agreement, including the Disclosure Schedule, the
Exhibits hereto and the other Documents referred to herein or furnished pursuant
hereto, constitutes the entire Agreement among the parties hereto with respect
to the transactions contemplated herein, and supersede all prior oral or written
Agreements, commitments or understandings with respect to the matters provided
for herein. No amendment, modification or discharge of this Investment Agreement
shall be valid or binding unless set forth in writing and duly executed and
delivered by the party against whom enforcement of the amendment, modification,
or discharge is sought.
12.6. WAIVER
No delay or failure on the part of any party hereto in exercising any
right, power or privilege under this Investment Agreement or under any other
Documents furnished in connection with or pursuant to this Investment Agreement
shall impair any such right, power or privilege or be construed as a waiver of
any default or any acquiescence therein. No single or partial exercise of any
such right, power or privilege shall preclude the further exercise of such
right, power or privilege, or the exercise of any other right, power or
privilege. No waiver shall be valid against any party hereto unless made in
writing and signed by the party against whom enforcement of such waiver is
sought and then only to the extent expressly specified therein.
12.7. SEVERABILITY
If any part of any provision of this Investment Agreement or any other
agreement or document given pursuant to or in connection with this Investment
Agreement shall be invalid or unenforceable in any respect, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Investment Agreement.
12.8. GOVERNING LAW
This Investment Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of the State of Georgia (excluding the
choice of law rules thereof).
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12.9. NOTICES
All notices, demands, requests, or other communications which may be or
are required to be given, served, or sent by any party to any other party
pursuant to this Investment Agreement, shall be in writing and shall be hand
delivered, sent by overnight courier or mailed by first-class, registered or
certified mail, return receipt requested, postage prepaid, or transmitted by
telegram, telecopy or telex, addressed as follows:
(i) If to ITC:
Mr. William H. Scott, III
ITC Holding Company, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
FACSIMILE: 706/643-5067
with a copy (which shall not constitute notice) to:
Kimberley E. Thompson
Vice President, General Counsel and Secretary
4717 Dolphin Lane
Alexandria, Virginia 22309
Facsimile: 703/619-9720
(ii) If to HeadHunter or the Shareholder:
Warren Bare
HeadHunter.NET, Inc.
1430 Boundary Boulevard
Suwanee, Georgia 30174
FACSIMILE: 770/495-6363
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request, or communication which shall be hand delivered,
sent, mailed, telecopied or telexed in the manner described above, or which
shall be delivered to a telegraph company, shall be deemed sufficiently given,
served, sent, received or delivered for all purposes at such time as it is
delivered to the addressee (with the return receipt, the delivery receipt, or
(with respect to a telecopy or telex) the answerback being deemed conclusive,
but not exclusive, evidence of such delivery) or at such time as delivery is
refused by the addressee upon presentation.
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12.10. HEADINGS
Article and Section headings contained in this Investment Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of
this Investment Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
12.11. EXECUTION IN COUNTERPARTS
To facilitate execution, this Investment Agreement way be executed in
as many counterparts as may be required. It shall not be necessary that the
signatures of, or on behalf of, each party, or that the signatures of all
persons required to bind any party, appear on each counterpart; but it shall be
sufficient that the signature of, or on behalf of, each party, or that the
signatures of the persons required to bind any party, appear on one or more of
the counterparts. All counterparts shall collectively constitute a single
Agreement. It shall not be necessary in making proof of this Investment
Agreement to produce or account for more than a number of counterparts
containing the respective signatures of, or on behalf of, all of the parties
hereto.
12.12. LIMITATION ON BENEFITS
The covenants, undertakings and agreements set forth in this Investment
Agreement shall be solely for the benefit of, and shall be enforceable only by,
the parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns, except that the
agreements set forth in Article 10 also shall be for the benefit of, and
enforceable by, ITC Indemnified Persons, HeadHunter Indemnified Persons and
their respective successors, heirs, executors, administrators, legal
representatives or permitted assigns.
12.13. BINDING EFFECT
Subject to any provisions hereof restricting assignment, this
Investment Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors, heirs, executors,
administrators, legal representatives and assigns.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Investment Agreement, or have caused this Investment Agreement to be duly
executed on their behalf, as of the day and year first above written.
ITC HOLDING COMPANY, INC.
By: /s/ Kimberley E. Thompson
------------------------------------------
Name: Kimberley E. Thompson
Title: Senior Vice President, General Counsel and
Secretary
HEADHUNTER.NET, INC.
By: /s/ Warren Bare
------------------------------------------
Warren Bare
President
/s/ Warren Bare
------------------------------------------
Warren Bare
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EXHIBIT 10.19
FORM
OF
NON-EMPLOYEE DIRECTOR
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is made and entered into effective as of the ____ day of
____, 1998 (the "Grant Date") by and between HEADHUNTER.NET, INC. (the
"Company"), a Georgia corporation, and ________________("Grantee").
BACKGROUND
A. The Company maintains the 1998 Long-Term Incentive Plan (the
"Plan"), which permits the Company to grant incentive awards consisting of
Options, Stock Appreciation Rights, Restricted Stock Awards, Performance Share
Awards, Dividend Equivalent Awards and other Stock-Based Awards ("Awards") to
certain officers, employee-directors and other employees of the Company.
However, until such time, if any, as the Common Stock of the Company shall be
traded on a national securities exchange or on the Nasdaq National Market,
non-employee directors of the Company are not eligible to receive Awards under
the Plan.
B. Grantee is a non-employee director and is not at the present
time eligible to receive an Award under the Plan. Although granted outside of
the Plan, the option represented by this Agreement is intended to be generally
consistent with the terms and conditions of the Plan. Therefore, for purposes of
reference only, and not to imply that the option granted hereby is governed by
or issued under the Plan, capitalized terms used herein and not defined in
context are defined in Section 6.11 hereof or in the Plan.
C. The Company and Grantee wish to confirm herein the terms,
conditions, and restrictions of the option.
D. For and in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the parties hereto
agree:
ARTICLE 1
GRANT AND EXERCISE OF OPTION
1.1 Grant of Option. Subject to the terms, restrictions,
limitations, and conditions stated herein, the Company hereby grants to Grantee
a non-qualified option (the "Option") to purchase all or any part of Ten
Thousand (10,000) shares of the Company's Common Stock (the "Option Shares").
This Option is intended to be a non-qualified stock option.
1.2 Exercise of Option. The Option may be exercised during the
Option Period (as defined in Section 1.4) only to the extent of the number of
Option Shares that are then vested ("Vested Shares") as determined pursuant to
the vesting schedule attached hereto as Schedule I. The Option shall be
exercised by written notice directed to the
<PAGE> 2
Secretary of the Company at the principal executive offices of the Company, in
substantially the form attached hereto as Exhibit A, or such other form as the
Committee may approve. Such written notice shall be accompanied by full payment
in cash, shares of Stock previously acquired by the Grantee, or any combination
thereof, for the number of shares specified in such written notice; provided,
however, that if shares of Stock are used to pay the exercise price, such shares
must have been held by the Grantee for at least six months. The Fair Market
Value of the surrendered Stock as of the date of the exercise shall be
determined in valuing Stock used in payment of the exercise price. To the extent
permitted under Regulation T of the Federal Reserve Board, and subject to
applicable securities laws, the Option may be exercised through a broker in a
so-called "cashless exercise" whereby the broker sells the Option shares and
delivers cash sales proceeds to the Company in payment of the exercise price.
Subject to the terms of this Option Agreement, the Option may be
exercised at any time and without regard to any other option held by the Grantee
to purchase stock of the Company.
1.3 Option Exercise Price. The price for each share of Stock for
which the Option is exercised is ___________________ ($_____) (the "Option
Exercise Price").
1.4 Term and Termination of Option. Except as otherwise provided
herein, the period in which the Option may be exercised as to any Vested Shares
(the "Option Period") shall commence on the date such shares become Vested
Shares and terminate at 5:00 p.m. Eastern Time on the date of the first to occur
of the following events:
(a) the 10th anniversary of the Grant Date;
(b) if Grantee ceases to be a director of the Company for
any reason other than as provided in paragraph (c) or (d) below, the
Option shall lapse, unless it is previously exercised, ninety (90) days
after Grantee's Termination of Directorship (as defined in Section
6.11); provided, however, that if Grantee's directorship is terminated
by the Company for Cause or by Grantee without the consent of the
Company, the Option shall (to the extent not previously exercised)
lapse immediately;
(c) if Grantee ceases to be a director of the Company by
reason of his Disability, the Option shall lapse, unless it is
previously exercised, one year after Grantee's Termination of
Directorship; or
(d) if Grantee dies while serving as a director, or
during the 90-day period described in paragraph (b) or during the
one-year period described in paragraph (c) and before the Option
otherwise lapses, the Option shall lapse one year after the date of the
Grantee's death. Upon Grantee's death, any exercisable Options may be
exercised by Grantee's legal representative or representatives, by
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<PAGE> 3
the person or persons entitled to do so under Grantee's last will and
testament, or, if Grantee shall fail to make testamentary disposition
of such Option or shall die intestate, by the person or persons
entitled to receive such Option under the applicable laws of descent
and distribution.
1.5 No Rights as Shareholder. Grantee, or, if applicable, any
transferee of Grantee, shall have no rights as a shareholder of the Company with
respect to any Option Shares until the issuance of a stock certificate for such
shares.
