<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 19, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
HEADHUNTER.NET, INC.
(Exact name of registrant as specified in its charter)
---------------------
<TABLE>
<S> <C>
7370 58-2403177
(Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification Number)
</TABLE>
---------------------
ROBERT M. MONTGOMERY, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HEADHUNTER.NET, INC.
333 RESEARCH COURT, SUITE 200
NORCROSS, GEORGIA 30092
TELEPHONE: (770) 349-2400
FACSIMILE: (770) 349-2401
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices and agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
J. VAUGHAN CURTIS, ESQ THOMAS W. BARK, ESQ.
SCOTT L. O'MELIA, ESQ. JONES, DAY, REAVIS & POGUE
ALSTON & BIRD LLP 599 LEXINGTON AVENUE
1201 WEST PEACHTREE STREET NEW YORK, NEW YORK 10022
ATLANTA, GEORGIA 30309-3424 TELEPHONE: (212) 326-3939
TELEPHONE: (404) 881-7000 FACSIMILE: (212) 755-7306
FACSIMILE: (404) 881-7777
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: as soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, 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(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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH MAXIMUM MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE(1) REGISTRATION FEE(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock, $0.01 par value per share
(including rights to purchase shares
of Junior Participating Preferred
Stock or Common Stock)............... 7,500,000 shares N/A $3,333.33 $0
- ---------------------------------------------------------------------------------------------------------------------
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</TABLE>
(1) Estimated solely for purpose of determining the registration fee pursuant to
Rule 457(f)(2). This Registration Statement relates to the maximum number of
shares of the registrant issuable, or to be reserved for issuance, to
holders of common stock in connection with the proposed merger. There is no
market for securities to be received by the registrant in the transaction,
and the issuer of the securities to be received by the registrant has an
accumulated capital deficit. The aggregate par value of all of the
securities to be received by the registrant in the transaction is
$10,000.00.
---------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[HEADHUNTER.NET LOGO]
June , 2000
Dear HeadHunter.NET shareholder:
You are cordially invited to attend the annual meeting of shareholders of
HeadHunter.NET, Inc., which will be held at our offices at 333 Research Court,
Suite 200, Norcross, Georgia, on July 27, 2000 at 9 a.m. local time.
I hope you are planning to attend the meeting so that you can become
acquainted with the members of our Board of Directors and our management team.
The items of business that will be considered and voted upon this year are
explained in the accompanying proxy statement/prospectus.
One of the items that you will be asked to approve at the annual meeting is
the issuance of 7.5 million shares of HeadHunter.NET common stock to the
stockholders of Career Mosaic Inc. in the pending merger of CareerMosaic into a
wholly owned subsidiary of HeadHunter.NET, Inc.
Approval of the issuance of shares of HeadHunter.NET common stock in the
merger requires the affirmative vote of a majority of the votes cast at the
annual meeting, provided that a quorum is present. Only shareholders who hold
shares of HeadHunter.NET common stock at the close of business on June 8, 2000
will be entitled to vote at the annual meeting or any postponement or
adjournment of the annual meeting.
We are excited about the opportunities we envision for the combined
company.
The proxy statement/prospectus provides detailed information about
HeadHunter.NET, CareerMosaic, the merger and the other items to be voted upon by
the HeadHunter.NET shareholders. Please give all of this information your
careful attention.
Your vote is very important regardless of the number of shares you own. To
vote your shares, you may use the enclosed proxy card or attend the annual
shareholders meeting in person.
Sincerely,
/s/ ROBERT M. MONTGOMERY, JR.
--------------------------------------
Robert M. Montgomery, Jr.
Chief Executive Officer and President
<PAGE> 3
HEADHUNTER.NET, INC.
333 RESEARCH COURT, SUITE 200
NORCROSS, GEORGIA 30092
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 27, 2000
---------------------
To the shareholders of HeadHunter.NET:
Notice is hereby given that the annual meeting of the shareholders of
HeadHunter.NET will be held at 9 a.m. local time, on July 27, 2000, at our
offices at 333 Research Court, Suite 200, Norcross, Georgia for the following
purposes:
1. To approve the issuance of 7.5 million shares of HeadHunter.NET
common stock in the merger of CareerMosaic into a wholly owned subsidiary
of HeadHunter.NET;
2. To elect three directors in Class II to serve until the 2003 annual
meeting of shareholders, two of whom will be replaced by two of the three
designees of Bernard Hodes Group if the merger with CareerMosaic occurs;
3. To approve the HeadHunter.NET, Inc. 2000 Qualified Employee Stock
Purchase Plan;
4. To ratify the selection of Arthur Andersen LLP as HeadHunter.NET's
independent auditors to serve for the fiscal year ending December 31, 2000;
and
5. To transact such other business as may properly come before the
meeting or any adjournments of the meeting.
Each of the foregoing items of business is more fully described in the
proxy statement/prospectus, which we urge you to read carefully.
Only shareholders of record at the close of business on June 8, 2000 are
entitled to notice of and to vote at the annual meeting and any adjournment or
postponement of the annual meeting.
YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. TO
ENSURE THAT YOU ARE REPRESENTED AT THE ANNUAL MEETING, YOU SHOULD COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE POSTAGE-PAID
ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN
PERSON. ANY EXECUTED BUT UNMARKED PROXY CARDS WILL BE VOTED FOR APPROVAL OF
PROPOSALS 1-4 ABOVE. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN VOTED AT
THE ANNUAL MEETING. IF YOU ATTEND THE ANNUAL MEETING YOU MAY VOTE IN PERSON EVEN
IF YOU HAVE RETURNED A PROXY.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ MARK W. PARTIN
--------------------------------------
Mark W. Partin
Chief Financial Officer and Assistant
Secretary
<PAGE> 4
[LOGO]
PROXY STATEMENT/PROSPECTUS
HEADHUNTER.NET, INC.
COMMON STOCK
This proxy statement/prospectus is the prospectus of HeadHunter.NET, Inc.
with respect to:
(1) the issuance by HeadHunter.NET of 7.5 million shares of
HeadHunter.NET common stock to holders of common stock of CareerMosaic in
connection with the merger of CareerMosaic into a wholly owned subsidiary
of HeadHunter.NET; and
(2) the resale by Bernard Hodes Group of up to shares of
HeadHunter.NET common stock that Bernard Hodes Group is receiving in the
merger.
This proxy statement/prospectus is the proxy statement of HeadHunter.NET
and is being furnished to HeadHunter.NET shareholders in connection with the
solicitation of proxies by the HeadHunter.NET board of directors for use at the
annual meeting of HeadHunter.NET shareholders to be held on July 27, 2000 at 9
a.m., local time, at our offices at 333 Research Court, Suite 200, Norcross,
Georgia.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
HeadHunter.NET's common stock is listed on the Nasdaq National Market under
the symbol "HHNT."
AN INVESTMENT IN HEADHUNTER.NET COMMON STOCK INVOLVES MATERIAL RISKS. SEE
"RISK FACTORS" BEGINNING ON PAGE 14.
---------------------
The date of this proxy statement/prospectus is June , 2000.
The proxy statement/prospectus was first mailed to HeadHunter.NET shareholders
on or about June , 2000.
<PAGE> 5
SOURCES OF ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about HeadHunter.NET that is not included or delivered
with this document. This information is available without charge to
HeadHunter.NET shareholders and CareerMosaic stockholders upon written or oral
request. Contact HeadHunter.NET at 333 Research Court, Suite 200, Norcross,
Georgia 30092, Attention: Mark W. Partin, Chief Financial Officer.
HeadHunter.NET's telephone number is (770) 349-2400. TO OBTAIN TIMELY DELIVERY
OF REQUESTED DOCUMENTS PRIOR TO THE ANNUAL MEETING OF HEADHUNTER.NET
SHAREHOLDERS, YOU MUST REQUEST THEM NO LATER THAN JULY 20, 2000, WHICH IS FIVE
BUSINESS DAYS PRIOR TO THE DATE OF THE ANNUAL MEETING.
Also see "Where You Can Find More Information" on pages 119 and 120 of this
proxy statement/ prospectus.
<PAGE> 6
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER AND OTHER MATTERS TO
BE VOTED ON............................................... 1
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS................... 5
The Companies............................................. 5
The Merger................................................ 5
Election of Directors..................................... 8
Approval of HeadHunter.NET 2000 Qualified Employee Stock
Purchase Plan.......................................... 8
Ratification of Independent Auditors...................... 8
Vote Required............................................. 9
HeadHunter.NET Recommendation to Shareholders............. 9
Summary Historical and Summary Unaudited Pro Forma
Condensed Combined Financial Data...................... 10
Comparative Historical and Unaudited Pro Forma Per Share
Data................................................... 13
RISK FACTORS................................................ 14
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS.. 23
THE HEADHUNTER.NET ANNUAL MEETING........................... 24
THE MERGER.................................................. 27
Background of the Merger.................................. 27
HeadHunter.NET Reasons for the Merger..................... 28
CareerMosaic Reasons for the Merger....................... 30
Opinion of Financial Advisor to HeadHunter.NET............ 30
Interests of Executive Officers and Directors of
HeadHunter.NET in the Merger........................... 40
Treatment of CareerMosaic Common Stock in the Merger...... 41
Accounting Treatment of the Merger........................ 41
Regulatory Approvals...................................... 41
Material United States Federal Income Tax Consequences.... 41
Nasdaq National Market.................................... 43
Resales of HeadHunter.NET Common Stock Issued in
Connection with the Merger............................. 43
No Appraisal Rights....................................... 43
THE MERGER AGREEMENT........................................ 44
General................................................... 44
The Exchange Ratio and Treatment of CareerMosaic Common
Stock.................................................. 44
No Fractional Shares...................................... 44
Effective Time of the Merger.............................. 44
Exchange of Certificates.................................. 45
Other Agreements.......................................... 45
Representations and Warranties............................ 46
Covenants................................................. 47
Employee Matters.......................................... 48
Director and Officer Indemnification and Insurance........ 48
Indemnification........................................... 48
Conditions to Completion of the Merger.................... 49
Termination............................................... 50
Expenses.................................................. 50
Waiver and Amendment...................................... 51
</TABLE>
i
<PAGE> 7
<TABLE>
<S> <C>
OTHER AGREEMENTS............................................ 52
Shareholder Protection Rights Agreement................... 52
Support Agreement......................................... 54
Registration Rights Agreement............................. 54
Shareholders' Agreement................................... 55
Credit Agreement.......................................... 55
Non-Competition Agreement................................. 56
Administrative Services Agreement......................... 56
Agency Agreement.......................................... 56
Indemnification Agreement................................. 57
Director and Officer Indemnity Agreements................. 57
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......... 58
COMPARATIVE PER SHARE DATA.................................. 62
COMPARISON OF RIGHTS OF HOLDERS OF HEADHUNTER.NET COMMON
STOCK AND CAREERMOSAIC COMMON STOCK....................... 64
INFORMATION REGARDING HEADHUNTER.NET........................ 71
HeadHunter.NET Business................................... 71
HeadHunter.NET Selected Consolidated Financial Data....... 79
HeadHunter.NET Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 81
HeadHunter.NET Management................................. 88
HeadHunter.NET Related Party Transactions................. 97
HeadHunter.NET Principal Shareholders..................... 99
INFORMATION REGARDING CAREERMOSAIC.......................... 101
CareerMosaic Business..................................... 101
CareerMosaic Selected Consolidated Financial Data......... 104
CareerMosaic Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 105
CareerMosaic Principal Stockholders....................... 108
DESCRIPTION OF HEADHUNTER.NET CAPITAL STOCK................. 109
SELLING STOCKHOLDER......................................... 112
PLAN OF DISTRIBUTION........................................ 113
ELECTION OF DIRECTORS....................................... 114
APPROVAL OF THE 2000 QUALIFIED EMPLOYEE STOCK PURCHASE
PLAN...................................................... 115
RATIFICATION OF SELECTION OF AUDITORS....................... 118
SHAREHOLDER PROPOSALS....................................... 119
LEGAL MATTERS............................................... 119
EXPERTS..................................................... 119
WHERE YOU CAN FIND MORE INFORMATION......................... 119
ANNEXES
Annex A -- Merger Agreement................................. A-1
Annex B -- Opinion of First Union Securities, Inc........... B-1
Annex C -- Shareholders' Agreement.......................... C-1
Annex D -- HeadHunter.NET, Inc. 2000 Employee Stock Purchase
Plan...................................................... D-1
</TABLE>
ii
<PAGE> 8
QUESTIONS AND ANSWERS ABOUT THE MERGER
AND OTHER MATTERS TO BE VOTED ON
Q: WHY ARE WE PROPOSING THE MERGER?
A: We are proposing to merge because we believe the proposed merger will
result in several potential benefits, including the following:
- the combination of our and CareerMosaic's brand recognition will enable
HeadHunter.NET to move decisively toward our key strategic goal of
increasing the number of job seekers using our online recruiting
service, which in turn may increase the number of employers and
recruiters willing to use our service;
- the merger will give us greater scale which will better position us to
establish strategic relationships with other Internet based companies;
and
- the merger will provide us with a strategic relationship with Omnicom
Group, which owns some of the leading companies in the disciplines of
advertising, public relations, marketing services, specialty
communications, interactive media and media buying services.
Q: WHY ARE BERNARD HODES GROUP AND OMNICOM GROUP PROPOSING THE MERGER?
A: Bernard Hodes Group and Omnicom Group are proposing to merge for several
reasons, including their belief that:
- combining CareerMosaic with a company whose business is solely on-line
recruiting will provide for a sharper strategic focus, which in turn
could improve the future prospects of the business;
- the combined company would have greater scale than CareerMosaic; and
- the combined company would have the opportunity to realize revenues and
cost savings synergies.
Q: HOW WILL THESE TWO COMPANIES MERGE?
A: CareerMosaic will merge with a wholly owned subsidiary of HeadHunter.NET.
Following the merger, CareerMosaic will be a wholly owned subsidiary of
HeadHunter.NET.
Q: WHAT WILL CAREERMOSAIC STOCKHOLDERS RECEIVE IN THE MERGER?
A: If the merger is completed, CareerMosaic stockholders will receive 750
shares of HeadHunter.NET common stock for each share of CareerMosaic
common stock that he/she owns, for a total of 7.5 million shares of
HeadHunter.NET common stock to be issued in the merger, which will
represent 40.7% of the outstanding shares of HeadHunter.NET common stock
immediately following the merger.
Q: WILL HEADHUNTER.NET SHAREHOLDERS RECEIVE ANY SHARES AS A RESULT OF THE
MERGER?
A: No. HeadHunter.NET shareholders will continue to hold the HeadHunter.NET
shares they own at the time of the merger.
Q: WHEN DO HEADHUNTER.NET AND CAREERMOSAIC EXPECT TO COMPLETE THE MERGER?
A: HeadHunter.NET and CareerMosaic are working to complete the merger as
quickly as possible. HeadHunter.NET and CareerMosaic expect to complete
the merger early in the third quarter of 2000. However, we cannot predict
the exact timing because the merger is subject to governmental and other
regulatory approvals.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER?
A: The parties believe the merger qualifies as a tax-free reorganization for
federal income tax purposes. If the merger qualifies as a tax-free
reorganization, then no gain or loss attributable to the exchange of
shares of CareerMosaic common stock for HeadHunter.NET common stock will
be recognized by CareerMosaic stockholders to the extent they receive
shares of HeadHunter.NET common stock in
1
<PAGE> 9
the merger. However, CareerMosaic stockholders will recognize taxable gain
to the extent they receive cash in the merger in lieu of fractional
shares. There are no direct tax consequences to HeadHunter.NET
shareholders in the merger. CareerMosaic stockholders should consult their
tax advisors for a full understanding of the tax consequences of the
merger.
Q: WHAT SHAREHOLDER VOTE IS REQUIRED TO APPROVE THE ISSUANCE OF THE SHARES OF
HEADHUNTER.NET COMMON STOCK IN THE MERGER?
A: The affirmative vote of a majority of the votes cast at the HeadHunter.NET
annual meeting, provided that a quorum is present, is required to approve
the issuance of the shares of HeadHunter.NET common stock in the merger.
The holders of record of % of the HeadHunter.NET common stock issued and
outstanding on the record date have agreed to vote all of the shares they
beneficially own in favor of the issuance of HeadHunter.NET common stock
in the merger.
Q: DOES THE HEADHUNTER.NET BOARD OF DIRECTORS RECOMMEND APPROVAL OF THE
ISSUANCE OF THE SHARES OF HEADHUNTER.NET COMMON STOCK IN THE MERGER?
A: Yes. After careful consideration, the HeadHunter.NET board of directors
unanimously recommends that its shareholders vote in favor of the issuance
of the shares of HeadHunter.NET common stock in the merger. For a more
complete description of the recommendation of the HeadHunter.NET board of
directors, see the section entitled "The Merger -- HeadHunter.NET Reasons
for the Merger" on pages 28 through 30.
Q: WHAT OTHER MATTERS WILL BE VOTED ON AT THE ANNUAL MEETING?
A: In addition to the issuance of shares in the merger, HeadHunter.NET
shareholders will be asked to elect three directors, approve the
HeadHunter.NET, Inc. 2000 Qualified Employee Stock Purchase Plan and
ratify the selection of Arthur Andersen LLP as HeadHunter.NET's
independent auditors for 2000.
If the merger is approved, Bernard Hodes Group will have the right to
designate three directors to HeadHunter.NET's board of directors. Bernard
Hodes Group has told us that it presently expects to designate the
directors prior to the effective time of the merger or shortly thereafter.
Q: WHAT DO I NEED TO DO NOW?
A: HeadHunter.NET urges you to read carefully this proxy
statement/prospectus, including its annexes, and to consider how the
merger will affect you as a shareholder of HeadHunter.NET. You also may
want to review the documents referenced under "Where You Can Find More
Information" on pages 119 and 120.
Q: HOW DO HEADHUNTER.NET SHAREHOLDERS VOTE?
A: As a HeadHunter.NET shareholder, you may indicate how you want to vote on
your proxy card and then sign and mail your proxy card in the enclosed
return envelope as soon as possible so that your shares will be
represented at the HeadHunter.NET annual meeting. HeadHunter.NET
shareholders may also attend the annual meeting and vote in person instead
of submitting a proxy. If you fail either to return a proxy card or to
vote in person at the annual meeting, or mark a proxy "abstain," there
will be no effect on the approval of the issuance of the shares of
HeadHunter.NET common stock in the merger. If you sign and send in your
proxy without indicating how you want to vote, the proxy will be counted
as a vote for the issuance of the shares of HeadHunter.NET common stock in
the merger unless your shares are held in a brokerage account.
Q: IF SHARES OF HEADHUNTER.NET COMMON STOCK ARE HELD IN A BROKERAGE ACCOUNT,
WILL THE BROKER VOTE SUCH SHARES FOR THE HEADHUNTER.NET SHAREHOLDER?
A: A broker will not be able to vote a HeadHunter.NET shareholder's shares
without instructions from that shareholder on how to vote. Therefore, it
is important that HeadHunter.NET shareholders follow the directions
provided by their brokers regarding how to instruct such brokers to vote
their shares. If
2
<PAGE> 10
a HeadHunter.NET shareholder fails to provide his/her broker with
instructions, there will be no effect on the approval of the issuance of
shares of HeadHunter.NET common stock in the merger.
Q: CAN I CHANGE MY VOTE AFTER I MAIL IN A SIGNED PROXY CARD?
A: You may change your vote at any time before the vote takes place at the
HeadHunter.NET annual meeting. To do so, you may either complete and
submit a later dated proxy card or send a written notice stating that you
would like to revoke your proxy. In addition, you may attend the annual
meeting and vote in person. However, if you elect to vote in person at the
annual meeting and your shares are held by a broker, bank or other
nominee, you must bring to the annual meeting a letter from the broker,
bank or other nominee confirming your beneficial ownership of the shares.
Q: WHEN AND WHERE IS THE HEADHUNTER.NET ANNUAL MEETING OF SHAREHOLDERS?
A: The annual meeting of HeadHunter.NET shareholders will be held at 9 a.m.,
local time, on July 27, 2000 at our offices at 333 Research Court, Suite
200, Norcross, Georgia.
Q: AM I ENTITLED TO APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER?
A: No. Neither HeadHunter.NET shareholders nor CareerMosaic stockholders will
have appraisal rights.
Q: ARE THERE ANY RISKS ASSOCIATED WITH THE MERGER?
A: The merger does involve risks, including that:
- sales of substantial amounts of our common stock in the public market
after the proposed merger could materially adversely affect the market
price of our common stock; and
- we may face challenges in integrating with CareerMosaic and, as a
result, may not realize the expected benefits of the merger.
For a more complete discussion of risk factors that should be considered
in evaluating the merger, see "Risk Factors" beginning on page 14.
Q: WHO MAY I CONTACT WITH ANY ADDITIONAL QUESTIONS?
A: You may call Mark W. Partin, HeadHunter.NET's Chief Financial Officer and
Assistant Secretary, at (770) 349-2400.
3
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4
<PAGE> 12
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger and to more fully understand the
other proposals on which HeadHunter.NET shareholders are being asked to vote,
you should read carefully this entire proxy statement/prospectus, including its
annexes and the documents to which we have referred you. See "Where You Can Find
More Information" on page 119.
THE COMPANIES
HeadHunter.NET, Inc.
333 Research Court, Suite 200
Norcross, Georgia 30092
(770) 349-2400
HeadHunter.NET is a leading provider of online recruiting services to
employers, recruiters and job seekers via its web site at www.headhunter.net.
HeadHunter.NET's services enable employers and recruiters to advertise job
opportunities and review resumes and enable job seekers to identify, research,
evaluate and apply to a broad range of job opportunities online. These services
focus on reducing the time, cost and effort of the recruiting and job searching
processes as compared to traditional methods such as classified newspaper
advertisements.
Career Mosaic Inc.
c/o Bernard Hodes Group Inc.
555 Madison Avenue
New York, New York 10022
(212) 758-2600
CareerMosaic was one of the first online recruiting services, providing
services to job candidates and companies via its web site at
www.careermosaic.com. Through its customer base of over twenty Fortune 100
companies, CareerMosaic offers job seekers comprehensive resources for locating
jobs online and provides its customers a cost-effective way to reach a large
number of job candidates.
THE MERGER
Through the merger, CareerMosaic will merge into a wholly owned subsidiary
of HeadHunter.NET. CareerMosaic stockholders will receive HeadHunter.NET common
stock in exchange for their shares of CareerMosaic common stock. The merger
agreement is attached to this proxy statement/prospectus as Annex A. We
encourage you to read the merger agreement as it is the legal document that
governs the merger.
What CareerMosaic Stockholders Will Receive (page 44)
Each share of CareerMosaic common stock will be exchanged for 750 shares of
HeadHunter.NET common stock, for a total of 7.5 million shares issued in the
merger, which would represent, assuming no change in the number of outstanding
shares of HeadHunter.NET common stock between the date of this proxy
statement/prospectus and the merger, 40.7% of the outstanding shares of
HeadHunter.NET common stock immediately following the merger. HeadHunter.NET
will not issue fractional shares of its common stock in connection with the
merger. Instead, HeadHunter.NET will pay cash for any fractional shares.
5
<PAGE> 13
Conditions to the Merger (pages 49 and 50)
The completion of the merger depends upon meeting a number of conditions,
including:
- our shareholders' approval of the issuance of shares in the merger;
- the expiration or termination of all applicable waiting periods, and any
extensions of these periods, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976;
- HeadHunter.NET and CareerMosaic having net revenues for the quarter ended
June 30, 2000 of at least $7,050,000 and $4,700,000, respectively;
- the approval of shares of HeadHunter.NET common stock issuable to
CareerMosaic stockholders for listing on the Nasdaq National Market; and
- other customary contractual conditions specified in the merger agreement.
Some of the conditions to the merger may be waived.
Regulatory Approvals (page 41)
Pursuant to the Hart-Scott-Rodino Act, HeadHunter.NET and CareerMosaic each
filed a pre-merger notification and report form with the Federal Trade
Commission and Antitrust Division of the Department of Justice on May 16, 2000.
No Solicitation by HeadHunter.NET (pages 47 and 48)
Subject to the HeadHunter.NET board of directors' fiduciary obligations
under applicable law, the HeadHunter.NET board of directors has agreed that it
will not authorize or cause HeadHunter.NET to enter into any letter of intent or
agreement related to any takeover proposal, unless such agreement would not
prevent completion of the merger and the holders of CareerMosaic common stock
would be treated in the same manner as all HeadHunter.NET shareholders.
Termination of the Merger Agreement (page 50)
HeadHunter.NET and Bernard Hodes Group can mutually agree to terminate the
merger agreement without completing the merger, and any party not then in
material breach of any representation, warranty or covenant in the merger
agreement can terminate the merger agreement upon the occurrence of a number of
events, including if:
- another party materially breaches any representation, warranty or
covenant in the merger agreement and fails to cure the breach within 30
days of receiving notice of the breach;
- any consent of any regulatory authority required to complete the merger
pursuant to the merger agreement or other transactions contemplated by
the merger agreement has been denied by final nonappealable action, or if
any action taken by such authority is not appealed within the time limit
for appeal;
- the merger is not completed by September 16, 2000; or
- HeadHunter.NET shareholders do not approve the issuance of the shares of
HeadHunter.NET common stock in the merger at the annual meeting of
HeadHunter.NET shareholders.
Furthermore, Bernard Hodes Group may terminate the merger agreement if
HeadHunter.NET's board of directors:
- authorizes or causes HeadHunter.NET to enter into a letter of intent or
agreement which would prevent completion of the merger or in which
CareerMosaic stockholders would be treated in a manner different from
HeadHunter.NET shareholders; or
6
<PAGE> 14
- fails to reaffirm its approval of the merger to the exclusion of a
takeover proposal which would prevent consummation of the merger or
resolves not to reaffirm the merger.
Opinion of Financial Advisor (pages 30 through 40)
In deciding to approve the merger agreement and the merger, the
HeadHunter.NET board of directors received an opinion from its financial
advisor, First Union Securities, Inc., to the effect that, as of April 15, 2000,
the terms of the merger were fair, from a financial point of view, to the
holders of HeadHunter.NET common stock. The full text of the opinion is attached
as Annex B to this proxy statement/prospectus and should be read carefully in
its entirety.
Interests of Executive Officers and Directors of HeadHunter.NET in the Merger
(pages 40 and 41)
In considering the recommendation of the HeadHunter.NET board of directors,
you should be aware of the interests that HeadHunter.NET executive officers and
directors have in the merger. All outstanding options granted prior to April 15,
2000, including those held by HeadHunter.NET's executive officers and directors,
will fully vest upon the effective time of the merger, except for options held
by Robert M. Montgomery, Jr., HeadHunter.NET's Chairman and Chief Executive
Officer.
Accounting Treatment (page 41)
HeadHunter.NET will account for the merger using the purchase method of
accounting, which means that the assets and liabilities of CareerMosaic,
including intangible assets, will be recorded at their fair value and the
results of operations of CareerMosaic will be included in HeadHunter.NET's
results from the date of acquisition.
Material United States Federal Income Tax Considerations (pages 41 through 43)
Neither HeadHunter.NET nor CareerMosaic has requested a ruling from the
Internal Revenue Service or an opinion from counsel regarding the tax
consequences of the merger. The parties believe the merger qualifies as a
tax-free reorganization under the Internal Revenue Code. If the merger qualifies
as a tax-free reorganization, no gain or loss generally will be recognized by
CareerMosaic stockholders for federal income tax purposes with respect to the
exchange of shares of CareerMosaic common stock solely for shares of
HeadHunter.NET common stock. However, CareerMosaic stockholders will recognize
gain or loss to the extent they receive cash in the merger in lieu of fractional
shares. There are no direct tax consequences to HeadHunter.NET shareholders.
Tax matters are very complicated, and the tax consequences of the merger to
you will depend on the facts of your own situation. You should consult your tax
advisor for a full understanding of the tax consequences of the merger to you.
Indemnification (pages 48 and 49)
Omnicom Group and Bernard Hodes Group, on the one hand, and HeadHunter.NET,
on the other hand, have agreed to indemnify the other for certain losses arising
from such party's breach of the merger agreement, subject to limitations set
forth in the merger agreement. Omnicom Group and Bernard Hodes Group have also
agreed to indemnify HeadHunter.NET for any tax liabilities relating to the
formation of CareerMosaic and as a result of CareerMosaic being a member of
Omnicom Group's consolidated tax group. Subject to exceptions specified in the
merger agreement, losses arising from a breach of a party's representations and
warranties must be asserted prior to April 1, 2001 and not until the aggregate
amount of such party's losses exceeds $1,000,000.
No Appraisal Rights (pages 43)
Neither HeadHunter.NET shareholders nor CareerMosaic stockholders will have
appraisal rights under applicable law.
7
<PAGE> 15
How the Rights of CareerMosaic Stockholders Will Differ as HeadHunter.NET
Shareholders (pages 64 through 70)
The rights of shareholders of HeadHunter.NET after the merger will be
governed by Georgia law and HeadHunter.NET's articles of incorporation and
bylaws. Those rights differ from rights of CareerMosaic stockholders under
Delaware law and CareerMosaic's certificate of incorporation and bylaws. See
"Comparison of Rights of Holders of HeadHunter.NET Common Stock and CareerMosaic
Common Stock."
Resale of HeadHunter.NET Common Stock (page 43 and 113)
Bernard Hodes Group may use this proxy statement/prospectus to offer and
resell up to approximately shares of the HeadHunter.NET common stock
issued in the merger to Bernard Hodes Group. Bernard Hodes Group presently
intends to reduce its stock ownership in HeadHunter.NET following the merger
consistent with its intent not to exert influence over the management or
policies of HeadHunter.NET. Under the terms of the merger agreement, Bernard
Hodes Group will have the right to sell under this proxy statement/prospectus
that number of shares of HeadHunter.NET it owns that would reduce its share
ownership to less than 20% of the outstanding shares of HeadHunter.NET.
Comparative Market Price Information (pages 62 and 63)
Shares of HeadHunter.NET common stock are quoted on the Nasdaq National
Market. On April 14, 2000, the last full trading day prior to the public
announcement of the merger, the last reported sale price of HeadHunter.NET
common stock was $14.50 per share. On May 18, 2000, the last reported sale price
of HeadHunter.NET common stock was $11.69 per share.
Shares of CareerMosaic common stock are not listed or traded on an exchange
or quotation system. Therefore, no meaningful basis exists to determine the
market price of CareerMosaic common stock.
ELECTION OF DIRECTORS (PAGE 114)
The terms of the three Class II directors of the HeadHunter.NET board of
directors expire at this year's HeadHunter.NET annual meeting. The
HeadHunter.NET board has nominated Donald W. Weber, J. Douglas Cox and Kimberley
E. Thompson for re-election as the three Class II directors. If the merger is
approved, Michael G. Misikoff, J. Douglas Cox and Donald W. Weber will resign
and Bernard Hodes Group will have the right to designate three directors to
HeadHunter.NET's board of directors. Bernard Hodes Group has told us that it
presently expects to designate the directors prior to the effective time of the
merger or shortly thereafter.
APPROVAL OF HEADHUNTER.NET 2000 QUALIFIED EMPLOYEE STOCK PURCHASE PLAN (PAGES
115 THROUGH 117)
On December 23, 1999, the HeadHunter.NET board of directors adopted the
HeadHunter.NET, Inc. 2000 Qualified Employee Stock Purchase Plan, which became
effective on January 3, 2000. Under this plan, eligible employees may deduct
from one to ten percent of their respective base salaries each pay period to
purchase shares of HeadHunter.NET common stock. Up to 50,000 shares of
HeadHunter.NET common stock may be issued under the plan. If the HeadHunter.NET
shareholders do not approve the plan, the plan will be terminated.
RATIFICATION OF INDEPENDENT AUDITORS (PAGE 118)
HeadHunter.NET's board of directors has selected Arthur Andersen LLP to
serve as HeadHunter.NET's independent auditors for the fiscal year ending
December 31, 2000. If the HeadHunter.NET shareholders do not ratify the
selection of Arthur Andersen LLP as HeadHunter.NET's independent auditors, the
HeadHunter.NET board of directors will reconsider its selection of independent
auditors for the fiscal year ending December 31, 2000.
8
<PAGE> 16
VOTE REQUIRED (PAGE 25 AND 26)
Approval of the issuance of the shares of HeadHunter.NET common stock in
the merger requires the affirmative vote of a majority of the votes cast at the
annual meeting, provided that a quorum is present. As of June 8, 2000, the
record date for the annual meeting, shares of HeadHunter.NET common stock
were outstanding. Only shareholders of record of HeadHunter.NET common stock at
the close of business on the record date for the annual meeting are entitled to
notice of and to vote at the annual meeting. As of the record date,
HeadHunter.NET executive officers, directors and their affiliates hold of record
approximately % of the outstanding HeadHunter.NET common stock.
As of the record date, ITC Holding Company, Inc., a substantial shareholder
of HeadHunter.NET, and Robert M. Montgomery, Jr., the President and Chief
Executive Officer of HeadHunter.NET, collectively own of record approximately
% of the outstanding shares of HeadHunter.NET common stock. These two
HeadHunter.NET shareholders have agreed to vote in favor of the issuance of the
shares of HeadHunter.NET common stock in the merger. Accordingly, holders of
only an additional % of the outstanding shares are required for shareholder
approval of the issuance of shares in the merger.
Election of the three Class II directors requires the affirmative vote of a
plurality of the votes cast at the annual meeting, provided a quorum is present.
Approval of the HeadHunter.NET 2000 Qualified Employee Stock Purchase Plan
requires the affirmative vote of a majority of the votes cast on such proposal,
provided a quorum is present. Ratification of the selection of auditors requires
that the votes cast in favor of ratification exceed the votes cast against such
ratification.
HEADHUNTER.NET RECOMMENDATION TO SHAREHOLDERS (PAGES 26 AND 28 THROUGH 30)
After careful consideration, the HeadHunter.NET board of directors has
determined that the terms and conditions of the merger are fair to
HeadHunter.NET's shareholders and in their best interests, and unanimously
recommends that HeadHunter.NET shareholders approve the issuance of 7.5 million
shares of HeadHunter.NET common stock in the merger. The HeadHunter.NET board of
directors also recommends that HeadHunter.NET shareholders vote in favor of the
proposals to elect three Class II directors, to approve the HeadHunter.NET, Inc.
2000 Qualified Employee Stock Purchase Plan and to ratify the selection of
Arthur Andersen LLP as independent auditors for the fiscal year ending December
31, 2000.
9
<PAGE> 17
SUMMARY HISTORICAL AND SUMMARY UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL DATA
SUMMARY FINANCIAL DATA OF HEADHUNTER.NET (HISTORICAL)
The following table sets forth our selected financial data as of and for
our inception period (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, the years ended December 31, 1998 and 1999, which have been
derived from the audited financial statements of the predecessor and our audited
financial statements and related notes included in another part of this proxy
statement/prospectus. The selected financial data as of and for the three months
ended March 31, 1999 and March 31, 2000 have been derived from our unaudited
financial statements and, in the opinion of our management, include all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation in all material respects of such information. Operating results for
the three months ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the entire year. The selected financial data
set forth below should be read in conjunction with "The Merger," "HeadHunter.NET
Management's Discussion and Analysis of Financial Condition and Results of
Operations," our financial statements and related notes and the other financial
data included elsewhere in this proxy statement/prospectus. Historical results
are not necessarily indicative of results to be expected in the future. See Note
2 of Notes to Financial Statements for an explanation of the determination of
the shares used in computing basic and diluted income (loss) per common share.
The weighted average shares outstanding data gives effect to the conversion of
our Class A preferred stock into our common stock at August 19, 1999, the date
of our initial public offering. Loss per share for the twelve months ended
December 31, 1999 and the three months ended March 31, 1999 include a one-time
non-cash charge to accumulated deficit of approximately $21.7 million for the
difference between the fair value and the conversion price of the loan and
security agreement related to conversion of this instrument from debt to equity
in January 1999. This was accounted for as a distribution to ITC Holding
Company, Inc., a Class A preferred shareholder, and, therefore, an increase in
net loss attributable to common shareholders. See Notes 2 and 3 to our financial
statements for further discussion.
<TABLE>
<CAPTION>
PREDECESSOR HEADHUNTER.NET
----------------------------------------- ------------------------------------------
FROM
INCEPTION TEN
(OCTOBER 10, MONTHS TWO MONTHS
1995) TO YEAR ENDED ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1997 1998 1999
------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................... $50,754 $190,146 $124,437 $ 29,591 $ 1,099,868 $ 9,253,954
Costs and expenses:
Costs of revenues............ -- -- 29,390 2,906 86,963 147,275
Marketing and selling........ -- 2,740 23,301 41,123 2,719,330 9,898,815
General and administrative... 5,073 52,105 95,967 126,268 1,714,756 3,786,728
Stock compensation expense... -- -- -- -- 205,574 5,528,114
Depreciation and
amortization............... 516 6,842 10,099 41,912 276,706 528,256
------- -------- -------- ---------- ----------- ------------
Total costs and
expenses.............. 5,589 61,687 158,757 212,209 5,003,329 19,889,188
------- -------- -------- ---------- ----------- ------------
Operating income (loss)...... 45,165 128,459 (34,320) (182,618) (3,903,461) (10,635,234)
------- -------- -------- ---------- ----------- ------------
Net income (loss)...... $45,165 $128,623 $(35,163) $ (176,392) $(4,345,868) $(10,256,036)
======= ======== ======== ========== =========== ============
LOSS PER SHARE:
Basic and diluted............. $ (0.08) $ (1.98) $ (5.90)
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic and diluted............. 2,200,000 2,200,000 5,412,135
<CAPTION>
HEADHUNTER.NET
--------------------------
THREE MONTHS
ENDED
MARCH 31,
--------------------------
1999 2000
----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................... $ 828,027 $ 6,379,553
Costs and expenses:
Costs of revenues............ 25,433 86,876
Marketing and selling........ 1,232,350 9,250,433
General and administrative... 492,269 1,865,842
Stock compensation expense... 2,861,676 255,062
Depreciation and
amortization............... 88,895 297,137
----------- ------------
Total costs and
expenses.............. 4,700,623 11,755,350
----------- ------------
Operating income (loss)...... (3,872,596) (5,375,797)
----------- ------------
Net income (loss)...... $(3,882,019) $ (5,098,225)
=========== ============
LOSS PER SHARE:
Basic and diluted............. $ (11.63) $ (0.47)
WEIGHTED AVERAGE SHARES
OUTSTANDING:
Basic and diluted............. 2,200,000 10,851,196
</TABLE>
<TABLE>
<CAPTION>
HEADHUNTER.NET
PREDECESSOR -----------------------------------------------------------
AT DECEMBER 31, AT DECEMBER 31, AT MARCH 31, 2000
--------------- --------------------------------------- -----------------
1995 1996 1997 1998 1999 ACTUAL
------- ------- ----------- ----------- ----------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $14,326 $25,973 $ 853,989 $ 254,937 $16,938,708 $13,576,977
Working capital (deficit)................. 31,214 33,706 788,976 (3,446,422) 21,236,203 14,886,411
Total assets.............................. 43,030 58,550 1,922,915 2,225,180 26,979,744 28,948,824
Total debt, including current
maturities............................... -- -- -- 3,500,000 -- --
Total shareholders' equity (deficit)...... 42,865 55,500 1,830,517 (1,967,943) 24,743,924 20,016,843
</TABLE>
10
<PAGE> 18
SUMMARY FINANCIAL DATA OF CAREERMOSAIC (HISTORICAL)
The following table sets forth selected financial data of CareerMosaic as
of and for the years ended December 31, 1998, and 1999, which have been derived
from the audited financial statements of CareerMosaic. The selected financial
data as of and for the year ended December 31, 1997 and for the three months
ended March 31, 1999 and March 31, 2000 have been derived from the unaudited
financial statements of CareerMosaic and, in the opinion of CareerMosaic
management, include all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation in all material respects of such information.