1.6 Changes in Capitalization. In the event a stock dividend is
declared upon the Stock, the number of shares of Stock subject to the Option
shall be increased proportionately without any change in the aggregate purchase
price therefor. In the event the Stock shall be changed into or exchanged for a
different number or class of shares of stock or securities of the Company or of
another corporation, whether through reorganization, recapitalization,
reclassification, stock split-up, combination of shares, merger or
consolidation, there shall be substituted for each such share of Stock then
subject to the Option the number and class of shares into which each outstanding
share of Stock shall be so exchanged, all without any change in the aggregate
purchase price for the shares then subject to the Option. In the event the Stock
shall be changed into or exchanged for cash or other property not consisting of
shares of stock or securities of the Company or of another corporation, whether
through reorganization, recapitalization, merger or consolidation, the Committee
may, in its sole discretion, provide (i) that the Option will expire after a
designated period of time to the extent not then exercised, (ii) that the Option
will be settled in cash rather than Stock, (iii) that the Option will be assumed
by another party to the transaction or otherwise be equitably converted in
connection with such transaction, or (iv) any combination of the foregoing.
1.7 Accelerated Vesting.
(a) Upon the occurrence of a Change of Control (as
defined in Section 6.11), the Option shall become fully exercisable and
all restrictions on the Option shall lapse; provided, however, that
such acceleration will not occur if, in the opinion of the Company's
accountants, such acceleration would preclude the use of "pooling of
interest" accounting treatment for a Change of Control transaction that
(i) would otherwise qualify for such accounting treatment, and (ii) is
contingent upon qualifying for such accounting treatment.
(b) Other Events. In the event of the occurrence of any
circumstance, transaction or event not constituting a Change of Control
but which the Board of Directors of the Company deems to be, or to be
reasonably likely to lead to, an effective change in control of the
Company of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of the 1934 Act, the Committee may in its
sole discretion declare the Option to be fully exercisable, and/or all
restrictions on the Option to have lapsed, in each case, as of such
date as
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<PAGE> 4
the Committee may, in its sole discretion, declare, which may be on or
before the consummation of such transaction or event. Additionally,
regardless of whether an event has occurred as described in this
Section 1.7, the Committee may in its sole discretion at any time
determine that all or a portion of the Option shall become fully or
partially exercisable, and/or that all or a part of the restrictions on
all or a portion of the Option shall lapse, in each case, as of such
date as the Committee may, in its sole discretion, declare.
(c) Acceleration upon Death or Disability.
Notwithstanding any other provision in this Agreement to the contrary,
upon Grantee's death or Disability during his service as a director,
the Option shall become fully exercisable and all restrictions on the
Option shall lapse. The Option shall thereafter continue or lapse in
accordance with the other provisions of this Agreement.
(d) Effect of Acceleration. If the Option is accelerated
pursuant to Section 1.7 of this Agreement, the Committee may, in its
sole discretion, provide (i) that the Option will expire after a
designated period of time after such acceleration to the extent not
then exercised, (ii) that the Option will be settled in cash rather
than Stock, (iii) that the Option will be assumed by another party to
the transaction giving rise to the acceleration or otherwise be
equitably converted in connection with such transaction, or (iv) any
combination of the foregoing.
ARTICLE 2
LIMITS ON OPTION
2.1 Limits on Transfer. No right or interest of Grantee in the
Option may be pledged, encumbered, or hypothecated to or in favor of any party
other than the Company or a Parent or Subsidiary, or shall be subject to any
lien, obligation, or liability of Grantee to any other party other than the
Company or a Parent or Subsidiary. The Option shall not be assignable or
transferable by Grantee other than by will or the laws of descent and
distribution; provided, however, that the Committee may (but need not) permit
other transfers where the Committee concludes that such transferability (i) does
not result in accelerated taxation, (ii) is otherwise appropriate and desirable,
taking into account any factors deemed relevant, including without limitation,
applicable state or federal tax or securities laws.
2.2 Beneficiaries. Notwithstanding Section 2.1, Grantee may, in
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Grantee and to receive any distribution with respect to the Option
upon Grantee's death. A beneficiary, legal guardian, legal representative, or
other person claiming any rights under this Agreement is subject to all terms
and conditions of this Agreement applicable to the Grantee, except to the extent
this Agreement otherwise provides, and any additional restrictions deemed
necessary or appropriate by the Committee. If no
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<PAGE> 5
beneficiary has been designated or survives the Grantee, payment shall be made
to the Grantee's estate. Subject to the foregoing, a beneficiary designation may
be changed or revoked by Grantee at any time provided the change or revocation
is filed with the Committee.
ARTICLE 3
REPURCHASE
3.1 Repurchase. The provisions of this Article 3 shall apply only
until such time, if any, as the Stock shall be traded on a national securities
exchange or on the Nasdaq National Market. At any time subsequent to Grantee's
Termination of Directorship, the Company may repurchase, and the Grantee (and
any transferee of Option Shares acquired pursuant to the Option granted
hereunder) shall be obligated to sell, all shares of Option Shares acquired
pursuant to the exercise the Option hereunder for a price equal to the Fair
Market Value of the Option Shares on the date of such repurchase. To exercise
its right to repurchase Option Shares hereunder, the Company shall give written
notice to the Grantee of (i) its election to repurchase the Option Shares, (ii)
the Fair Market Value of the Option Shares to be repurchased, and (iii) the
closing date for the repurchase, which shall be not later than 60 days after the
date of the notice required hereunder. In the case of any repurchase by the
Company of Option Shares under this Article 3, at the option of the Company, the
Company may pay the purchase price to the Grantee (or transferee of the Option
Shares) in four or fewer equal annual installments. Interest shall be credited
on the installments at the applicable federal rate (as determined for purposes
of Section 1274 of the Code) in effect on the date on which the purchase is
made. The Company shall pay at least one-fourth of the total purchase price each
year, plus interest on the unpaid balance, with the first installment being made
on the closing date of the purchase.
3.2 Delivery of Certificate for Option Shares. At any closing of a
purchase by the Company of Option Shares pursuant to this Article 3, a
certificate representing the Option Shares purchased by the Company, duly
endorsed for transfer to the Company, shall be delivered by Grantee (or
transferee of the Option Shares) to the Company at the closing, and upon receipt
of the certificate, the Company shall pay the consideration for the Option
Shares in accordance with Section 3.1.
ARTICLE 4
LEGENDS
4.1 Legends. Each certificate representing the Option Shares
purchased upon exercise of this Option shall be endorsed with the following
legend and Grantee shall not make any transfer of the Option Shares without
first complying with the restrictions on transfer described in such legend:
-5-
<PAGE> 6
TRANSFER IS RESTRICTED
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
REPURCHASE AND OTHER RESTRICTIONS ON TRANSFER SET FORTH IN A NON-QUALIFIED STOCK
OPTION AGREEMENT DATED JULY 15, 1998, A COPY OF WHICH IS AVAILABLE FROM THE
COMPANY.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
OR HYPOTHECATED UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION UNDER SUCH ACT
COVERING SUCH SECURITIES, (2) THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT, OR (3) THE ISSUER RECEIVES AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT.
THE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON ONE OR MORE EXEMPTIONS
FROM REGISTRATION UNDER APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH LAWS OR PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH LAWS.
Grantee agrees that the Company may also endorse any other legends
required by applicable federal or state securities laws.
The Company shall not be required (a) to transfer on its books any
Option Shares that have been sold or transferred in violation of the provisions
of this Agreement (including the foregoing legends), or (b) to treat the owner
of the Option Shares, or otherwise to accord voting or dividend rights to, any
transferee to whom the Option Shares have been transferred in contravention of
this Agreement (or such legends).
ARTICLE 5
WITHHOLDING
5.1 Withholding. The Company, Parent or any Subsidiary shall have the
authority and the right to deduct or withhold, or require Grantee the remit to
the Company, an amount sufficient to satisfy federal, state, and local taxes
(including the Grantee's FICA obligation) required by law to be withheld with
respect to any taxable event arising as a result of the Option. With respect to
withholding required upon any taxable event under the Option, the Committee may,
at the time the Option is granted or thereafter, require that any such
withholding requirement be satisfied, in whole or in part, by withholding Option
Shares having a Fair Market Value on the date of withholding equal to the amount
to be withheld for tax purposes, all in accordance with such procedures as the
Committee establishes.
-6-
<PAGE> 7
ARTICLE 6
GENERAL PROVISIONS
6.1 Governing Laws; Regulations. To the extent not governed by
federal law, this Agreement shall be construed in accordance with and governed
by the laws of the State of Georgia. The obligation of the Company to perform
under this Agreement shall be subject to all applicable laws, rules and
regulations, and to such approvals by government agencies as may be required.
The Company shall be under no obligation to register under the 1933 Act, or any
state securities act, any of the Option Shares. The Option Shares may in certain
circumstances be exempt from registration under the 1933 Act, and the Company
may restrict the transfer of such shares in such manner as it deems advisable to
ensure the availability of any such exemption.
6.2 Successors. This Agreement shall be binding upon and inure to
the benefit of the heirs, legal representatives, successors, and permitted
assigns of the parties.
6.3 Notice. Notices and communications under this Agreement must
be in writing and either personally delivered or sent by registered or certified
United States mail, return receipt requested, postage prepaid. Notice to the
Company must be addressed to:
HeadHunter.NET, Inc.
6410 Atlantic Blvd.
Suite 160
Norcross, Georgia 30071
Attn: Mr. Ken Dopher
or any other address designated by the Company in a written notice to Grantee.
Notices to Grantee will be directed to the address of Grantee then currently on
file with the Company, or at any other address given by Grantee in a written
notice to the Company.
6.4 Severability. In the event that any one or more of the
provisions or portion thereof contained in this Agreement shall for any reason
be held to be invalid, illegal, or unenforceable in any respect, the same shall
not invalidate or otherwise affect any other provisions of this Agreement, and
this Agreement shall be construed as if the invalid, illegal or unenforceable
provision or portion thereof had never been contained herein.
6.5 Entire Agreement. This Agreement expresses the entire
understanding and agreement of the parties with respect to the subject matter
hereof. This Agreement may
-7-
<PAGE> 8
be executed in two or more counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same instrument.
6.6 Violation. Except as provided herein, any transfer, pledge,
sale, assignment, or hypothecation of the Option or any portion thereof or of
any Option Shares issued upon exercise hereof shall be a violation of the terms
of this Agreement and shall be void and without effect.
6.7 Headings. Paragraph headings used herein are for convenience
of reference only and shall not be considered in construing this Agreement.
6.8 Specific Performance. In the event of any actual or threatened
default in, or breach of, any of the terms, conditions and provisions of this
Agreement, the party or parties who are thereby aggrieved shall have the right
to specific performance and injunction in addition to any and all other rights
and remedies at law or in equity, and all such rights and remedies shall be
cumulative.
6.9 No Rights to Continued Directorship. The grant of the Option
hereunder shall not be construed as giving Grantee the right to continue to
serve as a director of the Company.
6.10 Fractional Shares. No fractional shares of Stock shall be
issued and the Committee shall determine, in its sole discretion, whether cash
shall be given in lieu of fractional shares or whether such fractional shares
shall be eliminated by rounding up.
6.11 Certain Definitions. The capitalized terms listed below are
used herein with the meaning thereafter ascribed:
(a) "Change of Control" means and includes each of the
following:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the 1934 Act) of
25% or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions
shall not constitute a Change of Control: (A) any acquisition
by a Person who is on the Grant Date the beneficial owner of
25% or more of the Outstanding Company Voting Securities, (B)
any acquisition directly from the Company, including without
limitation a public offering of securities, (C) any
acquisition by the Company, (D) any acquisition by any
employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation
-8-
<PAGE> 9
controlled by the Company, or (E) any acquisition by any
corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of subsection (iii) of this
definition; or
(ii) Individuals who, as of (and including) the
Grant Date, constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Grant Date whose election, or nomination for
election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of
Directors of the Company; or
(iii) Consummation of a reorganization, merger or
consolidation to which the Company is a party or sale or other
disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial
owners of the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Voting
Securities, and (B) no Person (excluding any corporation
resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 25% or more of the
combined voting power of the then outstanding voting
securities of such corporation resulting from such Business
Combination except to the extent that such ownership existed
prior to the Business Combination, and (C) at least a majority
of the members of the board of directors of the corporation
resulting from such Business Combination were members of the
Incumbent Board (including persons deemed to be members of the
Incumbent Board by reason of the proviso to subsection (ii) of
this
-9-
<PAGE> 10
definition) at the time of the execution of the initial
agreement, or of the action of the Board of Directors of the
Company, providing for such Business Combination.
(b) "Committee" means the Committee designated by the
Board of Directors of the Company to administer the Plan. The Committee
shall also administer the Option granted hereby and, in such
connection, shall have all the authority granted to the Committee under
the Plan as if the Option had been granted thereunder. Notwithstanding
anything to the contrary contained herein: (i) until the Board of
Directors shall appoint the members of the Committee, the Option shall
be administered by the Board of Directors, and (ii) the Board of
Directors may, in its sole discretion, at any time and from time to
time, resolve to administer the Option. In either of the foregoing
events, unless otherwise provided herein, the term Committee as used
herein shall be deemed to mean the Board of Directors.
(c) "Disability" means any illness or other physical or
mental condition of Grantee that renders Grantee incapable of
performing his customary and usual duties for the Company, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in
the judgment of the Committee, is permanent and continuous in nature.
The Committee may require such medical or other evidence as it deems
necessary to judge the nature and permanency of Grantee's condition.
(d) "Fair Market Value," on any given date, means (i) if
the Stock is not listed on a securities exchange or traded over the
Nasdaq National Market or otherwise publicly quoted or traded, Fair
Market Value will be determined by such method as the Committee
determines in good faith to be reasonable; (ii) if the Stock is listed
on a securities exchange or is traded over the Nasdaq National Market,
the closing sales price on such exchange or the last reported sale
price over such system on such date or, in the absence of reported
sales on such date, the closing sales price or last sale price, as
applicable on the immediately preceding date on which sales were
reported; or (iii) if the Stock is not listed on a securities exchange
or traded over the Nasdaq National Market, the mean between the bid and
offered prices as quoted by Nasdaq or, if not quoted on Nasdaq, other
recognized quotations service selected by the Committee in good faith
for such date, provided that if it is determined that the Fair Market
Value is not properly reflected by such Nasdaq quotations, Fair Market
Value will be determined by such other method as the Committee
determines in good faith to be reasonable.
(e) "Parent" means a corporation which owns or
beneficially owns a majority of the outstanding voting stock or voting
power of the Company.
-10-
<PAGE> 11
(f) "Stock" means the $.01 par value Common Stock of the
Company and such other securities of the Company as may be substituted
for Stock pursuant to Section 1.6.
(g) "Subsidiary" means any corporation, limited liability
company, partnership or other entity of which a majority of the
outstanding voting stock or voting power is beneficially owned directly
or indirectly by the Company.
(h) "Termination of Directorship" means the termination
of Grantee's service as a director of the Company, regardless of the
fact that severance or similar payments are made to Grantee, for any
reason, including, but not by way of limitation, a termination by
resignation, discharge, death, Disability, or retirement. The Committee
shall, in its absolute discretion, determine the effect of all matters
and questions relating to Termination of Directorship, including, but
not by way of limitation, the question of whether a leave of absence
constitutes a Termination of Directorship, or whether a Termination of
Directorship is for Cause.
(i) "1933 Act" means the Securities Act of 1933, as
amended from time to time.
(j) "1934 Act" means the Securities Exchange Act of 1934,
as amended from time to time.
(signatures on following page)
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed and sealed this Agreement
on the day and year first set forth above.
HEADHUNTER.NET, INC.
By:
----------------------------------
Title:
GRANTEE:
--------------------------------------
-12-
<PAGE> 13
EXHIBIT A
TO
HEADHUNTER.NET, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
Notice of Exercise
Name
--------------------------------------
Address
-----------------------------------
-------------------------------------------
Date
--------------------------------------
HeadHunter.NET, Inc.
6410 Atlantic Boulevard
Suite 160
Norcross, Georgia 30071
Re: Exercise of Stock Option
Gentlemen:
I hereby give notice of my election to exercise options granted to me
to purchase ________ shares of common stock (the "Common Stock") of
HeadHunter.NET, Inc. (the "Company") under that certain Non-Qualified Stock
Option Agreement dated July 15, 1998 (the "Agreement"). The purchase shall take
place as of ___________ (the "Exercise Date").
On or before the Exercise Date, I will present you with a certified
check (or bank cashier's check) for $__________ for the full purchase price
payable to the order of __________________________.
I hereby represent, warrant, covenant, and agree with the Company as
follows:
The shares of the Common Stock being acquired by me will be
acquired for my own account without the participation of any other
person, with the intent of holding the Common Stock for investment and
without the intent of participating, directly or indirectly, in a
distribution of the Common Stock and not with a view to, or for resale
in connection with, any distribution of the Common Stock, nor am I
aware of the existence of any distribution of the Common Stock;
I am not acquiring the Common Stock based upon any
representation, oral or written, by any person with respect to the
future value of, or income from, the Common Stock but rather upon an
independent examination and judgment as to the prospects of the
Company;
Page 1
<PAGE> 14
The Common Stock was not offered to me by means of publicly
disseminated advertisements or sales literature, nor am I aware of any
offers made to other persons by such means;
I am able to bear the economic risks of the investment in the
Common Stock including the risk of a complete loss of my investment
therein;
I understand and agree that the Common Stock will be issued
and sold to me without registration under any state law relating to the
registration of securities for sale, and will be issued and sold in
reliance on the exemptions from registration under the Securities Act
of 1933 (the "1933 Act"), provided by Sections 3(b) and/or 4(2) thereof
and the rules and regulations promulgated thereunder;
The Common Stock cannot be offered for sale, sold or
transferred by me other than pursuant to: (A) an effective registration
under the 1933 Act or in a transaction, otherwise in compliance with
the 1933 Act; and (B) evidence satisfactory to the Company of
compliance with the applicable securities laws of other jurisdictions.