Operating results for the three months ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the entire year. Because
CareerMosaic has historically operated as a division of Bernard Hodes Group, the
historical financial information may not be indicative of what CareerMosaic's
financial position and results of operations would have been had CareerMosaic
operated as a separate, stand-alone entity. Allocation of corporate expenses
does not necessarily reflect the costs that CareerMosaic would be required to
pay third parties for similar services. The selected financial data set forth
below should be read in conjunction with "The Merger," "CareerMosaic
Management's Discussion and Analysis of Financial Condition and Results of
Operations," CareerMosaic's financial statements and related notes and the other
financial data included elsewhere in this proxy statement/prospectus.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------- --------------------------
1997 1998 1999 1999 2000
----------- ----------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ $4,191,811 $ 8,005,300 $13,636,170 $3,037,902 $ 3,630,922
Operating Expenses:
Marketing and selling......... 1,233,000 3,917,307 6,402,685 1,377,451 4,997,251(1)
General and administrative.... 1,883,900 3,860,667 7,083,566 1,090,917 3,246,177(1)
Depreciation and
amortization............... 49,712 91,314 280,075 25,548 160,059
Allocated Parent Company
expenses................... 624,000 1,330,289 2,049,778 472,140 541,449
---------- ----------- ----------- ---------- -----------
Total operating
expenses............ 3,790,612 9,199,577 15,816,104 2,966,056 8,944,936
---------- ----------- ----------- ---------- -----------
Operating income (loss)......... 401,199 (1,194,277) (2,179,934) 71,846 (5,314,014)
---------- ----------- ----------- ---------- -----------
Net income (loss)..... $ 215,386 $(1,004,927) $(2,211,017) $ 71,846 $(5,355,104)
========== =========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31, 2000
-------------------------------------- -----------------
1997 1998 1999 ACTUAL
----------- ---------- ----------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ -- $ -- $ -- $ --
Working capital (deficit).................. 348,945 (236,736) (2,492,966) (8,017,522)
Total assets............................... 1,336,265 1,737,216 4,160,208 4,146,858
Total debt, including current maturities... -- -- -- --
Total shareholders' equity (deficit)....... 649,305 40,519 (218,692) (5,573,796)
</TABLE>
(1) Increase due to launch of aggressive advertising campaign and increased
investment in personnel and technology. See "CareerMosaic Management's
Discussion and Analysis of Financial Condition and Results of Operations."
11
<PAGE> 19
SUMMARY PRO FORMA FINANCIAL DATA OF HEADHUNTER.NET AND CAREERMOSAIC
The following table sets forth selected pro forma combined financial
information for the year ended December 31, 1999, and the three months ended
March 31, 2000 giving effect to the merger using the purchase method of
accounting assuming issuance of 7.5 million shares and consummation of the
merger as of the beginning of each period. See "The Merger -- Accounting
Treatment of the Merger." The pro forma information is provided for
informational purposes only and is not necessarily indicative of actual results
that would have been achieved had the merger been consummated at the beginning
of the periods presented or of future results. The selected pro forma combined
financial information is derived from the pro forma condensed combined financial
information appearing elsewhere in this proxy statement/prospectus. This
information should be read in conjunction with the historical financial
statements of HeadHunter.NET and CareerMosaic, including the respective notes
thereto, included herein, and the unaudited pro forma financial information,
including notes thereto, appearing elsewhere in this proxy statement/prospectus.
See "Available Information," and "Pro Forma Condensed Combined Financial Data."
No adjustment has been included in the pro forma amounts for any anticipated
cost savings or other synergies. CareerMosaic previously operated as a division
of Bernard Hodes Group, a subsidiary of Omnicom Group. Accordingly,
CareerMosaic's historical financial information may not be indicative of what
its financial position and results of operations would have been had it operated
as a separate stand-alone entity.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1999 2000
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 22,890,124 $ 10,010,475
Costs and expenses:
Costs of revenues......................................... 147,275 86,876
Marketing and selling..................................... 16,301,500 14,247,684
General and administrative................................ 10,870,294 5,112,019
Stock compensation expense................................ 5,043,634 133,942
Depreciation and amortization............................. 19,103,979 5,031,108
Allocated corporate costs................................. 2,049,778 541,449
------------ ------------
Total costs and expenses.......................... 53,516,460 25,153,078
Operating loss.............................................. (30,626,336) (15,142,603)
------------ ------------
Net loss.......................................... (30,278,221) (14,906,121)
============ ============
LOSS PER SHARE:
Basic and diluted........................................... (3.51) (0.81)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted........................................... 14,802,546 18,351,196
BALANCE SHEET DATA:
Cash and cash equivalents................................... 19,938,708 16,576,977
Working capital............................................. 23,775,492 15,964,446
Total assets................................................ 124,326,389 127,573,921
Total debt, including current maturities.................... -- --
Total shareholders' equity.................................. 119,743,924 115,016,843
</TABLE>
12
<PAGE> 20
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA
The following table summarizes certain unaudited historical per share data
of HeadHunter.NET and CareerMosaic and the combined per share data on an
unaudited pro forma basis. Neither HeadHunter.NET nor CareerMosaic declared cash
dividends during the periods set forth in the following table. You should read
the information below along with the selected historical financial information
and the unaudited pro forma combined condensed financial information included
elsewhere in this proxy statement/prospectus. The pro forma combined condensed
financial information is not necessarily indicative of the operating results of
future operations or the actual results that would have occurred at the
beginning of the period presented.
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
DECEMBER 31, 1999 MARCH 31, 2000
----------------- --------------
<S> <C> <C>
HEADHUNTER.NET
Historical HeadHunter.NET:
Loss from continuing operations per share -- basic and
diluted(1)............................................. $ (1.90) $ (0.47)
Book value per share(2)................................... $ 4.57 $ 1.84
Pro Forma Combined:
Loss from continuing operations per share -- basic and
diluted(1)............................................. $ (2.05) $ (0.81)
Book value per share(2)(3)................................ $ 8.09 $ 6.27
CAREERMOSAIC(4)
Historical CareerMosaic(5):
Loss from continuing operations per share -- basic and
diluted................................................ $(22,110.17) $(53,551.04)
Book value per share(2)................................... $ (2,186.92) $(55,737.96)
Equivalent Pro Forma Combined(6):
Loss from continuing operations per share -- basic and
diluted(1)............................................. $ (4.04) $ (1.99)
Book value per share(2)................................... $ 15.97 $ 15.34
</TABLE>
- ---------------
(1) In January 1999, a one-time non-cash charge to accumulated deficit of $21.7
million was recorded in conjunction with the conversion of the loan and
security agreement from debt to equity. This conversion was accounted for as
a distribution to the Class A preferred shareholders and therefore, an
increase in net loss attributable to common shareholders. As such, net loss
attributable to common shareholders for the year ended December 31, 1999
would be as follows:
<TABLE>
<S> <C>
Historical HeadHunter.NET................................... $(5.90)
Pro Forma Combined.......................................... (3.51)
Equivalent Pro Forma Combined............................... (6.93)
</TABLE>
(2) Book value is computed by dividing total shareholders' equity by the number
of shares outstanding.
(3) HeadHunter.NET pro forma combined book value per share is computed by
dividing pro forma shareholders' equity by the pro forma number of shares of
HeadHunter.NET common stock which would have been outstanding had the merger
been completed as of the balance sheet date.
(4) Basic and diluted per share data is calculated based on 100 weighted average
shares of CareerMosaic's common stock as of December 31, 1999 and March 31,
2000.
(5) Because CareerMosaic previously operated as a subsidiary of Bernard Hodes
Group, the historical per share data does not provide a useful basis for
comparison to HeadHunter.NET.
(6) Equivalent pro forma combined amounts per share of CareerMosaic common stock
represent the pro forma combined amounts per share of HeadHunter.NET common
stock assuming the 750:1 exchange ratio.
13
<PAGE> 21
RISK FACTORS
The merger involves a high degree of risk and HeadHunter.NET shareholders
should consider the risk factors relating to the merger when they consider how
to cast their votes at the annual meeting. Any investor in our common stock
should also carefully consider the risk factors relating to our business before
he/she decides whether to invest in shares of our common stock. Our shareholders
and potential investors should also consider the other information in this proxy
statement/prospectus and the additional information in our other reports on file
with the Securities and Exchange Commission and in the other documents
incorporated by reference in this proxy statement/prospectus. See "Where You Can
Find More Information" on pages 119 and 120.
RISKS RELATING TO THE MERGER
WE MAY FACE CHALLENGES IN INTEGRATING WITH CAREERMOSAIC AND, AS A RESULT, MAY
NOT REALIZE THE EXPECTED BENEFITS OF THE ANTICIPATED MERGER.
Our management does not have significant experience in integrating
businesses following an acquisition. As a result of our limited experience, we
may not be successful in integrating ourselves with CareerMosaic. Integrating
the operations and personnel of ourselves with CareerMosaic will be a complex
process. We are uncertain that the integration will be completed rapidly or that
it will achieve the anticipated benefits of the merger.
The successful integration will require, among other things, integration of
HeadHunter.NET's and CareerMosaic's services, network operations, assimilation
of sales and marketing groups, integration of the companies' information and
software systems, and coordination of employee retention, hiring and training.
The diversion of the attention of management and any difficulties encountered in
the process of combining the companies could cause the disruption of, or a loss
of momentum in, the activities of the combined company's business. Further, the
process of combining HeadHunter.NET and CareerMosaic could negatively affect
employee morale and our ability to retain some of our or CareerMosaic's key
employees after the merger.
IF WE DO NOT SUCCESSFULLY INTEGRATE CAREERMOSAIC OR THE MERGER'S BENEFITS DO NOT
MEET THE EXPECTATIONS OF FINANCIAL OR INDUSTRY ANALYSTS, THE MARKET PRICE OF OUR
COMMON STOCK MAY DECLINE.
The market price of our common stock may decline as a result of the merger
if:
- the integration with CareerMosaic is unsuccessful;
- we do not achieve the perceived benefits of the merger as rapidly or to
the extent anticipated by financial or industry analysts; or
- the effect of the merger on our financial results is not consistent with
the expectations of financial or industry analysts.
SALES OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK IN THE PUBLIC MARKET AFTER THE
PROPOSED MERGER COULD MATERIALLY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.
Of the 7.5 million shares of our common stock issued in the merger,
approximately of the shares to be issued to Bernard Hodes Group in the
merger will be registered for resale by Bernard Hodes Group under the
registration statement of which this proxy statement/prospectus is a part and up
to 2,335,000 additional shares may be issued to parties other than Bernard Hodes
Group and, together with Bernard Hodes Group's registered shares, will
be freely tradeable immediately after the merger. Any sales of substantial
amounts of common stock in the public market, or the perception that such sales
might occur, whether as a result of this distribution or otherwise, could harm
the market price of our common stock.
In addition, ITC Holding Company and Bernard Hodes Group, the owners of
approximately 55.6% of our common stock outstanding immediately after the
merger, assuming no change in the number of outstanding shares of HeadHunter.NET
common stock between the date of this proxy statement/prospectus and the
14
<PAGE> 22
merger, will have registration rights which will allow them to participate in
our future public offerings immediately after the merger and to demand
registration of their shares for resale after the first anniversary of the
merger. Warren L. Bare also has registration rights which allow him to
participate in our future public offerings.
Upon closing of the merger, the vesting of options to purchase our common
stock which were outstanding prior to April 15, 2000 will fully accelerate and
become immediately exercisable. All of such shares which are not held by
affiliates will be freely tradeable, except for options held by Robert M.
Montgomery, Jr.
IF THE COSTS ASSOCIATED WITH THE MERGER EXCEED THE BENEFITS REALIZED, WE MAY
EXPERIENCE INCREASED LOSSES.
If the benefits of the merger do not exceed the costs associated with the
merger, our financial results could be adversely affected, including increased
losses.
THE TRANSITIONAL SERVICES BEING PROVIDED BY BERNARD HODES GROUP MAY NOT BE
SUFFICIENT TO MEET OUR NEEDS, AND WE MAY PAY INCREASED COSTS TO REPLACE THOSE
SERVICES AFTER OUR ADMINISTRATIVE SERVICES AGREEMENT WITH BERNARD HODES GROUP
EXPIRES.
Bernard Hodes Group has agreed to provide certain transitional services and
the services of certain key personnel for up to one year after the closing of
the merger. These services may not be provided at the same level as when
CareerMosaic was a part of Bernard Hodes Group. After expiration of these
arrangements, we may not be able to replace the transitional services in a
timely manner or on terms and conditions as favorable as those we received from
Bernard Hodes Group. The prices previously charged for these services were made
in the context of a parent-subsidiary relationship and may be different from the
prices that we may be required to pay third parties for similar services or the
costs of similar services if we undertake them ourselves.
WE MAY LOSE THE BENEFITS RESULTING FROM CAREERMOSAIC'S AFFILIATION WITH BERNARD
HODES GROUP AND OMNICOM GROUP.
Prior to the merger, CareerMosaic derives significant benefit from its
affiliation with Bernard Hodes Group and Omnicom Group, a leader in the
advertising and media buying industry, and their contacts with more than twenty
Fortune 100 clients. Because CareerMosaic will no longer be a subsidiary of
Bernard Hodes Group, Omnicom Group's and Bernard Hodes Group's incentive to sell
services or develop this business may be reduced and CareerMosaic's customers
may be less inclined to use CareerMosaic's services. The change in our
relationship with Bernard Hodes Group and Omnicom Group may therefore hinder
CareerMosaic's ability to establish new relationships and may negatively affect
our relationships with CareerMosaic's current customers and partners.
OUR OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST THAT MAY INFLUENCE THEM TO
SUPPORT THE MERGER.
Upon the closing of the merger, options to purchase shares of our common
stock which were outstanding prior to April 15, 2000 will fully vest and become
immediately exercisable, including options held by executive officers and
directors, except those held by for Robert M. Montgomery, Jr. The acceleration
of the vesting of their options may have influenced our officers and directors
to support the merger when such officers and directors may not have done so
otherwise.
UNCERTAINTIES ASSOCIATED WITH THE MERGER MAY CAUSE US TO LOSE KEY PERSONNEL.
Current and prospective HeadHunter.NET and CareerMosaic employees may
experience uncertainty about their future roles with us. This uncertainty may
adversely affect our ability to retain key management, sales, marketing and
technical personnel, or to attract qualified personnel in the future.
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OUR STOCK PRICE IS VOLATILE AND THE VALUE OF THE HEADHUNTER.NET COMMON STOCK
ISSUED IN THE MERGER WILL DEPEND ON ITS MARKET PRICE AT THE TIME OF THE MERGER.
At the closing of the merger, each share of CareerMosaic common stock will
be exchanged for 750 shares of our common stock. This exchange ratio will not be
adjusted for changes in the market price of our common stock. In addition,
neither we nor any other party to the merger agreement may terminate or
renegotiate the merger agreement solely because of changes in the market price
of our common stock. Consequently, the specific dollar value of our common stock
that CareerMosaic stockholders will receive upon the completion of the merger
will depend on the market value of our common stock at that time and may
increase or decrease from the date of this proxy statement/prospectus. You are
urged to obtain recent market quotations for our common stock. We cannot predict
or give any assurances as to the market price of our common stock at any time
before or after the merger.
The market price of our common stock, like that of the shares of many other
Internet companies, may be volatile. The market price of our common stock may
continue to fluctuate significantly in response to various factors, including:
- variations in quarterly operating results;
- changes in financial estimates by securities analysts;
- announcements of significant contracts, milestones, acquisitions,
strategic relationships or capital commitments;
- additions or departures of key personnel;
- significant sales of our common stock; and
- fluctuations in stock market price and volume, which are particularly
common among securities of Internet companies.
RISKS RELATING TO HEADHUNTER.NET'S BUSINESS
Our business involves a number of risks, many of which are also applicable
to CareerMosaic, which will constitute a significant portion of our business
following the merger.
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS AND PROSPECTS
DIFFICULT.
We launched our web site in October 1996 and have substantially modified it
since that time. As a result, we have a limited operating history upon which an
investor can base an evaluation of our business and prospects. Investors must
consider the risks, expenses and problems frequently encountered by companies in
their early stages of development, particularly companies in new and rapidly
evolving markets such as online recruiting. Some of the risks which we may face
as an early stage company include our ability to:
- implement our business model and strategy and adapt them as needed;
- attract employers, recruiters and job seekers to our web site; and
- develop strategic relationships with other Internet sites.
If we fail to successfully manage these risks, expenses and problems, and
the other risks described below, current evaluations of our business and
prospects may prove to be inaccurate.
WE HAVE A HISTORY OF LOSSES, ANTICIPATE FUTURE LOSSES AND MAY NEVER ACHIEVE
PROFITABILITY.
We have a history of losses and may never be profitable. We incurred net
losses of $4.3 million and $10.3 million for the years ended December 31, 1998
and 1999, respectively. As of March 31, 2000, we had an accumulated deficit of
approximately $41.6 million. We expect operating losses and negative cash flow
to
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continue for the foreseeable future. We anticipate our losses will increase
significantly from current levels because we expect to incur additional costs
and expenses related to:
- rapid expansion of sales and other personnel;
- increased marketing and advertising to strengthen brand awareness;
- development of strategic relationships with other Internet sites; and
- continued development of web site and service offerings.
Our ability to become profitable depends on our ability to generate and
maintain greater revenues while incurring reasonable expenses. Our ability to
generate greater revenues depends on:
- our ability to convince employers and recruiters to utilize our web site
for their online recruiting needs;
- the growth of acceptance of the Internet as a recruiting tool;
- the number of job seekers who visit our web site;
- our ability to attract and retain sales personnel; and
- the number of job opportunities and resumes posted on our web site.
If we do achieve profitability, we cannot be certain that we will be able
to sustain or increase profitability on a quarterly or annual basis in the
future. Our inability to achieve or maintain profitability or positive cash flow
could result in disappointing financial results, impede implementation of our
growth strategy or cause the market price of our common stock to decrease.
WE HAVE RECENTLY CHANGED OUR METHOD OF PRICING OUR SERVICES, WHICH MAY DECREASE
THE NUMBER OF JOB OPPORTUNITIES AND USERS ON OUR WEB SITE AND MAY RESULT IN
DECREASED REVENUE.
Until recently, employers and recruiters could post a job opportunity on
our web site for $20. On April 3, 2000, we increased the price of posting a job
opportunity on our web site to $50. As a result of this pricing change, the
number of job opportunities posted on our web site may decrease. In the event
the number of job opportunities in our database materially decreases, job
seekers may find that our web site is not as useful as other online recruiting
sites. A decrease in the number of job seekers on our web site may cause
employers and recruiters to further reduce the number of job opportunities they
post or the additional services that they are willing to purchase. Job seekers
may not post their resumes on www.headhunter.net which would reduce the number
of employers and recruiters willing to pay to access resumes. These changes may
reduce our revenue.
OUR FUTURE REVENUES ARE UNPREDICTABLE, AND OUR FINANCIAL RESULTS MAY FLUCTUATE,
WHICH MAY ADVERSELY AFFECT OUR STOCK PRICE.
Our revenue and results of operations are difficult to predict, and we
expect them to fluctuate significantly from quarter to quarter. If our revenue
or results of operations fall below the expectations of investors or public
market analysts, the price of our common stock could fall substantially. Our
revenue and results of operations may fluctuate significantly in response to the
following factors, many of which are beyond our control:
- the cancellation of a significant number of customer accounts;
- changes in the demand for service offerings;
- changes in our pricing policies or those of our competitors;
- the timing and effectiveness of marketing campaigns;
- the hiring cycles of employers;
- our ability to hire and retain qualified sales people;
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- seasonal trends in user traffic;
- introduction of additional, or enhancement of existing, service offerings
by us or our competitors;
- the incurrence of costs related to acquisitions of businesses or
technologies;
- the costs of establishing, and the timing of, strategic relationships;
and
- general economic conditions, including the effects of a recession.
ONE OF OUR STRATEGIES IS TO INCREASE AWARENESS OF OUR BRAND, AND IF WE FAIL TO
FURTHER DEVELOP SUCH BRAND, WE MAY NOT BE ABLE TO SUSTAIN OR INCREASE THE NUMBER
OF EMPLOYERS, RECRUITERS AND JOB SEEKERS USING OUR WEB SITE.
We believe that maintaining and strengthening our brand is an important
aspect of our business. Our brand name is critical in our efforts to sustain or
increase the number of employers, recruiters and job seekers who use our web
site. We believe that the importance of brand recognition will increase due to
the continued growth in the number of competitors entering the online recruiting
market. Our ability to promote and position our brand depends largely on the
success of our marketing efforts and our ability to effectively satisfy the
needs of employers, recruiters and job seekers. To promote our brand, we intend
to increase our marketing budget. If we fail to promote successfully and
maintain our brand, or if we incur excessive expenses attempting to promote and
maintain our brand, we may be unable to implement our business plan and our
financial results may suffer.
THE ONLINE RECRUITING MARKET IS INTENSIVELY COMPETITIVE AND WE MAY BE UNABLE TO
COMPETE SUCCESSFULLY AGAINST EXISTING AND FUTURE COMPETITORS, WHICH MAY MAKE IT
MORE DIFFICULT TO GROW OUR BUSINESS.
The online recruiting market is highly fragmented and intensely
competitive. We compete on the Internet with other online recruiting sites,
corporate Internet sites, Internet portal sites, Internet sites that provide
their users with access to content, commonly known as Internet content
providers, and nonprofit professional organizations. Many of our competitors
have longer operating histories in the online recruiting market, exclusive
arrangements with significant Internet companies, significantly greater
financial, technical and marketing resources, more users and larger databases
than we do. We also compete with traditional recruiting methods, such as
classified advertising, radio, television and traditional recruiting firms for a
share of the total recruiting budgets of employers and recruiters.
Presently, the barriers to entry by competitors in the market for online
recruiting are low. Current and new competitors can launch new Internet sites
and add substantial content on their sites at a low cost within a short time
period. Therefore, we expect competition to continue to intensify, and the
number of competitors could increase significantly in the near future. If we are
unable to compete successfully against existing and future competitors, we may
not benefit from the projected growth in the online recruiting market.
IF WE LOSE THE SERVICE OF OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER, OR IF WE
CANNOT RECRUIT AND RETAIN ADDITIONAL SKILLED PERSONNEL, OUR BUSINESS MAY SUFFER.
We depend on the continued services and performance of Robert M.
Montgomery, Jr., our President and Chief Executive Officer, for our future
success. We do not have an employment agreement with Mr. Montgomery, and are not
the beneficiary of any key person life insurance covering him or any other
executive officer.
Competition for personnel with experience in online recruiting and commerce
is intense. If we are unsuccessful in attracting and training new employees, or
retaining and motivating our current and future employees, our business could
suffer significantly.
WE DO NOT HAVE LONG-TERM AGREEMENTS WITH EMPLOYERS AND RECRUITERS, WHICH MAY
CAUSE OUR REVENUES TO FLUCTUATE.
We derive a substantial majority of our revenues from employers and
recruiters that pay to post job opportunities on our web site, to purchase
additional services and to access resumes posted on our web site.
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Generally, these employers and recruiters post their job opportunities on a
monthly basis. They have no obligation to purchase access to resumes or any
other service offerings, or to post any job opportunities for more than one
month at a time. As a result, an employer or recruiter that generates
substantial revenue for us in a particular month may not do so in a later month.
We must continually maintain existing accounts and establish and develop new
accounts with employers and recruiters. If we fail to do so, our revenue could
fluctuate, which may cause us to fail to meet expectations in the marketplace
and our stock price may decline.
WE MAY BE UNABLE TO EFFECTIVELY MANAGE OUR RAPID GROWTH, WHICH IS PLACING AND
MAY CONTINUE TO PLACE A STRAIN ON OUR RESOURCES.
We have rapidly expanded our operations and anticipate that further
expansion will be required to execute our growth strategy. Our rapid growth has
placed significant demands on our management, financial, technical and other
resources. These demands are likely to continue and may increase. To manage our
future growth, we must adapt to changing business conditions and improve
existing systems or implement new systems for our financial and management
controls, reporting systems and procedures. In addition, in order to achieve
rapid growth, we may acquire technologies or products or enter into strategic
alliances. For us to succeed, we must make our existing technology, business and
systems work effectively with those of any strategic partners without undue
expense, management distraction or other disruptions to its business. If we fail
to manage any of the above growth challenges successfully, we may be unable to
implement our business plan and our financial results may suffer.
BECAUSE WE DEPEND ON THIRD PARTIES TO FACILITATE ACCESS TO OUR WEB SITE, WE FACE
RISKS OF CAPACITY CONSTRAINTS, WHICH COULD INCREASE OUR EXPENSES OR REDUCE OUR
REVENUES UNEXPECTEDLY.
We depend on Internet service providers and other web site operators, which
may experience Internet connectivity outages. Such outages may cause users to
experience difficulties in accessing our web site. Any system failures at these
third parties may cause an interruption in service or a decrease in
responsiveness of our web site and may impair users' perceptions of our web
site. Any failure to handle current or increased volumes of traffic on our web
site may impede our ability to sustain or increase the number of employers,
recruiters and job seekers who use our web site.
We derive a substantial majority of our revenues from employers and
recruiters that pay to post their job opportunities and purchase other services.
The amounts they are willing to pay for such services depend to a significant
degree on the number of job seekers who visit our web site. We depend on the
performance, reliability and availability of our web site to attract and retain
these job seekers. Capacity constraints could prevent them from accessing our
web site for extended periods of time and decrease our traffic. Decreased
traffic could result in fewer employers and recruiters posting job opportunities
on our web site or purchasing fewer other services. This would result in
decreased revenues. In addition, if the number of employers, recruiters and job
seekers on our web site increases substantially, we may experience capacity
constraints and need to expand or upgrade our technology at a time when we do
not have adequate funds to do so, or when that technology is not readily
available.
ONE OF OUR GROWTH STRATEGIES IS TO PURSUE ACQUISITIONS AND WE MAY FACE RISKS IN
ACQUIRING AND INTEGRATING OTHER BUSINESSES AND TECHNOLOGIES.
One element of our growth strategy is to acquire other businesses and
technologies that we believe will complement our business. Acquiring other
businesses and technologies involves numerous risks, including:
- difficulties in integrating the operations, services, products and
personnel of an acquired company;
- diversion of management's attention from other business concerns;
- inability to retain and motivate key personnel of the acquired business;
and
- inability to retain clients or goodwill of the acquired business.
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In pursuing acquisitions, we may compete with competitors that may be
larger and have greater financial and other resources than we have. Competition
for these acquisition targets could result in increased prices of acquisition
targets.
In the future, we may take accounting charges in connection with
acquisitions. We cannot guarantee that the costs and expenses actually incurred
will not exceed the estimates we use to take the accounting charges.
WE MAY NOT BE ABLE TO PROTECT AND ENFORCE OUR INTELLECTUAL PROPERTY RIGHTS,
WHICH COULD RESULT IN THE LOSS OF OUR RIGHTS, LOSS OF BUSINESS OR INCREASED
COSTS.
Our success and ability to compete depend to a significant degree on our
internally developed proprietary technology and on our brand, marks and domain
names. We rely on trademark and other intellectual property laws, and on
confidentiality and non-disclosure agreements with our employees and third
parties, to establish and protect our proprietary rights. We cannot assure you
that the steps we have taken to protect our proprietary rights will be adequate
or that we will be able to defend our marks or obtain patents for any of our
internally developed systems. If we are unable to secure or protect our marks
and systems, such failure could result in the loss of our rights to our marks
and systems, or the loss of business.
Third parties may claim that our business activities infringe upon their
proprietary rights. From time to time in the ordinary course of business, we
have been, and expect to continue to be, subject to claims of infringement of
third parties' trademarks and other intellectual property rights. Although such
claims have not had a material adverse effect on our business, such claims could
subject us to significant liability and result in invalidation of our
proprietary rights. These claims could be time-consuming and expensive to
defend, even if we ultimately are not found liable and could divert our
management's time and attention. In addition, patents recently issued to third
parties regarding Internet business processes indicate additional Internet
business process patents may be issued in the future. While we do not believe we
infringe any existing business process patent, future patents may limit our
ability to use processes covered by such patents or expose us to claims of
patent infringement or otherwise require us to seek to obtain related licenses.
There can be no assurance that such licenses would be available on acceptable
terms or at all. The failure to obtain such licenses on acceptable terms could
have a material adverse effect on our business, financial condition, results of
operations and prospects.
OUR BUSINESS MAY SUFFER IF USERS CONFUSE SIMILAR DOMAIN NAMES WITH
HEADHUNTER.NET.
We cannot assure you that potential users of our web site will not confuse
our domain name with other similar domain names such as headhunters.com,
headhunter.org or headhunters.org. If any confusion occurs, we may lose business
to a competitor, or some of our users may have negative experiences with these
other web sites that they mistakenly associate with us.
OUR ARTICLES OF INCORPORATION, BYLAWS AND SHAREHOLDER PROTECTION RIGHTS
AGREEMENT AND GEORGIA LAW CONTAIN PROVISIONS THAT COULD DISCOURAGE A TAKEOVER OF
US.
Our articles of incorporation, bylaws and shareholder protection rights
agreement contain provisions that could make it more difficult for another
company to acquire us, even if that acquisition would benefit our shareholders.
Further, we have adopted provisions of Georgia law that could delay, prevent or
make more difficult a merger, tender offer or proxy contest involving us. See
"Description of HeadHunter.NET Capital Stock."
In connection with the merger, we will enter into a shareholders' agreement
with Bernard Hodes Group and ITC Holding Company, Inc. under which Bernard Hodes
Group and ITC Holding Company will vote the shares of our common stock held by
each of them to elect nominees selected by them to our board of directors. The
shareholders' agreement also prohibits the parties from initiating or
participating in a proxy solicitation contest, a tender offer, exchange offer,
merger or other business combination transaction not supported by our board of
directors for a period of five years. See "Other Agreements -- Shareholders'
Agreement."
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WE DEPEND ON THE ACCEPTANCE OF THE INTERNET AS A RECRUITING MEDIUM.
The Internet is a relatively new medium for recruiting, and employers,
recruiters and job seekers have not reached any consensus that online recruiting
is an effective means for satisfying their recruitment needs. A large number of
employers and recruiters have only limited experience in using the Internet for
recruitment. They are not yet spending a significant amount of their recruiting
budgets on online recruiting or committing to doing so over a long period. As a
result, our sales force spends a substantial amount of time and resources
retaining existing accounts, and educating employers and recruiters about our
services and the online recruiting market. We may be unable to persuade a large
number of employers, recruiters and job seekers that our services will satisfy
their needs more successfully than traditional recruiting methods. If we cannot
meet the needs of employers, recruiters and job seekers or adapt our services to
meet their demands, we may be unable to implement our business plan. Further, if
the market for online recruiting does not grow as projected we may not be able
to grow our business.
OUR MARKET IS SUBJECT TO RAPID CHANGE AND WE MAY NOT SUCCESSFULLY ADAPT TO THIS
CHANGE.
Our market is characterized by rapidly changing technology, introductions
and enhancements of competitive services, and changing user demands.
Accordingly, our future success depends on our ability to adapt to such rapid
changes in technology and improve the features, reliability and functionality of
our service offerings in response to our competitors. We cannot assure you that
we will succeed in addressing these issues.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION, WHICH MAY ADD
ADDITIONAL COSTS TO OPERATING OUR BUSINESS ON THE INTERNET OR DECREASE DEMAND
FOR OUR SERVICES.
We are subject to various laws and regulations relating to our business,
although there are few laws or regulations that apply directly to our
Internet-based services. However, due to the increasing popularity and use of
the Internet, it is possible that additional laws and regulations may be adopted
covering user privacy, freedom of expression, pricing, content, quality of
products and services, taxation, advertising, intellectual property rights and
information security. Moreover, the applicability to the Internet of existing
laws governing issues such as intellectual property ownership and infringement,
copyright, trademark, trade secret, obscenity, libel, employment and personal
privacy is uncertain and developing. The nature and effect of any proposed
legislation or regulation, or the application or interpretation of existing
laws, cannot be fully determined. Any new law or regulation pertaining to the
Internet, or the application or interpretation of existing laws, could decrease
the demand for our services or increase our operational costs.
The adoption of any such legislation could also dampen the growth in use of
the Internet generally and decrease its acceptance as a communications,
commercial and advertising medium. Any legislation which has an adverse impact
on the growth of the Internet could cause us to incur additional operating
expenses or decrease the demand for our services.
BECAUSE OUR BUSINESS INVOLVES THE TRANSMISSION OF INFORMATION, WE MAY INCUR
LIABILITY FOR INFORMATION RETRIEVED FROM OR TRANSMITTED OVER THE INTERNET.
We may be sued for defamation, obscenity, negligence, copyright or
trademark infringement or other legal claims relating to information that is
posted or made available on our web site. Other claims may be brought based on
the nature, publication or distribution of content or based on errors or false
or misleading information provided on our web site. We could also be sued for
the content that is accessible from our web site through links to other Internet
sites. We currently maintain insurance in amounts up to $2.0 million for general
aggregate claims and $1.0 million for personal injury claims. Our insurance may
not adequately protect us against claims related to information on our web site.
In addition, we could incur significant costs in investigating and defending
such claims, even if we ultimately are not found liable.
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CONCERNS REGARDING SECURITY OF TRANSACTIONS AND TRANSMITTING CONFIDENTIAL
INFORMATION OVER THE INTERNET MAY NEGATIVELY IMPACT OUR ELECTRONIC COMMERCE
BUSINESS.
We believe that concern regarding the security of confidential information
transmitted over the Internet, such as credit card numbers, prevents many
potential customers from engaging in online transactions. If we do not maintain
sufficient security features on our web site, our services may not gain market
acceptance or there may be additional legal exposure. We have included basic
security features in some of our products to protect the privacy and integrity
of customer data, such as password requirements to access some data.
Despite the measures we have taken, our infrastructure is potentially
vulnerable to physical or electronic break-ins or similar problems. If a person
circumvents our security measures, he or she could misappropriate proprietary
information or cause interruptions in our operations. Security breaches that
result in access to confidential information could damage our reputation and
expose us to a risk of loss or liability. We may be required to make significant
investments and efforts to protect against or remedy security breaches.
Additionally, as electronic commerce becomes more prevalent, our customers will
become more concerned about security. If we do not adequately address these
concerns we may incur liability and we may not be able to sustain or increase
the number of employers, recruiters and job seekers using our services.
COMPUTER VIRUSES MAY CAUSE OUR SYSTEMS TO INCUR DELAYS OR INTERRUPTIONS AND MAY
INCREASE OUR EXPENSES OR LIABILITIES.
Computer viruses may cause our systems to incur delays or other service
interruptions, which may cause us to incur additional operating expenses to
correct problems we may experience. In addition, the inadvertent transmission of
computer viruses could expose us to a material risk of loss or litigation and
possible liability. Moreover, if a computer virus affecting our system is
publicly disclosed, our reputation could be materially damaged and our visitor
traffic may decrease. In addition, our sales and marketing efforts could be
impeded due to dissatisfaction among employers, recruiters and job seekers. Most
general business interruption insurance policies do not cover interruptions
caused by computer viruses or hackers. We have not added specific insurance
coverage to protect against these risks.
A RECESSION COULD ADVERSELY IMPACT OUR BUSINESS.
Online recruiting is a relatively new industry and we do not know how
sensitive we are to general economic conditions. The level of economic activity
and employment in the United States may significantly and adversely affect the
demand for online recruiting services. A recession could cause employers and
recruiters to reduce or postpone their recruiting efforts generally, and their
online recruiting efforts in particular. If a recession or significant economic
downturn occurs in the United States, our business could suffer.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS, WHICH MAY PREVENT US
FROM IMPLEMENTING OUR BUSINESS PLAN.
Based on our current operating plan, we anticipate that our available funds
will be sufficient to satisfy our anticipated needs for working capital,
including our increased marketing expenses, capital expenditures and business
expansion for at least the next 12 months. After that time, or in the event that
we do not meet our operating plan, we may need additional capital.
Alternatively, we may need to raise additional funds prior to such time in order
to fund more rapid expansion, to increase brand development and market
awareness, to develop new or enhanced technology, to respond to competitive
pressures or to establish strategic relationships. If we raise additional funds
by issuing equity or convertible debt securities, the percentage ownership of
our shareholders will be diluted. Any new securities could have rights,
preferences and privileges senior to those of our common stock.
We cannot be certain that additional financing will be available when and
to the extent required or that, if available, it will be on acceptable terms.
Recently, some Internet companies with a history of generating losses apparently
have been unable to raise additional financing to fund such continued losses. If
adequate funds are not available on acceptable terms, we may not be able to fund
our expansion, increase brand
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development and market awareness, develop or enhance our service offerings,
respond to competitive pressures or establish strategic relationships.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus and the documents incorporated by reference
herein contain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are subject to risks
and uncertainties and are based on the beliefs and assumptions of HeadHunter.NET
and CareerMosaic, which are based on information currently available to us.
Words such as "believes," "expects," "anticipates," "intends," "plans,"
"estimates," "should," "likely," "potential" or similar expressions are intended
to qualify as forward-looking statements. Forward-looking statements include the
information concerning possible or assumed future results of operations of
HeadHunter.NET set forth under "Summary of the Proxy Statement/Prospectus,"
"Risk Factors," "Unaudited Pro Forma Combined Financial Information," "The
Merger -- Background of the Merger," "-- HeadHunter.NET Reasons for the Merger,"
"-- CareerMosaic Reasons for the Merger," "-- Opinion of Financial Advisor to
HeadHunter.NET," "Information Regarding HeadHunter.NET -- HeadHunter.NET
Business," "-- HeadHunter.NET Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Information Regarding
CareerMosaic -- CareerMosaic Business," "-- CareerMosaic Management's Discussion
and Analysis of Financial Condition and Results of Operations" and "Comparative
Per Share Data."
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. Our actual results may differ materially
from those expressed or implied in the forward-looking statements. Many of the
factors that will determine these results are beyond our ability to control or
predict. Shareholders are cautioned not to put undue reliance on any
forward-looking statements. We undertake no obligation to update any
forward-looking statements. For those statements, we claim the protection of the
safe harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
For a discussion of some of the factors that may cause actual results to
differ materially from those suggested by the forward-looking statements, please
read carefully the information under "Risk Factors" beginning on page 14. In
addition to other risk factors and other important factors discussed elsewhere
in this proxy statement/prospectus and in the documents which are incorporated
by reference into this proxy statement/prospectus, you should understand that
the following important factors could affect the future results of
HeadHunter.NET and could cause actual results to differ materially from those
suggested by the forward-looking statements:
- changes in laws or regulations, including increased government regulation
of the Internet and privacy related issues, third party relations and
approvals, decisions of courts, regulators and governmental bodies which
may adversely affect our business or ability to compete;
- we may encounter greater than expected costs and difficulties related to
combining CareerMosaic's technology with our technology;
- we may be unable to retain some of our employees after the merger; and
- other risks and uncertainties as may be detailed from time to time in our
public announcements and Securities and Exchange Commission filings.