The Company shall be entitled to rely upon an opinion of counsel
satisfactory to it with respect to compliance with the above laws;
The Company will be under no obligation to register the Common
Stock or comply with any exemption available for sale of the Common
Stock without registration or filing, and the information or conditions
necessary to permit routine sale of securities of the Company under
Rule 144 of the 1933 Act are not now available and no assurance has
been given that it or they will become available. The Company is under
no obligation to act in any manner so as to make Rule 144 available
with respect to the Common Stock;
I have and have had complete access to and the opportunity to
review and make copies of all material documents related to the
business of the Company, including, but not limited to, contracts,
financial statements, tax returns, leases, deeds and other books and
records. I have examined such of these documents as I wished and am
familiar with the business and affairs of the Company. I realize that
purchase of the Common Stock is a speculative investment and that any
possible profit therefrom is uncertain;
I have had the opportunity to ask questions of and receive
answers from the Company and any person acting on its behalf and to
obtain all material informal reasonably available with respect to the
Company and its affairs. I have received all information and data with
respect to the Company which I have requested and which I have deemed
relevant in connection with the evaluation of the merits and risks of
investment in the Company;
Page 2
<PAGE> 15
I have such knowledge and experience in financial and business
matters that I am capable of evaluating the merits and risks of the
purchase of the Common Stock hereunder and I am able to bear the
economic risk of such purchase; and
The agreements, representations, warranties, and covenants
made by me herein extend to and apply to all of the Common Stock of the
Company issued to me pursuant to this Option. Acceptance by me of the
certificate representing such Common Stock shall constitute a
confirmation by me that all such agreements, representations,
warranties, and covenants made herein shall be true and correct at that
time.
I understand that the certificates representing the shares being
purchased by me in accordance with this notice shall bear a legend referring to
the foregoing covenants, representations and warranties and restrictions on
transfer, and I agree that a legend to that effect may be placed on any
certificate which may be issued to me as a substitute for the certificates being
acquired by me in accordance with this notice.
Very truly yours,
---------------------------------
AGREED TO AND ACCEPTED:
HEADHUNTER.NET, INC.
By:
----------------------------
Title:
-------------------------
Number of Shares
Exercised:
--------------------
Number of Shares
Remaining: Date:
--------------------- ----------------------------
Page 3
<PAGE> 1
EXHIBIT 10.20
<TABLE>
<S> <C> <C> <C>
LYCOS(TM) Lycos, Inc. Tel. 508 424 0400 Send all payments to:
Your Personal Internet Guide 500 Old Connecticut Path Fax. 508 820 4499 Lycos, Inc.
Framingham, MA 01701 PO Box 6255
Boston, MA 02212-6255
LYCOS, INC. ADVERTISING CONTRACT
ADVERTISER: HeadHunter.Net TECHNICAL CONTACT: same
ADDRESS 1: Suite 160, 6410 Atlanta Blvd. TELEPHONE: same
ADDRESS 2: Norcross, GA 30071 EMAIL: [email protected]
AGENT/AGENCY REPORTING CONTACT: same
BILLING CONTACT NAME: Warren Bare TELEPHONE: same
BILLING ADDRESS 1: same EMAIL:
BILLING ADDRESS 2: same ONLINE REPORTING: HTTP://REPORTING.LYCOS.COM
TELEPHONE NUMBER: 770-300-9272 USER NAME: WARREN 5
FAX NUMBER: 770-300-9298 PASSWORD (8 CHARS) JOBHUNT7
ADVERTISER'S URL:
</TABLE>
<TABLE>
<CAPTION>
DISCOUNT
(IF
TARGET/ EXCL. KEYWORD DATE MINIMUM GROSS GROSS APPLICABLE) NET NET
KEYWORD RES ID DESCRIPTION START ---- END IMPRESSIONS CPM COST 0.0% COST CPM
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2nd Level Graphic Text
Link/Careers/Job Search 175 & 60 4/1/98 9/30/98 3,000,000 60,000.00 60,000.00
Top Position
Bonus ROS Impressions 468 x 60 4/1/98 9/30/98 300,000
Permanent Placement at top image during run.
*Lycos guarantees delivery of 3,000,000 impressions
--------- ----- --------- ----- --------- -----
3,300,000 60,000.00 0,000.00
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
(FOR INTERNAL PURPOSES ONLY)
Advertising Contract Split Yes No
Repeat/First Time advertiser Repeat First Time ADVERTISER/AGENT SIGNATURE /s/ Warren Bare
--------------------
Technical/Non Technical Tech Non Tech LYCOS ACCOUNT MANAGER SIGNATURE /s/
Keyword/Target/Impr/Comb Key Tgt Impr Combo --------------------
Domestic/International client Dom Intern
Number of brands represented
THIS ADVERTISING CONTRACT IS SUBJECT TO THE ATTACHED TERMS AND CONDITIONS
</TABLE>
<PAGE> 2
LYCOS, INC. ADVERTISING CONTRACT - page 2
TERMS AND CONDITIONS
1. General. A signed contract must be submitted to Lycos five days in advance
of initial publication date. By submitting advertising for inclusion on the
Lycos site, advertiser/agency agrees to be bound by the terms of this
contract. No conditions other than those set forth herein shall be binding
on Lycos unless specifically agreed to in writing in Lycos. Lycos will not
be bound by conditions printed or appearing or order blanks on copy
instructions submitted by or on behalf of the advertiser/ agency. This
contract supersedes all terms and conditions on Lycos' rate cards.
2. Changes and Cancellations. All artwork must be received at least five days
in advance of publication date. Cancellations or copy charges will not be
accepted after the published closing date of the update to the Lycos site.
Changes to artwork must be received by Lycos at least three days in advance
of requested change date. All cancellation or change orders must be made in
writing and acknowledged by Lycos. Change orders cannot be submitted any
more frequently than once every fourteen days. This contract may be
canceled by Lycos or advertiser/agency on 60 days notice to the other
party.
3. Payment. Unless otherwise agreed in writing, payments due Lycos are 50% of
first month's fees when the contract is executed by the advertiser/agency
and 50% upon publication. If payment is not made timely, Lycos at its
option, may terminate the contract. In addition, advertiser/agency shall be
liable to Lycos for all attorney's fees and other costs of collection.
Interest will accrue on any past due amounts at the rate of one and
one-half (1 1/2%) percent per month, but not in excess of the lawful
maximum. Lycos shall have the right to hold the advertiser and/or its
agency or agent jointly and severally liable for all amounts due.
4. Frequency and Discounts. If Lycos fails to provide the guaranteed number of
impressions, Lycos will make good on this contract by providing advertiser
with additional impressions. Lycos will not make good for under-delivery
due to delays caused by advertiser/agency. Advertiser/agency understands
that all frequency discounts are based on the advertiser's/agency's
commitment to fulfilling the frequency indicated in the contract. If, for
any reason, this frequency is n to met by the time of expiration or
cancellation of the contract, advertiser/agency agrees to pay a short rate
charge on all ads run. This charge will be equal to the difference between
the rate shows in the contract and the rate earned based on the applicable
rate card for the actual frequency completed.
5. Growth and Renewal. (a) Per Impression Contracts. At the expiration of a
contract for a guaranteed number of impressions, provided the contract is
for a length of time 180 days or longer, advertiser/agency has the right to
renew the contract for the same number of impressions for a second contract
period identical in duration to the first. The purchase price for a second
contract period will be determined by Lycos' then current rate card. (b)
Exclusive Key Word/Phrase Contracts. The estimated number of impressions
and the per impression charge for a contract for the exclusive right to a
key word/phrase will be determined at the time the contract is signed.
Advertiser/agency agrees to pay, on a per impression basis, for any
increase in impressions (calculated on a monthly basis) up to and including
twice the number of impressions estimated at the time the contract is
signed. At the termination of a key word/phrase contract, provided the
contract is for a length of time 180 days or longer, advertiser/agency has
the right to renew the contract for the same key word/phrase for a second
contract period identical in duration to the first. (c) Notice of Renewal.
In order to exercise the right of renewal, advertiser/agency must notify
Lycos in writing 30 days before the termination date of this contract that
the advertiser/agency is purchasing the same contract for the second
contract period. Failure to give timely notice will result in forfeiture of
the right to renew.
6. Licenses and Indemnification. The advertiser/agency represents that the
advertiser is the owner or is licensed to use the entire contents and
subject matter contained in its advertising and collateral information,
including, without limitation, (a) the names and/or pictures of persons;
(b) any copyrighted material, trademarks and/or depictions of trademarked
goods or services; and (c) any testimonials or endorsements contained in
any advertisement submitted to Lycos. In consideration of Lycos' acceptance
of such advertisements and information for publication, the advertiser and
agency will jointly and severally indemnify and hold Lycos harmless against
all loss, liability, damage and expense of any nature (including attorney's
fees) arising out of the copying, printing, distributing, or publishing of
advertiser's/agency's advertisements. If advertiser possesses any
preexisting copyright interests in the advertisements, advertiser grant
Lycos the right to use, reproduce, and distribute the advertisements.
7. Key Words and Phrases. Each advertiser may be given a "first right" to its
exact company name and trademarks for keyword/phrase advertising. Lycos may
preempt an existing key word/phrase advertiser by submitting a three-month
advertising contract. The existing contract-holder for the key word/phrase
will be provided with a two-week notification of preemption and will
receive a pro-rated refund for any unfulfilled number of guaranteed
impressions. If two or more advertisers have the same name or trademark,
the allocation will be made on a first-come basis and the existing contract
will take precedence.
8. Rejections. Lycos reserves the right, without liability, to reject, omit or
exclude any advertisement or to reject or terminate any links for any
reason at any time, with or without notice to the advertiser/agency, and
whether or not such advertisement or link was previously acknowledged,
accepted, or published.
9. Limitation of Liability. Lycos shall not be liable for any errors in
content or omissions. Should an error appear in an advertisement, Lycos'
liability will be limited to the cost of the advertisement (prorated for
the publishing completed). Lycos will not be liable for any delays in
delivery and/or non-delivery in the event of an act of God, action by any
government entity, transportation, strike, network difficulties, electronic
malfunction, etc. or any feasibility, reliability, or effectiveness related
to the Lycos site. Lycos does not represent or warrant that the Lycos site
will meet the objectives or needs of advertiser/agency or any third party.
In no event will Lycos be liable for any failure, disruption, downtime,
interruption, miscalculation, delay, inaccuracy, or any other
nonperformance related to the Lycos site.
UNDER NO CIRCUMSTANCES WILL LYCOS BE LIABLE FOR ANY SPECIAL, INDIRECT,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION, FOR
LOST INCOME OR PROFITS, IN ANY WAY ARISING OUT OF OR RELATED TO THIS
AGREEMENT, EVEN IF LYCOS HAS BEEN ADVISED AS TO THE POSSIBILITY OF SUCH
DAMAGES.
10. Choice of Law and Forum. This contract shall be interpreted and construed
in accordance with the laws of the Commonwealth of Massachusetts, without
regard to its conflicts of laws provision, and with the same force and
effect as if fully executed and performed therein. Each party hereby
consents to the personal jurisdiction of the Commonwealth of Massachusetts,
acknowledges that venue is proper in any state or Federal court in the
Commonwealth of Massachusetts, agrees that any action relate to this
agreement must be brought in a state or Federal court in the Commonwealth
of Massachusetts, and waives any objection that may exist, now or in the
future, with respect to any of the foregoing.
11. Miscellaneous. This contract cannot be sold, assigned or transferred by
advertiser/agency to any party. If any portion of the contract is found
unenforceable for any reason, the remainder will remain in full force and
effect. No waiver by Lycos shall operate as a waiver of any other provision
or any subsequent default. This document represents the entire agreement of
the parties; Lycos will not be bound by the representations of any agents,
brokers, or other third parties. Any modifications must be in writing and
signed by an authorized representative of Lycos.
The undersigned is legally empowered with due corporate authority to enter into
this Contract and agrees to be bound by the Terms and Conditions of this
contract.
Advertiser or Agent Lycos, Inc.
-------------------------- -------------------------------
Signature /s/ Warren Bare /s/
-------------------------- -------------------------------
Date
-------------------------- -------------------------------
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
LYCOS(TM) Lycos, Inc. Tel. 508 424 0400 Send all payments to:
Your Personal Internet Guide 500 Old Connecticut Path Fax. 508 820 4499 Lycos, Inc.
Framingham, MA 01701 PO Box 6255
Boston, MA 02212-6255
LYCOS, INC. ADVERTISING CONTRACT - CHANGE FORM
ADVERTISER: HeadHunter.Net ORIGINAL CONTRACT: Link/Job Search
ADDRESS 1: START DATE:
ADDRESS 2: END DATE:
AGENT/AGENCY PACKAGE:
BILLING CONTACT NAME: Warren Bare/Barbara Moore CONTRACT COST: $60K
BILLING ADDRESS 1:
BILLING ADDRESS 2:
TELEPHONE NUMBER:
FAX NUMBER: 770-300-9298 CHANGE IN NET COST: 0
PACKAGE DETAILS
CHANGES TO ORIGINAL CONTRACT
- --------------------------------------------------------------------------------------------------------
BONUS 10,000 CAREER WEDGRICH IMPS FOR
DELAY IN GETTING LINK UP - APRIL 11 -
APRIL 30.
Advertiser/Agent Lycos, Inc. Acct. Mgr. Lycos, Inc. Corporate
---------------------------------------------------------------------------------------------
Signature: /s/ Barbara L. Moore /s/ Neil R. _________
---------------------------------------------------------------------------------------------
Name Barbara Moore /s/ Neil ___________
---------------------------------------------------------------------------------------------
Title Office Manager Asst. Mgr.
---------------------------------------------------------------------------------------------
Date: 4/10/98 4/10/98
---------------------------------------------------------------------------------------------
</TABLE>
THIS CHANGE FORM IS SUBJECT TO THE TERMS AND CONDITIONS OF THE ORIGINAL
ADVERTISING CONTRACT.
<PAGE> 4
LYCOS, INC.
400-2 TOTTEN POND ROAD SEND ALL PAYMENTS TO:
WALTHAM, MA 02154 LYCOS, INC.
781-370-2867 P. O. BOX 6255
FAX: 781-370-2750 BOSTON, MA 02212-6255
LYCOS, INC. ADVERTISING CONTRACT - CHANGE FORM
ADVERTISER: HEADHUNTER.NET ORIGINAL CONTRACT: MR. WARREN BARE
ADDRESS 1: SUITE 160, 6410 ATLANTA BLVD. START DATE: 4/1/98
ADDRESS 2: NORCROSS, GA 30071 END DATE: 9/30/98
AGENT/AGENCY: PACKAGE:
BILLING CONTACT NAME: MR. WARREN BARE CONTRACT COST:
BILLING ADDRESS 1: SUITE 160, 6410 ATLANTA BLVD.
BILLING ADDRESS 2: NORCROSS, GA 30071
TELEPHONE NUMBER: 770-300-9272
FAX NUMBER: 770-300-9298 CHANGES IN NET COST: 0
PACKAGE DETAILS:
CHANGES TO ORIGINAL CONTRACT:
PLEASE RESET START DATE TO 4/10/98.
PLEASE RESET END DATE TO 10/9/98.
PLEASE ADD TO MAKE GOOD FOR UNANTICIPATED DELAY: 100,000 RUN OF SITE
BANNER IMPRESSIONS.
NO COST CHANGE.
<TABLE>
<S> <C> <C> <C> <C>
Advertiser/Agent Lycos, Inc. Acct. Mgr. Lycos, Inc. Corporate
-----------------------------------------------------------------------------------------
Signature: /s/ Warren Bare /s/ Mike Reynolds
-----------------------------------------------------------------------------------------
Name Warren Bare Mike Reynolds
-----------------------------------------------------------------------------------------
Title President Account Manager
-----------------------------------------------------------------------------------------
Date: 4/3/97 4/3/98
-----------------------------------------------------------------------------------------
</TABLE>
THIS CHANGE FORM IS SUBJECT TO THE TERMS AND CONDITIONS OF THE ORIGINAL
ADVERTISING CONTRACT.
-5-
<PAGE> 1
EXHIBIT 10.21
FRONTIER
GLOBALCENTER MASTER SERVICE AGREEMENT NO. 1
- --------------------------------------------------------------------------------
This Master Services Agreement (this "Agreement") is entered into as of
the 23rd day of June, 1998 ("Effective Date") by and between the entity
indicated on the Services Order Form attached hereto, with an office at the
address listed on the Services Order Form ("Client"), and Frontier GlobalCenter,
Inc., a corporation with offices at 1154 East Arques Ave., Sunnyvale, CA,
("Frontier GlobalCenter"), and describes the terms and conditions pursuant to
which Frontier GlobalCenter shall license to Client certain Software and provide
certain Services (as defined below).
In consideration of the mutual promises and upon the terms and conditions
set forth below, the parties agree as follows:
1. NATURE OF AGREEMENT. This is an Agreement for the provision by Frontier
GlobalCenter of Internet connectivity services (the "Bandwidth"), the lease of
equipment to provide such services (the "Hardware"), the availability of space
to store and operate such Hardware ("Space") and the licensing of software to
provide such Services (the "Software"), together comprising an Internet
connectivity and collocation package to be provided by Frontier GlobalCenter
under this Agreement (together, the "Services").
2. SERVICE ORDERS
2.1. ORDERS. Client may issue one or more service orders describing the
Bandwidth, Space, Hardware, and Software that Client desires ("Service Order").
Each Service Order will set forth the prices, initial term of Services and other
information in the form set forth in the Service Order Form. No Service Order
shall be effective until accepted by Frontier GlobalCenter. All Service Orders
will be subject to the terms and conditions of this Agreement, and the terms of
this Agreement shall supersede any terms and conditions which may appear on
Client's order form, or purchase order.
2.2. CANCELLATION. In the event that Client cancels or termiantes a Service
Order at any time for any reason whatsoever other than expiration of a Service
Order or a Service Interruption (as defined below), Client agrees to pay
Frontier GlobalCenter as a cancellatin fee all Monthly Recurring Charges
specified in the Service Order for the balance of the term therefor, which shall
become due and owing as of the effective date of cancellation or termination.
2.3. IP ADDRESSES. Frontier GlobalCenter may assign on a temporary basis a
reasonable number of Internet Protocol Addresses ("IP Addresses") from the
address space assigned to the Frontier GlobalCenter by InterNIC. Client
acknowlegdes that the IP Addresses are the sole proeprty of Frontier
GlobalCenter, are assigned to Client as part of the Service, and are not
"portable," as such term is used by InterNIC. Frontier GlobalCenter reserves the
right to change the IP Address assignments at any time; however, Frontier
GlobalCenter shall use reasonable efforts to avoid any disruption to Client
resulting from such renumbering requirement. Frontier GlobalCenter will give
Client reasonable notice of any such renumbering. Client agrees that it will
have no right to IP Addresses upon termination of this Agreement, and that any
renumbering required of Client after termiantion shall be the sole
responsibility of Client.