This list of factors that may affect our performance and the accuracy of
forward-looking statements is illustrative, but by no means exhaustive.
Accordingly, all forward-looking statements should be evaluated with the
understanding of their inherent uncertainty.
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THE HEADHUNTER.NET ANNUAL MEETING
HeadHunter.NET's board of directors is furnishing this proxy
statement/prospectus to holders of HeadHunter.NET common stock in connection
with the solicitation of proxies by the HeadHunter.NET board of directors for
use at the annual meeting of HeadHunter.NET shareholders to be held on July 27,
2000, and any adjournment of the meeting.
This proxy statement/prospectus is first being mailed or given to
HeadHunter.NET shareholders on or about June , 2000. This proxy
statement/prospectus is also furnished to CareerMosaic stockholders as a
prospectus in connection with the issuance by HeadHunter.NET of shares of
HeadHunter.NET common stock as contemplated by the merger agreement.
DATE, TIME AND PLACE
The annual meeting will be held on July 27, 2000 at 9 a.m., local time, at
our offices at 333 Research Court, Suite 200, Norcross, Georgia.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
At the annual meeting of HeadHunter.NET shareholders, and any adjournment
or postponement of the annual meeting, our shareholders will be asked:
1. To approve the issuance of 7.5 million shares of HeadHunter.NET
common stock in the merger of CareerMosaic into a wholly owned subsidiary
of HeadHunter.NET;
2. To elect three directors in Class II to serve until the 2003 annual
meeting of shareholders, two of whom will be replaced by two of the three
designees of Bernard Hodes Group if the merger with CareerMosaic occurs;
3. To approve the HeadHunter.NET, Inc. 2000 Qualified Employee Stock
Purchase Plan;
4. To ratify the selection of Arthur Andersen LLP as HeadHunter.NET's
independent auditors to serve for the fiscal year ending December 31, 2000;
and
5. To approve the transaction of such other business as may properly
come before the meeting or any adjournment of the meeting.
RECORD DATE
Only shareholders of record of HeadHunter.NET common stock at the close of
business on June 8, 2000, the record date for the annual meeting, are entitled
to notice of and to vote at the annual meeting.
VOTING AND REVOCATION OF PROXIES
We request that HeadHunter.NET shareholders complete, date and sign the
accompanying proxy and promptly return it in the accompanying postage-paid
envelope. Brokers holding shares in "street name" may vote the shares only if
the beneficial owner provides instructions on how to vote. Brokers will provide
beneficial owners instructions on how to direct the brokers to vote the shares.
All properly executed proxies that HeadHunter.NET receives prior to the vote at
the annual meeting, and that are not revoked, will be voted in accordance with
the instructions indicated on the proxies. If no direction is indicated, the
proxies will be voted (1) for approval of Proposals 1, 2, 3 and 4 and (2) if
HeadHunter.NET did not have notice on or before , 2000 of any matters
properly brought before the annual meeting, in the sole discretion of the
proxies as to such matters. The HeadHunter.NET board of directors does not
currently intend to bring any other business before the annual meeting and, to
their knowledge, no other matters are to be brought before the annual meeting.
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You may revoke your proxies at any time prior to its use:
- by delivering to the assistant secretary of HeadHunter.NET a signed
notice of revocation or a later-dated, signed proxy; or
- by attending the annual meeting and voting in person.
Attendance at the annual meeting is not sufficient to revoke a proxy.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The required quorum for the transaction of business at the annual meeting
is a majority of the HeadHunter.NET common stock issued and outstanding on the
record date. Abstentions will be included in determining the number of shares
present and voting at the meeting for the purpose of determining the presence of
a quorum, but will not be counted as votes cast. In the event that a broker,
bank, custodian, nominee or other record holder of HeadHunter.NET common stock
indicates on a proxy that it does not have discretionary authority to vote
shares on a particular matter, which is called a broker non-vote, those shares
will not be considered for purposes of determining the number of shares entitled
to vote with respect to a particular proposal on which the broker has expressly
not voted, but will be counted for purposes of determining the presence or
absence of a quorum for the transaction of business.
Brokers holding shares for beneficial owners cannot vote on the actions
proposed in this proxy statement/prospectus without the beneficial owners'
specific instructions. Accordingly, you are urged to return the enclosed proxy
card marked to indicate their vote.
With regard to election of directors (1) votes that are withheld will be
excluded entirely from the vote and will have no effect and (2) abstentions and
broker non-votes will also have no effect since approval by a percentage of the
shares present or outstanding is not required.
Abstentions and broker non-votes will have no effect on the approval of the
issuance of the shares of HeadHunter.NET common stock in the merger, the
approval of the 2000 Qualified Employee Stock Purchase Plan or the ratification
of Arthur Andersen LLP as the independent auditors for the fiscal year ending
December 31, 2000.
VOTE REQUIRED
As of the close of business on June 8, 2000, the record date for the annual
meeting, there were shares of HeadHunter.NET common stock outstanding
and entitled to vote. Holders of HeadHunter.NET's common stock have one vote per
share of HeadHunter.NET common stock owned on the record date. As of the close
of business on the record date, there were approximately holders of
record of HeadHunter.NET common stock.
Approval of the issuance of the shares of HeadHunter.NET common stock under
the merger agreement requires the affirmative vote of a majority of the votes
cast at the annual meeting, provided that a quorum is present.
As of the record date for the annual meeting, the directors and executive
officers of HeadHunter.NET and their affiliates (including ITC Holding Company
and Robert M. Montgomery) owned an aggregate of shares of
HeadHunter.NET common stock (excluding any shares issuable upon the exercise of
options or warrants), or approximately % of the total outstanding shares of
HeadHunter.NET common stock. In addition, ITC Holding Company and Mr.
Montgomery, who as of the record date for the annual meeting, collectively held
shares, or approximately % of the outstanding shares of
HeadHunter.NET common stock, entered into a support agreement with
HeadHunter.NET under which they have agreed to vote in favor of the issuance of
the shares of HeadHunter.NET common stock under the merger agreement.
Approval of the election of the three Class II directors requires the
affirmative vote of a plurality of the votes cast at the annual meeting,
provided a quorum is present.
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Approval of the 2000 Qualified Employee Stock Purchase Plan and
ratification of the selection of Arthur Andersen LLP as HeadHunter.NET's
independent auditors for the fiscal year ending December 31, 2000 require the
affirmative vote of a majority of the votes cast at the annual meeting, provided
that a quorum is present.
SOLICITATION OF PROXIES; EXPENSES
In addition to solicitation by mail, the directors, officers and employees
of HeadHunter.NET may solicit proxies from HeadHunter.NET shareholders by
telephone, facsimile, email or in person. HeadHunter.NET has retained Corporate
Communications to aid in the solicitation of proxies. These services are
included in HeadHunters.NET's monthly retainer currently being paid to Corporate
Communications. HeadHunter.NET will reimburse Corporate Communications'
out-of-pocket expenses in connection with proxy solicitation. Brokerage houses,
nominees, fiduciaries and other custodians will be requested to forward proxy
materials to beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending the proxy materials to beneficial owners.
HeadHunter.NET will bear its own expenses in connection with the solicitation of
proxies for its annual meeting of shareholders, except that HeadHunter.NET and
Omnicom Group each will pay one-half of all printing, filing and mailing costs,
fees and expenses, other than attorneys' fees, incurred in connection with the
registration statement, of which this proxy statement/prospectus is a part.
BOARD RECOMMENDATION
After careful consideration, the HeadHunter.NET board of directors has
determined that the merger is fair to, and in the best interests of,
HeadHunter.NET and its shareholders. Accordingly, the HeadHunter.NET board of
directors unanimously approved the merger agreement and the merger and
unanimously recommends that HeadHunter.NET shareholders vote for approval of the
issuance of the shares of HeadHunter.NET common stock in the merger. In
considering the recommendation of the HeadHunter.NET board of directors,
HeadHunter.NET shareholders should be aware that HeadHunter.NET's directors and
officers have interests in the merger that may be different from, or in addition
to, their own interests. See "The Merger -- Interests of Executive Officers and
Directors of HeadHunter.NET in the Merger" on pages 40 and 41.
The HeadHunter.NET board of directors also recommends a vote for
- the three nominees for election as Class II directors, two of whom will
be replaced by two of the three designees of Bernard Hodes Group if the
merger with CareerMosaic occurs,
- the approval of the HeadHunter.NET, Inc. 2000 Qualified Employee Stock
Purchase Plan, and
- the ratification of Arthur Andersen LLP as HeadHunter.NET's independent
auditors for the fiscal year ending December 31, 2000.
The matters to be considered at the annual meeting are of great importance
to HeadHunter.NET shareholders. Accordingly, HeadHunter.NET shareholders are
urged to read and carefully consider the information presented in this proxy
statement/prospectus, and to complete, date, sign and promptly return the
enclosed proxy in the enclosed postage-paid envelope.
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<PAGE> 34
PROPOSAL 1
THE MERGER
BACKGROUND OF THE MERGER
HeadHunter.NET's growth strategy includes possible acquisitions or
investment opportunities if we believe they will enable us to accelerate our
growth, add new content, develop new technologies or penetrate new markets. On
October 4, 1999, Robert M. Montgomery, Jr., the Chief Executive Officer and
President of HeadHunter.NET, directed First Union Securities, Inc.,
HeadHunter.NET's financial advisor, to contact John Wren, the Chief Executive
Officer of Omnicom Group Inc., regarding a potential business combination
between HeadHunter.NET and CareerMosaic, a division of Bernard Hodes Group, a
wholly owned subsidiary of Omnicom Group. HeadHunter.NET identified CareerMosaic
as a desirable candidate for acquisition because:
- CareerMosaic provides a material source for additional resumes, job
postings and customers,
- CareerMosaic provides premium online placement services under a strong
brand name that have the potential to assist HeadHunter.NET in its future
market penetration and growth,
- Omnicom Group is a significant participant in Internet businesses and is
a desirable strategic partner for HeadHunter.NET, and
- Bernard Hodes Group is a significant participant in the recruiting
business and is a desirable strategic partner for HeadHunter.NET.
On October 20, 1999, Mr. Montgomery and representatives of First Union
Securities met with Mr. Wren, Bernard Hodes, President and Chief Executive
Officer of Bernard Hodes Group, and Alan Schwartz, Executive Vice President,
Chief Operating Officer, and Chief Financial Officer of Bernard Hodes Group. At
this initial meeting, the parties discussed the trends in the online recruiting
industry and the possible benefits of a potential merger between HeadHunter.NET
and CareerMosaic, and determined that it may be desirable to further explore a
potential business combination between HeadHunter.NET and CareerMosaic.
Subsequently, the parties entered into a mutual confidentiality agreement and
initiated a limited exchange of information.
On November 22, 1999, Mr. Montgomery met with Ms. Kimberley E. Thompson, a
director and Secretary of HeadHunter.NET, and William H. Scott, III, Chairman of
the HeadHunter.NET board of directors, to discuss the possible business
combination with CareerMosaic. Representatives of First Union Securities and
Mark W. Partin, Chief Financial Officer of HeadHunter.NET and Craig Stamm, Vice
President-Business Development of HeadHunter.NET, also attended the meeting.
On November 23, 1999, Mr. Montgomery and representatives of First Union
Securities met again with Mr. Schwartz from Bernard Hodes Group and three
representatives from Omnicom Group -- Mr. Wren, Randall J. Weisenburger, Chief
Financial Officer of Omnicom Group, and John C. Doolittle, Chief Financial
Officer, Americas of Diversified Agency Services, a subsidiary of Omnicom Group.
In that meeting, the parties continued discussions about a possible business
combination between HeadHunter.NET and CareerMosaic that would have resulted in
the shareholders of HeadHunter.NET and the stockholders of CareerMosaic each
owning approximately 50% of the combined company. The board of directors of
HeadHunter.NET held a telephonic meeting the following day and authorized the
HeadHunter.NET management team to proceed with negotiations with Omnicom Group
and Bernard Hodes Group on the basis of the terms discussed.
Subsequent to November 24, 1999, however, both HeadHunter.NET and Omnicom
Group began to focus on other opportunities and operational matters. As a
result, on December 9, 1999, HeadHunter.NET notified Omnicom Group of its desire
to terminate discussions regarding the possible business combination.
In early January, Mr. Montgomery re-initiated discussions with Mr.
Weisenburger relating to the possible business combination on substantially the
same financial terms as had been discussed previously. In a meeting on January
21, 2000 held among Messrs. Montgomery, Partin and Stamm of HeadHunter.NET,
representa-
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tives of First Union Securities, and Messrs. Doolittle and Schwartz, and Joseph
Fortunato, Senior Vice President of Finance of Bernard Hodes Group, it was
agreed that each party would conduct first phase due diligence over the next two
weeks and formal due diligence requests were exchanged.
Also in late January, at the HeadHunter.NET board of directors' regular
meeting, Mr. Montgomery updated the members of the board regarding the status of
discussions. Both parties proceeded with their due diligence investigation over
the next several weeks and held several collective discussions regarding the
first phase due diligence request list as well as other aspects of the due
diligence process and CareerMosaic's business.
On February 24, 2000, Alston & Bird LLP, outside counsel to HeadHunter.NET,
sent out a first draft of a definitive merger agreement for the proposed
transaction. Over the next two weeks, HeadHunter.NET management and
representatives from Alston & Bird negotiated legal documents and business
issues with Omnicom Group, Bernard Hodes Group and their counsel, Jones, Day,
Reavis & Pogue.
During the week of March 15, 2000, Messrs. Montgomery and Scott met with
Messrs. Weisenburger and Doolittle to discuss the integration plan for the
combined company and the outstanding business issues. The parties were unable,
however, to agree upon the remaining business issues, including the terms of the
agency agreement between Bernard Hodes Group and HeadHunter.NET, CareerMosaic's
revenue levels in the last quarter of 1999, and the exchange ratio of the
merger.
On March 23, 2000, Mr. Montgomery, after informally consulting all of
HeadHunter.NET's board members, called Mr. Weisenburger to inform him that
representatives of HeadHunter.NET would meet with representatives of Bernard
Hodes Group in New York during the week of April 3, 2000 to further discuss the
vision of the combined company and its post-merger relationship with Bernard
Hodes Group. Following the meeting and throughout the next two weeks until April
14, 2000, the parties negotiated and agreed upon the final exchange ratio and
the terms of the merger agreement, the agency agreement and the other
agreements.
On April 15, 2000, the board of directors of HeadHunter.NET held a special
meeting to consider the merger. Also in attendance were Messrs. Stamm and
Partin, and representatives of First Union Securities and Alston & Bird.
Representatives of First Union Securities delivered its opinion regarding the
fairness of consideration paid in the merger agreement discussed under the
heading "--Opinion of Financial Advisor to HeadHunter.NET" below.
Representatives of Alston & Bird discussed the terms of the merger agreement
with members of the board and advised the board of its fiduciary duties under
Georgia law. After discussion, the board unanimously approved the issuance of
HeadHunter.NET common stock pursuant to the merger agreement and the other
transactions contemplated in the merger agreement, and approved the submission
of the merger and the issuance of 7.5 million shares of HeadHunter.NET common
stock in connection with the merger to the HeadHunter.NET shareholders for their
approval.
During the same time, the parties finalized all diligence and legal
documentation. The merger was jointly announced by HeadHunter.NET and Omnicom
Group during the morning of April 17, 2000.
HEADHUNTER.NET REASONS FOR THE MERGER
At the meeting held on April 15, 2000, the board of directors of
HeadHunter.NET concluded that the merger consideration to be paid pursuant to
the merger agreement was fair to HeadHunter.NET and its shareholders and
unanimously approved the issuance of HeadHunter.NET common stock pursuant to the
merger, and approved the submission of the merger and the issuance of 7.5
million shares of HeadHunter.NET common stock to the HeadHunter.NET shareholders
for their approval . The decision of the board of directors of HeadHunter.NET
was based upon several potential benefits of the merger and other factors which
it believes could contribute to the success of the combined company and thus
inure to the benefit of HeadHunter.NET shareholders, including the following,
the order of which does not necessarily reflect their relative significance:
- the combination materially increases HeadHunter.NET's number of resumes,
job postings and customers;
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- the combination of our and CareerMosaic's brand recognition will enable
HeadHunter.NET to move decisively toward our key strategic goal of
increasing the number of job seekers using our online recruiting service,
which in turn may increase the number of employers and recruiters willing
to use our service;
- the merger combines two of the leading providers of online recruiting
service with strengths in different primary customer
segments -- HeadHunter.NET with small businesses and recruiters, and
CareerMosaic with Fortune 100 companies and advertising agencies;
- the combination of two leading providers of online recruiting solutions
will give the combined company greater scale, which will better position
it to establish strategic relationships with other Internet based
companies;
- the merger will provide HeadHunter.NET with a strategic relationship with
Omnicom Group, which owns some of the leading companies in the
disciplines of advertising, marketing services, specialty communications,
interactive media, and media buying services;
- the combination of HeadHunter.NET's and CareerMosaic's businesses will
allow for economies of scale in technology expenditures;
- the merger will broaden the combined companies' offerings of online
recruiting services; and
- the combined companies will be able to recognize operating synergies in
marketing and administrative resources.
In addition to benefits arising from the combined companies, the
HeadHunter.NET board favorably noted the following, the order of which does not
necessarily reflect their relative significance:
- the financial condition, results of operations and business of
HeadHunter.NET and CareerMosaic before and after giving effect to the
merger and the determination by the HeadHunter.NET board of the merger's
effect on shareholder value;
- the receipt of the opinion of First Union Securities that the
consideration in the merger is fair, from a financial point of view, to
the holders of HeadHunter.NET common stock; and
- the terms of the merger agreement and other related agreements.
The HeadHunter.NET board also identified and considered a number of
potentially negative factors in its deliberations concerning the merger
including the following:
- the challenges associated with integrating companies and the risk that
the potential benefits of the merger may not be realized;
- the possibility that the merger may not be completed, even if approved by
the HeadHunter.NET shareholders, and the negative impact the failure to
consummate the merger might have on HeadHunter.NET's stock price;
- HeadHunter.NET's ability to enter into future strategic relationships;
- HeadHunter.NET's ability to retain key CareerMosaic employees; and
- other applicable risks described in this proxy statement/prospectus under
the heading "Risk Factors."
The HeadHunter.NET board of directors also took special note of the
interest of the executive officers and directors in the merger as discussed
under the heading "--Interests of Executive Officers and Directors of
HeadHunter.NET in the Merger" below.
The HeadHunter.NET board concluded, however, that, on balance, the merger's
potential benefits to HeadHunter.NET and its shareholders outweighed the
associated risks. The discussion of the information and factors considered by
the HeadHunter.NET board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the merger,
the HeadHunter.NET board did not find
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it practicable to, and did not quantify or otherwise assign relative weight to,
the specific factors considered in reaching its determination.
CAREERMOSAIC REASONS FOR THE MERGER
The decision by Bernard Hodes Group and Omnicom Group to approve the merger
agreement was based upon various factors, including the following:
- combining CareerMosaic with a company whose business is solely on-line
recruiting will provide a sharper strategic focus, which in turn could
improve the future prospects of the business;
- the combined company would have greater scale than CareerMosaic; and
- the combined company would have the opportunity to realize revenues and
cost savings synergies.
OPINION OF FINANCIAL ADVISOR TO HEADHUNTER.NET
Pursuant to an engagement letter dated September 22, 1999, HeadHunter.NET
retained First Union Securities, Inc., a subsidiary of First Union Corporation,
to act as its financial advisor with respect to, among other things, a potential
acquisition of CareerMosaic. In connection with the consideration by
HeadHunter.NET's board of directors of the merits of the proposed merger of
HeadHunter.NET and CareerMosaic, HeadHunter.NET requested First Union Securities
to perform, under the terms of the engagement letter, various financial analyses
and deliver to the board of directors an opinion of First Union Securities based
on such analyses.
THE FULL TEXT OF SUCH WRITTEN OPINION OF FIRST UNION SECURITIES DATED APRIL
15, 2000, IS ATTACHED HERETO AS ANNEX B AND SETS FORTH CERTAIN IMPORTANT
QUALIFICATIONS, ASSUMPTIONS MADE, MATTERS CONSIDERED, AREAS OF RELIANCE ON
OTHERS, AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN CONNECTION WITH SUCH
OPINION. THE FIRST UNION SECURITIES OPINION WAS DIRECTED TO THE BOARD OF
DIRECTORS OF HEADHUNTER.NET FOR ITS CONSIDERATION IN CONNECTION WITH THE
PROPOSED MERGER, RELATES ONLY TO THE FAIRNESS OF THE CONSIDERATION PAID FOR THE
CAREERMOSAIC COMMON STOCK IN THE MERGER FROM A FINANCIAL POINT OF VIEW AND DOES
NOT ADDRESS ANY OTHER ASPECTS OF THE MERGER. THE SUMMARY DESCRIPTION OF THE
FIRST UNION SECURITIES OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY BY
THE FULL TEXT OF SUCH OPINION, ATTACHED HERETO AS ANNEX B AND INCORPORATED
HEREIN BY REFERENCE, AND SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY IN
CONNECTION WITH THE PROXY MATERIAL. FIRST UNION SECURITIES HAS CONSENTED TO THE
USE OF ITS OPINION IN CONNECTION WITH THIS JOINT PROXY STATEMENT/PROSPECTUS.
In arriving at its opinion, First Union Securities, among other things:
- reviewed the financial terms of the merger as set forth in the merger
agreement;
- reviewed certain business, financial and other information, including
financial forecasts, regarding HeadHunter.NET and CareerMosaic that was
publicly available, including HeadHunter.NET's publicly available filings
with the Securities and Exchange Commission, or furnished to First Union
Securities by members of HeadHunter.NET's and CareerMosaic's management,
and discussed with such management teams their respective company's
business prospects and financial forecasts;
- considered certain financial data related to HeadHunter.NET and
CareerMosaic, and compared that data with similar data for publicly held
companies in businesses similar to those of HeadHunter.NET and
CareerMosaic, as well as relative to one another;
- considered the financial terms of certain other mergers and acquisitions
that First Union Securities deemed relevant; and
- considered such other information, financial studies, analyses and
investigations as well as financial and economic and market criteria that
First Union Securities deemed relevant.
Representatives of First Union Securities participated in the meeting of
the board of directors of HeadHunter.NET held on April 15, 2000, and at which
the board of directors discussed and approved the
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merger. At the meeting, First Union Securities delivered its opinion to the
HeadHunter.NET board of directors that based upon and subject to its review of
the foregoing financial and other information, First Union Securities' analyses
described below, its experience as an investment banking firm and other factors
First Union Securities deemed relevant, but subject to the limitations set forth
below and in reliance upon the assumptions set forth below, the consideration
paid for the acquisition of CareerMosaic was, as of April 15, 2000, fair from a
financial point of view to the holders of HeadHunter.NET common stock.
In connection with its review, First Union Securities relied upon the
accuracy and completeness of the foregoing financial and other information and
did not assume any responsibility for any independent verification of such
information. With respect to CareerMosaic's historical financial statements that
First Union Securities reviewed and that First Union Securities pointed out to
HeadHunter.NET's board were unaudited at the time First Union Securities
presented its opinion to HeadHunter.NET's board, First Union Securities assumed
that those financial statements presented fairly, in all material respects, the
financial position of CareerMosaic as of the date to which they referred and the
results of CareerMosaic's operations and CareerMosaic's cashflows for the
respective periods then ended in conformity with generally accepted accounting
principles. With respect to the financial forecasts for HeadHunter.NET and
CareerMosaic provided to First Union Securities, First Union Securities assumed
that the financial forecasts had been reasonably prepared on bases reflecting
the best available estimates and judgments of HeadHunter.NET's and
CareerMosaic's management teams as to the future financial performance of their
respective companies and that such forecasts provided a reasonable basis upon
which First Union Securities could form its opinion. First Union Securities did
not assume responsibility for making an independent evaluation, appraisal or
physical inspection of any of the assets or liabilities (contingent or
otherwise) of HeadHunter.NET or CareerMosaic, nor was First Union Securities
furnished with any such appraisals. HeadHunter.NET and CareerMosaic imposed no
limitations on First Union Securities with respect to the investigations made or
procedures followed by First Union Securities.
First Union Securities based its opinion on economic, market, financial and
other conditions as those conditions existed and could be evaluated as of the
date of the opinion and on the information made available to First Union
Securities as of the date of the opinion. Accordingly, although subsequent
developments may affect its opinion, First Union Securities did not assume and
does not have any obligation to update, revise or reaffirm its opinion. First
Union Securities assumed that the merger will be consummated in accordance with
the terms described in the merger agreement, without any waiver of any material
terms or conditions. First Union Securities assumed further that the voting,
standstill and lock-up agreements to be executed by ITC Holding Company, Inc.
will have no adverse impact on the value of ITC Holding Company's interest in
HeadHunter.NET. First Union Securities' opinion does not address the relative
merits of the merger or the other business strategies considered by the board of
HeadHunter.NET, nor does it address the board's decision to proceed with the
merger. The merger agreement is filed as Annex A hereto and the terms in the
merger agreement and the conditions to HeadHunter.NET's obligations thereunder
should be reviewed and understood by holders of HeadHunter.NET common stock in
connection with their consideration of the merger.
Set forth below is a brief summary of selected analyses presented by First
Union Securities to the board of HeadHunter.NET on April 15, 2000, in connection
with First Union Securities' opinion.
Relative Revenue Contribution Analysis
First Union Securities performed a relative revenue contribution analysis
to determine what percentage of gross revenue and net revenue have historically
been and are projected to be contributed by HeadHunter.NET and CareerMosaic on a
pro forma combined basis. The net revenue calculation accounts for commissions
paid for wholesale revenue generated from agency business. For HeadHunter.NET,
these commissions were immaterial.
- Gross Revenue -- First Union Securities analyzed the relative
contribution by HeadHunter.NET and CareerMosaic on a pro forma combined
basis by annualizing each company's gross revenue in the
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fourth quarter of 1999(LQA), projected for the first quarter of 2000 and
the first two months of 2000 and by looking at projected gross revenue for
all of 2000. The analysis concluded that:
- on an LQA basis, HeadHunter.NET contributed 48.1% and CareerMosaic
contributed 51.9%;
- on an estimated first quarter 2000 annualized basis, HeadHunter.NET
contributed 55.8% and CareerMosaic contributed 44.2%;
- on an estimated January and February 2000 annualized basis,
HeadHunter.NET contributed 54.5% and CareerMosaic contributed 45.5%;
and
- on a projected 2000 basis, HeadHunter.NET contributed 52.6% and
CareerMosaic contributed 47.4%.
The median of the four relative gross revenue contribution metrics
indicated HeadHunter.NET contributing 53.5% and CareerMosaic contributing 46.5%
of total gross revenue on a pro forma combined basis. First Union Securities
noted that this analysis, taken together with all of its analyses, supports the
position that the terms of the merger are fair from a financial point of view to
the holders of HeadHunter.NET common stock.
- Net Revenue -- First Union Securities analyzed the relative contribution
by HeadHunter.NET and CareerMosaic on a pro forma combined basis by
annualizing each company's net revenue in the fourth quarter of 1999
(LQA), projected for the first quarter of 2000 and the first two months
of 2000 and by looking at projected net revenue for all of 2000. The
analysis concluded that:
- on an LQA basis, HeadHunter.NET contributed 53.5% and CareerMosaic
contributed 46.5%;
- on an estimated first quarter 2000 annualized basis, HeadHunter.NET
contributed 62.6% and CareerMosaic contributed 37.4%;
- on an estimated January and February 2000 annualized basis,
HeadHunter.NET contributed 62.0% and CareerMosaic contributed 38.0%;
and
- on a projected 2000 basis, HeadHunter.NET contributed 58.3% and
CareerMosaic contributed 41.7%.
The median of the four relative net revenue contribution metrics indicated
HeadHunter.NET contributing 60.2% and CareerMosaic contributing 39.8% of total
net revenue on a pro forma combined basis. First Union Securities noted that
this analysis, taken together with all of its analyses, supports the position
that the terms of the merger are fair from a financial point of view to the
holders of HeadHunter.NET common stock.
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HEADHUNTER.NET
RELATIVE CONTRIBUTION ANALYSIS (1)
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HEADHUNTER.NET CAREERMOSAIC COMBINED
-------------- + ------------ = ---------
<S> <C> <C> <C> <C> <C>
Gross Billings -- LQA................ $15,792 $17,048 $32,840
Relative Contribution................ 48.1% 51.9% 100.0%
Gross Billings -- Q1'00(E)
Annualized......................... $24,663 $19,500 $44,163
Relative Contribution................ 55.8% 44.2% 100.0%
Gross Billings -- Jan00/Feb00(E)
Annualized......................... $23,322 $19,500 $42,822
Relative Contribution................ 54.5% 45.5% 100.0%
Gross Billings -- FY00(E)............ $34,744 $31,288 $66,032
Relative Contribution................ 52.6% 47.4% 100.0%
------- ------- -------
Median Relative Contribution......... 53.5% 46.5% 100.0%
======= ======= =======
Net Revenue -- LQA................... $15,792 $13,720 $29,512
Relative Contribution................ 53.5% 46.5% 100.0%
Net Revenue -- Q1'00(E) Annualized... $24,663 $14,716 $39,379
Relative Contribution................ 62.6% 37.4% 100.0%
Net Revenue -- Jan00/Feb00(E)
Annualized......................... $23,322 $14,274 $37,596
Relative Contribution................ 62.0% 38.0% 100.0%
Net Revenue -- FY00(E)............... $34,744 $24,809 $59,553
------- ------- -------
Relative Contribution................ 58.3% 41.7% 100.0%
======= ======= =======
Median Relative Contribution......... 60.2% 39.8% 100.0%
======= ======= =======
</TABLE>
- ---------------
(1) Net revenue accounts for commissions paid for wholesale revenue generated
from agency business. For HeadHunter.NET, these commissions were immaterial.
Comparable Public Company Analysis
- HeadHunter.NET, Inc. -- Using publicly available information and
information provided by HeadHunter.NET, First Union Securities compared
the historical and projected financial performance of HeadHunter.NET to
the corresponding performance of a comparable group of publicly-traded
online recruiting companies that First Union Securities deemed to be
similar to HeadHunter.NET. These comparable companies were Careerbuilder,
Inc., HotJobs.com, Ltd. and TopJobs.net, Plc. In comparing
HeadHunter.NET's financial performance to that of the comparable
companies, First Union Securities made the following observations, among
others:
- HeadHunter.NET had latest quarter annualized (LQA) revenue of $15.8
million compared to the median LQA revenue of $18.8 million for the
comparable companies;
- HeadHunter.NET had a projected 2000 revenue growth rate of 275.5%
compared to the median 2000 revenue growth rate of 136.4% for the
comparable companies; and
- HeadHunter.NET had 1999 gross margins of 98.4% compared to the median
1999 gross margins of 83.2% for the comparable companies.
33
<PAGE> 41
COMPARABLE COMPANIES ANALYSIS
($ IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARKET DATA
----------------------------------------------------------
4/13/00 PRICE AS % SHARES ADJUSTED
COMPANY NAME PRICE OF 52- OUT. MKT. MARKET
LATEST QTR.-FYE TICKER LOW-HIGH WEEK HIGH (MILS.)(1) VALUE VALUE(2)
- --------------- ------ ------------ ---------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Careerbuilder, Inc.*....... CBDR $2.88 14.4% 23.8 $ 68.4 $ 4.8
12/31/99 Dec. 2.88-20.00
HotJobs.com, Ltd........... HOTJ 12.31 25.6 31.7 390.5 253.7
12/31/99 Dec. 7.50-48.00
TopJobs.net, Plc........... TJOB 8.13 38.4 10.0 81.5 65.9
12/31/99 Mar. 4.50-21.19
Low........................
Mean.......................
Median.....................
High.......................
HeadHunter.NET(4).......... HHNT $14.94 61.3 12.6 188.2 157.7
12/31/99 Dec. 10.13-24.38
<CAPTION>
FINANCIAL INFORMATION VALUATION DATA
--------------------------------------- ---------------------------------
ADJUSTED MARKET VALUE/
REVENUE 2000(E) REVENUE
COMPANY NAME -------------------------- 1999 GROSS REVENUE -----------------------
LATEST QTR.-FYE LQA 1999 2000(E)(3) MARGIN GROWTH LQA 1999 2000(E)
- --------------- ----- ----- ---------- ---------- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Careerbuilder, Inc.*....... $18.8 $14.9 $30.3 55.1% 103.0% 0.3x 0.3x 0.2x
12/31/99 Dec.
HotJobs.com, Ltd........... 34.4 20.7 48.9 83.2 136.4 7.4x 12.3x 5.2x
12/31/99 Dec.
TopJobs.net, Plc........... 9.5 6.0 16.8 91.2 181.1 6.9x 11.0x 3.9x
12/31/99 Mar.
Low........................ $ 9.5 $ 6.0 $16.8 55.1% 103.0% 0.3x 0.3x 0.2x
Mean....................... 20.9 13.9 32.0 76.5% 140.2% 7.1x 11.6x 4.6x
Median..................... 18.8 14.9 30.3 83.2% 136.4% 7.1x 11.6x 4.6x
High....................... 34.4 20.7 48.9 91.2% 181.1% 7.4x 12.3x 5.2x
HeadHunter.NET(4).......... 15.8 9.3 34.7 98.4 275.5 10.0x 17.0x 4.5x
12/31/99 Dec.
</TABLE>
- ---------------
(1) Fully diluted shares outstanding.
(2) Market value of equity plus net debt.
(3) Estimates obtained from various research reports. Calendarized to reflect
December year end.
(4) Financial information obtained from management. As of December 31, 1999,
cash on the balance sheet was approximately $21.1 million. First Union
Securities has added an additional $9.4 million of cash resulting from the
exercising of all outstanding options and warrants.
* Excluded from mean and median adjusted market value/revenue multiples.
Recent financial performance and revenue growth significantly below others
in comparable companies group.
In order to arrive at an implied valuation for HeadHunter.NET, First Union
Securities calculated the adjusted market value, defined as aggregate equity
value plus debt less cash and cash equivalents, of the comparable companies as a
multiple of LQA revenue, 1999 revenue, and 2000 projected revenue.
First Union Securities noted that in calculating its median multiples for
the comparable companies, it excluded the multiples of Careerbuilder, Inc.
because Careerbuilder's recent financial performance and revenue growth were
substantially lower than that of HeadHunter.NET and the rest of the comparable
companies. An analysis of the multiples of adjusted market value to LQA revenue
yielded a range of multiples from 0.3x to 7.4x, with a median multiple of 7.1x
for the comparable companies (excluding Careerbuilder's multiple of 0.3x). An
analysis of the multiples of adjusted market value to 1999 revenue yielded a
range of multiples from 0.3x to 12.3x, with a median multiple of 11.6x for the
comparable companies (excluding Careerbuilder's multiple of 0.3x). An analysis
of the multiples of adjusted market value to projected 2000 revenue yielded a
range of multiples from 0.2x to 5.2x, with a median multiple of 4.6x for the
comparable companies (excluding Careerbuilder's multiple of 0.2x). First Union
Securities applied the median LQA and projected 2000 revenue multiples for the
comparable companies (excluding Careerbuilder's multiples) to the corresponding
financial metrics of HeadHunter.NET to calculate the implied adjusted market
value of HeadHunter.NET. This analysis indicated a median implied adjusted
market value of HeadHunter.NET of approximately $135.5 million.
MEDIAN VALUATION BASED UPON COMPARABLE COMPANIES ANALYSIS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTED
MEDIAN MARKET
CAPITALIZATION RATE HHNT MULTIPLE VALUE
- ------------------- ------- X -------- = --------
<S> <C> <C> <C> <C> <C>
Adj. MV/LQA Net Revenue..................................... $15,792 7.1 $112,844
Adj. MV/FY00(E) Net Revenue................................. 34,744 4.6 158,215
--------
Median Implied Adjusted Market Value........................ $135,530
</TABLE>
34
<PAGE> 42
- CareerMosaic -- Using information provided by CareerMosaic, First Union
Securities compared the historical and projected financial performance of
CareerMosaic to the corresponding performance of the same group of
publicly-traded online recruiting companies that First Union Securities
deemed to be similar to HeadHunter.NET. In comparing CareerMosaic's
financial performance to that of the comparable companies, First Union
Securities made the following observations, among others:
- CareerMosaic had LQA revenue of $13.7 million compared to the median
LQA revenue of $18.8 million for the comparable companies; and
- CareerMosaic had a projected 2000 revenue growth rate of 81.5%
compared to the median 2000 revenue growth rate of 136.4% for the
comparable companies.
COMPARABLE COMPANIES ANALYSIS
($ IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARKET DATA
----------------------------------------------------------
4/13/00 PRICE AS % SHARES ADJUSTED
COMPANY NAME PRICE OF 52- OUT. MKT. MARKET
LATEST QTR.-FYE TICKER LOW-HIGH WEEK HIGH (MILS.)(1) VALUE VALUE(2)
- --------------- ------ ------------ ---------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Careerbuilder, Inc.*....... CBDR $ 2.88 14.4% 23.8 $ 68.4 $ 4.8
12/31/99 Dec. 2.88-20.00
HotJobs.com, Ltd........... HOTJ 12.31 25.6 31.7 390.5 253.7
12/31/99 Dec. 7.50-48.00
TopJobs.net, Plc........... TJOB 8.13 38.4 10.0 81.5 65.9
12/31/99 Mar. 4.50-21.19
Low:.......................
Mean:......................
Median:....................
High:......................
<CAPTION>
FINANCIAL INFORMATION VALUATION DATA
--------------------------------------- ---------------------------------
ADJUSTED MARKET VALUE/
REVENUE 2000(E) REVENUE
COMPANY NAME -------------------------- 1999 GROSS REVENUE -----------------------
LATEST QTR.-FYE LQA 1999 2000(E)(3) MARGIN GROWTH LQA 1999 2000(E)
- --------------- ----- ----- ---------- ---------- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Careerbuilder, Inc.*....... $18.8 $14.9 $30.3 55.1% 103.0% 0.3x 0.3x 0.2x
12/31/99 Dec.
HotJobs.com, Ltd........... 34.4 20.7 48.9 83.2 136.4 7.4x 12.3x 5.2x
12/31/99 Dec.
TopJobs.net, Plc........... 9.5 6.0 16.8 91.2 181.1 6.9x 11.0x 3.9x
12/31/99 Mar.
Low:....................... $ 9.5 $ 6.0 $16.8 55.1% 103.0% 0.3x 0.3x 0.2x
Mean:...................... 20.9 13.9 32.0 76.5% 140.2% 7.1x 11.6x 4.6x
Median:.................... 18.8 14.9 30.3 83.2% 136.4% 7.1x 11.6x 4.6x
High:...................... 34.4 20.7 48.9 91.2% 181.1% 7.4x 12.3x 5.2x
</TABLE>
- ---------------
(1) Fully diluted shares outstanding.
(2) Market value of equity plus net debt.
(3) Estimates obtained from various research reports. Calendarized to reflect
December year end.
* Excluded from mean and median adjusted market value/revenue multiples.
Recent financial performance and revenue growth significantly below others
in comp group.
In order to arrive at an implied valuation for CareerMosaic, First Union
Securities used the adjusted market value of the comparable companies as a
multiple of LQA revenue, 1999 revenue and 2000 projected revenue described above
in the last paragraph on page 35. First Union Securities applied the median LQA
and projected 2000 revenue multiples for the comparable companies, excluding
Careerbuilder's multiples, to the corresponding financial metrics of
CareerMosaic to calculate the implied adjusted market value of CareerMosaic.
This analysis indicated a median implied adjusted market value of CareerMosaic
of approximately $105.5 million.
MEDIAN VALUATION BASED UPON COMPARABLE COMPANIES ANALYSIS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
MEDIAN ADJUSTED
CAPITALIZATION RATE CAREERMOSAIC MULTIPLE MARKET VALUE
- ------------------- ------------ X -------- = ------------
<S> <C> <C> <C> <C> <C>
Adj. MV/LQA Net Revenue.................. $13,720 7.1 $ 98,038
Adj. MV/FY00(E) Net Revenue.............. 24,809 4.6 112,973
--------
Median Implied Adjusted Market........... $105,505
</TABLE>
First Union Securities noted that this analysis, taken together with all of
its analyses, supports the position that the terms of the merger are fair from a
financial point of view to the holders of HeadHunter.NET common stock.
35
<PAGE> 43
Comparable Acquisitions Analysis
- HeadHunter.NET, Inc. -- Using publicly available information, First Union
Securities reviewed selected merger and acquisition transactions between
companies that First Union Securities believed to have similar
characteristics to HeadHunter.NET. These comparable transactions
included:
- CMGI, Inc.'s acquisition of Tallan, Inc.;
- CMGI, Inc.'s acquisition of FlyCast Communications Corporation;
- CMGI, Inc.'s acquisition of AdForce, Inc.;
- Go2Net, Inc.'s acquisition of Dogpile, LLC;
- Go2Net, Inc.'s acquisition of Authorize.Net; and
- Multex.com, Inc.'s acquisition of Market Guide, Inc.
First Union Securities compared the adjusted market value of the acquired
companies as implied by the consideration paid in each transaction to the
corresponding latest twelve months revenue for the acquired companies. This
analysis indicated that adjusted market value as a multiple of latest twelve
months revenue ranged from 14.7x to 30.9x with a median of 22.0x.
36
<PAGE> 44
RECENT COMPARABLE MERGERS AND ACQUISITIONS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
LATEST TWELVE
MONTHS
----------------
TARGET / GROSS EQUITY MARKET ADJ. MKT. VALUE AMV/
ACQUIRING COMPANY REVENUE MARGIN VALUE(MV) (AMV)(1) LTM REVENUE
- ----------------- ------- ------ ------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
TALLAN, INC.
CMGI, Inc (2/00)................... $53,941 43.3% $1,150,000 $1,139,908 21.1x
FLYCAST COMMUNICATIONS CORP.
CMGI, Inc. (9/99).................. 27,330 28.0 690,000 624,655 22.9x
ADFORCE, INC.
CMGI, Inc. (9/99).................. 14,511 28.6 500,000 437,457 30.1x
DOGPILE, LLC
Go2Net, Inc. (8/99)................ 1,771 85.6 55,000 54,767 30.9x
AUTHORIZE.NET(2)
Go2Net, Inc. (7/99)................ 5,669 96.0 90,500 88,878 15.7x
MARKET GUIDE, INC.
Multex.com, Inc. (6/99)............ 10,097 63.7 149,620 148,363 14.7x
Low: 14.7x
Mean: 22.6x
Median: 22.0x
High: 30.9x
</TABLE>
- ---------------
(1) Adjusted market value equals equity value plus net debt.
(2) Revenue was annualized as of nine months ended June 30, 1999.
First Union Securities applied the median latest twelve months revenue
multiple for the comparable acquisitions to HeadHunter.NET's LQA revenue and
applied a 41.7% discount relating to the significant decrease in public market
valuations of companies similar to HeadHunter.NET since the date of the most
recent comparable acquisition. The analysis indicated an implied adjusted market
value of $202.6 million for HeadHunter.NET.
MEDIAN VALUATION BASED UPON COMPARABLE MERGERS AND ACQUISITIONS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
MEDIAN ADJUSTED
CAPITALIZATION RATE HEADHUNTER.NET MULTIPLE MARKET VALUE
- ------------------- -------------- X -------- = ------------
<S> <C> <C> <C> <C> <C>
Adj. MV/LQA Net Revenue................ $15,792 22.0x $347,334
Less: 41.7% Discount for Recent Market
Activity(1).......................... 144,699
--------
Implied Adjusted Market Value Based
Upon Median Multiple................. $202,635
========
</TABLE>
- ---------------
(1) The 41.7% discount was determined by calculating the change in the trading
level of HeadHunter.NET's peer group Index between February 14, 2000 and
April 13, 2000.
- CareerMosaic -- First Union Securities utilized the same group of
comparable acquisitions to determine an implied adjusted market value for
CareerMosaic that were used in HeadHunter.NET's comparable acquisitions
analysis. First Union Securities compared the adjusted market value of the
acquired companies as implied by the consideration paid in each transaction
to the corresponding latest twelve months revenue for the acquired
companies. This analysis indicated that adjusted market value as a multiple
of latest twelve months revenue ranged from 14.7x to 30.9x with a median of
22.0x. First
37
<PAGE> 45
Union Securities applied the median latest twelve months revenue multiple
for the comparable acquisitions to CareerMosaic's LQA revenue and applied a
41.7% discount relating to the significant decrease in public market
valuations of companies similar to CareerMosaic since the date of the most
recent comparable acquisition. The analysis indicated an implied adjusted
market value of $176.0 million for CareerMosaic.
MEDIAN VALUATION BASED UPON COMPARABLE MERGERS AND ACQUISITIONS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
MEDIAN ADJUSTED
CAPITALIZATION RATE CAREERMOSAIC MULTIPLE MARKET VALUE
- ------------------- ------------ X -------- = ------------
<S> <C> <C> <C> <C> <C>
Adj. MV/LQA Net Revenue.................... $13,720 22.0x $301,762
Less: 41.7% Discount for Recent Market
Activity(1).............................. 125,714
--------
Implied Adjusted Market Value Based Upon
Median Multiple.......................... $176,048
========
</TABLE>
- ---------------
(1) The 41.7% discount was determined by calculating the change in the trading
level of CareerMosaic's publicly traded peer group Index between February
14, 2000 and April 13, 2000.
First Union Securities noted that this analysis, taken together with all of
its analyses, supports the position that the terms of the merger are fair from a
financial point of view to the holders of HeadHunter.NET common stock.
Implied Exchange Ratio Analysis
- Comparable Public Company Analysis -- First Union Securities utilized the
comparable public company valuations of $135.5 million and $105.5 million
for HeadHunter.NET and CareerMosaic, respectively, to calculate an
implied exchange ratio. The analysis yielded an implied exchange ratio of
1.000 to 0.778, compared to the exchange ratio of 1.000 to 0.667 implied
by the terms of the merger calculated on a fully diluted basis. First
Union Securities noted that this analysis, taken together with all of its
analyses, supports the position that the terms of the merger are fair
from a financial point of view to the holders of HeadHunter.NET common
stock.
- Comparable Acquisitions Analysis -- First Union Securities utilized the
comparable acquisition valuations of $202.6 million and $176.0 million
for HeadHunter.NET and CareerMosaic, respectively, to calculate an
implied exchange ratio. The analysis yielded an implied exchange ratio of
1.000 to 0.869, compared to the exchange ratio of 1.000 to 0.667 implied
by the terms of the merger calculated on a fully diluted basis. First
Union Securities noted that this analysis, taken together with all of its
analyses, supports the position that the terms of the merger are fair
from a financial point of view to the holders of HeadHunter.NET common
stock.
RELATIVE VALUATION ANALYSIS
($ IN THOUSANDS)
COMPARABLE COMPANIES ANALYSIS
<TABLE>
<CAPTION>
CAREERMOSAIC
HEADHUNTER.NET MEDIAN ADJUSTED
MEDIAN ADJUSTED MARKET VALUE MARKET VALUE
$135,530 $105,505
- ------------------------------------------------------------ ---------------------
<S> <C> <C> <C>
Exchange Ratio Based Upon Median Valuation.................. 1.000 : 0.778
Exchange Ratio Implied by a 60/40 Transaction............... 1.000 : 0.667
</TABLE>
38
<PAGE> 46
COMPARABLE ACQUISITIONS ANALYSIS
<TABLE>
<CAPTION>
CAREERMOSAIC
HEADHUNTER.NET MEDIAN ADJUSTED
MEDIAN ADJUSTED MARKET VALUE MARKET VALUE
$202,635 $176,048
- ------------------------------------------------------------ ---------------------
<S> <C> <C> <C>
Exchange Ratio Based Upon Median Valuation.................. 1.000 : 0.869
Exchange Ratio Implied by a 60/40 Transaction............... 1.000 : 0.667
</TABLE>
First Union Securities did not utilize the leveraged buyout analysis in its
valuation of HeadHunter.NET and CareerMosaic because in First Union Securities'
judgment the nature and limited operating history of the two companies would
make a leveraged buyout unlikely. First Union Securities did not perform an
accretion/dilution analysis because earnings are currently not a measure of
value in HeadHunter.NET's and CareerMosaic's industry segment. Additionally,
given HeadHunter.NET's and CareerMosaic's high growth rates and volatility of
cashflows, First Union Securities decided that the discounted cash flow analysis
would not accurately reflect HeadHunter.NET's and CareerMosaic's current
valuations.
While the foregoing summary describes the analyses and examinations that
First Union Securities deemed material in arriving at its opinion, the summary
does not purport to be a comprehensive description of all analyses and
examinations actually conducted by First Union Securities. The preparation of a
fairness opinion necessarily is not susceptible to partial analysis or summary
description; and selecting portions of the analyses and of the factors
considered by First Union Securities, without considering all analyses and
factors, would create an incomplete view of the process underlying the analyses
set forth in the presentation of First Union Securities to the board of
HeadHunter.NET on April 15, 2000. In addition, First Union Securities may have
given some analyses more or less weight than other analyses, and may have deemed
various assumptions more or less probable than other assumptions. Accordingly,
the ranges of valuations resulting from any particular analysis described above
should not be taken to be First Union Securities' view of the actual value of
HeadHunter.NET and CareerMosaic. To the contrary, First Union Securities
expressed no opinion on the actual value of HeadHunter.NET and CareerMosaic, and
its opinion extends only to the belief expressed by First Union Securities that
from a financial point of view the consideration paid for CareerMosaic in the
merger is within the range of values that might fairly be ascribed to
HeadHunter.NET and CareerMosaic from both a relative contribution and relative
valuation perspective.
In performing its analyses, First Union Securities made numerous
assumptions with respect to industry performance, general business and economic
conditions, and other matters, many of which are beyond the control of
HeadHunter.NET and CareerMosaic. The analyses performed by First Union
Securities are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than those suggested
by such analyses. The analyses do not purport to be appraisals or to reflect the
prices at which a company might actually be sold or the prices at which any
securities may trade at any time in the future. First Union Securities used in
its analyses various projections of future performance prepared by the
management of HeadHunter.NET and CareerMosaic. The projections are based on
numerous variables and assumptions which are inherently unpredictable and must
be considered not certain or accurate as projected. Accordingly, actual results
could vary significantly from those set forth in such projections.
As described above, the opinion of First Union Securities and the
presentation to the board summarized above were among the many factors taken
into consideration by the board in making its determination to approve, and to
recommend that HeadHunter.NET's shareholders approve, the merger. First Union
Securities does not, however, make any recommendation to holders of
HeadHunter.NET common stock (or to any other person or entity) as to whether
such shareholders should vote for or against the issuance of stock in the
merger.
Pursuant to the engagement letter between First Union Securities and
HeadHunter.NET, HeadHunter.NET agreed to pay First Union Securities a retainer
fee of $50,000 and a fee of $350,000 upon the delivery of the opinion to the
board as described above. These fees were not conditioned on the outcome
39
<PAGE> 47
of First Union Securities' opinion or whether HeadHunter.NET or its board deemed
such opinion favorable or unfavorable. In addition, if HeadHunter.NET and
CareerMosaic effect the merger on the terms set forth in the merger agreement,
the engagement letter requires HeadHunter.NET to pay First Union Securities a
transaction fee equal to 1.25% of the consideration paid for the acquisition of
CareerMosaic up to and including $100,000,000 plus 1.0% of the consideration
paid for the acquisition of CareerMosaic in excess of $100,000,000, with the
value of the consideration being determined by the average of the last sale
prices for HeadHunter.NET common stock on the last 20 trading days before the
closing of the merger. HeadHunter.NET will be obligated to pay the transaction
fee only if HeadHunter.NET and CareerMosaic successfully complete the merger.
Accordingly, the payment of a substantial majority of First Union Securities'
total fee is subject to consummation of the merger. Assuming the successful
consummation of the merger and that the average of the last sale prices for
HeadHunter.NET common stock on the last 20 trading days before the closing of
the merger was $12.00, the transaction fee payable by HeadHunter.NET to First
Union Securities would be approximately $1,125,000. The engagement letter also
requires HeadHunter.NET to reimburse First Union Securities for its reasonable
out-of-pocket expenses and for HeadHunter.NET to indemnify First Union
Securities, its affiliates and their respective directors, agents, employees and
controlling persons against certain liabilities, including liabilities under the
federal securities laws, relating to or arising out of First Union Securities'
engagement.
First Union Securities is a nationally recognized firm and an affiliate of
First Union Corporation and, as part of its investment banking activities,
regularly engages in the valuation of businesses and their securities in
connection with merger transactions and other types of acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes.
HeadHunter.NET selected First Union Securities as its financial advisor on the
basis of First Union Securities' experience and expertise in transactions
similar to the merger, its prior work on behalf of HeadHunter.NET and its
reputation in the technology industry. First Union Securities and its affiliates
may maintain business relationships with HeadHunter.NET, Omnicom Group, ITC
Holding Company and their respective affiliates. In the past, First Union
Securities or its affiliates have performed certain investment banking services
for HeadHunter.NET and its affiliates, including acting as managing underwriter
of the initial public offering of HeadHunter.NET common stock in August 1999,
and received customary fees and commissions for such services. In the ordinary
course of business, First Union Securities or its affiliates may actively trade
the debt and equity securities of HeadHunter.NET, Omnicom Group and their
respective affiliates for the account of First Union Securities or any of its
affiliates or for the account of customers and, accordingly, may hold a long or
short position in such securities.
INTERESTS OF EXECUTIVE OFFICERS AND DIRECTORS OF HEADHUNTER.NET IN THE MERGER
In considering the recommendation of the HeadHunter.NET board, you should
be aware of the interests that our executive officers and directors have in the
merger. There will be a full acceleration of vesting of stock options granted
prior to April 15, 2000 that are held by our executive officers and directors
upon the closing of the merger, except for options held by Robert M. Montgomery,
Jr., our Chief Executive Officer and President. Mr. Montgomery has voluntarily
agreed to waive the acceleration of all of his options.
The acceleration of vesting of stock options granted under the
HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan will occur at the effective
time of the merger in accordance with the terms of the plan. Options granted
under the HeadHunters, L.L.C. Employee Common Unit Option Plan and assumed by
HeadHunter.NET do not by their terms accelerate at the effective time of the
merger, but the board of directors of HeadHunter.NET approved an acceleration of
such options at its April 15, 2000 meeting approving the merger and related
issuance of shares. The board approved this acceleration because it concluded
that it was in the best interests of HeadHunter.NET to treat all of its option
holders the same.
40
<PAGE> 48
Set forth below is a chart summarizing the effects of the acceleration of
the options on each executive officer and director:
<TABLE>
<CAPTION>
NAME OF EXECUTIVE NUMBER OF SHARES WEIGHTED AVERAGE EXERCISE
OFFICER OR DIRECTOR SUBJECT TO ACCELERATING OPTIONS PRICE OF ACCELERATING OPTION
- ------------------- ------------------------------- ----------------------------
<S> <C> <C>
William H. Scott...................... 8,000 $ 3.90
Mark W. Partin........................ 101,000 2.12
Judith G. Hackett..................... 40,000 4.00
James R. Canfield..................... 110,000 2.43
C. Eric Presley....................... 40,000 3.25
J. Douglas Cox........................ 8,000 3.90
Burton G. Goldstein................... 8,000 4.65
Donald W. Weber....................... 8,000 4.65
Michael G. Misikoff................... 12,000 4.10
Kimberley E. Thompson................. 12,000 4.10
Mark W. Fouraker...................... 32,000 4.68
Jay M. Myer........................... 100,000 14.25
</TABLE>
In considering the fairness of the merger to HeadHunter.NET shareholders,
the HeadHunter.NET board took into account these interests. These interests are
different from and in addition to the interests as shareholders of
HeadHunter.NET.
TREATMENT OF CAREERMOSAIC COMMON STOCK IN THE MERGER
In the merger, each share of CareerMosaic common stock will be exchanged
for 750 shares of HeadHunter.NET common stock.
ACCOUNTING TREATMENT OF THE MERGER
We will account for the merger using the purchase method of accounting for
a business combination. Under this method of accounting, the assets and
liabilities of CareerMosaic, including intangible assets will be recorded at
their fair market value and included in our financial statements. The results of
operations and cash flows of CareerMosaic will be included in our financials
prospectively as of the completion of the merger.
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, our
acquisition of CareerMosaic may not be completed until notifications have been
furnished to the Federal Trade Commission and the Antitrust Division of the
Department of Justice and specified waiting period requirements have been
satisfied. HeadHunter.NET and CareerMosaic each filed a pre-merger notification
and report form with the FTC and the Antitrust Division on May 16, 2000. The
obligations of each of HeadHunter.NET and CareerMosaic to complete the merger
are subject to the condition that any applicable waiting period under the
Hart-Scott-Rodino Act will have expired without action by the Antitrust Division
or the FTC to prevent completion of the merger. See "The Merger
Agreement -- Conditions to Completion of the Merger" on pages 49 and 50.
At any time before the effective time of the merger, the Department of
Justice, the FTC or a private person or entity could seek under antitrust laws,
among other things, to enjoin the merger and any time after the effective time
of the merger, to cause us to divest, in whole or in part, of the surviving
corporation of the merger or of businesses conducted by the surviving
corporation of the merger. There can be no assurance that a challenge to the
merger will not be made or that we will prevail if a challenge is made.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary discusses the material federal income tax
consequences of the merger. Neither HeadHunter.NET nor CareerMosaic has
requested a ruling from the Internal Revenue Service or an opinion from counsel
regarding the tax consequences of the merger and the summary below is not based
on any such ruling or opinion. The summary is based on the Internal Revenue Code
of 1986, as amended, applicable U.S.
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Treasury regulations under the Internal Revenue Code, administrative rulings and
judicial authority, all as of the date of this prospectus/proxy statement. All
of the foregoing authorities are subject to change, and any changes could affect
the continuing validity of this summary. The summary assumes that the holders of
CareerMosaic common stock hold their shares as a capital asset. The summary does
not address the tax consequences that may be applicable to particular
CareerMosaic stockholders in light of their individual circumstances or to
CareerMosaic stockholders who are subject to special tax rules, like tax-exempt
organizations, dealers in securities, financial institutions, insurance
companies, non-United States persons, stockholders who acquired shares of
CareerMosaic common stock from the exercise of options or otherwise as
compensation or through a qualified retirement plan or as part of a straddle,
hedge, or conversion transaction. Further, this summary does not address any
issues related to intercompany transactions or changes in accounting methods
that may result from the merger. This summary also does not address any
consequence arising under the tax laws of any state, local or foreign
jurisdiction.
If the merger qualifies as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, then:
(1) Except as discussed in (4) below regarding cash received instead of
a fractional share of HeadHunter.NET common stock, a CareerMosaic
stockholder will recognize no gain or loss upon the exchange of
CareerMosaic common stock for HeadHunter.NET common stock in the merger.
(2) The tax basis of HeadHunter.NET common stock to be received by
CareerMosaic stockholders who exchange their shares of CareerMosaic common
stock for HeadHunter.NET common stock in the merger will be the same as the
aggregate tax basis of CareerMosaic common stock surrendered in the
exchange, less the basis of any fractional shares of HeadHunter.NET common
stock settled by cash payment.
(3) The holding period of HeadHunter.NET common stock received by a
CareerMosaic stockholder in the merger will include the holding period of
CareerMosaic common stock surrendered in the exchange.
(4) The payment of cash to CareerMosaic stockholders in lieu of a
fractional share of HeadHunter.NET common stock will be treated for federal
income tax purposes as if the fractional shares were distributed as part of
the exchange and then were redeemed by HeadHunter.NET. These cash payments
will be treated as distributions in full payment in exchange for the stock
redeemed as provided in Section 302(a) of the Internal Revenue Code. A
CareerMosaic stockholder who receives cash in lieu of a fractional share of
HeadHunter.NET common stock will generally recognize capital gain or loss
in an amount equal to the difference between the amount of cash received
and the portion of the CareerMosaic stockholder's tax basis in CareerMosaic
common stock allocable to the fractional share interest.
(5) No gain or loss will be recognized by HeadHunter.NET, CareerMosaic
or Resume Acquisition Corporation.
The summary above does not address the tax consequences of transactions
effectuated prior or subsequent to, or concurrently with the merger, in
particular, the transfer of assets by Bernard Hodes Group prior to the merger to
CareerMosaic and the impact of the merger on such earlier transfer. If the
transfer of assets to CareerMosaic is not treated as a transfer governed by
Internal Revenue Code Section 351, then Bernard Hodes Group will have gain or
loss upon the transfer of the assets in a manner similar to the merger not
qualifying as a tax-free transaction. In addition, any stockholders of
CareerMosaic that received, or will receive prior to the merger, their shares of
CareerMosaic stock for their services or as compensation will generally have
ordinary income at the time of the receipt of the shares of CareerMosaic stock
equal to their value at such time. Accordingly, the fact that the merger may
qualify as tax-free under the Code will have little or no consequence to them.
THIS DISCUSSION IS ONLY A GENERAL SUMMARY OF THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER. THE TAX CONSEQUENCES OF THE MERGER TO YOU MAY BE
DIFFERENT FROM THOSE SUMMARIZED ABOVE, BASED ON YOUR INDIVIDUAL SITUATION. YOU
ARE STRONGLY URGED TO CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX
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CONSEQUENCES OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER APPLICABLE TAX LAWS,
AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
NASDAQ NATIONAL MARKET
It is a condition to the completion of the merger that the shares of
HeadHunter.NET common stock to be issued in the merger be listed on the Nasdaq
National Market. HeadHunter.NET will file a notification form for listing of
additional shares in a timely fashion prior to the closing.
RESALES OF HEADHUNTER.NET COMMON STOCK ISSUED IN CONNECTION WITH THE MERGER
HeadHunter.NET common stock issued in connection with the merger will be
freely transferable, except for shares issued to Bernard Hodes Group. Bernard
Hodes Group presently intends to reduce its stock ownership in HeadHunter.NET
following the merger consistent with its intent not to exert influence over the
management or policies of HeadHunter.NET. Under the terms of the merger
agreement, Bernard Hodes Group will have the right to sell under this proxy
statement/prospectus that number of shares of HeadHunter.NET it owns that would
reduce its share ownership to less than 20% of the outstanding shares of
HeadHunter.NET. These shares may be sold under this proxy statement/prospectus
for a period of one year. Thereafter, Bernard Hodes Group will have registration
rights with respect to the remainder of its shares and up to 1% of the total
outstanding shares of HeadHunter.NET will be tradeable by Bernard Hodes Group
during any three-month period under Rule 144 of the Securities Act of 1933.
NO APPRAISAL RIGHTS
Neither HeadHunter.NET shareholders nor CareerMosaic stockholders will have
appraisal rights under applicable law.
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THE MERGER AGREEMENT
The following information describes material aspects of the merger
agreement and related agreements. This description does not provide a complete
description of all the terms and conditions of the merger agreement and related
agreements. It is qualified in its entirety by the copies of the merger
agreement and the shareholders agreement attached as annexes to this proxy
statement/prospectus. The merger agreement and the shareholders agreement are
incorporated herein by reference. You are urged to read the annexes in their
entirety.
GENERAL
The merger agreement provides for the acquisition of CareerMosaic by
HeadHunter.NET pursuant to the merger of CareerMosaic into a wholly owned
subsidiary of HeadHunter.NET, Resume Acquisition Corporation. Resume Acquisition
Corporation will be the surviving corporation resulting from the merger and will
remain a wholly owned subsidiary of HeadHunter.NET.
THE EXCHANGE RATIO AND TREATMENT OF CAREERMOSAIC COMMON STOCK
If the merger is completed, and you are a holder of CareerMosaic common
stock, you will receive 750 shares of HeadHunter.NET common stock in exchange
for each share of CareerMosaic common stock.
The actual market value of a share of HeadHunter.NET common stock at the
effective time of the merger and at the time certificates for those shares are
delivered to CareerMosaic stockholders may be more or less than the value of a
share of HeadHunter.NET common stock at the time the parties executed the merger
agreement. You are urged to obtain current market quotations for HeadHunter.NET
common stock. See "Market Price Information" on pages 62 and 63.
NO FRACTIONAL SHARES
No fractional shares of HeadHunter.NET common stock will be issued in
connection with the merger. Instead, each CareerMosaic stockholder will receive
cash in an amount equal to the fraction of the share they would have received
multiplied by the average of the last sales price for one share of
HeadHunter.NET common stock for the ten trading days immediately prior to the
effective time of the merger on the Nasdaq National Market as reported by
Bloomberg's Financial Service.
EFFECTIVE TIME OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
merger, the merger will become effective on the date and at the time specified
in the certificate of merger reflecting the merger to be filed with the
Secretary of State for the State of Delaware. Unless HeadHunter.NET, and Bernard
Hodes Group, Omnicom Group and CareerMosaic agree otherwise, they will use their
reasonable best efforts to cause the merger to become effective the first
business day following the effective date of the last required consent of any
regulatory authority or the date on which the HeadHunter.NET shareholders
approve the issuance of the shares of HeadHunter.NET common stock in the merger,
whichever is later.
HeadHunter.NET, Bernard Hodes Group, Omnicom Group and CareerMosaic
currently anticipate that the merger will become effective early in the third
quarter of 2000. We cannot assure you that the necessary shareholder and
regulatory approvals of the merger will be obtained or that other conditions to
completion of the merger can or will be satisfied. Either HeadHunter.NET or
Bernard Hodes Group may terminate the merger agreement if the merger is not
completed by September 16, 2000, unless it is not completed because of the
breach of the merger agreement by the party seeking termination or its
affiliates. See "The Merger Agreement -- Conditions to Completion of the Merger"
on pages 49 and 50 and "The Merger Agreement -- Termination" on page 50.
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EXCHANGE OF CERTIFICATES
The merger agreement provides that promptly after the merger is completed,
each former CareerMosaic stockholder should mail such stockholder's certificates
representing shares of CareerMosaic common stock to HeadHunter.NET, attention
Mark W. Partin.
The merger agreement provides that after a CareerMosaic stockholder
surrenders to HeadHunter.NET the certificates for CareerMosaic common stock duly
endorsed for transfer as HeadHunter.NET may reasonably require, HeadHunter.NET
or its transfer agent will mail such stockholder a certificate or certificates
representing the number of shares of HeadHunter.NET common stock to which such
former CareerMosaic stockholder is entitled and a check for the amount to be
paid in lieu of any fractional share (without interest), if any. HeadHunter.NET
will not be obligated to deliver the merger consideration to any former
CareerMosaic stockholder until such stockholder has surrendered the CareerMosaic
stock certificates.
The merger agreement provides that if any CareerMosaic stockholder's stock
certificate has been lost, stolen, or destroyed, HeadHunter.NET or its transfer
agent will issue the shares of HeadHunter.NET common stock and any cash in lieu
of fractional shares upon the stockholder's submission of an affidavit claiming
the certificate to be lost, stolen, or destroyed by the stockholder of record
and any other documents necessary to evidence and effect the exchange.
The merger agreement provides that at the time the merger becomes
effective, the stock transfer books of CareerMosaic will be closed to
CareerMosaic stockholders and no transfer of shares of CareerMosaic common stock
by any stockholder will thereafter be made or recognized. Until surrendered for
exchange, after the effective time of the merger each certificate representing
shares of CareerMosaic common stock will represent only the right to receive the
merger consideration discussed above. If permitted by law, former stockholders
of CareerMosaic will be entitled to vote after the effective time of the merger
at any meeting of HeadHunter.NET shareholders the number of whole shares of
HeadHunter.NET common stock into which their respective shares of CareerMosaic
common stock are converted, regardless of whether they have exchanged their
certificates for certificates representing HeadHunter.NET common stock.
OTHER AGREEMENTS
At the effective time of the merger, J. Douglas Cox, Donald W. Weber and
Michael G. Misikoff will resign from the HeadHunter.NET board of directors and
the remaining directors, Robert M. Montgomery, Jr., William H. Scott, III,
Burton B. Goldstein, Jr. and Kimberley E. Thompson shall appoint three directors
who will be designated by Omnicom Group, subject to HeadHunter.NET's approval,
prior to the effective time of the merger or shortly thereafter.
Simultaneously with the execution of the merger agreement, HeadHunter.NET
approved a shareholder protection rights agreement and agreed not to terminate
or amend such agreement prior to the effective time of the merger. See "Other
Agreements -- Shareholder Protection Rights Agreement" on pages 52 through 54.
Concurrently with the execution of the merger agreement, ITC Holding
Company Inc. and Robert M. Montgomery, Jr., who collectively own % of the
issued and outstanding HeadHunter.NET common stock as of the record date,
entered into a support agreement with HeadHunter.NET and Bernard Hodes Group
under which ITC Holding Company and Mr. Montgomery agreed to vote all of the
shares they beneficially own in favor of the issuance of the shares of
HeadHunter.NET common stock in the merger and against any other takeover
proposal at the annual meeting of HeadHunter.NET shareholders. See "Other
Agreements -- Support Agreement" on page 54.
At the effective time of the merger, the following agreements will be
entered into among the parties listed beside such agreement:
- shareholders' agreement among HeadHunter.NET, Omnicom Group, Bernard
Hodes Group Inc. and ITC Holding Company;
- administrative services agreement between Bernard Hodes Group and
HeadHunter.NET;
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- registration rights agreement among HeadHunter.NET, Bernard Hodes Group
and ITC Holding Company;
- credit agreement between Omnicom Finance, Inc. and HeadHunter.NET;
- agency agreement between HeadHunter.NET and Bernard Hodes Group;
- non-competition agreement between Bernard Hodes Group and HeadHunter.NET;
- indemnity agreements between HeadHunter.NET and each of the three
directors to be designated by Omnicom Group prior to the effective time
of the merger or shortly thereafter as newly appointed directors of
HeadHunter.NET; and
- indemnification agreement between HeadHunter.NET and each of ITC Holding
Company and Bernard Hodes Group.
Additional information about each of the above agreements can be found
under the heading "Other Agreements" below.
HeadHunter.NET also agreed to amend its bylaws to set the size of its board
of directors to seven members and to require the approval of at least two-thirds
of directors to increase or decrease the size of the board by board action.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties of
CareerMosaic, Bernard Hodes Group, Omnicom Group, HeadHunter.NET and Resume
Acquisition Corporation. In addition to other matters, the representations
relate to:
- each party's organization, existence, good standing, corporate power and
similar corporate matters;
- authorization, execution, delivery, required filings and consents and
performance and the enforceability of the merger agreement and related
matters;
- capitalization of CareerMosaic, HeadHunter.NET and Resume Acquisition
Corporation;
- absence of conflicts, violations and defaults under their corporate
charters and bylaws and other agreements and documents;
- HeadHunter.NET and CareerMosaic financial statements;
- absence of undisclosed liabilities of HeadHunter.NET and CareerMosaic;
- absence of certain changes in HeadHunter.NET's and CareerMosaic's
businesses;
- tax matters of HeadHunter.NET and CareerMosaic;
- material assets of HeadHunter.NET and CareerMosaic;
- material contracts of HeadHunter.NET and CareerMosaic;
- intellectual property of HeadHunter.NET and CareerMosaic;
- environmental matters of HeadHunter.NET and CareerMosaic;
- compliance with laws by HeadHunter.NET and CareerMosaic;
- labor matters of HeadHunter.NET and CareerMosaic;
- employee benefit plans of HeadHunter.NET and CareerMosaic;
- litigation against HeadHunter.NET and CareerMosaic; and
- accuracy of information provided in connection with this proxy
statement/prospectus.
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COVENANTS
The merger agreement obligates HeadHunter.NET and CareerMosaic to conduct
their respective businesses only in the usual, regular and ordinary course
before the merger becomes effective and imposes some limitations on their
respective operations. These limitations generally include agreements by
HeadHunter.NET and CareerMosaic not to:
- amend their respective charters, bylaws or other governing instruments;
- incur any additional debt obligation or other obligation for borrowed
money in excess of an aggregate of $2,000,000 for HeadHunter.NET or
$100,000 for CareerMosaic except in the ordinary course of business;
- acquire or exchange any shares, or any securities convertible into any
shares, of their respective capital stock or declare or pay any dividend
or make any other distribution in respect of their respective capital
stock;
- with some exceptions set forth in the merger agreement, including the
issuance of CareerMosaic common stock to employees of CareerMosaic and
Bernard Hodes Group, issue, sell, pledge, encumber, authorize the
issuance of or otherwise permit to become outstanding, any additional
shares of common stock or the capital stock of any subsidiary, or any
stock appreciation rights, options, warrants, or other equity rights;
- adjust, split, combine or reclassify any of their capital stock or issue
or authorize the issuance of any other securities in respect of or in
substitution for shares of their respective common stock;
- sell, lease, mortgage or otherwise dispose of or encumber any shares of
its capital stock or any material asset other than in the ordinary course
of business for reasonable and adequate consideration;
- subject to limited exceptions, grant any increase in compensation or
benefits to their respective employees, officers or directors, except in
accordance with the ordinary course of business consistent with past
practice;
- enter into or amend any severance or employment agreement with any
officer that the party does not have the unconditional right to terminate
without liability;
- adopt any new employee benefit plan or make any material changes to any
existing employee benefit plans;
- make significant changes in any tax or accounting methods or systems of
internal accounting controls;
- commence or settle any litigation other than in the ordinary course of
business;
- subject to limited exceptions, enter into, amend or terminate any
material contract or waive, release, compromise or assign any material
rights or claims; or
- take any action that would cause their respective representations and
warranties to no longer be true and correct in all material respects.
The parties to the merger agreement have also agreed not to take any action
that would materially adversely affect their ability to obtain any consents
required for the merger or materially adversely affect their ability to perform
their covenants under the merger agreement.
Until the merger agreement is terminated, the HeadHunter.NET board of
directors has agreed that it will not authorize or cause HeadHunter.NET to enter
into a letter of intent or agreement relating to any "takeover proposal" unless
such agreement would not prevent completion of the merger and the holders of
CareerMosaic common stock are treated in the same manner as the HeadHunter.NET
shareholders. Nothing in the merger agreement prevents HeadHunter.NET from
disclosing its position in response to a tender offer under the rules under the
Securities Exchange Act of 1934 or the HeadHunter.NET board of directors from
withdrawing or modifying its recommendation of the merger to the HeadHunter.NET
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shareholders, provided that the failure to do so would result in a breach of the
fiduciary duties of the members of the HeadHunter.NET board of directors to the
HeadHunter.NET shareholders under Georgia law.
Under the merger agreement, "takeover proposal" means any inquiry, proposal
or offer from any person relating to any:
- sale, lease, exchange, transfer or other disposition of at least 30% of
the assets of HeadHunter.NET and its subsidiaries, taken as a whole, or
- merger, reorganization, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution, tender offer,
exchange offer or other similar transaction the result of which is that
HeadHunter.NET's shareholders immediately prior to such transaction in
the aggregate cease to own at least 50% of the voting securities of the
ultimate parent entity resulting from such transaction.
EMPLOYEE MATTERS
Following the merger, HeadHunter.NET will prevent Resume Acquisition
Corporation from taking any action during the first year after the closing that
results in an employee of CareerMosaic receiving compensation and benefits that,
in the aggregate, are less favorable than the compensation and benefits received
by similarly situated employees of HeadHunter.NET.
DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE
The merger agreement provides that, after the completion of the merger, all
rights of indemnification and advancement of expenses and similar rights
existing in favor of present and former officers, directors, employees and
agents of CareerMosaic under specified agreements of CareerMosaic shall survive
the merger and continue in full force and effect in accordance with their terms.
The merger agreement also provides that, for six years after the completion of
the merger, HeadHunter.NET will cover each of CareerMosaic's nominees to the
HeadHunter.NET board of directors with the directors' and officers' liability
insurance currently maintained by HeadHunter.NET.
INDEMNIFICATION
HeadHunter.NET will indemnify Bernard Hodes Group and its affiliates and
representatives for any claims, losses or liabilities resulting from or based on
HeadHunter.NET's or Resume Acquisition Corporation's material breach of any
representation or warranty contained in the merger agreement or any material
breach of any covenant contained in the merger agreement. Omnicom Group and
Bernard Hodes Group will jointly indemnify HeadHunter.NET, Resume Acquisition
Corporation and their affiliates and representatives for any:
- claims, losses or liabilities resulting from or based on Omnicom's,
Bernard Hodes Group's or CareerMosaic's material breach of any
representation or warranty contained in the merger agreement or any
material breach of any covenant contained in the merger agreement;
- losses arising out of any tax liability resulting from the failure of the
contribution of assets to CareerMosaic by Bernard Hodes Group to qualify
for tax-free treatment; and
- losses arising out of any tax liability incurred by HeadHunter.NET as the
result of CareerMosaic being a member of the Omnicom Group affiliated
group filing a consolidated federal income tax return.
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Subject to limited exceptions specified in the merger agreement, the
representations, warranties and covenants of the parties survive the closing of
the merger until April 1, 2001. No party may make a claim for indemnification
until the total of all indemnifiable losses exceeds $1,000,000 and then such
party may make a claim for the entire amount of all indemnifiable losses
incurred by such party. In addition, the maximum amount that any party will have
to indemnify is $35,000,000, unless the indemnification claim is based on:
- the intentional misrepresentation, intentional breach of warranty or
fraud;
- HeadHunter.NET's claim for indemnification for losses arising out of a
tax liability incurred by HeadHunter.NET as a result of CareerMosaic
being a member of the Omnicom Group affiliated group filing a
consolidated return;
- HeadHunter.NET's claim for indemnification for losses arising out of any
tax liability resulting from the failure of the contribution of assets to
CareerMosaic by Bernard Hodes Group to qualify for tax-free treatment; or
- breaches of certain specified representations and warranties relating to
tax, environmental and employee benefits matters.