FRONTIER 1
GLOBALCENTER
<PAGE> 2
FRONTIER MASTER SERVICE AGREEMENT NO. 1
GLOBALCENTER
- --------------------------------------------------------------------------------
3. SOFTWARE LICENSE AND RIGHTS
3.1. LICENSE. During the term of the applicable Service Order, Frontier
GlobalCenter grants Client a nontransferable, nonexclusive license to use the
Software in object code form only, solely on the Hardware in conjunction with
the Services.
3.2. PROPRIETARY RIGHTS. This Agreement transfers to Client neither title nor
any proprietary or intellectual proeprty rights to the Software, Hardware,
documentation, or any copyrights, patents, or trademarks, embodied or used in
connection therewith, except for the rights expressly granted herein.
3.3. LICENSE RESTRICTIONS. Client agrees that it will not itself, or through
any parent, subsidiary, affiliate, agent or other third party:
3.4.1. copy the software except as expressly allowed under this Agreement. In
the event Client makes any copies of the Software, Client shall reproduce all
proprietary notices of Frontier GlobalCenter on any such copies;
3.4.2. reserve engineer, decompile, disassemble, or otherwise attempt to derive
source code from the Software;
3.4.3. sell, lease, license or sublicense the Software or the documentation;
3.4.4. write or develop any derivative software or any other software program
based upon the Software or any Confidential Information (as defined below); or
3.4.5. use the Software to provide processing services to third parties, or
otherwise use the Software on a 'service bureau' basis.
4. HARDWARE TERMS AND CONDITIONS
4.1. INSTALLATION. Frontier GlobalCenter will use commercially reasonable
efforts to install the Hardware as the Hardware is shipped to Frontier
GlobalCenter. At Client's request, Frontier GlobalCenter will work with the
Client on an installation plan to define installation time frame and
requirements.
4.2. PURCHASE AND TITLE OF HARDWARE. If so indicated on the Service Order,
Client shall purchase the Hardware and deliver, at Client's expense, the
Hardware to the Space. Client agrees that the Hardware shall reside at the Space
during the term of this Agreement.
4.3 LEASE OF HARDWARE. If so indicated on the Service Order, Client shall
lease the Hardware, and Frontier GlobalCenter shall obtain and deliver to the
Space the Hardware. In the event client leases the Hardware, the following terms
and conditions shall apply: The Hardware is and shall remain the property of
Frontier GlobalCenter. Client shall not have taken, or attempt to take, any
right, title or interest therein or permit any third party to take any interest
therein. Client will not transfer, sell, assign, sublicense, pledge, or
otherwise dispose of, encumber or suffer a lien or encumbrance upon or against
the Hardware or any interest in the Hardware. Client will use the Hardware only
at the Space. Client will not move the Hardware from that facility without
Frontier GlobalCenter's prior written permission. Client shall be responsible
for any damage to the Hardware. Client will use the Hardware only for the
purpose of exercising its rights under this Agreement.
4.4. RENT TO OWN. If so indicated on the Service Order, Client shall lease the
Hardware on a "rent to own" plan. In such event, all of
FRONTIER 2
GLOBALCENTER
<PAGE> 3
FRONTIER MASTER SERVICE AGREEMENT NO. 1
GLOBALCENTER
- --------------------------------------------------------------------------------
the terms and conditions in Section 4.3 shall apply, and the following terms and
conditions shall also apply. At the end of the term of the Service Order,
providing Client is not in breach of this Agreement, Client shall have the
option to purchase the Hardware. The purchase price shall be as indicated on the
Service Order. Upon payment by Client of the purchase price, title in the
Hardware shall pass to Client at the Space. Unless the Service Order is extended
by mutual agreement, Client shall immediately delete, or shall allow Frontier
GlobalCenter to delete, all copies of the Software, associated documentation, or
any other materials of Frontier GlobalCenter resident on the Hardware.
5. SPACE
5.1. LICENSE TO OCCUPY. Frontier GlobalCenter grants to Client a non-exclusive
license to occupy the Space. Client acknowledges that it has been granted only a
license to occupy the Space and that it has not been granted any real property
interests in the Space. In the event, however, that this arrangement shall be
construed by the owner of the building in which the Space is situated to be such
a grant and if the landlord of the building asserts such a grant to be a
violation of the lease under which Frontier GlobalCenter occupies its premises,
Frontier GlobalCenter agrees to cooperate with Client in obtaining the approvals
Client may need to obtain from the landlord.
5.2. MATERIAL AND CHANGES. Client shall not make any construction changes or
material alterations to the interior or exterior portions of the Space,
including any cabling or power supplies for the Hardware, without obtaining
Frontier GlobalCenter's prior written approval for Client to have the work
performed. Alternatively, Client may request Frontier GlobalCenter to perform
the work. Frontier GlobalCenter reserves the right to perform and manage any
construction or alterations within the Space areas at rates to be negotiated
between the Parties hereto. Client agrees not to erect any signs or devices to
the exterior portion of the Space without submitting the request to Frontier
GlobalCenter and obtaining Frontier GlobalCenter's advance written approval.
5.3. DAMAGE. Client agrees to reimburse Frontier GlobalCenter for all
reasonable repair or restoration costs associated with damage or destruction
caused by Client's personnel, Client's agents, Client's suppliers/contractors,
or Client's visitors during the term or as a consequence of Client's removal of
the Hardware or property installed in the Space.
5.4. INSURANCE. Unless otherwise agreed, Client agrees to maintain, at Client's
expense, (i) Comprehensive General Liability Insurance in an amount not less
than One Million Dollars ($1,000,000) per occurrence for bodily injury or
property damage, (ii) Employer's Liability in an amount not less than Five
Hundred Thousand Dollars ($500,000) per occurrence, and (iii) Worker's
Compensation in an amount not less than that prescribed by statutory limits.
Prior to taking occupancy of the Collocation Space, Client shall furnish
Frontier GlobalCenter with certificates of insurance which evidence the minimum
levels of insurance set forth herein. Client shall also maintain insurance
covering Hardware or property owned or leased by Client against loss or physical
damage.
5.5. REGULATIONS. Client shall comply with and not violate all of Frontier
GlobalCenter's safety, health and operational rules and regulations, which may
be amended by
FRONTIER 3
GLOBALCENTER
<PAGE> 4
\
FRONTIER MASTER SERVICE AGREEMENT NO. 1
GLOBALCENTER
- --------------------------------------------------------------------------------
Frontier GlobalCenter from time to time. Client's failure to comply with
Frontier GlobalCenter's rules and regulations shall constitute a material
default under this Agreement. Frontier GlobalCenter may, in its sole discretion,
limit Client's access to a reasonable number of authorized Client employees or
designees. Client shall not interfere with any other clients of Frontier
GlobalCenter, or such other clients' use of the Space.
5.6. DISCLAIMER. Frontier GlobalCenter does not make any representation or
warranty whatsoever as to the fitness of the Space for Client's use. Client
hereby assumes any and all risks associated with Client, its agents or
employees' use of the Space and shall indemnify, defend and hold harmless
Frontier GlobalCenter from any and all claims, liabilities, judgments, causes of
action, damages, costs, and expenses (including reasonable attorneys' and
experts' fees), caused by or arising in connection with such use.
6. SERVICE INTERRUPTIONS
6.1. 99% UPTIME GUARANTEE. In the event of Downtime (as defined below), the
monthly fee payable for the Services shall be reduced as follows:
6.1.1. if the total Downtime in the calendar month is more than seven
and two-tenths (7.2) hours, but does not exceed fourteen and
four-tenths (14.4) hours, the monthly fee for that month shall be
reduced by one-third (33.3%);
6.1.2. if the total Downtime in the calendar month is more than
fourteen and four-tenths (14.4) hours, but does not exceed twenty-one
and six tenths (21.6) hours, the monthly fee for that month shall be
reduced by two-thirds (66.6%); and
6.1.3. If the total Downtime in the calendar month is more than
twenty-one and six-tenths (21.6) hours, the monthly fee for that month
shall be waived.
For the purposes of this Section, Downtime shall mean any interruption of one
(1) minute or more in the availability to users or any Web site residing on the
Hardware and made available through the Services, only if such interruption is
due to either (i) failure by Frontier GlobalCenter to manage a server anomaly so
as to avoid interruption in Web availability, or (ii) a disruption in the
connection between any such server and the Internet. For purposes of this
Section, the Internet is deemed to consist of services that commence where
Frontier GlobalCenter transmits a Client's content to Frontier GlobalCenter's
carrier(s) at the Frontier GlobalCenter border router port(s). Such carriers
provide Frontier GlobalCenter with private and dedicated bandwidth. Frontier
GlobalCenter undertakes no obligation for the circuit or link between Frontier
GlobalCenter's facilities and such carrier's services. If router packet loss is
excess of seventy percent (70%) and is sustained for sixty (60) seconds or more,
Frontier GlobalCenter will classify this an "outage." If an "outage" continues
for a time period of more than two (2) minutes, then such outage will be deemed
Downtime.
6.2. INVESTIGATION OF SERVICE INTERRUPTIONS. At Client's request, Frontier
GlobalCcnter will investigate any report of Downtime, and attempt to remedy any
Downtime expeditiously. Frontier GlobalCenter reasonably determines that all
FRONTIER 4
GLOBALCENTER
<PAGE> 5
FRONTIER MASTER SERVICE AGREEMENT NO. 1
GLOBALCENTER
facilities, systems and equipment furnished by Frontier GlobalCenter are
functioning properly, and that Downtime arose from some other cause, Frontier
GlobaICenter reserves the right to recover labor and materials cost for services
actually performed at the usual and customary rates for similar services
provided by Frontier GlobalCenter to clients in the same locality.