CONDITIONS TO COMPLETION OF THE MERGER
HeadHunter.NET, Resume Acquisition Corporation, Omnicom Group, Bernard
Hodes Group and CareerMosaic are required to complete the merger only after the
satisfaction of specified conditions. These conditions include:
- the shareholders of HeadHunter.NET common stock must approve the issuance
of the shares of HeadHunter.NET common stock in the merger;
- the parties to the merger agreement must receive the required regulatory
approvals;
- the representations and warranties of the parties to the merger agreement
as set forth in the merger agreement must be accurate as of the date of
the merger agreement and as of the date the merger becomes effective in
all material respects;
- the shares of HeadHunter.NET common stock to be issued in the merger are
approved for listing on the Nasdaq National Market;
- the parties to the merger agreement must perform all agreements and
comply with all covenants set forth in the merger agreement in all
material respects;
- the parties to the merger agreement must receive all other consents that
may be required to complete the merger or to prevent any default under
any contract or permit which would be reasonably likely to have,
individually or in the aggregate, a material adverse effect on
HeadHunter.NET or CareerMosaic;
- the absence of any law or order or any action taken by any court,
governmental, or regulatory authority of competent jurisdiction
prohibiting or restricting the merger or making it illegal; and
- the parties to the merger agreement shall execute and deliver each of the
following agreements, to the extent a party thereto (each of the
following agreements is discussed in more detail under the heading "Other
Agreements" below):
- shareholders' agreement;
- administrative services agreement;
- registration rights agreement;
- credit agreement;
- agency agreement;
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- non-competition agreement, and
- indemnity agreements.
In addition, HeadHunter.NET is not required to complete the merger if
CareerMosaic has net revenues of less than $4,700,000 for the quarter ending
June 30, 2000. Bernard Hodes Group is not required to complete the merger if
HeadHunter.NET has net revenues of less than $7,050,000 for the quarter ending
June 30, 2000.
Except for shareholder approval and certain legal or regulatory
requirements, these conditions may be waived by the beneficiary of them,
including in the case of HeadHunter.NET, after shareholder approval.
HeadHunter.NET cannot assure you as to when or if all of the conditions to
the merger can or will be satisfied or waived by the party permitted to do so.
If the merger is not effected on or before September 16, 2000, any party may
terminate the merger agreement and abandon the merger. See "-- Termination."
TERMINATION
HeadHunter.NET and Bernard Hodes Group can mutually agree to terminate the
merger agreement without completing the merger, and any party not then in
material breach of any representation, warranty or covenant in the merger
agreement can terminate the merger agreement upon the occurrence of a number of
events, including the following:
- another party materially breaches any representation, warranty or
covenant in the merger agreement and fails to cure the breach within 30
days of receiving notice of the breach;
- if any consent of any regulatory authority required to complete the
merger or other transactions contemplated by the merger agreement has
been denied by final nonappealable action, or if any action taken by such
authority is not appealed within the time limit for appeal;
- HeadHunter.NET shareholders do not approve the issuance of the shares of
HeadHunter.NET common stock in the merger at the annual meeting of
HeadHunter.NET shareholders; or
- the merger is not completed by September 16, 2000.
In addition, Bernard Hodes Group can terminate the merger agreement if the
HeadHunter.NET board of directors:
- authorizes or causes HeadHunter.NET to enter into a letter of intent or
agreement which would prevent the completion of the merger or under which
CareerMosaic stockholders would be treated in a different manner than
HeadHunter.NET shareholders; or
- fails to reaffirm its approval of the merger to the exclusion of a
takeover proposal which would prevent consummation of the merger or
resolves not to reaffirm the merger.
EXPENSES
Each party under the merger agreement will each pay their own expenses in
connection with the merger, except that HeadHunter.NET and Omnicom Group will
each pay one half of the costs and expenses incurred in connection with the
filing and printing of the registration statement of which this proxy statement/
prospectus is a part, the mailing of this proxy statement/prospectus and the
filing fees for the premerger notification and report forms required under the
Hart-Scott-Rodino Act.
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WAIVER AND AMENDMENT
The merger agreement may be amended by a subsequent writing signed by each
party, whether before or after the HeadHunter.NET shareholders have approved the
issuance of the shares of HeadHunter.NET common stock in the merger. Prior to or
at the effective time of the merger, any party may waive any default in the
performance of any covenant by the other party and any condition precedent to
the obligation of such party to perform under the merger agreement. All waivers
must be in writing and signed by the waiving party.
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OTHER AGREEMENTS
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
On April 15, 2000, HeadHunter.NET and American Stock Transfer & Trust
Company entered into a shareholder protection rights agreement and the
HeadHunter.NET board of directors declared a dividend of one preferred stock
purchase right for each outstanding share of HeadHunter.NET common stock. The
dividend was payable on April 27, 2000 to the HeadHunter.NET shareholders of
record on that date. Each right entitles the registered holder to purchase from
HeadHunter.NET one one-thousandth of a share of HeadHunter.NET junior
participating preferred stock at an exercise price of $200 per one
one-thousandth of a share, subject to adjustment. American Stock Transfer &
Trust Company serves as HeadHunter.NET's rights agent.
Separation Time
Until the date on which specified events take place or the "separation
time," the rights will be evidenced by, with respect to any HeadHunter.NET
common stock certificate which was outstanding on April 27, 2000, such stock
certificate and a summary of rights which was mailed to each holder of record on
such date. The term "separation time" means the close of business on the earlier
of
- the tenth business day (or such earlier or later date as may be
determined by the HeadHunter.NET board of directors) following a public
announcement by HeadHunter.NET that a person or group of affiliated or
associated persons has acquired beneficial ownership of 15% or more of
the outstanding HeadHunter.NET common stock, or an "acquiring person," or
- the tenth business day (or such later date as may be determined by the
HeadHunter.NET board of directors) after the date on which any person or
group of affiliated or associated persons commences a tender or exchange
offer the consummation of which would result in the beneficial ownership
by such person of 15% or more of the outstanding HeadHunter.NET common
stock. However, an acquiring person does not include:
- any person who was the beneficial owner of 15% or more of the
outstanding HeadHunter.NET common stock on April 15, 2000, who becomes
a beneficial owner of 15% or more of the outstanding HeadHunter.NET
common stock solely as a result of acquisitions of such stock by
HeadHunter.NET or who acquires 15% or more of the outstanding
HeadHunter.NET common stock in the merger, unless such person
thereafter acquires beneficial ownership of additional HeadHunter.NET
common stock, except for additional shares of common stock received by
ITC Holding Company upon exercise of options granted to directors who
are ITC Holding Company representatives,
- a person who acquires beneficial ownership of 15% or more of the
outstanding HeadHunter.NET common stock without any intention to
affect control of HeadHunter.NET and who thereafter promptly divests
sufficient shares so that such person ceases to be the beneficial
owner of 15% or more of the outstanding HeadHunter.NET common stock,
or
- a person who is or becomes a beneficial owner of 15% or more of the
outstanding HeadHunter.NET common stock as a result of an option
granted by HeadHunter.NET in connection with an agreement to acquire
or merge with HeadHunter.NET prior to a flip-in date.
ITC Holding Company or Omnicom Group and its affiliates will not be deemed
an acquiring person unless:
- either of them acquires a beneficial ownership level of greater than
50% or
- ITC Holding Company or Omnicom Group receives written notice from the
HeadHunter.NET board of directors that it has determined in good faith
that ITC Holding Company or Omnicom Group is an acquiring person and
within 30 days thereafter ITC Holding Company or Omnicom
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<PAGE> 60
Group has not divested itself of enough HeadHunter.NET common stock as
is required pursuant to the notice.
Transfer of Rights and Certificates
The shareholder protection rights agreement provides that, until the
separation time, the rights will be transferred with and only with the
HeadHunter.NET common stock. Until the separation time, or the earlier
termination or expiration of the rights, new certificates for HeadHunter.NET
common stock issued upon transfer or new issuance of HeadHunter.NET common stock
will contain a notation incorporating the shareholder protection rights
agreement by reference. Until the separation time, or the earlier termination or
expiration of the rights, the surrender for transfer of any certificates for
HeadHunter.NET common stock outstanding as of April 15, 2000, even without such
notation, will also constitute the transfer of the rights associated with the
HeadHunter.NET common stock represented by such certificate. As soon as
practicable following the separation time, separate certificates evidencing the
rights will be mailed to holders of record of the HeadHunter.NET common stock as
of the close of business on the separation time, and such separate right
certificates alone will evidence the rights.
Exercise Period
The rights are not exercisable until the separation time. After the
separation time and prior to the expiration time, each right, unless previously
terminated, will entitle the holder to purchase, for the exercise price, one
one-thousandth of a share of the HeadHunter.NET junior participating preferred
stock. The rights will expire on the expiration time, unless the expiration time
is extended, or the rights are earlier terminated by HeadHunter.NET. The term
"expiration time" is defined in the shareholder protection rights agreement and
generally means April 15, 2010, unless the rights are sooner exchanged or
terminated.
Exercise of Rights for HeadHunter.NET Common Stock
Under the shareholder protection rights agreement, the "flip-in date" means
the tenth business day after HeadHunter.NET publicly announces that someone has
become an "acquiring person." At a flip-in date, rights owned by the acquiring
person or any affiliate or associate thereof or any transferee thereof will
automatically become void and each other right will automatically become a right
to buy at the exercise price that number of HeadHunter.NET common stock having a
market value of twice the exercise price. Instead of issuing HeadHunter.NET
common stock upon exercise of a right following a flip-in date, HeadHunter.NET
may substitute cash, property, a reduction in the exercise price, HeadHunter.NET
junior participating preferred stock or other securities having a value equal to
the HeadHunter.NET common stock which would otherwise be issuable. After a
flip-in date occurs, HeadHunter.NET may not consolidate or merge with, or sell
50% or more of its assets or earning power to, any person, if HeadHunter.NET's
board of directors is controlled by the acquiring person, unless proper
provision is made so that each right would thereafter become a right to buy, for
the exercise price, that number of shares of common stock of such other person
having a market value of twice the exercise price.
Optional Exchange of Rights
At any time after a flip-in date occurs and prior to the time a person or
group of persons become the beneficial owner of more than 50% of the outstanding
HeadHunter.NET common stock, the HeadHunter.NET board of directors may elect to
exchange all of the outstanding rights for shares of HeadHunter.NET common stock
at an exchange ratio of one share of HeadHunter.NET common stock per right.
Termination of Rights
At any time prior to the close of business on the flip-in date, the
HeadHunter.NET board of directors may terminate the rights without any payment
to the holders of the rights. Immediately upon any termination of the rights,
the right to exercise the rights will terminate.
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<PAGE> 61
Amendments
HeadHunter.NET and American Stock Transfer & Trust Company may amend the
shareholder protection rights agreement in any respect prior to the close of
business on the flip-in date. Thereafter, such agreement may be amended in any
respect which shall not materially adversely affect the interests of holders of
rights generally, other than to cure an ambiguity or to correct any provision
which may be inconsistent with any other provision or otherwise defective.
Rights Prior to Exercise
Until a right is exercised, the holder thereof, as such, will have no
rights as a HeadHunter.NET shareholder, including, the right to vote or to
receive dividends.
SUPPORT AGREEMENT
ITC Holding Company, Inc. and its subsidiaries and Robert M. Montgomery,
Jr., who collectively own an aggregate of outstanding shares of
HeadHunter.NET common stock or approximately % of the outstanding
HeadHunter.NET common stock as of the record date of the annual meeting, entered
into a support agreement with HeadHunter.NET and Bernard Hodes Group as an
inducement to Bernard Hodes Group to enter into the merger agreement.
The support agreement provides, among other things, that ITC Holding
Company and Mr. Montgomery will vote in favor of the issuance of the shares of
HeadHunter.NET common stock in the merger at the annual meeting and that ITC
Holding Company and Mr. Montgomery will vote against any takeover proposal that
may be submitted to the HeadHunter.NET shareholders for their consideration. The
support agreement also limits ITC Holding Company's and Mr. Montgomery's ability
to dispose of their shares of HeadHunter.NET common stock prior to completion of
the merger.
REGISTRATION RIGHTS AGREEMENT
At the effective time of the merger, Bernard Hodes Group, ITC Holding
Company and HeadHunter.NET will enter into a registration rights agreement.
Under this agreement, Bernard Hodes Group will have registration rights
regarding shares of HeadHunter.NET common stock received by Bernard Hodes Group
in the merger and ITC Holding Company will have registration rights regarding
shares of HeadHunter.NET common stock held by, or issuable upon exercise of
options or warrants beneficially owned by, ITC Holding Company at the effective
time of the merger.
Bernard Hodes Group or ITC Holding Company at any time commencing after the
first anniversary of the effective time of the merger, may demand, with
customary exceptions, that HeadHunter.NET register the resale of all of such
holder's registrable securities or at least a number of such shares which would
result in an aggregate offering price of at least $5,000,000. HeadHunter.NET is
obligated to effect up to five demand registrations for each of ITC Holding
Company and Bernard Hodes Group and up to two demand registrations for any other
holder of registrable securities who is entitled to demand registration rights
under the registration rights agreement.
In addition, subject to specified exceptions, if HeadHunter.NET proposes to
register any of its equity securities, HeadHunter.NET must provide notice of
such proposed registration to any shareholder entitled to registration rights
under the registration rights agreement. Such shareholders will be permitted to
include their registrable securities in such proposed registration, subject to
customary underwriter cut-backs.
HeadHunter.NET will pay all costs and expenses of any registration under
the registration rights agreement, except for underwriters' discounts and
commissions.
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<PAGE> 62
SHAREHOLDERS' AGREEMENT
At the effective time of the merger, HeadHunter.NET, Omnicom Group, Bernard
Hodes Group and ITC Holding Company will enter into a shareholders' agreement.
Our discussion of the shareholders' agreement is qualified in its entirety by
reference to the complete text of this agreement, which is included in this
proxy statement/prospectus as Annex C and is incorporated herein by reference.
The shareholders' agreement provides that
- until such time as ITC Holding Company or Omnicom Group and Bernard Hodes
Group beneficially own less than the lower of (1) 10% of the voting power
of all outstanding HeadHunter.NET voting securities and (2) 50% of the
voting power beneficially owned by such holder(s) on the effective time
of the merger, ITC Holding Company and Omnicom Group/Bernard Hodes Group
will vote all outstanding voting securities as follows:
- with respect to the election of HeadHunter.NET directors, in favor of
the persons named by ITC Holding Company and Bernard Hodes Group in
accordance with the shareholders' agreement;
- on all proposals of any other HeadHunter.NET shareholders, as
recommended by the HeadHunter.NET board of directors; and
- on all other matters which come before the HeadHunter.NET
shareholders, in such party's discretion up to 30% of the total voting
power of HeadHunter.NET and with respect to any voting securities held
in excess of such 30%, in proportion to how all other HeadHunter.NET
voting securities which are not held by such holder are voted.
- for a period of five years after the effective time of the merger, each
of ITC Holding Company and Omnicom Group/Bernard Hodes Group will not:
- effect, participate or propose to effect or participate in any
acquisition of any securities or assets of HeadHunter.NET;
- effect, participate or propose to effect or participate in any tender
or exchange offer or any merger or other business combination
involving HeadHunter.NET;
- effect, participate or propose to effect or participate in any
recapitalization, restructuring, liquidation, dissolution or other
similar transaction with respect to HeadHunter.NET;
- effect, participate or propose to effect or participate in any
solicitation of proxies or consents to vote any HeadHunter.NET voting
securities;
- form, join or participate in a group, as defined under the Securities
Exchange Act of 1934;
- except by reason of an affiliate serving on the HeadHunter.NET board
of directors, act, alone or in concert with others, to seek to control
or influence the management, board of directors or policies of
HeadHunter.NET; or
- take any action which might force HeadHunter.NET to make a public
announcement regarding, or enter into any discussions with any third
party with respect to, any of the above matters.
Despite this restriction, each of ITC Holding Company and Omnicom
Group/Bernard Hodes Group may make a confidential proposal to the HeadHunter.NET
board of directors with respect to any of the foregoing as long as the terms of
the proposal are conditioned on HeadHunter.NET maintaining the confidentiality
of the proposal.
CREDIT AGREEMENT
At the effective time of the merger, HeadHunter.NET and Omnicom Finance,
Inc. will enter into a credit agreement under which Omnicom Finance will provide
a revolving line of credit of up to $10,000,000 to HeadHunter.NET. The revolving
line of credit will terminate and the outstanding principal and accrued but
unpaid interest will become due and payable upon the earlier of (1) the first
anniversary of the effective time
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<PAGE> 63
of the merger or (2) any public offering by HeadHunter.NET which results in
gross cash proceeds to HeadHunter.NET of at least $30,000,000, except for public
offerings to HeadHunter.NET's employees, directors and consultants or any
business combination. Interest will accrue on outstanding principal borrowed by
HeadHunter.NET under the credit agreement at a rate equal to the internal cost
of capital for Omnicom Group as in effect from time to time and such interest is
due and payable quarterly. The revolving line of credit is unsecured.
During the term of the credit agreement, HeadHunter.NET must comply with
specified covenants including that HeadHunter.NET may not make capital
expenditures in excess of $5,000,000 and must have consolidated revenues of at
least:
- $7,150,000 for the quarter ending September 30, 2000;
- $7,500,000 for the quarter ending December 31, 2000;
- $7,900,000 for the quarter ending March 31, 2001; and
- $8,300,000 for the quarter ending on June 30, 2001.
NON-COMPETITION AGREEMENT
At the effective time of the merger, HeadHunter.NET and Bernard Hodes Group
will enter into a non-competition agreement. Under the non-competition agreement
Bernard Hodes Group agrees that for a period of one year after the effective
time of the merger,
- Bernard Hodes Group will not engage in, or own, manage, operate, control
or participate in as a 10% or greater shareholder, partner, member or
joint venturer in any company which engages in, the business of creating
and operating online multi-company commercial job posting boards via the
Internet. Bernard Hodes Group is permitted to provide advisory or
consulting services to its clients related to the development of such
clients' online job boards for their own job opportunities and continue
the activities of Recruitsoft.com Inc.;
- Bernard Hodes Group will not solicit for employment any then current
employee of HeadHunter.NET who formerly worked for CareerMosaic; and
- Bernard Hodes Group will not solicit or call on as a client or customer
for the purpose of engaging in the business of creating and operating
online multi-company commercial job posting boards via the Internet, any
person or entity that has been a customer of CareerMosaic during the year
prior to the effective time of the merger.
Omnicom Group is not a party to this agreement and is not subject to the
noncompetition provisions.
ADMINISTRATIVE SERVICES AGREEMENT
At the effective time of the merger, HeadHunter.NET and Bernard Hodes Group
will enter into an administrative services agreement under which for a period of
one year after the effective time of the merger, Bernard Hodes Group will
provide specified transitional and administrative services to HeadHunter.NET to
facilitate the combination of the business of CareerMosaic with HeadHunter.NET.
For such services, HeadHunter.NET will pay a monthly or hourly fee based on the
services provided and will reimburse Bernard Hodes Group for all reasonable
out-of-pocket costs incurred by Bernard Hodes Group in connection with the
administrative services. HeadHunter.NET may terminate this agreement upon 45
days written notice.
AGENCY AGREEMENT
At the effective time of the merger, Bernard Hodes Group and HeadHunter.NET
will enter into an agency agreement under which Bernard Hodes Group may sell
HeadHunter.NET's online recruiting services at rates prescribed by
HeadHunter.NET. Bernard Hodes Group will pay to HeadHunter.NET a percentage of
all gross billings attributable to HeadHunter.NET services that it sells, which
percentage will be adjusted
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<PAGE> 64
quarterly based on the immediately preceding quarter's annualized gross
billings. Bernard Hodes Group does not have any obligation to sell
HeadHunter.NET services. This agreement has an initial term of two years and
will automatically renew for additional two year terms unless either party
terminates such agreement. Either party may terminate this agreement upon 30
days written notice.
INDEMNIFICATION AGREEMENT
At the effective time of the merger, HeadHunter.NET will enter into
indemnification agreements with each of ITC Holding Company and Bernard Hodes
Group under which HeadHunter.NET will agree to indemnify ITC Holding Company and
Bernard Hodes Group for any indemnifiable losses incurred by either of them
which is based on any action or inaction of HeadHunter.NET, except for losses
for which ITC Holding Company or Bernard Hodes Group, respectively, have
expressly agreed to be liable pursuant to any written contract between
HeadHunter.NET and ITC Holding Company or Bernard Hodes Group, respectively, or
the portion of any losses based on a final non-appealable determination by a
court that such losses were related solely to the gross negligence, recklessness
or willful misconduct of ITC Holding Company or Bernard Hodes Group,
respectively.
DIRECTOR AND OFFICER INDEMNITY AGREEMENTS
At the effective time of the merger, HeadHunter.NET will enter into
indemnification agreements with each of the three directors to be designated by
Omnicom Group prior to the effective time of the merger or shortly thereafter
pursuant to which HeadHunter.NET will agree to indemnify each of the foregoing
in the event that any such individual was or is a party or threatened to be made
a party to any action, suit or proceeding by reason of the fact that he or she
is a director of HeadHunter.NET.
THE HEADHUNTER.NET BOARD OF DIRECTORS RECOMMENDS THAT
HEADHUNTER.NET SHAREHOLDERS VOTE FOR THE APPROVAL OF THE ISSUANCE OF 7,500,000
SHARES OF HEADHUNTER.NET COMMON STOCK IN THE MERGER.
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<PAGE> 65
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined balance sheet as of March 31,
2000, reflects the assumed consummation of the merger accounted for under the
purchase method of accounting. The following unaudited pro forma combined
statements of operations for the three months ended March 31, 2000, and for the
year ended December 31, 1999, reflect the assumed consummation of merger
accounted for under the purchase method as of the beginning of each such period.
No adjustment has been included in the pro forma amounts for any anticipated
cost savings or other synergies. See "The Merger -- Accounting Treatment of the
Merger."
The unaudited pro forma financial information has been prepared by the
management of HeadHunter.NET based on the historical financial statements of
HeadHunter.NET and CareerMosaic. The unaudited pro forma combined financial
information is prepared for informational purposes only and is not necessarily
indicative of future results or of actual results that would have been achieved
had the merger been consummated at the beginning of the periods presented nor is
it indicative of future financial position or results of operations. The
unaudited pro forma combined financial information is based on the historical
financial statements of HeadHunter.NET and CareerMosaic and should be read in
conjunction with the respective historical financial statements. CareerMosaic
previously operated as a division of Bernard Hodes Group, a subsidiary of
Omnicom Group. Accordingly, CareerMosaic's historical financial information may
not be indicative of what its financial position and results of operations would
have been had it operated as a separate stand-alone entity.
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<PAGE> 66
UNAUDITED COMBINED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 2000
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
HEADHUNTER.NET CAREERMOSAIC ADJUSTMENTS HEADHUNTER.NET
-------------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............ $ 13,576,977 $ -- $ (2,000,000)(a) $ 16,576,977
5,000,000(b)
Short-term investments............... 5,503,901 -- -- 5,503,901
Accounts receivable, net............. 3,667,844 1,385,121 -- 5,052,965
Prepaid expenses and other assets.... 1,069,670 318,011 -- 1,387,681
------------ ----------- ------------ ------------
Total current assets.......... 23,818,392 1,703,132 3,000,000 28,521,524
------------ ----------- ------------ ------------
PROPERTY AND EQUIPMENT, net............ 3,390,193 913,320 -- 4,303,513
INTANGIBLES, NET....................... 1,164,658 1,264,833 91,478,239(a) 93,907,730
OTHER ASSETS........................... 575,581 265,573 -- 841,154
------------ ----------- ------------ ------------
Total assets.................. $ 28,948,824 $ 4,146,858 $ 94,478,239 $127,573,921
============ =========== ============ ============
CURRENT LIABILITIES:
Accounts payable..................... $ 1,724,984 $ 87,255 $ -- $ 1,812,239
Accrued expenses..................... 3,510,641 1,920,510 -- 5,431,151
Due to parent........................ -- 6,095,557 (6,095,557)(a) --
Customer deposits.................... 203,840 -- -- 203,840
Deferred revenue..................... 3,492,516 1,617,332 -- 5,109,848
------------ ----------- ------------ ------------
Total current liabilities..... 8,931,981 9,720,654 (6,095,557) 12,557,078
------------ ----------- ------------ ------------
Common stock......................... 109,097 100 (100)(a) 184,097
75,000
Additional paid in capital........... 64,899,582 664,346 94,260,654(a)(b) 159,824,582
Stock warrants....................... 341,834 -- -- 341,834
Accumulated deficit.................. (41,576,517) (6,238,242) 2,481,089(a)(c) (45,333,670)
Deferred compensation................ (3,757,153) -- 3,757,153(c) --
------------ ----------- ------------ ------------
Total equity.................. 20,016,843 (5,573,796) 100,573,796 115,016,843
------------ ----------- ------------ ------------
Total liabilities and
equity...................... $ 28,948,824 $ 4,146,858 $ 94,478,239 $127,573,921
============ =========== ============ ============
</TABLE>
- ---------------
(a) Reflects our estimate of the purchase price allocation arising from the
merger of CareerMosaic into our wholly owned subsidiary as if it had
occurred on January 1, 1999. A summary of the computation is as follows:
<TABLE>
<S> <C>
Purchase Price.............................................. $ 90,000,000
Less: Net tangible assets acquired.......................... (521,761)
Less: Identifiable intangible assets........................ (81,800,000)
------------
7,678,239
Plus: Transaction costs of purchase acquisition............. 2,000,000
------------
Excess purchase price over the fair value of CareerMosaic's
net assets acquired (i.e. goodwill)....................... $ 9,678,239
============
</TABLE>
Since the merger with CareerMosaic has not been consummated, the estimated
allocation of the purchase price should be considered preliminary.
Subsequent to the consummation of the transaction, we will undertake a full
investigation of the allocation of the purchase price among the assets
acquired. The result of such an investigation may materially impact our
results of operations as allocation of value among assets acquired and
liabilities assumed with differing useful lives may differ from our
management's current estimate.
(b) Reflects $5 million to be contributed by Bernard Hodes Group to
CareerMosaic.
(c) Reflects the vesting of outstanding options of HeadHunter.NET which vest
upon change in control.
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UNAUDITED COMBINED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
HEADHUNTER.NET CAREERMOSAIC ADJUSTMENTS(A) HEADHUNTER.NET
-------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
REVENUES........................... $ 6,379,553 $ 3,630,922 $ -- $ 10,010,475
OPERATING EXPENSES:
Cost of revenues................. 86,876 -- -- 86,876
Marketing and selling............ 9,250,433 4,997,251 -- 14,247,684
General and administrative....... 1,865,842 3,246,177 -- 5,112,019
Stock compensation expense....... 255,062 -- (121,120)(b) 133,942
Depreciation and amortization.... 297,137 160,059 4,573,912(c) 5,031,108
Allocated corporate costs........ -- 541,449 -- 541,449
----------- ----------- ------------- ------------
TOTAL OPERATING
EXPENSES............... 11,755,350 8,944,936 4,452,792 25,153,078
OTHER INCOME (EXPENSE):
Interest income (expense)........ -- (41,090) -- (41,090)
Other income (expense)........... 277,572 -- -- 277,572
----------- ----------- ------------- ------------
INCOME (LOSS) BEFORE INCOME
TAXES............................ (5,098,225) (5,355,104) (4,452,792) (14,906,121)
----------- ----------- ------------- ------------
INCOME TAX BENEFIT................. -- -- -- --
----------- ----------- ------------- ------------
NET INCOME (LOSS).................. $(5,098,225) $(5,355,104) $ (4,452,792) $(14,906,121)
=========== =========== ============= ============
Basic and diluted loss per
share:........................... (0.47) (0.81)
=========== ============
Weighted average number of common
shares -- basic and diluted...... 10,851,196 7,500,000(d) 18,351,196
=========== ============= ============
</TABLE>
- ---------------
(a) Adjustments have not been made to cost of revenue or to selling, general and
administrative costs. However, cost of revenue and selling, general and
administrative costs incurred by CareerMosaic may not be indicative of the
cost of revenue and selling, general and administrative costs that would
have been incurred by HeadHunter.NET in relation to the same assets.
(b) Reflects the reduction of stock compensation expense related to the
amortization of deferred compensation in connection with stock options
issued prior to January 1, 1999.
(c) Represents additional amortization based on preliminary purchase price
allocation as noted in footnote (a) to the pro forma balance sheet for the
acquisition of CareerMosaic using a five-year amortization period. Purchase
price will be allocated to certain identifiable intangible assets including
customer list, trademark, technology, workforce and non-compete agreement
with the remaining purchase price being allocated to goodwill.
(d) Reflects 7.5 million shares of HeadHunter.NET common stock issued to
stockholders of CareerMosaic in the merger (representing approximately $90
million, at $12.00 per share) as if such shares were outstanding since
January 1, 1999. Also, excludes the effect of stock options for purposes of
the diluted earnings per share calculation, since the effect for pro forma
purposes is antidilutive.
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UNAUDITED COMBINED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
HEADHUNTER.NET CAREERMOSAIC ADJUSTMENTS(A) HEADHUNTER.NET
-------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
REVENUES............................ $ 9,253,954 $13,636,170 $ -- $ 22,890,124
OPERATING EXPENSES:
Cost of revenues.................. 147,275 -- -- 147,275
Marketing and selling............. 9,898,815 6,402,685 -- 16,301,500
General and administrative........ 3,786,728 7,083,566 -- 10,870,294
Stock compensation expense........ 5,528,114 -- (484,480)(b) 5,043,634
Depreciation and amortization..... 528,256 280,075 18,295,648(c) 19,103,979
Allocated corporate costs......... -- 2,049,778 -- 2,049,778
------------ ----------- ------------- ------------
Total Operating
Expenses................ 19,889,188 15,816,104 17,811,168 53,516,460
OTHER INCOME (EXPENSE):
Interest income (expense)......... -- (31,083) -- (31,083)
Other income (expense)............ 379,198 -- -- 379,198
------------ ----------- ------------- ------------
INCOME (LOSS) BEFORE INCOME TAXES... (10,256,036) (2,211,017) (17,811,168) (30,278,221)
------------ ----------- ------------- ------------
INCOME TAX BENEFIT.................. -- -- -- --
------------ ----------- ------------- ------------
NET INCOME (LOSS)................... $(10,256,036) $(2,211,017) $ (17,811,168) $(30,278,221)
============ =========== ============= ============
Basic and diluted loss per share:
(d)............................... (5.90) (3.51)
============ ============
Weighted average number of common
shares -- basic and diluted....... 5,412,135 9,390,411(e) 14,802,546
============ ============= ============
</TABLE>
- ---------------
(a) Adjustments have not been made to cost of revenue or to selling, general
and administrative costs. However, cost of revenue and selling, general and
administrative costs incurred by CareerMosaic may not be indicative of the
cost of revenue and selling, general and administrative costs that would
have been incurred by HeadHunter.NET in relation to the same assets.
(b) Reflects the reduction of stock compensation expense related to the
amortization of deferred compensation in connection with stock options
prior to January 1, 1999.
(c) Represents additional amortization based on preliminary purchase price
allocation as noted in footnote (a) to the pro forma balance sheet for the
acquisition of CareerMosaic using a five-year amortization period. Purchase
price will be allocated to certain identifiable intangible assets including
customer list, trademark, technology, workforce and non-compete agreement
with the remaining purchase price being allocated to goodwill.
(d) In January 1999, a one-time non-cash charge to accumulated deficit of $21.7
million was recorded in conjunction with the conversion of the loan and
security agreement from debt to equity. This conversion was accounted for
as a distribution to the Class A preferred shareholders and therefore, an
increase in net loss attributable to common shareholders.
(e) Reflects (i) 3 million shares of HeadHunter.NET common stock issued in a
public offering completed August 19, 1999 (ii) 7.5 million shares of
HeadHunter.NET common stock issued to stockholders of CareerMosaic in the
merger (representing approximately $90 million, at $12.00 per share) as if
such shares were outstanding since January 1, 1999. Also, excludes the
effect of stock options for purposes of the diluted earnings per share
calculation, since the effect for pro forma purposes is antidilutive.
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COMPARATIVE PER SHARE DATA
The following table summarizes specified unaudited historical per share
data of HeadHunter.NET and CareerMosaic and the combined per share data on an
unaudited pro forma basis. Neither HeadHunter.NET nor CareerMosaic has declared
cash dividends during the periods presented in the table below. You should read
the information below along with the selected historical financial information
and the unaudited pro forma combined condensed financial information included
elsewhere in this proxy statement/prospectus. The pro forma combined condensed
financial information is not necessarily indicative of the results of future
operations or the actual results that would have occurred at the beginning of
the periods presented.
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
DECEMBER 31, 1999 MARCH 31, 2000
----------------- --------------
<S> <C> <C>
HEADHUNTER.NET
Historical HeadHunter.NET:
(Loss) from continuing operations per share -- basic and
diluted(1)............................................. $ (1.90) $ (0.47)
Book value per share(2)................................... $ 4.57 $ 1.84
Pro Forma Combined:
(Loss) from continuing operations per share -- basic and
diluted(1)............................................. $ (2.05) $ (0.81)
Book value per share(2)(3)................................ $ 8.09 $ 6.27
CAREERMOSAIC(4)
Historical CareerMosaic(5):
(Loss) from continuing operations per share -- basic and
diluted................................................ $(22,110.17) $(53,551.04)
Book value per share(2)................................... $ (2,186.92) $(55,737.96)
Equivalent Pro Forma Combined:(6)
(Loss) from continuing operations per share -- basic and
diluted(1)............................................. $ (4.04) $ (1.99)
Book value per share(2)................................... $ 15.97 $ 15.34
</TABLE>
- ---------------
(1) In January 1999, a one-time non-cash charge to accumulated deficit of $21.7
million was recorded in conjunction with the conversion of the loan and
security agreement from debt to equity. This conversion was accounted for as
a distribution to the Class A preferred shareholders and therefore, an
increase in net loss attributable to common shareholders. As such, net loss
per share attributable to common shareholders for the year ended December
31, 1999 would be as follows:
<TABLE>
<S> <C>
Historical HeadHunter.NET........................... $(5.90)
Pro Forma Combined.................................. (3.51)
Equivalent Pro Forma Combined....................... (6.93)
</TABLE>
(2) Book value is computed by dividing total shareholders' equity by the number
of shares outstanding.
(3) HeadHunter.NET pro forma combined book value per share is computed by
dividing pro forma shareholders' equity by the pro forma number of shares of
HeadHunter.NET common stock which would have been outstanding had the merger
been completed as of the balance sheet date.
(4) Basic and diluted per share data calculated based on 100 weighted average
shares of CareerMosaic's common stock as of December 31, 1999 and March 31,
2000.
(5) Because CareerMosaic previously operated as a subsidiary at Bernard Hodes
Group, the historical per share data does not provide a useful basis for
comparison to HeadHunter.NET.
(6) Equivalent pro forma combined amounts per share of CareerMosaic common stock
represent the pro forma combined amounts per share of HeadHunter.NET common
stock assuming the 750:1 exchange ratio.
MARKET PRICE INFORMATION
HeadHunter.NET Market Price Information
HeadHunter.NET common stock has traded on the Nasdaq National Market under
the symbol "HHNT" since August 19, 1999, the date of HeadHunter.NET's initial
public offering.
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The table below sets forth, for the periods indicated, the high and low
sale prices of HeadHunter.NET common stock as reported on the Nasdaq National
Market.
Fiscal Period
<TABLE>
<CAPTION>
HIGH PRICE LOW PRICE
---------- ---------
<S> <C> <C>
1999
From August 19, 1999 -- September 30, 1999.................. $21.38 $ 9.50
From September 30, 1999 -- December 31, 1999................ $16.75 $10.19
2000
From January 1, 2000 -- March 31, 2000...................... $26.13 $10.75
From March 31, 2000 -- May 18, 2000......................... $18.13 $10.63
</TABLE>
You are advised to obtain current market quotations for HeadHunter.NET
common stock. No assurance can be given as to the market price of HeadHunter.NET
common stock at any time before or after the completion of the merger. Because
the exchange ratio is fixed, it will not be adjusted based on increases or
decreases in the market price of HeadHunter.NET common stock which could occur
before the merger becomes effective. In the event the market price of
HeadHunter.NET common stock decreases or increases prior to the completion of
the merger, the value of the HeadHunter.NET common stock to be received in the
merger in exchange for CareerMosaic common stock would correspondingly decrease
or increase.
CareerMosaic Price Information
CareerMosaic common stock is not listed or traded on any exchange or
quotation system. As of the date of this proxy statement/prospectus,
CareerMosaic is a subsidiary of Bernard Hodes Group. As such, there is no
meaningful basis upon which to determine a market price for CareerMosaic common
stock.
RECENT CLOSING PRICES
The last sale price per share of HeadHunter.NET common stock as reported on
the Nasdaq National Market on (1) April 14, 2000, the last full trading day
prior to the public announcement that HeadHunter.NET and CareerMosaic had
entered into a merger agreement, was $14.50 and (2) May 18, 2000, the most
recent practicable date prior to the printing of this proxy
statement/prospectus, was $11.69.
Shares of CareerMosaic common stock are not listed or traded on any
exchange or quotation system.
DIVIDENDS
HeadHunter.NET
In November 1997, HNET, Inc., a predecessor to HeadHunter.NET, made a
distribution to a shareholder in the amount of $100,000. HeadHunter.NET does not
anticipate paying cash dividends on the HeadHunter.NET common stock in the
foreseeable future because it intends to retain its earnings, if any, to finance
its growth and for general corporate purposes.
CareerMosaic
CareerMosaic has never paid and does not anticipate paying dividends on the
CareerMosaic common stock.
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COMPARISON OF RIGHTS OF HOLDERS OF HEADHUNTER.NET COMMON STOCK
AND CAREERMOSAIC COMMON STOCK
HeadHunter.NET is a Georgia corporation subject to the provisions of
Georgia law, while CareerMosaic is a Delaware corporation subject to the
provisions of Delaware law. Because of differences in governing law, and
different provisions in the companies' articles or certificates of incorporation
and bylaws, the rights of shareholders of the companies will differ in some
instances.
Set forth below are comparisons between the rights of HeadHunter.NET
shareholders and CareerMosaic stockholders under their respective articles or
certificates of incorporation and bylaws and governing state law. This
description summarizes the material differences that may affect the rights of
shareholders of HeadHunter.NET and CareerMosaic, but does not purport to be a
complete statement of all such differences. Shareholders should read the
relevant provisions of the laws and documents discussed below.
CAPITALIZATION
HeadHunter.NET. HeadHunter.NET's articles of incorporation provide that
the total number of authorized shares of HeadHunter.NET capital stock is
58,000,000 shares, which consists of 45,500,000 shares, par value $0.01 per
share, of HeadHunter.NET common stock, 7,500,000 shares, par value $0.01 per
share, of Class A preferred stock and 5,000,000 shares, par value $0.01 per
share, of Class B serial preferred stock, of which 500,000 shares have been
designated as junior participating preferred stock in connection with the
adoption by HeadHunter.NET of the shareholder protection rights agreement. The
number of authorized shares of common stock may be increased or decreased (but
not below the number of shares outstanding) by the affirmative vote of a
majority of the stock entitled to vote. The HeadHunter.NET board has the
authority to issue shares of authorized Class B serial preferred stock, from
time to time in one or more series, and to fix the rights and preferences,
including voting rights, of each series of Class B serial preferred stock. The
HeadHunter.NET board may provide that the rights and preferences of any series
of preferred stock are superior to the rights and preferences of HeadHunter.NET
common stock or any other series of preferred stock.