6.3. TERMINATION. Client may terminate a Service Order in the event of Downtime
of either twenty-four (24) hours or cumulative time during any continuous twelve
(12) month period, or any continuous Downtime of eight (8) hours or more.
6.4. SALE REMEDY. The terms and conditions of this Section 6 shall be Client's
sole remedy and Frontier GlobalCenter's sole obligation for any Downtime.
7. USER CONTENT. Client is solely responsible for the content of any
postings, data, or transmissions using the Services ("Content"), or any other
use of the Services by Client or by any person or entity Client permits to
access the Services (a "User"). Client represents and warrants that it and any
User will not use the services for unlawful purposes (including without
limitation infringement of copyright or trademark, misappropriation of trade
secrets, wire fraud, invasion of privacy, pornography, obscenity and libel), or
to interfere with or disrupt other network users, network services or network
equipment. Disruptions include without limitation distribution of unsolicited
advertising or chain letters, repeated harassment of other network users,
wrongly impersonating another such user, falsifying one's network identity for
improper or illegal purposes, sending unsolicited mass e-mailings, propagation
of computer worms and viruses, and using the network to make unauthorized entry
to any other machine accessible via the network. If Frontier GlobalCenter has
reasonable grounds to believe that Client or a User is utilizing the Services
for any such illegal or disruptive purpose, Frontier GlobalCenter may suspend or
terminate Services immediately upon notice to Client. Client shall defend,
indemnify, hold harinless Frontier GlobalCenter from and against all liabilities
and costs (including reasonable attorney's fees) arising from any and all claims
by any person arising out of Client's use of the Services, including without
limitation any content.
8. PRICING AND PAYMENT TERMS
8.1. PAYMENT TERMS. Client shall pay the fees set forth in the Services Order
Form according to the terms set forth therein. Client agrees to pay a late
charge of two percent (2%) above the prime rate as reported by the Wall Street
Journal at the time of assessment or the maximum lawful rate, whichever is less,
for all undisputed amounts not paid within thirty (30) days of receipt of
invoice.
8.2. LATE PAYMENTS. In the event of non-payment by Client of sums over-due
hereunder for more than sixty (60) days, Frontier GlobalCenter may upon written
notice to Client either retain any equipmcnt or other assets of Client then in
Frontier GlobalCenter's possession and sell them in partial satisfaction of such
unpaid sums, or request Client to remove equipment from Frontier GlobalCenter's
premises within ten (10) days. If Client fails to so remove, Frontier
GlobalCenter may deliver the equipment to Client at the latter's address for
notices at Client's expense for shipment and insurance,
FRONTIER
GLOBALCENTER 5
<PAGE> 6
FRONTIER
GLOBALCENTER MASTER SERVICE AGREEMENT NO. 1
- --------------------------------------------------------------------------------
and Client shall be obligated to accept such delivery.
8.3. PRICE INCREASES. Frontier GlobalCenter shall not increase the prices for
services during the initial term of any Service Order, but may thereafter change
prices upon sixty (60) days written notice, made to primary and secondary
contacts.
9. MAINTENANCE AND SUPPORT. Frontier GlobalCenter shall provide Client with
maintenance and support of the Software and Hardware, if any ("Maintenance and
Support") as specified in the Service Specification.
9.1 EXCLUSIONS. Maintenance and Support shall not include services for
problems arising out of (a) modification. alteration or addition or attempted
modification, alteration or addition of the Hardware or Software undertaken by
persons other than Frontier GlobalCenter or Frontier GlobalCenter's authorized
representatives; or (b) programs or hardware supplied by Client.
9.2. CLIENT DUTIES. Client shall document and promptly report all errors or
malfunctions of the Hardware Software to Frontier GlobalCenter. Client shall
take all steps necessary to carry out procedures for the rectification of errors
or malfunctions within a reasonable time after such procedures have been
received from Frontier GlobalCenter. Client shall maintain a current backup copy
of all programs and data. Client shall properly train its personnel in the use
and application of the Hardware and Software.
10. TERM AND TERMINATION
10.1. TERM. The term of this Agreement shall commence on the Effective Date and
continue indefinitely unless terminated in accordance with this Section 10. The
term of each Service Order shall be as indicated therein. The term of any
Service Order may be extended upon mutual agreement.
10.2. TERMINATION UPON DEFAULT. Either party may terminate this Agreement in the
event that the other party materially defaults in performing any obligation
under this Agreement and such default continues unremedied for a period of
thirty (30) days following written notice of default. In the event this
Agreement is terminated due to Frontier GlobalCenter's breach, Frontier
GlobalCenter shall refund to Client any Services fees on a straight line
prorated basis.
10.3. TERMINATION UPON INSOLVENCY. This Agreement shall terminate, effective
upon delivery of written notice by a party: (i) upon the institution of
insolvency, receivership or bankruptcy proceedings or any other proceedings for
the settlement of debts of the other party; (ii) upon the making of an
assignment for the benefit of creditors by the other party; or (iii) upon the
dissolution of the other party.
10.4. EFFECT OF TERMINATION. The provisions of Sections 1, 2.3, 3.2, 3.3, 7,
10.4, 11, 12, 13 and 14 shall survive termination of this Agreement. All other
rights and obligations of the parties shall cease upon termination of this
Agreement. The term of any license granted hereunder shall expire upon
expiration or termination of this Agreement.
11. CONFIDENTIAL INFORMATION. All information identified disclosed by either
parry ("Disclosing Party") to the other party ("Receiving Party"), if disclosed
in writing,
FRONTIER 6
GLOBALCENTER
<PAGE> 7
FRONTIER
GLOBALCENTER MASTER SERVICE AGREEMENT NO. 1
labeled as proprietary or confidential, or if disclosed orally, reduced to
writing within thirty (30) days and labeled as proprietary or confidential
("Confidential Information") shall remain the sole property of Disclosing Party.
Except for the specific rights granted by this Agreement, Receiving Party shall
not use any Confidential Information of Disclosing Party for its own account.
Receiving Party shall use the highest commercially reasonable degree of care to
protect Disclosing Party's Confidential Information. Receiving Party shall not
disclose Confidential Information to any third party without the express written
consent of Disclosing Party (except solely for Receiving Party's internal
business needs, to employees or consultants who are bound by a written agreement
with Receiving Party to maintain the confidentiality of such Confidential
Information in a manner consistent with this Agreement). Confidential
Information shall exclude information (i) available to the public other than by
a breach of this Agreement; (ii) rightfully received from a third party not in
breach of an obligation of confidentiality; (iii) independently developed by
Receiving Party without access to Confidential Information; (iv) known to
Receiving Party at the time of disclosure; or (v) produced in compliance with
applicable law or a court order, provided Disclosing Party is given reasonable
notice of such law or order and an opportunity to attempt to preclude or lirnit
such production. Subject to the above, Receiving Party agrees to cease using any
and all materials embodying Confidential Information, and to promptly return
such materials to Disclosing Party upon request.
12. LIMITATION OF LIABILITY. FRONTIER GLOBALCENTER'S LIABILITY FOR ALL CLAIMS
ARISING OUT OF THIS AGREEMENT SHALL BE LIMITED TO THE AMOUNT OF FEES PAID BY
CLIENT TO FRONTIER GLOBALCENTER UNDER THIS AGREEMENT. IN NO EVENT SHALL FRONTIER
GLOBALCENTER BE LIABLE FOR ANY LOSS OF DATA, LOSS OF PROFITS, COST OF COVER OR
OTHER SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES ARISING FROM OR IN
RELATION TO THIS AGREEMENT OR THE USE OF THE SERVICES, HOWEVER CAUSED AND
REGARDLESS OF THEORY OF LIABILITY. THIS LIMITATION WILL APPLY EVEN IF FRONTIER
GLOBALCENTER HAS BEEN ADVISED OR IS AWARE OF THE POSSIBILITY OF SUCH DAMAGES.
13. DISCLAIMER OF WARRANTIES. FRONTIER GLOBALCENTER SPECIFICALLY DISCLAIMS
ALL WARRANTIES EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, THE IMPLIED
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE. AND
NONINFRINGEMENT OF THE SYSTEM OR SERVICES PROVIDED BY FRONTIER GLOBALCENTER
HEREUNDER.
14. MISCELLANEOUS
14.1. INDEPENDENT CONTRACTOR. The relationship of Frontier GlobalCenter and
Client established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed to (i) give either party
the power to direct and control the day-to-day activities of the other; (ii)
constitute the parties as partners, joint ventures, co-owners or otherwise as
participants in a joint undertaking; or (iii) allow either party to create or
assume any obligation on behalf of the other party for any purpose whatsoever.
14.2. NOTICES. Any notice required or permitted hereunder shall be in writing
and shall given by registered or certified mail addressed to the names and
addresses first
FRONTIER 7
GLOBALCENTER
<PAGE> 8
FRONTIER
GLOBALCENTER MASTER SERVICE AGREEMENT NO. 1
written above. Such notice shall be deemed to be given upon the earlier of
actual receipt or three (3) days after it has been sent, properly addressed and
with postage prepaid. Either party may change its address for notice by means of
notice to the other party given in accordance with this Section.