CareerMosaic. CareerMosaic's certificate of incorporation provides that
the total number of authorized shares of capital stock is 10,000 shares of
common stock.
NUMBER AND ELECTION OF DIRECTORS
HeadHunter.NET. HeadHunter.NET's bylaws provide that its board shall
consist of at least three persons and no more than eleven persons, as the board
shall designate. Under the merger agreement, HeadHunter.NET has adopted an
amendment to its bylaws which would set the size of the board at seven members
and which would prohibit any increase or decrease of the board by the board
without approval of at least 2/3 of the board members. HeadHunter.NET's board is
divided into three classes, consisting of as nearly an equal number of directors
as possible, with each class serving a three-year term provided their successors
are elected and qualified. Whenever the number of directors is increased between
annual meetings of HeadHunter.NET shareholders, under the HeadHunter.NET
articles and bylaws, a majority of the directors then in office or a sole
remaining director have the power to elect the new directors until the next
annual meeting of shareholders.
CareerMosaic. Under Delaware law, directors are elected at each annual
meeting of stockholders unless the certificate of incorporation or bylaws
provide otherwise, or if their terms are staggered. CareerMosaic's bylaws
provide that the number of members of the CareerMosaic board shall consist of no
less than one individual, as the board shall designate. Three directors
currently serve on CareerMosaic's board.
VOTING
HeadHunter.NET. HeadHunter.NET's articles and bylaws provide that each
shareholder of record shall have one vote for each share of stock entitled to
vote. Cumulative voting is not allowed.
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CareerMosaic. CareerMosaic's bylaws provide that each stockholder of
record shall have one vote for each share of stock entitled to vote. Cumulative
voting is not allowed.
SPECIAL MEETING OF SHAREHOLDERS
HeadHunter.NET. HeadHunter.NET's bylaws provide that special meetings of
the HeadHunter.NET shareholders may be called at any time by the HeadHunter.NET
chairman of the board, president or board of directors or holders of two-thirds
of the votes entitled to be cast on any issue proposed to be considered at such
special meeting.
CareerMosaic. Under Delaware law, a special meeting of stockholders may be
called by the board of directors or by other persons authorized by the
certificate of incorporation or bylaws. CareerMosaic's bylaws provide that
special meetings of the stockholders may be called at any time by the board of
directors or the chief executive officer of CareerMosaic. Special meetings will
also be called by the secretary or chief executive officer of CareerMosaic upon
the written request of a majority of the directors or upon the written request
of the holders of at least 10% of all the outstanding shares of CareerMosaic
voting stock.
WRITTEN CONSENT OF SHAREHOLDERS
HeadHunter.NET. Under Georgia law, shareholders may take action by written
consent in lieu of voting at a stockholders meeting. Under Georgia law, all
actions taken by written consent must be unanimous unless the articles of
incorporation provide otherwise. HeadHunter.NET's articles provide that any
action required or permitted to be taken at a shareholder's meeting may be taken
without a meeting if the action is taken by persons who hold of record at least
two-thirds of all of the then outstanding shares of HeadHunter.NET capital stock
entitled to vote upon such action.
CareerMosaic. Delaware law provides that, unless otherwise provided in the
certificate of incorporation, any action that could be taken by the stockholders
at a meeting may be taken without a meeting if a consent or consents in writing,
setting forth the action taken, is signed by the holders of record of
outstanding stock having at least the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote on the matter were present and voted. CareerMosaic's bylaws
provide that actions may be taken by stockholders without a meeting by the
written consent of the holders of shares having at least the minimum number of
votes required to authorize the action at meeting at which all shares entitled
to vote were present and voted.
NOTICE OF SHAREHOLDER MEETINGS AND ACTIONS
HeadHunter.NET. HeadHunter.NET's bylaws require that written notice of
annual and special meetings be given to each shareholder entitled to vote at the
meeting not less than ten nor more than sixty days before the date of the
meeting.
CareerMosaic. CareerMosaic's certificate of incorporation and bylaws do
not require stockholders to provide advance written notice for business to be
brought before a meeting of the stockholders. CareerMosaic's bylaws require that
written notice of annual and special meetings be given to each stockholder
entitled to vote at the meeting not less than twenty nor more than sixty days
before the date of the meeting.
INDEMNIFICATION
HeadHunter.NET. The HeadHunter.NET bylaws provide that HeadHunter.NET will
indemnify an individual who is a party to a proceeding because he or she is or
was a director or officer against liability incurred in the proceeding, provided
such individual is not adjudged liable to HeadHunter.NET or subjected to
injunctive relief in favor of HeadHunter.NET:
- for any appropriation, in violation of his or her duties, of any
HeadHunter.NET business opportunity,
- for acts or omissions which involve intentional misconduct or knowing
violation of law,
- for any unlawful distribution, or
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- for any transaction from which he or she received an improper personal
benefit.
CareerMosaic. Under Delaware law, a corporation may indemnify any person
who was or is a party or is threatened to be made a party to any proceeding,
other than an action by or on behalf of the corporation, because the person is
or was a director or officer, against liability incurred in connection with the
proceeding if:
- the director or officer acted in good faith and in a manner reasonably
believed to be in the best interests of the corporation; and
- with respect to any criminal action or proceeding, had no reasonable
cause to believe the conduct was unlawful.
Under Delaware law, a corporation may not indemnify a director or officer in
connection with any proceeding in which the director or officer has been
adjudged to be liable to the corporation unless and only to the extent that the
court in which the proceeding was brought determines that, in view of all the
circumstances of the case, the director or officer is fairly and reasonably
entitled to indemnity for such expenses which the court deems proper.
Delaware law provides that any indemnification for a director or officer,
unless ordered by a court, is subject to a determination that the director or
officer has met the applicable standard of conduct. The determination will be
made:
- by a majority vote of the directors who are not parties to such
proceeding, even though less than a quorum;
- if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion; or
- by the stockholders.
CareerMosaic's certificate of incorporation and bylaws provide that
CareerMosaic will indemnify its directors and officers to the fullest extent
allowed by law.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
HeadHunter.NET. The HeadHunter.NET articles eliminate a director's
personal liability for monetary damages to HeadHunter.NET or any of its
shareholders for any breach of duties of such position, except that such
liability is not eliminated for:
- any appropriation, in violation of such director's duties, of any
business opportunity of HeadHunter.NET,
- acts or omissions which involve intentional misconduct or a knowing
violation of law,
- liability for any unlawful distributions,
- any transaction from which the director received an improper personal
benefit.
HeadHunter.NET's articles of incorporation provide that if at any time
Georgia law is amended to further eliminate or limit the liability of a
director, then the liability of each director of HeadHunter.NET shall be
eliminated or limited to the fullest extent permitted thereby.
CareerMosaic. Delaware law provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of
directors to the corporation or its stockholders for monetary damages for breach
of a fiduciary duty as a director, except no provision in the certificate of
incorporation can eliminate or limit the liability of a director:
- for any breach of a director's duty of loyalty to the corporation or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
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- statutory liability for unlawful payment of dividends or unlawful stock
purchase or redemption; or
- for any transaction from which the director derived an improper personal
benefit.
CareerMosaic's certificate provides that, to the fullest extent permitted
by law, all personal liability of the directors of CareerMosaic is eliminated.
CHARTER AMENDMENTS
HeadHunter.NET. Under Georgia law, unless the articles of incorporation
provide otherwise, a corporation's board of directors may adopt one or more
amendments to the corporation's articles of incorporation without shareholder
action:
- To extend the duration of the corporation if it was incorporated at a
time when limited duration was required by law;
- To delete the names and addresses of the initial directors;
- To delete the name and address of the initial registered agent or
registered office, if an annual registration is on file with the
Secretary of State;
- To change each issued or each issued and unissued authorized share of an
outstanding class into a greater number of whole shares if the
corporation has only shares of that class outstanding;
- To change or eliminate the par value of each issued and unissued share of
an outstanding class if the corporation has only shares of that class
outstanding;
- To change the corporate name; or
- To make any other change expressly permitted by Georgia law to be made
without shareholder action.
Other amendments require the approval of at least a majority of the outstanding
stock entitled to vote on the amendment proposed by the board of directors.
CareerMosaic. Under Delaware law, an amendment to the certificate of
incorporation of a corporation requires the approval of the board of directors
and the approval of the holders of a majority of the outstanding stock entitled
to vote on the proposed amendment. The holders of the outstanding shares of a
class are entitled to vote as a separate class on a proposed amendment that
would:
- increase or decrease the aggregate number of authorized shares of such
class;
- increase or decrease the par value of the shares of such class; or
- alter or change the powers, preferences or special rights of the shares
of such class, so as to affect them adversely.
If any proposed amendment would alter or change the powers, preferences or
special rights of one or more series of any class so as to affect them
adversely, but would not so affect the entire class, then only the shares of the
series so affected by the amendment will be considered a separate class.
Under CareerMosaic's certificate of incorporation, the certificate of
incorporation may be amended in any manner allowed by law.
AMENDMENTS TO BYLAWS
HeadHunter.NET. Under HeadHunter.NET's articles, HeadHunter.NET's bylaws
may be altered, amended, repealed or appealed by either an affirmative vote of
two-thirds of the shares of capital stock entitled to vote in the election of
directors or the board of directors.
CareerMosaic. Under Delaware law, unless a corporation's certificate of
incorporation provides otherwise, the stockholders will have the power to adopt,
amend or repeal the bylaws. CareerMosaic's bylaws allow the directors and
stockholders to amend or repeal the bylaws.
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APPRAISAL RIGHTS
HeadHunter.NET. Under Georgia law, a shareholder of a corporation
participating in certain major corporate transactions may be entitled to
dissenters' or appraisal rights pursuant to which such shareholder may receive
cash in the amount of the fair value of his or her shares in lieu of the
consideration he or she would otherwise receive in the transaction. Under
Georgia law, dissenters' rights are available in the event of any of the
following corporate actions:
- a merger if the approval of the shareholders is required for such merger
and the shareholder is entitled to vote on the merger or if the
corporation is a subsidiary that is merged with its parent,
- a share exchange in which the corporation's shares will be acquired, if
the shareholder is entitled to vote on the share exchange,
- a sale or exchange of all or substantially all of the assets of a
corporation, if a shareholder vote is required, other than a sale
pursuant to a court order or a sale for cash the proceeds of which will
be distributed to the shareholder within one year,
- an amendment of the articles of incorporation that adversely affects
rights relating to such shareholder's shares, or
- any corporate action taken pursuant to a shareholder vote to the extent
the articles of incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
This right is not available when the affected shares are listed on a
national securities exchange or held of record by more than 2,000 shareholders
unless the articles of incorporation or a resolution of the board of directors
approving the transaction provide otherwise, or in a plan of merger or share
exchange the holders of such shares are required to accept anything other than
shares of the surviving corporation or another publicly held corporation which
at the effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000 shareholders,
except for payments in lieu of fractional shares.
CareerMosaic. Under Delaware law, a stockholder of a Delaware corporation
is generally entitled to demand an appraisal and to obtain payment of the fair
value of his or her shares in the event of a merger or consolidation in which
the corporation is to be a party. The right to demand an appraisal does not
apply to holders of shares of any class or series of stock which are:
- shares of a surviving corporation and if a vote of the stockholders of
that corporation is not necessary to authorize the merger or
consolidation;
- listed on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., such as The Nasdaq National
Market; or
- held of record by more than 2,000 holders.
Appraisal rights are available for holders of shares of any class or series
of stock of a Delaware corporation if the holders are required by the terms of
the merger or consolidation agreement to accept in exchange for their stock
anything except:
- shares of stock of the corporation surviving or resulting from the merger
or consolidation;
- shares of stock of any other corporation which, at the effective time of
the merger or consolidation, will be listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, such as The Nasdaq National Market, or held of record by more
than 2,000 holders;
- cash instead of fractional shares of the corporations described above; or
- any combination of the shares of stock and cash instead of fractional
shares described above.
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RIGHTS PLAN
HeadHunter.NET. HeadHunter.NET's rights plan is described above under
"Other Agreements -- Shareholder Protection Rights Agreement," beginning on page
52.
CareerMosaic. CareerMosaic does not have a rights plan.
SHAREHOLDER SUITS
HeadHunter.NET. Under Georgia law, a shareholder may not commence or
maintain a derivative proceeding unless the shareholder was shareholder of the
corporation at the time of the act or omission complained of or became a
shareholder through transfer by operation of law from one who was a shareholder
at that time. In addition, Georgia law requires that the shareholder fairly and
adequately represents the interests of the corporation in enforcing the rights
of the corporation.
CareerMosaic. Under Delaware law and applicable court decisions, a
stockholder may file a lawsuit on behalf of the corporation. Delaware law
provides that a stockholder must state in the complaint that he or she was a
stockholder of the corporation at the time of the transaction of which he or she
complains. However, no action may be brought by a stockholder unless he first
seeks remedial action on his claim from the corporation's board of directors,
unless the demand for redress is excused.
The board of directors may appoint an independent litigation committee to
review a stockholder's request for a derivative action and the litigation
committee, acting reasonably and in good faith, can terminate the stockholder's
action subject to a court's review of the committee's independence, good faith
and reasonable investigation.
BUSINESS COMBINATION RESTRICTIONS
HeadHunter.NET. Under Georgia law, "business combinations" by corporations
with "interested shareholders" are subject to a moratorium of three or five
years, respectively, unless specified conditions are met. The prohibited
transactions include a merger with, disposition of assets to, or the issuance of
stock to, the interested shareholder, or certain transactions that have the
effect of increasing the proportionate share of the outstanding securities held
by the interested shareholder. Under Georgia law, an interested shareholder may
avoid the prohibition against effecting certain significant transactions with
the corporation if the board of directors, prior to the time such shareholder
becomes an interested shareholder, approves such transaction or the transaction
by which such shareholder becomes an interested shareholder. The similar
provisions of Georgia law do not apply to a Georgia corporation unless it has
affirmatively elected in its bylaws to be governed by them.
The HeadHunter.NET bylaws currently contain a provision electing to be
governed by the similar provisions of Georgia law. Georgia law also contains a
provision concerning "fair price requirements" which if elected by a Georgia
corporation in its bylaws imposes certain requirements on "business
combinations" of a Georgia corporation with any person who is an "interested
shareholder" of that corporation. The HeadHunter.NET bylaws presently contain a
provision electing to be governed by the fair price requirements.
CareerMosaic. CareerMosaic is subject to the antitakeover provisions of
Delaware law. The antitakeover provisions prohibit "business combinations,"
subject to some limitations, between a Delaware corporation and an interested
stockholder, as described below, within three years of the time the interested
stockholder became an interested stockholder unless:
- before that time, the board of directors approved either the business
combination or the transaction in which the interested stockholder became
an interested stockholder;
- upon completion of the transaction that resulted in the stockholder
becoming an interested stockholder, the stockholder owned at least 85% of
the voting stock of the corporation, excluding shares held by directors
who are also officers of the corporation and by employee stock ownership
plans that do not permit employees to determine confidentially whether
shares held by the plan will be tendered in a tender or exchange offer;
or
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- on or following that time, the business combination is approved by the
board of directors and the business combination transaction is approved
by the holder of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the interested stockholder.
The business combination restrictions described above described above do
not apply if:
- the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by the antitakeover
provisions in Delaware law;
- the holders of a majority of the voting stock of the corporation approve
an amendment to its certificate of incorporation or bylaws expressly
electing not to be governed by the antitakeover provisions, which
election will be effective 12 months after the amendment's adoption and
would not apply to any business combination with a person who was an
interested stockholder at or prior to the time the amendment was
approved; or
- the corporation does not have a class of voting stock that is (a) listed
on a national securities exchange, (b) authorized for quotation on Nasdaq
or a similar quotation system, or (c) owned by more than 2,000
stockholders.
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INFORMATION REGARDING HEADHUNTER.NET
HEADHUNTER.NET BUSINESS
OVERVIEW OF OUR BUSINESS
HeadHunter.NET is a leading provider of online recruiting services to
employers, recruiters, and job seekers via its web site at www.headhunter.net.
We enable employers and recruiters to advertise job opportunities and review
resumes online, and job seekers to identify, research, evaluate and apply to a
broad range of job opportunities online. Our revenues have grown rapidly,
increasing from approximately $1.1 million for the year ended December 31, 1998
to approximately $9.3 million for the year ended December 31, 1999. Our revenues
for the three months ended March 31, 2000 were approximately $6.4 million. We
derive revenue primarily from fees paid by employers and recruiters to post job
opportunities on our web site, to access resumes posted by job seekers on our
web site and to cross-post their job opportunities to numerous free job sites
and online news groups.
THE MARKET OPPORTUNITY FOR ONLINE RECRUITING
According to interbiznet.com's 2000 Electronic Recruiting Index, the market
for recruitment advertising in the United States is approximately $11 billion
and rapidly growing. We believe factors such as the increasing labor shortage
and employee turnover are forcing employers to increase spending for recruiting
efforts in order to maintain and grow their workforce.
Traditionally, employers and recruiters have used various advertising
methods to achieve their recruiting objectives. These methods include newspaper
classifieds and other print advertising, career fairs, job search agents, and
on-campus recruiting. Each of these methods have their own limitations, but in
general these methods are typically:
- very time consuming from the initial screening of the candidate to the
final hire;
- expensive as it relates to providing full descriptions of an employer or
job opportunity and advertising nationally in a print classified
advertisement, or paying the placement fees associated with hiring a job
search agent; and
- limiting with respect to the amount and flow of timely information
between the employer and the job candidate.
With the growing acceptance of the Internet as a means of sharing
information, communicating and conducting commerce electronically, we believe
the Internet has become an attractive medium for recruiting. We expect companies
from a broad range of industries to increase their online recruiting efforts.
Forrester Research estimates that the size of the online recruiting market will
increase at a compound annual growth rate of 61.3% from $411 million in 1999 to
$3.2 billion by 2004.
We believe that online recruiting has a number of advantages over
traditional means of recruiting and job searching because it:
- is interactive, allowing immediate links to additional information;
- provides information about local and geographically dispersed job seekers
and job opportunities;
- allows employers, recruiters and job seekers to conduct more focused
searches;
- allows employers, recruiters and job seekers to research and gather
information anonymously;
- is more cost-effective; and
- is accessible at any time by employers, recruiters and job seekers.
Currently, employers and recruiters advertising job opportunities across
several geographic regions or industries are likely to post these job
opportunities on multiple recruiting web sites. Each web site offers these
employers or recruiters different services and varying degrees of control to
manage their online recruiting. As
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a result, they must spend significant time and resources to manage numerous
relationships and understand various technologies and posting processes. Despite
the benefits of online recruiting relative to traditional methods of recruiting,
we believe that many of the online recruiting web sites are limited in that
they:
- prohibit recruiting firms from posting job opportunities on their web
sites;
- are niche sites that focus on a specific industry sector or functional
area (for example, technology or sales and marketing); or
- are geographically focused.
We believe that employers and recruiters will increasingly utilize those
online recruiting services that enable them to access a large number of job
seekers and exercise a high degree of control over the exposure of their job
opportunities.
THE HEADHUNTER.NET SOLUTION
We believe that we provide a superior online recruiting solution to
employers, recruiters and job seekers by providing them with services focused on
reducing the time, cost and effort of the recruiting and job seeking processes
as compared to traditional methods. In addition to the advantages we offer over
traditional methods of job searching and recruiting, we provide employers,
recruiters and job seekers with the following advantages over other online
recruiting services:
A Large Number of Qualified Job Seekers. We believe that employers and
recruiters consider access to a large number of qualified job seekers a critical
factor in determining which online recruiting services to use. Our online
recruiting services attract a large number of job seekers. During February 2000,
based on data from our server log files, our web site averaged over 170,000
users and more than 2.3 million page views per business day.
Access to Job Opportunities Posted by Both Employers and Recruiters. We
enable both employers and recruiters to post job opportunities on our web site
and to access resumes posted on our web site. We believe that job seekers
benefit significantly from our practice of including recruiters on our web site.
Some of our competitors elect to prohibit recruiters from using their recruiting
services or compete directly with such recruiting firms. We provide an
independent online solution to recruiters which we believe results in superior
services to our job seekers by (1) providing them with access to the broad
universe of job opportunities posted by recruiters, and (2) increasing the
exposure for their resumes they post on our web site.
Employers and Recruiters Can Improve the Placement and Increase Exposure of
Their Job Opportunities. Due to the breadth of job opportunities posted on our
web site, a single focused job search can return numerous job opportunities on
several pages. In order to enhance the visibility of their job opportunities, we
enable employers and recruiters to improve the placement in a search result by
purchasing enhanced performance packages for job opportunities posted on our web
site. We list a job opportunity in a search result according to the level of
performance package purchased by the employer or recruiter. The higher the level
of the performance package purchased for a job opportunity is, the closer to the
top of the list it appears in a search result. We believe these performance
packages provide employers and recruiters with a high degree of flexibility to
manage their online recruiting needs based on the market dynamics of the
category and geographic location of each job opportunity.
Breadth of Job Opportunities Available on Our Web Site. We enable
employers, recruiters and job seekers to achieve their recruiting and job search
objectives through a single web site. Our web site provides information
regarding a large number of geographically diverse job opportunities
representing a wide variety of industries and occupations. At March 31, 2000, we
had approximately 10,000 employers and recruiters paying to use our services. We
focus on employers, recruiters and job seekers throughout the United States and
across multiple industries, unlike many of our competitors which have a limited
industry or geographic focus. We also provide access to job opportunities posted
by recruiters, as well as employers, which increases the breadth of available
job opportunities.
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Employers and Recruiters Can Track, Measure and Analyze Results of Their
Online Recruiting Efforts. We provide employers and recruiters with information
in their monthly billing statement regarding the number of times (1) each of
their job opportunities was retrieved by a job search, (2) the page containing
each of their job opportunities was viewed, (3) job seekers viewed more
information online about their job opportunities, and (4) job seekers responded
online to their job opportunities. Employers and recruiters may also access
current information through our web site regarding click-throughs and responses
and can use this information to frequently evaluate the results of each job
opportunity posted and to better manage their online recruiting needs.
Ease of Use and Functionality of Our Web Site. We make the process of
posting job opportunities and searching for jobs on our web site easy and fast.
Employers and recruiters can post job opportunities and instantly update them
online, eliminating delays associated with paperwork and telephone or facsimile
confirmations. Employers and recruiters may also elect to cross-post their job
opportunities to a network of over 250 web sites and online news groups. This
allows employers and recruiters to better manage their online recruiting needs
because they can post job opportunities quickly and on multiple web sites. Job
seekers may store their resumes online privately so they may easily and quickly
apply for job opportunities of interest to them.
OUR GROWTH STRATEGY
Our objective is to be the leading provider of online recruiting services
to employers and recruiters. The key elements of our strategy to accomplish this
objective include the following:
Continue to Aggressively Expand Our Sales Force. We have increased our
sales force from 32 persons at June 30, 1999 to 79 persons as of March 31, 2000.
We plan to expand rapidly our direct sales efforts by increasing the size of our
existing sales force in major metropolitan areas, such as Atlanta, Boston,
Chicago, Dallas, Los Angeles, New York City, San Francisco and Washington, D.C.,
and by adding personnel to focus on other metropolitan markets such as Austin
and Houston, in order to further penetrate those markets. We believe that local
market presence gives us a better understanding of that market's particular
recruiting needs. We also intend to increase significantly our telephone sales
personnel to focus on markets and potential customers which do not currently
require our direct sales efforts in order to further penetrate our target
customers.
Continue to Increase Awareness of the HeadHunter.NET Brand. We plan to
continue to increase awareness of the HeadHunter.NET brand through an aggressive
marketing campaign that combines online and traditional advertising, direct
marketing and strategic relationships. Building the HeadHunter.NET brand is
important to our success because we believe it will increase the number of job
seekers using our online recruiting service and, as a result, we believe that
employers and recruiters will be more likely to use our services. We also
believe that increasing the awareness of our brand among employers and
recruiters will increase the effectiveness of our sales efforts.
Develop Alternative Channels of Distribution Through Strategic
Relationships. We have entered into and continuously evaluate strategic
relationships as a means to increase traffic to our web site, enhance visibility
of job opportunities, increase awareness of the HeadHunter.NET brand, and
provide marketing and promotional opportunities. For example, we recently have
entered into agreements with NBC Internet and a subsidiary of Cox Interactive
Media and we plan to establish strategic relationships with industry specific
web sites and other partners who we believe will increase our exposure.
Continue to Enhance Web Site Functionality. We believe that our web site
currently provides an easy, efficient and cost-effective method of conducting
online recruiting. Employers and recruiters can post job opportunities and
update or change them in real-time. We intend to add enhancements that increase
the functionality of our web site for employers and recruiters. For example, in
December 1999 we added the ability for employers and job seekers to cross-post
job opportunities to over 250 web sites and online news groups. Additionally, we
intend to enhance the design and functionality of our web site so that job
seekers can conduct faster, more focused and more accurate searches.
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Pursue Strategic Acquisitions of Complementary Businesses and
Technologies. We plan to evaluate possible acquisitions of complementary
businesses, products and technologies. We will explore acquisition or investment
opportunities if we believe they will enable us to accelerate our growth, add
new content, develop new technologies or penetrate new markets.
OUR SERVICES
We generate revenues from primarily three services that we offer employers
and recruiters, which enable them to: (1) post job opportunities; (2) access
complete resumes posted by job seekers on our web site; and (3) cross-post job
opportunities to a network of over web sites and online news groups. We also
allow job seekers to post their resumes and access our database of job
opportunities free of charge.
Services to Employers and Recruiters.
Posting Job Opportunities. Employers and recruiters post job opportunities
on our web site for a minimum of 30 days by purchasing performance packages.
They can post job opportunities and instantly update, change or remove them
online. Each job posting is available to the large number of qualified job
seekers who use our web site. In addition, due to the breadth of job
opportunities on our web site, a single focused job search can return numerous
job opportunities on several pages. In order to enhance the visibility of their
job opportunities, we enable employers and recruiters to improve their placement
in a search result by purchasing enhanced performance packages. We list a job
opportunity in a search result according to the level of performance package
purchased by the employer or recruiter. The higher the level of the performance
package purchased for a job opportunity is, the closer it appears to the top of
the list in a search result. We believe these performance packages provide
employers and recruiters with a high degree of flexibility to manage their
online recruiting needs based on the market dynamics of the category and
geographic location of each job opportunity.
Resume Access. In February 2000, we began charging employers and
recruiters a fee to access any complete resume posted on our web site. Employers
and recruiters can purchase access to resumes posted on our web site for periods
of three months or one year.
Cross-Posting. Employers and recruiters may pay a flat fee to cross-post
all of their job opportunities posted on our web site to a network of over 250
web sites and online news groups to increase the exposure of such job
opportunities with relatively minimal effort.
Account Options for Employers and Recruiters.
Employers and recruiters can purchase our services through one of the
following accounts:
- EaseEPost. EaseEPost allows employers and recruiters immediate access to
any of our services online using a credit card. This completely automated
account is designed for employers and recruiters with occasional
recruiting needs. Employers and recruiters pay a monthly fee to purchase
enhanced performance packages and to purchase other value add services
such as access to the resumes posted on our web site and cross-posting
their job opportunities to a network of over 250 web sites and online
news groups.
- Corporate Accounts. Corporate accounts are designed for employers and
recruiters that regularly post multiple job opportunities on our web
site. Corporate account participants can access statistics online
regarding the number of times users viewed additional information online
about each job opportunity and the number of online responses to each job
opportunity. Employers and recruiters use this information to quickly
evaluate the results of any posted job opportunity. Corporate account
participants also receive monthly billing statements containing
statistical information that they can use to track and measure the
success of their online recruiting efforts. Corporate account
participants pay a negotiated fee for the performance package and value
add services they choose to purchase.
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Services to Job Seekers
Job seekers may post their resumes and conduct searches free of charge. We
believe this attracts a large number of job seekers who explore, evaluate and
compare job opportunities on our web site, making our web site a valuable tool
for employers and recruiters. Job seekers also can store their resume privately
on our web site so they may apply quickly online for job opportunities of
interest to them without allowing other employers and recruiters access to their
resume. In addition, we offer an online monthly newsletter called CareerBytes,
which provides online career advice and information for job seekers.
OUR CUSTOMERS
Our customers are employers and recruiters who have a large number of
geographically dispersed job opportunities representing a wide variety of
industries and occupations. At March 31, 2000, we had over 10,000 paying
customers for our online recruiting services, of which approximately 6,000 were
EaseEPost customers and 4,000 were corporate customers. Our customers have
month-to-month accounts and typically do not sign long-term agreements for our
services. No single customer accounts for 5% or more of our revenues.
OUR SALES FORCE AND SUPPORT SERVICES
At March 31, 2000, we employed 79 full-time sales personnel compared to 32
full-time sales personnel at June 30, 1999. Our sales personnel are located in
Atlanta, Boston, Chicago, Dallas, Los Angeles, New York City, San Francisco and
Washington, D.C. We plan to continue to rapidly expand our direct sales efforts
by increasing the size of our existing sales force in those metropolitan areas
and in other metropolitan markets, such as Austin and Houston, in order to
further penetrate these markets. We also plan to increase significantly our
telesales efforts by increasing the size of our existing telesales force and
focusing on markets and potential customers which currently do not require our
direct sales efforts.
We believe that one of the most important services our sales personnel
provides to employers and recruiters is ongoing consulting services. Our sales
staff consults regularly with employers and recruiters to customize our service
offerings to meet their recruiting needs. The majority of our sales to date have
been through telesales. Telesales is an effective sales method because our sales
representatives and prospective customers can simultaneously view our web site
while our sales representatives explain and demonstrate its use and features.
Because we believe that local market presence in some metropolitan areas gives
us a better understanding of that market's particular recruiting needs, we plan
to continue to place a greater emphasis on direct sales in those markets as we
increase the number of our direct sales personnel and open new sales offices. We
compensate our sales personnel for maintaining and expanding relationships with
the employers and recruiters who already use our web site.
We believe that our support services are a key component in attracting and
retaining employers, recruiters and job seekers. We solicit questions and
feedback from employers, recruiters and job seekers who use our web site, and
our support staff responds by e-mail to inquiries concerning technical aspects
of our web site and service offerings. We also provide telephone support to
employers and recruiters regarding our service offerings, billing and technical
aspects on our web site.
ADVERTISING AND MARKETING
Our advertising and marketing strategy is designed to establish
www.headhunter.net as the leading recruiting web site. We use multiple channels
to advertise, market and promote our web site, including online advertising,
traditional advertising and direct marketing.
Online Advertising
We advertise online to increase market awareness of the HeadHunter.NET
brand. We advertise on web sites of major Internet content providers, including
AltaVista, Lycos, Excite, NBC Snap, Looksmart, Dogpile and GoTo.com, that enable
us to target potential job seekers and allow them to click-through to
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www.headhunter.net. We also purchase keyword targeted banners and permanent
buttons or links to our web site whenever they are available at reasonable
rates. Generally, our agreements to purchase advertising are short-term and we
receive a guaranteed number of banner advertisement impressions for a fixed fee.
Traditional Advertising
We believe that traditional advertising is also an effective means of
increasing awareness of the HeadHunter.NET brand and attracting employers,
recruiters and job seekers. Our traditional advertising efforts have included:
- local spot television advertising in select markets;
- spot radio and traffic reports in top 10 markets;
- national and select local daily newspapers, such as USA Today and the New
York Times;
- business weeklies, recruitment magazines and vertical industry trade
publications; and
- outdoor billboards, buses and airport advertising.
Direct Marketing
Our direct marketing efforts include direct mail, fax and e-mail campaigns
aimed at human resources executives, recruiters and recruitment advertising
agencies. We also publish two monthly newsletters via e-mail, CareerBytes for
job seekers and Hireadigm for employers and recruiters. In addition, we actively
market at trade shows, job seminars and career fairs to reach employers and
recruiters and inform them of the benefits of our web site.
OUR TECHNOLOGY AND WEB SITE MANAGEMENT
We use an internally developed software system that is scalable and
specifically designed to support a high volume of web site traffic and searches,
as well as immediate additions, modifications and deletions of job opportunities
and resumes. We deliver content from our web servers to the Internet via leased
high speed telecommunications lines from Pentium-based servers installed at
multiple locations. We contract co-location services from third party providers.
We maintain location redundancy such that in the event one location experiences
service interruption, the delivery speed of our web site will not be
significantly impacted.
We route requests for information from our web site to the closest server
with available capacity. This architecture balances the user load across diverse
geographic locations and provides fault tolerance. We route requests for
information away from any location that may be suffering from a network outage.
This architecture allows our web site to remain available 24-hours-a-day,
seven-days-a-week. If any server needs routine maintenance, we can temporarily
route requests for information to alternate servers.
We distribute job opportunities and resumes submitted to our web site to
all of our servers simultaneously, using an internally developed proprietary
technology. This technology is essential to maintaining consistency across a
collection of geographically dispersed parallel servers while still providing
employers, recruiters and job seekers with immediate access to new and changing
job opportunities and resumes.
OUR COMPETITION
The market for online recruiting services is relatively new, intensely
competitive and rapidly evolving. There are minimal barriers to entry, and
current and new competitors can launch new web sites and add content at
relatively low costs within relatively short time periods. We expect competition
to persist and intensify and the number of competitors to increase significantly
in the future. We compete against other online recruiting services, such as
Monster.com, HotJobs.com, Career Path and CareerMosaic, as well as corporate
Internet sites, and not-for-profit web sites operated by individuals,
educational institutions and governments. In addition to this online
competition, we compete against a variety of companies that provide similar
content through one or more media, such as classified advertising, radio and
television. Many of our
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current and potential competitors, including those mentioned above, have
significantly greater financial, technical and marketing resources, longer
operating histories, better name recognition and more experience than we do.
Many of our competitors also have established relationships with employers,
recruiters and other job posters.
To compete successfully, we must attract more employers, recruiters and job
seekers, and generate fees. The competitive factors attracting employers,
recruiters and job seekers to our web site include the quality of presentation
and the relevance, timeliness, depth and breadth of recruiting information and
services offered on, and the ease of use of, our web site. The competitive
factors also include, among others, the fees charged to list job opportunities,
the cost of upgrades and other services and the cost and accessibility of
similar services through the Internet or competing media. Our competitors'
services may be sufficiently attractive to employers, recruiters and job seekers
to dissuade them from using our web site. If we are unable to attract a
significant number of employers, recruiters and job seekers to our web site, our
business, financial condition and results of operations will suffer.
GOVERNMENT REGULATION
There is an increasing number of laws and regulations pertaining to the
Internet, including laws, or regulations and cases relating to user privacy,
liability for information retrieved from or transmitted over the Internet,
online content regulation, user privacy and domain name registration. Moreover,
the applicability to the Internet of existing laws governing issues such as
intellectual property ownership and infringement, copyright, patent, trademark,
trade secret, obscenity, libel, employment and personal privacy is uncertain and
developing.
Privacy Concerns. Government agencies are considering adopting regulations
regarding the collection and use of personal identifying information obtained
from individuals when accessing web sites in circumstances similar to ours.
While we have implemented and intend to implement additional programs designed
to enhance the protection of the privacy of its users, these programs may not
conform to any regulations adopted by these agencies. In addition, these
regulatory and enforcement efforts may adversely affect our ability to collect
demographic and personal information from users, which could have an adverse
effect on our ability to provide advertisers with demographic information. The
European Union has adopted a directive that imposes restrictions on the
collection and use of personal data. The directive could impose restrictions
that are more stringent than current Internet privacy standards in the United
States. The directive may adversely affect the activities of businesses that
engage in data collection from users in European Union member countries.
Domain Names. Domain names are the user's Internet "addresses." The
current system for registering, allocating and managing domain names has been
the subject of litigation and statutory reform. Although we have applied to
register "HeadHunter.NET" as a trademark, third parties may bring claims for
infringement against us for the use of this domain name as a trademark. There
can be no assurance that our domain name will not lose its value if we have to
obtain new domain names in addition to or in lieu of our current domain names
for legal or other reasons.
Jurisdictions. Due to the global nature of the Internet, it is possible
that, although our transmissions over the Internet originate primarily in
Atlanta, the governments of other states and foreign countries might attempt to
regulate our business activities or tax our revenues. In addition, because our
service is available over the Internet in multiple states and foreign countries,
these jurisdictions may require us to qualify to do business as a foreign
corporation in each of these states or foreign countries, which could subject us
to taxes and other regulations.
INTELLECTUAL PROPERTY
Our success and ability to compete depends significantly on our internally
developed proprietary technology and on our brand and marks. We rely upon
trademark and other intellectual property laws, and on confidentiality and
non-disclosure agreements with our employees and third parties to establish and
protect our proprietary rights. We have obtained a federal registered mark for
"HeadHunters," and we have a
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pending federal trademark application for "HeadHunter.NET." We cannot assure you
that any of our trademark registrations will be approved or granted or, if
granted, that they will not be successfully challenged by others or invalidated
through administrative process or litigation. If our 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
we will be able to enter into arrangements on commercially reasonable terms to
allow us to continue to use that trademark.
We also seek to protect our proprietary rights through the use of
confidentiality agreements with employees, consultants, advisors and others. We
cannot assure you that these agreements will provide adequate protection for our
proprietary rights if there is any unauthorized use or disclosure of our
proprietary information or if our employees, consultants, advisors or others
fail to maintain the confidentiality of our proprietary information. We also
cannot assure you that our proprietary information will not otherwise become
known, or be independently developed, by competitors.
In addition, patents recently issued to third parties regarding Internet
business processes indicate additional Internet business process patents may be
issued in the future. While we do not believe we infringe any existing business
process patent, future patents may limit our ability to use processes covered by
such patents or expose us to claims of patent infringement or otherwise require
us to seek to obtain related licenses. There can be no assurance that such
licenses would be available on acceptable terms or at all. The failure to obtain
such licenses on acceptable terms could have a material adverse effect on our
business, financial condition, results of operations and prospects. See "Risk
Factors -- We may not be able to protect and enforce our intellectual property
rights, which could result in the loss of our rights, loss of business or
increased costs."
EMPLOYEES
At May 16, 2000, we had 214 full-time employees, most of whom are based at
our executive offices. Of these employees, 158 were in sales and marketing, 30
were in technology and operations and 26 were performing general and
administrative functions. None of our employees are represented by a labor union
and we consider our employee relations to be good.
FACILITIES
We recently moved our executive offices to Norcross, Georgia, at 333
Research Court, Suite 200. We believe that our current executive office space
will be adequate for our needs for the foreseeable future. We also lease office
space in each of the metropolitan areas in which we have direct sales personnel.
LEGAL PROCEEDINGS
We are not currently a party to any legal proceedings. From time to time,
we may be subject to legal proceedings and claims in the ordinary course of
business. Such claims, even if not meritorious, could result in the expenditure
of significant financial and managerial resources.
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HEADHUNTER.NET SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected financial data as of and for
our inception period (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 years ended December 31, 1998, 1999, which have been
derived from the audited financial statements of the predecessor and our audited
financial statements and related notes included in another part of this proxy
statement/prospectus. The selected financial data as of and for the three months
ended March 31, 1999 and March 31, 2000 have been derived from our unaudited
financial statements and, in the opinion of our management, include all
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation in all material respects of such information. Operating results for
the three months ended March 31, 2000 are not necessarily indicative of the
results that may be expected for the entire year. You should read the selected
financial data together with our financial statements and related notes and the
section of this proxy statement/prospectus entitled "HeadHunter.NET Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Historical results are not necessarily indicative of results to be expected in
the future. See Note 2 of Notes to Financial Statements for an explanation of
the determination of the shares used in computing basic and diluted net income
(loss) per common share. The weighted average shares outstanding data gives
effect to the conversion of our Class A preferred stock into our common stock at
August 19, 1999, the date of our initial public offering. Loss per share for the
twelve months ended December 31, 1999 and the three months ended March 31, 1999
include a one-time non-cash charge to accumulated deficit of approximately $21.7
million for the difference between the fair value and the conversion price of
the loan and security agreement related to conversion of this instrument from
debt to equity in January 1999. This was accounted for as a distribution to ITC
Holding Company, Inc., a Class A preferred shareholder, and, therefore, an
increase in net loss attributable to common shareholders. See Notes 2 and 3 to
our financial statements for further discussion.
<TABLE>
<CAPTION>
PREDECESSOR HEADHUNTER.NET
----------------------------------------- ------------------------------------------
FROM
INCEPTION TEN
(OCTOBER 10, MONTHS TWO MONTHS
1995) TO YEAR ENDED ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, OCTOBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1997 1998 1999
------------ ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Statement Of
Operations Data:
Revenues.............. $50,754 $190,146 $124,437 $ 29,591 $ 1,099,868 $ 9,253,954
Costs and expenses:
Costs of revenues.... -- -- 29,390 2,906 86,963 147,275
Marketing and
selling............ -- 2,740 23,301 41,123 2,719,330 9,898,815
General and
administrative..... 5,073 52,105 95,967 126,268 1,714,756 3,786,728
Stock compensation
expense............ -- -- -- -- 205,574 5,528,114
Depreciation and
amortization....... 516 6,842 10,099 41,912 276,706 528,256
------- -------- -------- ---------- ----------- ------------
Total costs and
expenses...... 5,589 61,687 158,757 212,209 5,003,329 19,889,188
------- -------- -------- ---------- ----------- ------------
Operating income
(loss)............... 45,165 128,459 (34,320) (182,618) (3,903,461) (10,635,234)
------- -------- -------- ---------- ----------- ------------
Net income (loss)..... $45,165 $128,623 $(35,163) $ (176,392) $(4,345,868) $(10,256,036)
======= ======== ======== ========== =========== ============
Loss Per Share:
Basic and diluted.... $ (0.08) $ (1.98) $ (5.90)
Weighted Average
Shares Outstanding:
Basic and
diluted.......... 2,200,000 2,200,000 5,412,135
<CAPTION>
HEADHUNTER.NET
--------------------------
THREE MONTHS
ENDED
MARCH 31,
--------------------------
1999 2000
----------- -----------
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
Statement Of
Operations Data:
Revenues.............. $ 828,027 $ 6,379,553
Costs and expenses:
Costs of revenues.... 25,433 86,876
Marketing and
selling............ 1,232,350 9,250,433
General and
administrative..... 492,269 1,865,842
Stock compensation
expense............ 2,861,676 255,062
Depreciation and
amortization....... 88,895 297,137
----------- -----------
Total costs and
expenses...... 4,700,623 11,755,350
----------- -----------
Operating income
(loss)............... (3,872,596) (5,375,797)
----------- -----------
Net income (loss)..... $(3,882,019) $(5,098,225)
=========== ===========
Loss Per Share:
Basic and diluted.... $ (11.63) $ (0.47)
Weighted Average
Shares Outstanding:
Basic and
diluted.......... 2,200,000 10,851,196
</TABLE>
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<TABLE>
HEADHUNTER.NET
--------------------------------------
PREDECESSOR
AT DECEMBER 31, AT DECEMBER 31,
----------------- -------------------------------------- MARCH 31, 2000
1995 1996 1997 1998 1999 (UNAUDITED)
------- ------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................ $14,326 $25,973 $ 853,989 $ 254,937 $16,938,708 $13,576,977
Working capital (deficit)........................ 31,214 33,706 788,976 (3,446,422) 21,236,203 14,886,411
Total assets..................................... 43,030 58,550 1,922,915 2,225,180 26,979,744 28,948,824
Total debt, including current maturities......... -- -- -- 3,500,000 -- --
Total shareholders' equity (deficit)............. 42,865 55,500 1,830,517 (1,967,943) 24,743,924 20,016,843
</TABLE>
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HEADHUNTER.NET MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our financial
statements and related notes, and other financial information appearing
elsewhere in this proxy statement/prospectus. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from the results anticipated in these
forward-looking statements as a result of factors including those set forth in
"Risk Factors" contained in this proxy statement/prospectus.
OVERVIEW
We provide online recruiting services to employers, recruiters and job
seekers via our web site. HNET, Inc., our predecessor, was founded in October
1995 and was wholly owned by our founder, Warren L. Bare. From its inception
until late 1996, HNET, Inc. derived all of its revenues from web site
development consulting services. As a result of the experience that it gained
during this period, HNET, Inc. identified online recruiting as an emerging
industry. It launched the www.headhunter.net web site in October 1996, and began
to focus on growing its online recruiting service business.
In October 1997, HNET, Inc. entered into an investment agreement with ITC
Holding Company under which:
- HeadHunters, L.L.C. was formed;
- HNET, Inc. contributed all of its assets related to the operation of the
web site in exchange for a 45% interest in HeadHunters, L.L.C.; and
- ITC Holding Company contributed $1.1 million in cash in exchange for a
55% interest in HeadHunters, L.L.C.
This transaction was accounted for as a purchase.
In July 1998, HeadHunters, L.L.C., ITC Holding Company and Warren L. Bare
entered into a contribution agreement under which:
- HeadHunter.NET, Inc. was incorporated;
- Mr. Bare contributed all of the outstanding stock of HNET, Inc. to us in
exchange for 2,200,000 shares of our common stock and 50,000 shares of
our Class A preferred stock; and
- ITC Holding Company contributed its 55% interest in HeadHunters, L.L.C.
to us in exchange for 2,750,000 shares of our Class A preferred stock.
This transaction was accounted for in a manner similar to a pooling of interest.
As a result of this transaction, HeadHunters, L.L.C. and HNET, Inc. became our
wholly owned subsidiaries.
We derive revenue primarily from fees paid by employers and recruiters to
post a job opportunity on our web site using performance postings which allow
premium positioning within a search result. We also earn revenue from fees paid
by employers and recruiters for additional services and from the sale of banner
advertisements. Initially, we charged one flat fee for a combination of our
services, although we did not charge employers and recruiters to post job
opportunities on our web site. As a result, revenue was earned principally from
a combination of upgrade fees and the sale of banner advertisements on our web
site, with sales of banner advertising comprising a more significant percentage
of our revenues. We modified our pricing structure effective as of August 1,
1998 and began offering upgrade services on a per job basis and on April 3, 2000
we changed our pricing and packaging structure by replacing the upgrade service
with performance postings that offer enhanced visibility based upon the product
pricing. As a result of the growth of our sales force and the pricing changes
related to job postings, revenue associated with job postings has continued to
grow as a percentage of our revenues. We also continue to generate additional
sources of revenue from banner advertising and the sale of complementary
services to our job posting products.
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From June 1, 1999 until April 3, 2000, we charged employers and recruiters
a fee for a basic posting of job opportunities and employers and recruiters who
wanted to improve the placement of their jobs in a search result could pay an
additional fee. Beginning on April 3, 2000 we changed the pricing and packaging
of our job posting service to a performance posting service where employers and
recruiters purchase a single product at a price point that gives them the
desired priority in the job search results. The new minimum cost is $50 for an
economy listing while the standard listing is priced at $100. Increases in
search result priority are available in $25 increments. We generally provide
favorable pricing terms to employers and recruiters that post a significant
number of job opportunities.
We implemented our "VIP Resume Reserve" service in April 1999. Until
February 2000, we held all resumes in our VIP Resume Reserve for seven days
before we posted them for general review on our web site. The reserve also
contained resumes that job seekers specifically requested to remain in the
reserve instead of being posted for general review. In February 2000, we
implemented a new pricing structure whereby employers and recruiters must pay a
quarterly or annual subscription fee to access any complete resume.
We believe that job posting fees and fees paid to access resumes will
account for a substantial majority of our revenues for the foreseeable future.
We record advance billings prior to the delivery of services or the display
of an advertisement as deferred revenues and recognize them as revenue ratably
when the services are provided or the advertisements are displayed. At March 31,
2000, we had approximately $3.5 million of deferred revenues.
Our costs and expenses include:
- costs of revenues, consisting of bandwidth access fees, co-location costs
and Internet connection charges;
- marketing and selling expenses, consisting primarily of salaries and
commissions for sales, marketing and customer service personnel,
advertising costs and other marketing-related expenses (including
strategic relationship and product design costs);
- general and administrative expenses, consisting primarily of salaries and
related costs for general corporate functions, including finance and
accounting personnel, software development and technical personnel,
office facilities and fees for professional services; and
- depreciation and amortization, including depreciation of computer and
other equipment and amortization of goodwill.
We have recently made significant changes to our pricing policies.
Accordingly, we have an extremely limited operating history on which you can
evaluate these changes. Thus, period-to-period comparisons of our operating
results are not particularly meaningful, and you should not rely on the results
for any period as an indication of our future performance. We have experienced,
and expect to continue to experience, seasonality in our user traffic, with
lower traffic during the summer vacation and year-end holiday periods. Because
our business model is new, we do not know if our results of operations are
subject to any additional seasonal fluctuations. We believe that revenue from
classified advertising and other traditional recruiting services is generally
lower in the months of July, November and December because of vacation periods
and holiday seasons. As the online recruiting market develops, we believe that
we may experience similar seasonal patterns or discover other seasonal patterns.
We have a history of losses and at March 31, 2000, we had an accumulated
deficit of approximately $41.6 million, which includes a one-time non-cash
charge of approximately $21.7 million for the difference between the fair value
and the conversion price of the loan and security agreement related to
conversion of this instrument from debt to equity in January 1999. This was
accounted for as a distribution to ITC Service Company, a Class A preferred
shareholder, and, therefore, an increase in net loss attributable to common
shareholders. See Note 2 to our financial statements for further discussion. We
expect to continue to incur losses and negative cash flow for the foreseeable
future. In addition, to foster our planned growth, we expect to continue to
significantly increase our operating expenses in the areas of marketing, sales
and technology.
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RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 Compared to the Three Months Ended March 31,
1999
Revenues. Our revenues increased approximately $5.6 million, or 673%, from
approximately $828,000 for the three months ended March 31, 1999 to $6.4 million
for the three months ended March 31, 2000. Revenues from job posting and upgrade
fees grew from $667,000 to approximately $5.7 million. This increase primarily
resulted from the pricing change that was implemented on June 1, 1999, the
growth of our direct sales force, and a more aggressive marketing campaign.
During the same time frame, our advertising revenue grew from $161,000 to
approximately $701,000. This growth resulted from an increase in traffic to our
web site over last year, which enabled us to sell more banner advertisements on
our web site.
Costs of revenues. Our costs of revenues increased $62,000, or 248%, from
$25,000 for the three months ended March 31, 1999 to $87,000 for the three
months ended March 31, 2000. Costs of revenues increased primarily due to
increased bandwidth access fees, co-location costs and Internet connection
charges to accommodate the growth in user traffic and content on our web site.
However, as a percentage of revenue, our costs of revenues decreased from 3% for
the three months ended March 31, 1999 to 1% for the comparable period in 2000.
The decrease in costs as a percentage of revenues was primarily due to economies
of scale.
Marketing and selling expenses. Marketing and selling expenses increased
$8.1 million, or 675%, from $1.2 million for the three months ended March 31,
1999 to $9.3 million for the three months ended March 31, 2000. Marketing
expenses increased $5.7 million, or 765%, from $740,000 for the three months
ended March 31, 1999 to $6.4 million for the three months ended March 31, 2000.
This increase is primarily the result of aggressive advertising and marketing
campaigns designed to attract more employers, recruiters and job seekers to our
web site. Selling expenses increased $2.3 million, or 468%, from $493,000 for
the three months ended March 31, 1999 to $2.8 million for the three months ended
March 31, 2000. This increase is primarily due to the addition of direct sales
personnel to our sales force from March 31, 1999 through March 31, 2000, and
sales management and administrative personnel hired to support our sales effort.
General and administrative expenses. General and administrative expenses
increased $1.4 million, or 285%, from $492,000 for the three months ended March
31, 1999 to $1.9 million for the three months ended March 31, 2000. The increase
in these expenses was primarily due to an increase of $614,000 for salaries,
benefits and other employee-related costs due to the hiring of additional
personnel, an increase of $197,000 in bad debt expenses related to the increase
in revenues, an increase of $178,000 in accounting legal and professional fees
associated with organizational changes and an increase of $104,000 related to
increased facilities and equipment requirements to support additional personnel.
We expect general and administrative expenses to continue to grow as we hire
additional personnel and incur additional expenses to support the growth of our
operations.
Stock compensation expense. Stock compensation expense was $255,000 for
the three months ended March 31, 2000. During the three months ended March 31,
1999, we sold 181,167 shares of Class A preferred stock to a group of ten
executive officers, key employees and directors at $1.50 per share. In
accordance with Accounting Principles Board Opinion No. 25, we recognized $2.9
million in compensation expense related to the difference between the purchase
price and the estimated fair value of the shares of Class A preferred stock.
Depreciation and amortization. Depreciation and amortization increased
$208,000, or 234%, from $89,000 for the three months ended March 31, 1999 to
$297,000 for the three months ended March 31, 2000. The increase in depreciation
was primarily the result of the purchase of additional capital equipment. The
amortization expense remained relatively level and relates to goodwill of
approximately $1.0 million created upon the formation of HeadHunters, L.L.C.
Fiscal Year Ended December 31, 1999 Compared to Fiscal Year Ended December 31,
1998
Revenues. Our revenues increased $8.2 million, or 745%, from $1.1 million
for the twelve months ended December 31, 1998 to $9.3 million for the twelve
months ended December 31, 1999. Revenues from job posting and upgrade fees grew
from $462,000 to approximately $8.0 million. This increase primarily resulted
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from the pricing change that was implemented on June 1, 1999, the growth of our
direct sales force, and a more aggressive marketing campaign. During the same
time frame, our advertising revenue grew from $661,000 to approximately $1.3
million. This growth resulted from an increase in traffic on our web site over
last year, which enabled us to sell more banner advertisements on our web site.
Costs of revenues. Our costs of revenues increased $60,000, or 69%, from
$87,000 for the twelve months ended December 31, 1998 to $147,000 for the twelve
months ended December 31, 1999. Costs of revenues increased primarily due to
increased bandwidth access fees, co-location costs and Internet connection
charges to accommodate the growth in user traffic and content on our web site.
However, as a percentage of revenue, our costs of revenues decreased from 8% for
the twelve months ended December 31, 1998 to 2% for the comparable period in the
twelve months ended December 31, 1998. The decrease in costs as a percentage of
revenues was primarily due to economies of scale.
Marketing and selling expenses. Marketing and selling expenses increased
$7.2 million, or 267%, from $2.7 million for the twelve months ended December
31, 1998 to $9.9 million for the twelve months ended December 31, 1999.
Marketing expenses increased $3.9 million, or 195%, from $2.0 million for the
twelve months ended December 31, 1998 to $5.9 million for the twelve months
ended December 31, 1999. This increase is primarily the result of aggressive
advertising and marketing campaigns designed to attract more employers,
recruiters and job seekers to our web site. Selling expenses increased $3.3
million, or 456%, from $720,000 for the twelve months ended December 31, 1998 to
$4.0 million for the twelve months ended December 31, 1999. This increase is
primarily due to the addition of direct sales personnel to our sales force from
December 31, 1998 through December 31, 1999, and sales management and
administrative personnel hired to support our sales efforts.
General and administrative expenses. General and administrative expenses
increased $2.1 million, or 124%, from $1.7 million for the twelve months ended
December 31, 1998 to $3.8 million for the twelve months ended December 31, 1999.
The increase in these expenses was due primarily to an increase of $1.2 million
for salaries, benefits and other employee-related costs due to the hiring of
additional personnel and an increase of $430,000 for accounting and legal fees
related to our year-end audit and organizational changes. We expect general and
administrative expenses to continue to grow as we hire additional personnel and
incur additional expenses to support the growth of our operations.
Stock compensation expense. Stock compensation expense was $5.5 million
for the twelve months ended December 31, 1999. During the six months ended June
30, 1999, we sold 271,167 shares of Class A preferred stock and 140,000 shares
of common stock to a group of ten executive officers, key employees and
directors at $1.50 per share and $2.00 per share, respectively. In accordance
with Accounting Principles Board Opinion No. 25, we recognized $3.8 million in
compensation expense related to the difference between the purchase price and
the estimated fair value of the shares of Class A preferred stock and common
stock. Further, we recognized $1.7 million of compensation expense in the twelve
months ended December 31, 1999 related to the difference between the option
exercise price and the estimated fair value of the shares of common stock from
options granted between January 1998 through May 1999. The total difference
between the exercise price and the fair value for the options will be amortized
ratably over the five year vesting period for the options.
Depreciation and amortization. Depreciation and amortization increased
$251,000, or 91%, from $277,000 for the twelve months ended December 31, 1998 to
$528,000 for the twelve months ended December 31, 1999. The increase in
depreciation was primarily the result of the purchase of additional capital
equipment. The amortization expense remained relatively level and relates to
goodwill for approximately $1.0 million created upon the formation of
HeadHunters, L.L.C.
Results for the Year Ended December 31, 1998; the Two Months Ended December
31, 1997; and the Ten Months Ended October 31, 1997
Revenues. We generated revenues of $1.1 million for the year ended
December 31, 1998, $30,000 for the two months ended December 31, 1997, and
$124,000 for the ten months ended October 31, 1997. Our revenues consisted of
upgrade fees of $462,000, $14,000, and $42,000, banner advertising sales of
$661,000,
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$16,000, and $9,000, and consulting revenues of $0, $0, and $52,000,
respectively for such periods. The increase in revenues from upgrade fees and
sales of banner advertising and the corresponding decrease in consulting
revenues from 1997 through 1998 resulted primarily from the change from a web
site development consulting business to an online recruiting business which
commenced with the launch of our web site in October 1996. Our predecessor
company generated revenues primarily from providing consulting services, which
we no longer provide. As a result, we do not believe a comparison of our
predecessor company's operating results to current operations is meaningful.
Costs of revenues. Our costs of revenues were $87,000 for the year ended
December 31, 1998, $3,000 for the two months ended December 31, 1997, and
$29,000 for the ten months ended October 31, 1997. Costs of revenues grew
primarily due to increased Internet connectivity and co-location expenses
following the launch of our web site related to growth in content and traffic on
our web site.
Marketing and selling expenses. Our marketing and selling expenses were
$2.7 million for the year ended December 31, 1998, $41,000 for the two months
ended December 31, 1997, and $23,000 for the ten months ended October 31, 1997.
The substantial increase in these expenses beginning in late 1997 relates
primarily to the development of our sales force and increased advertising
spending.
General and administrative expenses. Our general and administrative
expenses were $1.7 million for the year ended December 31, 1998, $126,000 for
the two months ended December 31, 1997, and $96,000 for the ten months ended
October 31, 1997. The increase in these expenses in 1998 from prior periods was
primarily due to our hiring of additional personnel and accounting and
professional fees incurred in connection with our previously contemplated
initial public offering.
Depreciation and amortization. Our depreciation and amortization expenses
were $277,000 for the year ended December 31, 1998, $42,000 for the two months
ended December 31, 1997, and $10,000 for the ten months ended October 31, 1997.
The increase in depreciation expense in 1998 and the two months ended December
31, 1997 was primarily the result of our purchase of additional capital
equipment, and the increase in amortization expense in such periods primarily
relates to goodwill of approximately $1.0 million created upon the formation of
HeadHunters, L.L.C.
Other income (expense). Other income (expense) was $(442,000) for the year
ended December 31, 1998, $6,000 for the two months ended December 31, 1997, and
$(800) for the ten months ended October 31, 1997. The increase in other loss in
1998 was primarily the result of increased interest expense related to the
warrant issued to ITC Holding Company and increased outstanding balance under
the credit facility with ITC Holding Company.
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QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited statement of operations data for
our nine most recent quarters. This quarterly information has been derived from
our unaudited financial statements and, in the opinion of management, includes
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the information for the periods covered. The quarterly
data should be read in conjunction with our financial statements and related
notes. The operating results for any quarter are not necessarily indicative of
the operating results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------------------
STATEMENT OF MARCH 31, JUNE 30, SEPTEMBER 31, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
OPERATIONS DATA 1998 1998 1998 1998 1999 1999 1999
- --------------- --------- --------- ------------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................. $ 79,569 $ 198,482 $ 392,577 $ 429,240 $ 828,027 $ 1,584,928 $ 2,892,653
Costs and expenses:
Costs of revenues....... 18,220 19,319 26,201 23,223 25,433 34,822 33,271
Marketing and selling... 158,549 349,831 1,220,301 990,649 1,232,352 1,647,577 2,939,547
General and
administrative........ 189,018 478,373 687,851 359,514 492,270 714,236 1,156,159
Stock compensation
expense............... -- 32,705 95,113 77,756 2,861,676 1,688,912 488,763
Depreciation and
amortization.......... 55,080 63,003 74,062 84,561 88,895 109,347 134,483
--------- --------- ----------- ----------- ----------- ----------- -----------
Total costs and
expenses......... 420,867 943,231 2,103,528 1,535,703 4,700,626 4,194,894 4,752,223
--------- --------- ----------- ----------- ----------- ----------- -----------
Operating loss........... (341,298) (744,749) (1,710,951) (1,106,463) (3,872,599) (2,609,966) (1,859,570)
Other income (expense)... 7,533 11 (165,683) (284,268) (9,423) (31,492) 107,112
--------- --------- ----------- ----------- ----------- ----------- -----------
Net loss.......... $(333,765) $(744,738) $(1,876,634) $(1,390,731) $(3,882,022) $(2,641,458) $(1,752,458)
========= ========= =========== =========== =========== =========== ===========
<CAPTION>
THREE MONTHS ENDED
--------------------------
STATEMENT OF DECEMBER 31, MARCH 31,
OPERATIONS DATA 1999 2000
- --------------- ------------ -----------
<S> <C> <C>
Revenues................. $ 3,948,346 $ 6,379,553
Costs and expenses:
Costs of revenues....... 53,749 86,876
Marketing and selling... 4,079,339 9,250,433
General and
administrative........ 1,424,063 1,865,842
Stock compensation
expense............... 488,763 255,062
Depreciation and
amortization.......... 195,531 297,137
----------- -----------
Total costs and
expenses......... 6,241,445 11,755,350
----------- -----------
Operating loss........... (2,293,099) (5,375,797)
Other income (expense)... 313,001 277,572
----------- -----------
Net loss.......... $(1,980,098) $(5,098,225)
=========== ===========
</TABLE>
Our quarterly revenue and results of operations may fluctuate significantly
from quarter to quarter, which may cause the price of our common stock to fall
substantially if they do not match the expectations of investors or securities
analysts. Factors which may cause these fluctuations include:
- changes in the demand for our service offerings;
- the cancellation of significant numbers of customer accounts;
- changes in our pricing policies or those of our competitors;
- the introduction of additional, or enhancement of existing, service
offerings by us or our competitors;
- seasonal trends in user traffic;
- the hiring cycles of employers; and
- the impact of acquisitions of businesses or technologies.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, we had approximately $13.6 million in cash and cash
equivalents. Net cash used in operating activities was $194,000 and $4.5 million
for the three months ended March 31, 2000 and the twelve months ended December
31, 1999, respectively. Net cash used in operating activities primarily
consisted of the net loss for the periods.
Net cash used in investing activities were for capital expenditures, the
purchase of short-term investments and the December 1999 acquisition of the
assets of the All In One Submit business, and totaled approximately $3.3 million
and $6.4 million for the three months ended March 31, 2000 and the twelve months
ended December 31, 1999, respectively. Investing activities included the
purchase of short-term investments of $1.4 million for the three months ended
March 31, 2000 and $4.1 million for the period ending December 31, 1999,
respectively, of high grade short term investments having maturities of less
than one year. The majority of the capital purchases relate to
telecommunications and computer equipment to build our network infrastructure
and office furniture to accommodate our increased personnel. We currently have
no material commitments for capital expenditures other than in the ordinary
course of business.
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Net cash provided by financing activities was $116,000 and $27.6 million
for the three months ended March 31, 2000 and for the twelve months ended
December 31, 1999, respectively. The 1999 financing activity relates primarily
to net proceeds received from our August 19, 1999 initial public offering. We
have incurred losses and negative cash flows from operations since inception as
a result of efforts to build out our network infrastructure, increase staffing,
and develop our systems. We currently estimate that our working capital
generated from operations and the net proceeds of the offering will be
sufficient to meet our anticipated operating and capital expenditure needs for
at least the next 12 months. Prior to this period of time, we expect to seek to
raise additional funds through borrowings or the issuance of equity or debt
securities, although there is no assurance that this financing will be on terms
favorable to us. If we are not successful in raising additional capital, we may
have to decrease our marketing efforts and slow our planned expansion rate for
our sales force and other infrastructure.
If we complete the merger with CareerMosaic, Omnicom Finance will provide a
$10 million line of credit to HeadHunter.NET. If received, the addition of these
funds will enable us to further accelerate our sales and marketing efforts and
other strategic initiatives. We estimate these additional funds coupled with
accelerated programs will position us with sufficient capital resources to meet
our anticipated operating and capital expenditure needs for at least the next 12
months. There can be no assurance that the merger will be completed as it is
subject to a number of conditions. See "The Merger."
Our ability to grow will depend in part on our ability to expand and
improve our Internet operations, the effectiveness of our sales and marketing
efforts, and our customer support capabilities. We may need to raise funds in
excess of our current expectations in order to take advantage of new
opportunities, to react to unforeseen difficulties or to otherwise respond to
competitive pressures. If we raise additional funds by issuing equity or
convertible debt securities, the percentage ownership of our existing
shareholders will be reduced, shareholders may experience additional dilution,
and such securities may have rights, preferences or privileges senior to those
of our common stock.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
We believe our exposure to market rate fluctuations on our investments is
nominal due to the short-term nature of those investments. At present, we do not
employ any derivative financial instruments, other financial instruments or
derivative commodity instruments to hedge any market risks and we do not
currently plan to employ them in the future. At March 31, 2000, we held
approximately $5.5 million in short term investments in high grade instruments
having maturities less than one year.
RECENT ACCOUNTING PRONOUNCEMENTS
We do not believe that any new accounting pronouncements will have a
material impact on our financial statements.
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HEADHUNTER.NET MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth specific information regarding
HeadHunter.NET's executive officers and directors as of the date of this proxy
statement/prospectus:
<TABLE>
<CAPTION>
NAME AGE CLASS(1) POSITION
- ---- --- -------- -----------------------------------
<S> <C> <C> <C>
William H. Scott, III(2)........... 52 III Chairman of the Board and Director
Robert M. Montgomery, Jr........... 42 I President, Chief Executive Officer
and Director
Mark W. Partin..................... 32 -- Chief Financial Officer and
Assistant Secretary
Judith G. Hackett.................. 40 -- Senior Vice President -- Marketing
Jay M. Myer........................ 38 -- Senior Vice President -- Corporate
Marketing and Sales
C. Eric Presley.................... 33 -- Vice President of Technology
Mark W. Fouraker................... 38 -- Vice President of Site Operations
Burton B. Goldstein, Jr.(2)(3)..... 52 I Director
Donald W. Weber(3)................. 63 II Director
J. Douglas Cox(3).................. 49 II Director
Michael G. Misikoff(2)............. 47 I Director
Kimberley E. Thompson.............. 42 II Director and Secretary
</TABLE>
- ---------------
(1) Class II term expires at the annual meeting of shareholders in 2000, Class
III term expires at the annual meeting of shareholders in 2001, and Class I
term expires at the annual meeting of shareholders in 2002.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
William H. Scott, III has served as a director of HeadHunter.NET 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 Holding Company, Inc., a
diversified telecommunications and technology holding company and principal
shareholder of HeadHunter.NET, and has served on its board of directors since
May 1989. Mr. Scott serves as a director of Powertel, Inc., a wireless
telecommunications services company; KNOLOGY Holdings, Inc., a broadband
telecommunications services provider; Earthlink Network, Inc., an Internet
service provider; ITC*DeltaCom, Inc., a regional telecommunications services
provider; and Innotrac Corporation, a provider of customized technology-based
marketing and support services.
Robert M. Montgomery, Jr. has served as a director of HeadHunter.NET since
January 1998, our President since January 1999 and our Chief Executive Officer
since March 1999. Since 1992, Mr. Montgomery has served as a Vice President of
ITC Holding Company, Inc. In 1991, Mr. Montgomery founded InterCall, Inc., a
teleconferencing company and a wholly owned subsidiary of ITC Holding Company,
Inc., and served as its President and Chief Executive Officer until April 1999.
From 1993 to April 1999, Mr. Montgomery 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. Currently, Mr. Montgomery serves as a director of InterCall, Inc.
Mark W. Partin has served as our Chief Financial Officer and Assistant
Secretary since May 1999. From 1997 to 1999, Mr. Partin served as Vice President
of Finance at Sunchoice Medical Supply, Inc., a national medical supply company.
From 1995 to 1997, Mr. Partin was controller/director of mergers and
acquisitions for Williams Group International, a diversified holding company.
From 1991 to 1995, Mr. Partin worked in
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the audit and operational consulting divisions of Arthur Andersen LLP. Mr.
Partin is a certified public accountant.
Judith G. Hackett has served as our Senior Vice President -- Marketing
since May 1998. 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.
Jay M. Myer has served as our Senior Vice President -- Corporate Sales and
Marketing since December 1999. From 1997 to 1999, Mr. Myer was Regional Manager
of Tivoli Systems, a developer of network management software for distributor
systems. From 1987 to 1995, Mr. Myer was Vice President of Sales at Network
Imaging, a database object management company. From 1993 to 1995, Mr. Myer was
Area Vice President of Legent Corporation, a software company now owned by
Computer Associates.
C. Eric Presley has served as our Vice President of Technology since
October 1998. From December 1997 to April 1998, Mr. Presley served as our
Manager of Technology and from April 1998 to October 1998, he served as our
Director of Technology. From 1993 to 1997, Mr. Presley held several positions at
Advance Technology Corporation, 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.
Mark W. Fouraker has served as our Vice President of Operations since
October 1998. From April 1998 to October 1998, Mr. Fouraker served as our
Director of Operations. In 1989, Mr. Fouraker co-founded Advance Technology
Corporation and, from that time until April 1998, he held several positions
there 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.
Burton B. Goldstein, Jr. has served as a director of HeadHunter.NET since
July 1998. Mr. Goldstein is currently President of netWorth Partners, LLC, an
Internet venture capital fund. 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. Mr. Goldstein serves
as a director of Tunes.com. Inc., an online music network.
Donald W. Weber has served as a director of HeadHunter.NET 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 Holding Company, Inc.. From 1993 to
1997, Mr. Weber served as President and Chief Executive Officer of ViewStar
Entertainment Services, Inc., a digital satellite services company. From 1987 to
1991, Mr. Weber held various executive positions, including President and Chief
Executive Officer, at and served as a director of Contel Corporation, a
telecommunications company. Currently, Mr. Weber serves as a director of
Powertel, Inc., Pegasus Communications Corporation, a media and communications
company, KNOLOGY Holdings, Inc., and HIE, Inc., a health care software provider.
J. Douglas Cox has served as a director of HeadHunter.NET since October
1997. Currently, Mr. Cox is a private investor and from time-to-time provides
advisory services to support such investments. From September 1997 to September
1999, Mr. Cox served as Senior Vice President -- Corporate Development of ITC
Holding Company, Inc. He has also served as Chief Financial Officer and Vice
President (Finance) of ITC Holding Company, Inc. and several of its subsidiaries
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.
Michael G. Misikoff has served as a director of HeadHunter.NET since May
1999. Since February 1999, Mr. Misikoff has also served as a consultant to
HeadHunter.NET. From January 1995 to February 1999, Mr. Misikoff served as Vice
President, Chief Financial Officer, Secretary, Treasurer and a director of
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Mindspring Enterprises, Inc. From January 1992 to December 1994, Mr. Misikoff
was the acting Chief Financial Officer and a director of InterCall, Inc.
Kimberley E. Thompson has served as a director of HeadHunter.NET and our
Secretary since May 1999. Since September 1997, Ms. Thompson has served as
Senior Vice President, General Counsel and Secretary of ITC Holding Company,
Inc. and from June 1996 to September 1997, she served as its Vice President,
General Counsel and Secretary. From 1989 to 1996, Ms. Thompson was a partner
with Hogan & Hartson L.L.P., a Washington D.C. law firm.
The executive officers named above would continue to serve as
HeadHunter.NET's executive officers following the merger. If the merger closes,
Messrs. Weber, Cox and Misikoff will resign effective as of the effective date
of the merger, and Bernard Hodes Group will have the right to designate three
directors to HeadHunter.NET's board of directors. Bernard Hodes Group has told
us that it presently expects to designate the directors prior to the effective
time of the merger or shortly thereafter.
BOARD COMMITTEES
In July 1998, our board of directors established a compensation committee
and an audit committee. The compensation committee reviews and recommends to the
board of directors all compensation and benefit arrangements of our executive
officers and also administers our incentive and stock option plans. The audit
committee recommends to the board of directors the engagement of our independent
auditors and reviews and consults with the independent auditors regarding the
scope and results of the audits, our internal accounting controls, audit
practices and the professional services furnished by the independent auditors.
Our board does not have a nominating or similar committee.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
During the 1999 fiscal year, our board of directors met twelve times, and
its audit and compensation committees met one and four times, respectively. Each
director, during the period he/she was director, attended at least 75% of the
aggregate number of meetings of the HeadHunter.NET board of directors and the
committees of the board of directors of which he/she was a member.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the compensation committee in July 1998, our board of
directors determined executive compensation. Messrs. Scott, Goldstein and
Misikoff currently serve on the compensation committee. Except for Mr. Scott,
none of our executive officers currently serves as a member of the compensation
committee or as a director of any entity of which any of our directors serve as
an executive officer. Mr. Scott is a director of ITC for which Mr. Cox and Ms.
Thompson are executive officers. Mr. Montgomery was a member of the compensation
committee until April 1999.
DIRECTOR COMPENSATION
Our bylaws allow our board of directors to determine from time to time the
compensation that directors may receive for their services as directors.
However, since inception, our 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, Goldstein and Misikoff, and Ms. Thompson were
granted options to purchase 10,000 shares of common stock at exercise prices of
$0.40, $0.40, $0.40, $1.40, $1.40, $2.00, and $2.00, respectively. In addition,
in January 2000 every director other than Messrs. Scott and Montgomery received
an option to purchase 2,000 additional shares of common stock at an exercise
price of $14.38. Directors are eligible to receive options and awards under the
HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to any person serving as our Chief
Executive Officer at any time during 1999 and our four most highly compensated
other executive officers during the year ended December 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ---------------------
--------------------------- SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- --------- -------- --------------------- ---------------
<S> <C> <C> <C> <C> <C>
Warren L. Bare(1).................... 1999 $ 77,933 $ 2,070 -- $ 675
President and Chief Executive
Officer
Robert M. Montgomery, Jr.(2)......... 1999 72,917 25,000 400,000 3,399
President and Chief Executive
Officer
Mark W. Partin(3).................... 1999 61,195 42,841 100,000 --
Chief Financial Officer and
Assistant Secretary
Judith G. Hackett.................... 1999 125,000 53,421 10,000 1,125
Senior Vice President -- Marketing
James R. Canfield(4)................. 1999 91,662 39,128 10,000 737
Vice President of Sales
C. Eric Presley...................... 1999 87,500 20,459 10,000 803
Vice President of Technology
</TABLE>
- ---------------
(1) Mr. Bare served as our President until January 1999 and our Chief Executive
Officer until March 1999.
(2) Mr. Montgomery has served as President since January 1999 and as Chief
Executive Officer since March 1999.
(3) Mr. Partin has served as our Chief Financial Officer and Assistant Secretary
since May 1999.
(4) Mr. Canfield served as our Vice President of Sales until March 2000.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1999
The following table sets forth summary information concerning individual
grants of stock options made during the year ended December 31, 1999 to each of
the executive officers named in the Summary Compensation Table. We granted all
options at the market value on the date of grant as determined by our board of
directors. Amounts reported in the "Potential Realizable Value Rates of Stock
Price Appreciation for Options Terms" columns represent hypothetical amounts
that may be realized on exercise of options immediately prior to the expiration
of their term assuming the specified compounded rates of appreciation of our
common stock over the term of the options. These numbers are calculated based on
rules promulgated by the Securities and Exchange Commission and do not reflect
our estimate of future stock price growth. Actual gains, if any, on stock option
exercises and common stock holdings are dependent on the timing of such
exercises and the future performance of our common stock. We cannot assure you
that we can achieve
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<PAGE> 99
the rates of appreciation assumed in this table or that the individuals in this
table will receive the amounts reflected.
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE
NUMBER OF TOTAL OPTIONS VALUE RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTIONS TERMS
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED(#) YEAR ($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Montgomery, Jr......... 100,000 11.0% 1.50 01/07/09 2,291,000 3,564,000
Robert M. Montgomery, Jr......... 100,000 11.0% 1.50 04/29/09 2,291,000 3,564,000
Robert M. Montgomery, Jr......... 200,000 22.1% 11.81 10/28/09 2,646,000 5,428,000
Mark W. Partin................... 100,000 11.0% 2.00 04/29/09 2,241,000 3,514,000
Judith G. Hackett................ 10,000 0.01% 11.81 10/28/09 132,300 271,400
James R. Canfield................ 10,000 0.01% 11.81 10/28/09 132,300 271,400
C. Eric Presley.................. 10,000 0.01% 11.81 10/28/09 132,000 271,400
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding the:
- number of unexercised options held by the executive officers named in the
Summary Compensation Table at December 31, 1999; and
- aggregate dollar value of unexercised options held at December 31, 1999.