14.3. ASSIGNMENT. Client may not assign this Agreement, in whole or in part,
either voluntarily or by operation of law, and any attempt to do so shall be a
material default of this Agreement and shall be void.
14.4. GOVERNING LAW. This Agreement shall be interpreted according to the laws
of the State of California without regard to or application of choice-of-law
rules or principles. The parties hereby agree to the exclusive jurisdiction of
the state and federal courts located in Santa Clara County, California.
14.5. ENTIRE AGREEMENT AND WAIVER. This Agreement shall constitute the entire
agreement between Frontier GlobalCenter and Client with respect to the subject
matter hereof and all prior agreements, representations, and statement with
respect to such subject matter are superceded hereby, including without
limitation any non-disclosure agreement previously executed between the parties.
This Agreement may be changed only by written agreement signed by both Frontier
GlobalCenter and Client. No failure of either party to exercise or enforce any
of its rights under this Agreement shall act as a waiver of subsequent breaches;
and the waiver of any breach shall not act as a waiver of subsequent breaches.
14.6. SEVERABILITY. In the event any provision of this Agreement is held by a
court of other tribunal of competent jurisdiction to be unenforceable, that
provision will be enforced to the maximum extent permissible under applicable
law, and the other provisions of this Agreement will remain in full force and
effect.
14.7. NON-SOLICITATION. During the term of this agreement and for a period of
one (1) year thereafter, neither party shall solicit, nor attempt to solicit the
services, of any employee or subcontractor of the other without the prior
written consent of the employer.
14.8. SUBSTITUTION. Frontier GlobalCenter may substitute, change or modify the
Software or Hardware at any time, but shall not thereby alter the technical
parameters of the Services.
Frontier GlobalCenter Client
/s/ William H. Rinehart /s/ Mark W. Fouraker
- ------------------------------- ---------------------------
By: William H. Rinehart By: Mark W. Fouraker
---------------------------- Title: Director, Operations
Title: Sr. VP
-------------------------
FRONTIER 8
GLOBALCENTER
<PAGE> 9
<TABLE>
<S> <C> <C> <C>
FRONTIER SERVICE ORDER #001 SERVICE ORDER TERM: 12 MONTHS
GLOBALCENTER MSA # HH001 SERVICE ORDER DATE: 06/19/98
SITE EXPRESS ESTIMATED INSTALL DATE:
===================================================================================================================
PRIMARY CONTACT: Mark Fouraker CONTACT Mark Stavrou
SECONDARY CONTACT: Eric Presley Regional Sales Manager
COMPANY: HeadHunter.NET ADDRESS: Frontier GlobalCenter, Inc.
380 Herndon Pkwy, #1000
ADDRESS: 6410 Atlantic Blvd Ste. 160 Herndon, VA 20170
CITY/ST/ZIP: Norcross, GA 30071 PHONE: 703.318.7591
PHONE: 770.300.9272x707 FAX: 703.318.0120
FAX: 770.300.9398 PAGER: 800.418.0905
PAGER: CELL:
EMAIL: [email protected] EMAIL: [email protected]
===================================================================================================================
</TABLE>
SITE EXPRESS ONE TIME INSTALLATION FEES, CA AND VA FACILITIES:
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
ITEM # DESCRIPTION QTY. UNIT PRICE TOTAL
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Port Installation, 2 facilities: 2 $1,500.00 $3,000.00
Dedicated Switched 100Mbps Fast Ethernet port on Frontier GlobalCenter
Cisco Catalyst 5500 switch. Charges are for ports in CA and VA data
facilities
- -------------------------------------------------------------------------------------------------------------------
3 Technical Account Manager (TAM) Installation, 2 facilities: 2 $500.00 $1,000.00
Includes port allocation, IP address allocation, customized Remedy
monitoring procedure setup, Express Control and KickStart Remote
Reboot setup. Additional TAM Hours available for customized hardware
and software installation and/or configuration.
- -------------------------------------------------------------------------------------------------------------------
One Time Total: $4,000.00
- -------------------------------------------------------------------------------------------------------------------
SITE EXPRESS MONTHLY RECURRING FEES, CA AND VA FACILITIES:
- -------------------------------------------------------------------------------------------------------------------
ITEM # DESCRIPTION QTY. UNIT TOTAL
PRICE
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
1A Committed Bandwidth - CA facility 2Mbps $900.00 $1,800.00
Guaranteed dedicated switched per Mbps bandwidth to the Frontier
GlobalCenter backbone via Cisco Catalyst 5500 switch.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 10
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1B Burstable Bandwidth - CA facility above any committed rate Per $975.00 Variable
Mbps
Bandwidth above the committed rate determined and billed via the 95th
Percentile rule (See Below).
- -------------------------------------------------------------------------------------------------------------------
1C Committed Bandwidth - VA facility 2Mbps $900.00 $1,800.00
Guaranteed dedicated switched per Mbps bandwidth to the Frontier
GlobalCenter backbone via Cisco Catalyst 5500 switch.
- -------------------------------------------------------------------------------------------------------------------
1D Burstable Bandwidth - VA facility above any committed rate Per $975.00 Variable
Mbps
Bandwidth above the committed rate determined and billed via the 95th
Percentile Rule (See Below).
- -------------------------------------------------------------------------------------------------------------------
2 Co-location: 2 $850.00 $1,700.00
19" x 77" Full Racks, one in CA, one in VA
- -------------------------------------------------------------------------------------------------------------------
3 Technical Account Manager (TAM) Consulting Time Per hr $150 Per Variable
Hour if
Pre-contracted on per monthly contracted time during standard necessary
business hours
- -------------------------------------------------------------------------------------------------------------------
4 Express Lane Intelligent Distributed Load Balancing Solution: 2 sites $0 $0
Intelligent End user routing to the most available site, distributed
load balancing to improve performance of local traffic, to local
sites using topological dns information. All Setup, HW and SW
provided by GlobalCenter.
- -------------------------------------------------------------------------------------------------------------------
Monthly Recurring Total: $5,300.00
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
MONTHLY SERVICE INCLUDES:
1) HTTP, PING MONITORING OF SERVERS, CUSTOM ESCALATION PROCEDURES
2) KICKSTART REMOTE REBOOT USING A SECURE WEB PAGE
3) REAL-TIME BANDWIDTH UTILIZATION STATISTICS USING A SECURE WEB PAGE
4) 24X7 NOC SUPPORT, REMOTE HANDS SERVICES, DEDICATED TAM SUPPORT
5) IP ADDRESS SPACE, DNS SERVICES.
6) HVAC, RAISED FLOOR ENVIRONMENT, UPS WITH GENERATOR BACKUP, HALON AND/OR
FM200 FIRE SUPPRESSION
7) 20 AMPS OF POWER PER RACK, EXTENSIVE PRIVATE PEERING WITH MAJOR NETWORKS
95TH PERCENTILE RULE
Every Frontier GlobalCenter client purchases a guaranteed amount of bandwidth
per month on the Frontier GlobalCenter Internet Backbone. Bandwidth fluctuations
do occur over time and there may be certain periods where your Site will burst
over the amount of bandwidth purchased. Frontier GlobalCenter clients are billed
for the guaranteed or committed bandwidth each month. Bandwidth above that
committed amount is determined and billed via Frontier GlobalCenter's SNMP
bandwidth monitoring. Frontier Global Center will sample (samples equal a data
point reflecting bankwidth utilization at that particular instance) your average
bandwidth utilization every 30 minutes and store those samples for a period of
one month.
At the end of a month, ALL data samples are sorted from highest to lowest and
the top 5% are discarded. The highest remaining data sample will then be
referred to as the "95th Percentile" number. This number will then be used as
the basis in computing the bandwidth rate for that particular month over the
guaranteed or committed bandwidth rate.
-2-
<PAGE> 11
<TABLE>
<S> <C> <C> <C>
FRONTIER SERVICE ORDER #001 SERVICE ORDER TERM: 12 MONTHS
GLOBALCENTER MSA # HH001 SERVICE ORDER DATE: 06/19/98
SITE EXPRESS ESTIMATED INSTALL DATE:
</TABLE>
================================================================================
Service Order subject to a Frontier GlobalCenter Master Service Agreement.
Service Order serves as a Purchase Order when signed by an authorized
representative. Please send or FAX signed Service Order to the above Frontier
GlobalCenter address.
Accepted by: /s/ Mark W. Fouraker
------------------------------
Printed Name: Mark W. Fouraker Title: Director, Operations
-------------------------------
PO #: ------------------------------ Date: 6/24/98
<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
August 25, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 196,366
<SECURITIES> 0
<RECEIVABLES> 157,365
<ALLOWANCES> 34,249
<INVENTORY> 0
<CURRENT-ASSETS> 352,562
<PP&E> 195,355
<DEPRECIATION> 23,965
<TOTAL-ASSETS> 1,524,696
<CURRENT-LIABILITIES> 772,682
<BONDS> 0
0
28,000
<COMMON> 22,000
<OTHER-SE> 702,014
<TOTAL-LIABILITY-AND-EQUITY> 1,524,696
<SALES> 0
<TOTAL-REVENUES> 278,051
<CGS> 0
<TOTAL-COSTS> 1,364,098
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 34,249
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,078,503)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,078,503)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,078,503)
<EPS-PRIMARY> (0.49)
<EPS-DILUTED> (0.47)
</TABLE>