The values of the unexercised in-the-money options have been calculated by
subtracting the option exercise price from the closing price per share of
$12.5625 on December 31, 1999, and multiplying that figure by the total number
of exercisable/unexercisable options.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- -------------------- --------------------
<S> <C> <C> <C> <C>
Robert M. Montgomery, Jr............ 33,333 $383,330 0/376,667 0/$2,380,671
Mark W. Partin...................... 0 N/A 0/100,000 0/$1,056,250
Judith G. Hackett................... 0 N/A 0/60,000 0/$ 565,650
James R. Canfield................... 0 N/A 0/110,000 0/$1,113,775
C. Eric Presley..................... 0 N/A 0/60,000 0/$ 615,650
</TABLE>
EMPLOYMENT AGREEMENTS
Our board of directors and Compensation Committee periodically review
salaries and bonuses of our executive officers and, from time to time, elect to
increase an officer's salary or bonus based on individual performance and our
overall performance. None of our employment agreements contain provisions
requiring payments to an officer upon severance or a change-of-control of our
company.
HEADHUNTERS, L.L.C. EMPLOYEE COMMON UNIT OPTION PLAN
We assumed the options that had been granted by HeadHunters, L.L.C. to
purchase its common units under the HeadHunters, L.L.C. Employee Common Unit
Option Plan. Such options have been converted into options to purchase an equal
number of shares of our common stock. The converted options will be administered
by our board of directors or our Compensation Committee substantially in
accordance with the terms of the assumed common unit option plan. As of May 16,
2000, 53 persons hold outstanding converted options to purchase a total of
589,500 shares of our common stock. 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,
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Montgomery and Cox each hold a converted option to purchase 10,000 shares of
common stock at an exercise price of $0.40. We do not intend to grant any
additional options pursuant to this plan. HeadHunter.NET's board of directors
has adopted a resolution that provides that, if the merger closes, all options
granted under this plan will become fully vested and immediately exercisable
upon the closing of the merger.
HEADHUNTER.NET, INC. 1998 LONG-TERM INCENTIVE PLAN
On July 15, 1998, our board of directors adopted the HeadHunter.NET, Inc.
1998 Long-Term Incentive Plan and on July 16, 1998, our shareholders approved
this plan. We amended the plan in April 1999 to increase the number of shares
available for issuance under the plan and the shareholders approved such
amendment to the plan in April 1999. We have reserved 1,000,000 shares of common
stock for issuance in connection with options and awards granted under this
plan. We may grant options and awards to our officers, employees, non-employee
directors and consultants. As of May 16, 2000, there are 129 persons holding
outstanding options to purchase 897,850 shares of common stock that we granted
under the incentive plan. The incentive plan authorizes the granting of awards
to eligible participants in the form of:
- options to purchase shares of common stock, which may be incentive stock
options or non-qualified stock options;
- stock appreciation rights;
- performance shares;
- restricted stock awards;
- dividend equivalents; or
- other stock-based awards.
The incentive plan is administered by our board of directors or the compensation
committee in accordance with its terms.
In accordance with the terms of this plan, all options granted under the
plan outstanding prior to April 15, 2000 will become fully vested and
immediately exercisable upon the closing of the merger. Robert M. Montgomery has
agreed to defer the accelerated vesting of his options to purchase 376,667
shares granted under the plan until the times previously specified in his option
agreements.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS OF HEADHUNTER.NET
ON EXECUTIVE COMPENSATION
The compensation committee of the board of directors has prepared the
following report on HeadHunter.NET's policies with respect to the compensation
of executive officers for the fiscal year ended December 31, 1999. The
compensation committee is charged with making decisions with respect to the
compensation of HeadHunter.NET's executive officers and administering
HeadHunter.NET's stock option plans. No member of the compensation committee is
an employee of the HeadHunter.NET or its subsidiaries.
Compensation Policies Toward Executive Officers
The compensation policies of HeadHunter.NET are designed to attract,
motivate and retain experienced and qualified executives, increase the overall
performance of HeadHunter.NET, increase shareholder value and increase the
performance of individual executives.
The compensation committee seeks to provide competitive salaries based upon
individual performance together with annual cash bonuses awarded based on
HeadHunter.NET's overall performance relative to corporate objectives, taking
into account individual contributions, teamwork and performance levels. In
addition, it is the policy of HeadHunter.NET to grant stock options to
executives upon their commencement of employment with HeadHunter.NET and
annually thereafter in order to strengthen the alliance of interest between such
executives and HeadHunter.NET's shareholders and to give executives the
opportunity to
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<PAGE> 101
reach the top compensation levels of the competitive market depending on
HeadHunter.NET's performance, as reflected in the market price of HeadHunter.NET
common stock.
The following describes in more specific terms the elements of compensation
that implement the compensation committee's compensation policies, with specific
reference to compensation reported for 1999.
Base Salaries. Base salaries of executives are initially determined by
evaluating the responsibilities of the position, the experience and knowledge of
the individual, and the competitive marketplace for executive talent, including
a comparison to base salaries for comparable positions at peer public companies
in HeadHunter.NET's geographic region. Base salaries for executive officers are
reviewed annually by the compensation committee based upon, among other things,
individual performance and responsibilities.
Annual salary adjustments are recommended by the Chief Executive Officer by
evaluating the performance of each executive officer after considering new
responsibilities and the previous year's performance. The compensation committee
performs the same review of the performance of the Chief Executive Officer.
Individual performance ratings take into account such factors as achievement of
specific goals that are driven by HeadHunter.NET's strategic plan and attainment
of specific individual objectives. The factors affecting base salary levels are
not assigned specific weights.
Bonuses. HeadHunter.NET's annual bonuses to its executive officers are
based on both corporate and individual performance, as measured by reference to
factors that reflect objective performance criteria over which management
generally has the ability to exert some degree of control. These corporate
performance factors consist of revenue and earnings targets established in
HeadHunter.NET's annual budget. Bonuses for 1999, which were paid in 2000, are
based upon the achievement of such financial and operating factors.
Stock Options. A third component of executive officers' compensation
consists of awards under the HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan,
pursuant to which HeadHunter.NET grants executive officers and other key
employees options to purchase shares of common stock.
The compensation committee grants stock options to HeadHunter.NET's
executives in order to align their interests with the interests of the
shareholders. Stock options are considered by the compensation committee to be
an effective long-term incentive because the executives' gains are linked to
increases in the value of HeadHunter.NET common stock, which in turn provides
shareholder gains. The compensation committee generally grants options to new
executive officers and other key employees upon their commencement of employment
with HeadHunter.NET and annually thereafter. The options generally are granted
at an exercise price equal to the closing market price of the HeadHunter.NET
common stock at the date of the grant. Options granted to executive officers in
1999 typically vest over a period of four to five years following the date of
grant. The maximum option term is ten years. The full benefit of the options is
realized upon appreciation of the stock price in future periods, thus providing
an incentive to create value for HeadHunter.NET's shareholders through
appreciation of stock price. Management of HeadHunter.NET believes that stock
options have been helpful in attracting and retaining skilled executive
personnel.
Stock option grants made to executive officers in 1999 reflect significant
individual contributions relating to HeadHunter.NET's operations and
implementation of HeadHunter.NET's development and growth programs. Certain
newly hired executive officers also received stock option grants at the time of
their employment with HeadHunter.NET. During 1999, HeadHunter.NET granted stock
options to purchase an aggregate of 928,500 shares of common stock to
approximately 101 employees, including options to purchase an aggregate of
530,000 shares of common stock to HeadHunter.NET's five most highly compensated
executive officers at December 31, 1999. The per share option exercise prices of
options granted to employees during 1999 ranged from $1.50 to $14.25, which
generally equaled the fair market value of a share of HeadHunter.NET common
stock on the respective dates of grant.
Other. HeadHunter.NET has adopted a contributory retirement plan, referred
to as the "401(k) plan," for employees with at least six months of service to
HeadHunter.NET. The 401(k) plan provides that each participant may contribute up
to 15% of the participant's salary, but not to exceed the annual statutory
limit. In 1999, HeadHunter.NET made matching contributions to each participant's
account equal to 20% of the first 6% of such participant's annual contribution
by salary and/or bonus deferral to the 401(k) plan.
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<PAGE> 102
Chief Executive Officer Compensation
The executive compensation policy described above is applied in setting Mr.
Montgomery's compensation. Mr. Montgomery generally participates in the same
executive compensation plans and arrangements available to the other senior
executives. Accordingly, his compensation also consists of annual base salary,
annual bonus and long-term equity-linked compensation. The compensation
committee's general approach in establishing Mr. Montgomery's compensation is to
be competitive with peer companies, but to have a large percentage of his target
compensation based upon the long-term performance of HeadHunter.NET, as
reflected in part in the market price of the common stock.
Mr. Montgomery's compensation for the year ended December 31, 1999 included
$72,917 in base salary and a $25,000 cash bonus. Mr. Montgomery's salary and
bonus payments for 1999 were based on, among other factors, the HeadHunter.NET's
performance and the 1998 compensation of chief executive officers of comparable
companies, although his compensation was not linked to any particular group of
these companies. Mr. Montgomery was also granted options to purchase 400,000
shares of common stock in 1999 under HeadHunter.NET's 1998 Long-Term Incentive
Plan.
Compensation Deductibility Policy
Under Section 162(m) of the Internal Revenue Code, and applicable Treasury
regulations, no tax deduction is allowed for annual compensation in excess of $1
million paid to any of HeadHunter.NET's five most highly compensated executive
officers in any one calendar year. The compensation committee intends to
maximize the extent of tax deductibility of executive compensation under the
provisions of Section 162(m) so long as doing so is compatible with its
determinations as to the most appropriate methods and approaches for the design
and delivery of compensation to HeadHunter.NET's executive officers.
Respectfully submitted,
Compensation Committee
William H. Scott, III
Burton B. Goldstein, Jr.
Michael G. Misikoff
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COMPARATIVE STOCK PERFORMANCE
The following graph shows a comparison of cumulative total stockholder
returns for HeadHunter.NET's common stock, the Nasdaq Stock Market Index for
U.S. Companies, and the Media General Internet Information Providers Index as a
peer group comparison. The graph assumes the investment of $100 on August 19,
1999, the date of HeadHunter.NET's initial public offering, to December 31,
1999. The data regarding HeadHunter.NET assumes an investment at $10.188 per
share, the closing price on the day of our initial public offering. The Media
General Internet Information Providers Index is composed of companies that
provide internet navigation and reference guide information for World Wide Web
and that publish, provide or present proprietary, advertising and/or third party
content. HeadHunter.NET is included in the calculation of the returns of Media
General Internet Information Providers Index.
COMPARATIVE STOCK PERFORMANCE CHART
COMPARISON OF 4 MONTH CUMULATIVE TOTAL RETURN*
AMONG HEADHUNTER.NET, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND INTERNET INFORMATION PROVIDERS
<TABLE>
<CAPTION>
Cumulative Total Return 8/19/99 8/99 9/99 10/99 11/99 12/99
- ----------------------- ------- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
HEADHUNTER.NET, INC. 100.00 110.43 122.70 111.66 132.52 123.32
INTERNET INFORMATION PROVIDERS 100.00 98.94 109.78 125.25 167.66 257.39
NASDAQ STOCK MARKET (U.S.) 100.00 104.68 104.74 113.06 126.74 154.53
</TABLE>
- ---------------
* $100 invested on 8/19/99 in our common stock, the NASDAQ Stock Market or the
Media General Internet Information Providers Index -- including reinvestment
of dividends.
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SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Based solely on a review of the copies of reports furnished to us, or
written representations that no annual forms (Form 5) were required, we believe
that, during the 1999 fiscal year, all filing requirements of our officers,
directors and 10% or greater shareholders for reporting to the Securities and
Exchange Commission their ownership and changes in ownership of HeadHunter.NET
common stock (as required by Section 16(a) of the Securities Exchange Act of
1934) were complied with, except that Jay M. Myer filed a late Form 3 in March
2000 that was due in December 1999.
HEADHUNTER.NET RELATED PARTY TRANSACTIONS
We believe that all of the following transactions were made on terms no
less favorable to us than could have been obtained from unaffiliated third
parties. All future transactions, including loans, between us and our officers,
directors, principal shareholders and their affiliates will be approved by a
majority, but not fewer than two of our disinterested directors, and will
continue to be on terms no less favorable to us than could be obtained from
unaffiliated third parties.
In October 1997, HNET, Inc., a corporation wholly owned by Warren L. Bare,
contributed all of its assets and liabilities related to our web site to
HeadHunters, L.L.C. in exchange for a 45% equity interest, and ITC Holding
Company contributed $1,100,000 in cash in exchange for a 55% equity interest,
under an investment agreement between Mr. Bare, HNET, Inc. and ITC Holding
Company.
In November 1997, HeadHunters, L.L.C. paid a dividend of $100,000 to a
corporation wholly owned by Warren L. Bare, which was included in the initial
contribution of cash by ITC Holding Company to HeadHunters, L.L.C. under the
terms of an investment agreement between Mr. Bare, HNET, Inc. and ITC Holding
Company.
In January 1998, we entered into an arrangement with ITC*DeltaCom, Inc.
under which ITC*DeltaCom, Inc. serves as our Internet service provider and our
local and long-distance telephone services provider. Internet access and
long-distance telephone charges totaled $72,028 for the year ended December 31,
1998 and $119,100 for the year ended December 31, 1999. At such time,
ITC*DeltaCom, Inc. was related to ITC Holding Company through both common
ownership and board membership. Based on ITC*DeltaCom, Inc.'s then available
publicly-available filings with the Securities and Exchange Commission, and ITC
Holding Company's web site, eight of the ten members of ITC Holding Company's
board of directors served on the nine-member board of directors of ITC*DeltaCom,
Inc. In addition, three directors of ITC each beneficially owned greater than
five percent of the outstanding common stock of ITC*DeltaCom, Inc.
On July 15, 1998, HeadHunters, L.L.C., ITC Holding Company and Mr. Bare
entered into a contribution agreement under which Mr. Bare contributed all of
the outstanding stock of HNET, Inc. to us in exchange for 2,200,000 shares of
our common stock and 50,000 shares of our Class A preferred stock, and ITC
Holding Company contributed its 55% interest in HeadHunters, L.L.C. to us in
exchange for 2,750,000 shares of our Class A preferred stock. Under this
contribution agreement, ITC Holding Company and Mr. Bare were also granted
registration rights relating to their shares of our Class A preferred stock and
our common stock. Under the contribution agreement, ITC Holding Company and Mr.
Bare received shares of our Class A preferred stock and our common stock
reflecting the same percentage ownership interests as their direct and indirect
ownership interests in HeadHunters, L.L.C.
On July 16, 1998, we entered into an amended and restated credit facility
with ITC Holding Company, which was amended in October 1998, under which ITC
Holding Company made available to us a revolving line of credit of up to $3.5
million until December 31, 1998. In connection with this credit facility, we
issued a warrant to ITC Holding Company to purchase 416,667 shares of common
stock at an exercise price of $1.50 per share. This warrant vested upon issuance
and is exercisable for a term of 10 years. In January 1999, the outstanding
principal of $3.5 million under this credit facility was converted at a rate of
$1.50 per share into
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2,333,333 shares of Class A preferred stock, which were issued to ITC Holding
Company. In January 1999, we paid ITC in cash the total accrued interest of
$100,100 with respect to the credit facility.
On January 28, 1999, we entered into a loan and security agreement with ITC
Holding Company pursuant to which ITC Holding Company made available to us a
revolving line of credit of up to $3.0 million. On the closing date of our
initial public offering, we used a portion of the net proceeds to repay all
outstanding principal balance and interest under this facility, which then
terminated. We paid to ITC Holding Company approximately $2.2 million, including
interest of approximately $71,000.
In January 1999, we sold a total of 271,167 shares of Class A preferred
stock at $1.50 per share to James R. Canfield, Kenneth E. Dopher, Mark W.
Fouraker, Judith G. Hackett, Robert M. Montgomery, Jr., C. Eric Presley, Donald
W. Weber and Burton R. Goldstein, Jr., all of whom were directors or officers at
the time of the sale.
In February 1999, in connection with Mr. Bare's resignation as our Chief
Executive Officer, we entered into a separation agreement with him. As part of
this agreement, Mr. Bare will remain a consultant to us until March 1, 2001 for
an annual fee of $75,000. If Mr. Bare chooses to discontinue his consulting
services during the term of the agreement, we have agreed to pay him $50,000 a
year until March 1, 2001. Mr. Bare provides consulting services to us with
respect to our network architecture and infrastructure, and software purchasing.
In May 1999, we sold Messrs. Montgomery, Partin and Misikoff 100,000,
20,000 and 20,000 shares of our common stock, respectively, at $2.00 per share.
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HEADHUNTER.NET PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of the record date with respect to: (1) each of
our directors, (2) our Chief Executive Officer and each of the executive
officers named in the Summary Compensation Table; (3) all of our executive
officers and directors as a group; and (4) each person known by us to own
beneficially more than 5% of our common stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR AFTER
TO THE MERGER THE MERGER(1)
--------------------- ---------------------
NAME NUMBER PERCENT NUMBER PERCENT
- ---- ---------- -------- ---------- --------
<S> <C> <C> <C> <C>
ITC Holding Company, Inc.(2)........................... 5,508,000 48.4% 5,508,000 29.2
Bernard Hodes Group Inc. .............................. -- --
Warren L. Bare(3)...................................... -- * -- *
William H. Scott, III(4)(9)............................ 5,515,300 50.4 5,523,300 29.9
Robert M. Montgomery, Jr............................... 238,333 2.2 238,333 1.3
Mark W. Partin(5)...................................... 20,000 * 121,000 **
Judith G. Hackett...................................... 30,000 * 70,000 **
James R. Canfield(6)................................... 100,000 * 210,000 1.1
C. Eric Presley(7)..................................... 27,000 * 67,000 *
J. Douglas Cox(8)...................................... 8,000 * 16,000 *
Burton B. Goldstein, Jr.(8)............................ 21,267 * 29,267 *
Donald W. Weber(8)(9).................................. 5,533,000 50.5 5,541,000 30.0
Michael G. Misikoff(10)................................ 21,000 * 33,000 *
Kimberley E. Thompson(9)(10)........................... 5,512,000 50.4 5,524,000 29.9
All directors and executive officers as a
group(9)(11)(11 persons)............................. 5,919,900 53.8 6,288,900 33.3
</TABLE>
- ---------------
* Less than 1%
(1) Assumes vesting at the effective time of the merger of all options held by
executive officers and directors of HeadHunter.NET, except for options held
by Mr. Montgomery.
(2) ITC's address is 3300 20th Avenue, P. O. Box 20, Valley, Alabama 36854.
Includes 416,667 shares of common stock subject to a warrant held by ITC
Service Company, a wholly owned subsidiary, exercisable within 60 days of
the date of this proxy statement/prospectus, and 8,000 shares of common
stock subject to options originally granted to Messrs. Cox and Scott as
directors of HeadHunter.NET, the benefits of which have been assigned to
ITC and which are exercisable within 60 days of the date of this proxy
statement/prospectus.
(3) Mr. Bare resigned as President in January 1999, as Chief Executive Officer
in March 1999 and as Vice Chairman and a director in April 2000. Mr. Bare's
address is 1430 Boundary Boulevard, Suwanee, Georgia 30024.
(4) Beneficial ownership prior to the merger includes 300 shares held by Mr.
Scott's spouse and 4,000 shares subject to options exercisable within 60
days of the date of this proxy statement/prospectus. Beneficial ownership
after the merger includes 300 shares held by Mr. Scott's spouse and 12,000
shares subject to options exercisable upon closing of the merger.
(5) Beneficial ownership after the merger includes 101,000 shares subject to
options exercisable upon closing of the merger.
(6) Beneficial ownership prior to the merger includes 30,000 shares held in an
individual retirement account. Beneficial ownership after the merger
includes 30,000 shares held in an individual retirement account and 110,000
shares subject to options exercisable upon closing of the merger.
(7) Beneficial ownership prior to the merger includes 20,000 shares subject to
options exercisable within 60 days of the date of this proxy
statement/prospectus. Beneficial ownership after the merger includes 60,000
shares subject to options exercisable upon closing of the merger.
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(8) Beneficial ownership prior to the merger includes 4,000 shares subject to
options exercisable within 60 days of the date of this proxy
statement/prospectus. Beneficial ownership after the merger includes 12,000
shares subject to options exercisable upon the closing of the merger.
(9) Includes 5,508,000 shares beneficially owned by ITC Holding Company, with
respect to which Messrs. Scott and Weber, and Ms. Thompson, as executive
officers and/or directors of ITC Holding Company, may be deemed to be the
beneficial owner. Messrs. Scott and Weber, and Ms. Thompson disclaim
beneficial ownership of all such shares.
(10) Beneficial ownership after the merger includes 12,000 shares subject to
options exercisable upon the closing of the merger.
(11) Beneficial ownership prior to the merger includes 56,000 shares subject to
options exercisable within 60 days of the date of this proxy
statement/prospectus. Beneficial ownership after the merger includes
425,000 shares subject to options exercisable upon the closing of the
merger. Excludes shares beneficially owned by Mr. Canfield.
SECURITY OWNERSHIP OF BERNARD HODES GROUP
Bernard Hodes Group will receive at least 5,165,100 shares of
HeadHunter.NET common stock in the merger, representing at least 28.0% of the
outstanding shares of HeadHunter.NET common stock after the merger. Other
CareerMosaic stockholders may receive up to 2,334,900 HeadHunter.NET shares in
the merger. Bernard Hodes Group presently intends to reduce its stock ownership
in HeadHunter.NET following the merger consistent with its intent not to exert
influence over the management or policies of HeadHunter.NET. Under the terms of
the merger agreement, Bernard Hodes Group will have the right to sell under this
proxy statement/prospectus that number of shares of HeadHunter.NET it owns that
would reduce its share ownership to less than 20% of the outstanding shares of
HeadHunter.NET. Accordingly, HeadHunter.NET registered for resale in this proxy
statement/prospectus by Bernard Hodes Group approximately shares of
HeadHunter.NET common stock. Bernard Hodes Group will have registration rights
with respect to the remainder of these shares and up to 1% of the total
outstanding shares of HeadHunter.NET will be tradeable by Bernard Hodes Group
during any three-month period under Rule 144 of the Securities Act of 1933.
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INFORMATION REGARDING CAREERMOSAIC
CAREERMOSAIC BUSINESS
OVERVIEW OF THE BUSINESS
CareerMosaic provides online recruiting services to employers and job
seekers via its web site at www.careermosaic.com. CareerMosaic was founded in
July 1994 by Bernard Hodes Group, a wholly owned subsidiary of Omnicom Group
Inc. CareerMosaic's site was originally developed as an online job placement
service exclusively for clients of Bernard Hodes Group. Soon after its initial
launch, the potential viability of the site as an independent enterprise became
apparent. The site was among the first to successfully bring together vast
numbers of employers and job seekers in a single online forum.
CareerMosaic grew quickly from 1994 to 1996 under the guidance of the
Bernard Hodes Group sales staff. In the second half of 1996, a dedicated team
was appointed to directly supervise operations. During this period, CareerMosaic
launched an e-commerce initiative enabling employers to post job listings. The
ability to process transactions online greatly increased the site's efficiency,
number of job listings and subsequent financial results. The addition of direct
sales and marketing personnel in 1997 further accelerated its growth as
increased promotion of its brand, and the site's features brought additional
clients and sales. This period was also marked by the first vertical expansion
of online offerings with the addition of several industry-specific products
tailored to the needs of niche communities of its clients and users.
CareerMosaic continued to expand its reach during 1998 and by the beginning
of 1999 the site had become one of the world's largest and most diverse online
career resources. At March 31, 2000, CareerMosaic employed a staff of 67 in its
Palo Alto and New York City operations and had additional direct sales
representatives in five other locations in North America. In addition, several
international CareerMosaic web sites have been established in Europe and the
Asia-Pacific region.
Effective January 1, 2000, Bernard Hodes Group contributed all of the
assets and assigned all of the liabilities related to the operation of
www.careermosaic.com to CareerMosaic.
CareerMosaic's web site provides employers with:
- access to a large number of job seekers, currently including over 140,000
resumes at any time and up to 531,000 queries to the job database on a
daily basis;
- quick, easy and cost-effective job postings; and
- access to leading web sites and industry-specific sites through its
arrangements with over 35 other web sites.
The web site provides job seekers with:
- access to more than 100,000 current opportunities posted by employers in
a variety of industries;
- information regarding a large number of geographically diverse job
opportunities in a wide variety of industries and occupations;
- links to localized web sites in more than a dozen countries in North
America, Europe, Asia, and Australia;
- a collection of online resources for the workforce emerging from college;
and
- information on and links to sites relating to job hunting, resume and
cover letter writing, relocation resources, wage and salary information,
and other research tools to help job seekers market themselves.
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GROWTH STRATEGY
Since its inception in 1994 by Bernard Hodes Group, CareerMosaic has
pursued a growth strategy with three principal components:
Employees. CareerMosaic has increased its number of sales personnel from
14 people at March 31, 1999 to 23 at March 31, 2000. Historically, CareerMosaic
employed staff primarily at its New York City and Palo Alto locations, but has
since 1998 expanded and currently also employs sales personnel in Chicago,
Boston, Dallas, San Diego and Washington, D.C.
Advertising. CareerMosaic has advertised its web site and brand name
through marketing campaigns on the Internet, as well as through traditional
advertising services. In the quarter ended March 31, 2000, CareerMosaic
increased its marketing and selling costs by 215% compared to the comparable
quarter in the prior year.
Strategic Relationships. In order to expand its business and opportunities
on its web site, CareerMosaic has entered into several strategic relationships
with other important companies involved in e-commerce, including Yahoo! and
AccountingNet.
SERVICES TO EMPLOYERS
CareerMosaic's web site offers employers a series of recruiting services
enabling them to advertise their business, post available positions, and search
for qualified candidates to fill those positions. Corporate customers can choose
from a variety of job posting options, ranging from single job postings to
packages of multiple postings or even an unlimited number of postings. Fees
start as low as $160 for a single posting and go up to $72,000 for a full year
of unlimited postings. Customers can also purchase their own employer profile
pages on the site, which range from $2,500 to $6,000 and provide visitors with
company information, job listings, and direct links to CareerMosaic's home page.
In addition, corporate customers may subscribe to access the resume databases to
search for qualified candidates. One-year rates for resume database access range
from $995 for a single individual to $35,000 for unlimited users.
SERVICES TO JOB SEEKERS
CareerMosaic allows job applicants to post their resumes on its web site
and conduct searches for potential employers free of charge.
CUSTOMERS
CareerMosaic's customers are employers in a variety of industries from
around the world, currently listing over 100,000 job openings. No single
customer accounts for more than 1% of CareerMosaic's revenues.
ADVERTISING AND MARKETING
In order to expand its customer base and market its web site and brand
name, CareerMosaic advertises on the Internet, as well as in newspapers and
television and through direct marketing.
Online Advertising. CareerMosaic advertises on several web sites,
including Yahoo!, Alta Vista, Lycos and Excite. CareerMosaic also purchases
links to its web sites in order to increase customer traffic.
Traditional Advertising. In addition to online advertising, CareerMosaic
advertises using such traditional methods as:
- television advertising in local markets;
- national and local daily newspapers;
- business weeklies, recruitment magazines, and vertical industry trade
publications; and
- airport advertising.
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Direct Marketing. CareerMosaic also conducts marketing through direct
mailings, faxes, and focused e-mail advertisements.
TECHNOLOGY AND WEB SITE MANAGEMENT
CareerMosaic uses a software system developed by Bernard Hodes Group and
CareerMosaic to deliver content from its web servers to the Internet through
high speed telecommunications lines from several servers. Unlike many of its
competitors, each server used by CareerMosaic is designed to serve a specific
database function, including separate job servers and resume servers. These
servers are large enough such that service interruptions in a portion of each
server will not affect that server's ability to function properly and
CareerMosaic can continue to meet its customers needs.
COMPETITION
CareerMosaic competes against other online job recruiting services,
including Monster.com, HotJobs.com, HeadHunter.NET, and Career Path, as well as
other corporate Internet sites, not-for-profit web sites operated by
individuals, educational institutions, and governments. CareerMosaic also
competes with a variety of non-Internet companies that provide similar services
through alternative media.
INTELLECTUAL PROPERTY
CareerMosaic has obtained federal registered trademarks for both the name
and design of "CAREERMOSAIC," as well as several other Internet domain names. In
addition, CareerMosaic has foreign trademark registrations for its name in
Argentina, Brunei, Canada, Chile, China, France, Hong Kong, Israel, Japan, South
Korea, New Zealand, Singapore, South Africa, Spain, Thailand, and the United
Kingdom, with applications pending in Australia, Brazil, India, Indonesia,
Malaysia, and Uruguay.
EMPLOYEES
At March 31, 2000, CareerMosaic had 67 full-time employees. Of these
employees, 26 were in sales and marketing. None of CareerMosaic's employees are
represented by a labor union.
FACILITIES
CareerMosaic's executive offices are located at 555 Madison Avenue, New
York, New York, and it also leases office space in Palo Alto.
LEGAL PROCEEDINGS
CareerMosaic is not currently a party to any legal proceedings, although
from time to time, it may be subject to legal proceedings and claims in the
ordinary course of business. Such claims, even if not meritorious, could result
in the expenditure of significant financial and managerial resources by
CareerMosaic.
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CAREERMOSAIC SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected financial data of CareerMosaic as
of and for the years ended December 31, 1998, and 1999, which have been derived
from the audited financial statements of CareerMosaic. The selected financial
data as of and for the year ended December 31, 1997 have been derived from the
unaudited financial statements of CareerMosaic. The selected financial data as
of and for the three months ended March 31, 1999 and March 31, 2000 have been
derived from the unaudited financial statements of CareerMosaic and, in the
opinion of CareerMosaic management, include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation in all material
respects of such information. Operating results for the three months ended March
31, 2000 are not necessarily indicative of the results that may be expected for
the entire year. Because CareerMosaic has historically operated as a division of
Bernard Hodes Group, the historical financial information may not be indicative
of what CareerMosaic's financial position and results of operations would have
been had CareerMosaic operated as a separate, stand-alone entity. Allocation of
corporate expenses does not necessarily reflect the costs that CareerMosaic
would be required to pay to third parties for similar services. The selected
financial data set forth below should be read in conjunction with "The Merger,"
"CareerMosaic Management's Discussion and Analysis of Financial Condition and
Results of Operations," CareerMosaic's financial statements and related notes
and the other financial data included elsewhere in this proxy
statement/prospectus.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------- --------------------------
1997 1998 1999 1999 2000
----------- ----------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.......................... $4,191,811 $ 8,005,300 $13,636,170 $3,037,902 $ 3,630,922
Operating Expenses:
Marketing and selling........... 1,233,000 3,917,307 6,402,685 1,377,451 4,997,251
General and administrative...... 1,883,900 3,860,667 7,083,566 1,090,917 3,246,177
Depreciation and amortization... 49,712 91,314 280,075 25,548 160,059
Allocated Parent Company
expenses..................... 624,000 1,330,289 2,049,778 472,140 541,449
---------- ----------- ----------- ---------- -----------
Total operating
expenses.............. 3,790,612 9,199,577 15,816,104 2,966,056 8,944,936
---------- ----------- ----------- ---------- -----------
Operating income (loss)........... 401,199 (1,194,277) (2,179,934) 71,846 (5,314,014)
---------- ----------- ----------- ---------- -----------
Net income (loss)....... $ 215,386 $(1,004,927) $(2,211,017) $ 71,846 $(5,355,104)
========== =========== =========== ========== ===========
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT MARCH 31, 2000
-------------------------------------- -----------------
1997 1998 1999 ACTUAL
----------- ---------- ----------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ -- $ -- $ -- $ --
Working capital (deficit).................. 348,945 (236,736) (2,492,966) (8,017,522)
Total assets............................... 1,336,265 1,737,216 4,160,208 4,146,858
Total debt, including current maturities... -- -- -- --
Total shareholders' equity (deficit)....... 649,305 40,519 (218,692) (5,573,796)
</TABLE>
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CAREERMOSAIC MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with CareerMosaic's
financial statements and related notes included elsewhere in this proxy
statement/prospectus. This discussion contains forward-looking statements that
involve risks and uncertainties. CareerMosaic's actual results could differ
materially from the results anticipated in these forward-looking statements as a
result of factors including, but not limited to, those set forth in "Risk
Factors" contained in this proxy statement/prospectus.
OVERVIEW
CareerMosaic has multiple revenue streams and frequently secures recurrent
purchases from corporate customers. Financial results are predominantly
generated through selling individual job postings and various job packages and
services to employers. Nearly two-thirds of its revenues are generated through
selling job postings while another one-third stems from fees associated with
either searching the resume database, developing an employer profile, and/or
creating hyperlinks directing online visitors to individual corporate sites. The
remainder of its revenues is derived from selling listings for online job fairs
as well as selling a steadily increasing number of banner advertisements.
CareerMosaic records advance billings prior to the delivery of services or
the display of an advertisement as deferred revenues and recognizes them as
revenue ratably when the services are provided or the advertisements are
displayed. At December 31, 1999, CareerMosaic had approximately $1.7 million of
deferred revenues.
CareerMosaic's operating expenses include:
- marketing and selling expenses, consisting primarily of the sales,
marketing and customer support personnel costs as well as the third party
costs involved with advertising, marketing, and promotion;
- general and administrative expenses, consisting primarily of salaries and
related costs for general corporate functions, technology costs connected
with the enhancement of the web site design and functionality, and costs
for maintaining office facilities; and
- depreciation and amortization, including the depreciation of computer and
other office equipment and amortization of intangible assets.
- allocated expenses of Bernard Hodes Group, consisting primarily of
management and functional area salaries.
CareerMosaic has a history of losses and at December 31, 1999, it had an
accumulated deficit of approximately $900,000. CareerMosaic expects to continue
to incur losses and negative cash flow for the foreseeable future through
increased investments in aggressive advertising and marketing campaigns and
further improvements in the technology of its web site.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 Compared to the Three Months Ended March 31,
1999
Revenues. CareerMosaic's revenues increased by $593,000, or 20%, from $3.0
million for the 3 months ended March 31, 1999 to $3.6 million for the 3 months
ended March 31, 2000. The increase is primarily a result of the further
development of the sales force. However, the competition for employees in this
area intensified at the beginning of 2000 due to the success of several dot com
ventures. The impact on CareerMosaic has been a higher than expected turnover
rate in the sales force and the inherent inefficiencies related to the turnover.
Marketing and selling costs. CareerMosaic's marketing and selling costs
increased by $3.6 million, or 264%, from $1.4 million for the 3 months ended
March 31, 1999 to $5.0 million for the 3 months ended
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March 31, 2000. The increase primarily results from an aggressive print and
television advertising campaign that was launched early in 2000.
General and administrative expenses. CareerMosaic's general and
administrative salaries increased by $2.1 million, or 198%, from $1.1 million
for the 3 months ended March 31, 1999 to $3.2 million for the 3 months ended
March 31, 2000. The increase primarily results from the increased investment in
personnel and third-party costs for technology to enhance the web site's design
and functionality.
Depreciation and amortization expense. CareerMosaic's depreciation and
amortization expense increased by $135,000, or 527% from $25,000 for the 3
months ended March 31, 1999 to $160,000 for the 3 months ended March 31, 2000.
The increase primarily results from the amortization expense related to the
purchase of the careers.com domain name in September 1999. In addition, there
was an increase in fixed assets (telecommunications and computer equipment) to
support the additional CareerMosaic employees.
Allocated corporate expense. The allocated corporate expense from Bernard
Hodes Group to CareerMosaic increased by $69,000, or 15%, from $472,000 for the
3-month period ended March 31, 1999 to $541,000 for the 3-month period ended
March 31, 2000. The increase relates to an allocation of Bernard Hodes Group
executive costs based on the amount of time spent on CareerMosaic matters.
Fiscal Year Ended December 31, 1999 Compared to Fiscal Year Ended December 31,
1998
Revenues. CareerMosaic's revenues increased by $5.6 million, or 70%, from
$8.0 million for the 12 months ended December 31, 1998 to $13.6 million for the
12 months ended December 31, 1999. The increase primarily resulted from the
growth of CareerMosaic's direct sales force and the increased awareness among
its corporate customers of the cost effectiveness of online recruiting. During
1999, CareerMosaic encountered intense competition from several competitors
(namely Monster.com and HotJobs.com) who invested aggressively in building their
own brands.
Marketing and selling costs. CareerMosaic's marketing and selling costs
increased by $2.5 million, or 64%, from $3.9 million for the 12 months ended
December 31, 1998 to $6.4 million for the 12 months ended December 31, 1999.
This increase is primarily the result of additional advertising and marketing
campaigns designed to attract more employers and job seekers to CareerMosaic's
web site.
General and administrative expenses. CareerMosaic's general and
administrative expenses increased by $3.2 million, or 83%, from $3.9 million for
the 12 months ended December 31, 1998 to $7.1 million for the 12 months ended
December 31, 1999. The increase resulted primarily from the increased spending
during 1999 on outside consultants involved in the ongoing design and
functionality of CareerMosaic's web site.
Depreciation and amortization expense. CareerMosaic's depreciation and
amortization expense increased by $189,000, or 207%, from $91,000 for the 12
months ended December 31, 1998 to $281,000 for the 12 months ended December 31,
1999. The increase is the result of the amortization expense related to the
careers.com domain name that was purchased in September 1999.
Allocated corporate expense. The allocated corporate expense from Bernard
Hodes Group to CareerMosaic increased by $720,000, or 54%, from $1.3 million for
the 12 month period ended December 31, 1998 to $2 million for the 12 month
period ended December 31, 1999. The expense relates to an allocation of Bernard
Hodes Group executive costs based on the amount of time spent on CareerMosaic
matters. As the revenues and headcount of CareerMosaic increase, there is a
ratable increase in allocated corporate expenses.
Fiscal Year Ended December 31, 1998 Compared to Fiscal Year Ended December 31,
1997
Revenues. CareerMosaic's revenues increased by $3.8 million, or 91%, from
$4.2 million for the 12 months ended December 31, 1997 to $8.0 million for the
12 months ended December 31, 1998. As the pioneer in the online recruiting
space, CareerMosaic did not encounter significant competition until early 1999
and experienced substantial revenue growth during 1998.
Marketing and Selling Costs. CareerMosaic's marketing and selling costs
increased by $2.7 million, or 215%, from $1.2 million for the 12 months ended
December 31, 1997 to $3.9 million for the 12 months ended
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December 31, 1998. This increase was primarily the result of additional
advertising and marketing campaigns designed to attract more recruiters,
employers and job seekers to CareerMosaic's site. Also, additional members of
the sales force were hired.
General and administrative expenses. General and administrative expenses
increased by $2.0 million, or 105%, from $1.9 million for the 12 months ended
December 31, 1997 to $3.9 million for the 12 months ended December 31, 1998. The
increase resulted primarily from the increased spending during 1998 for
technology consultants involved with the design and functionality of
CareerMosaic's web site. In addition, the administration services provided by
Bernard Hodes Group were expanded in order to support the increased level of
business activity.
Depreciation and amortization expense. CareerMosaic's depreciation and
amortization expense increased by $42,000, or 84%, from $49,000 for the 12
months ended December 31, 1997 to $91,000 for the 12 months ended December 31,
1998. The increase is the result of the increase in fixed assets for additional
telecommunications and computer equipment purchased during 1998.
Allocated corporate expense. The allocated corporate expense from Bernard
Hodes Group to CareerMosaic increased by $700,000, or 113%, from $600,000 for
the 12 month period ended December 31, 1997 to $1.3 million for the 12 month
period ended December 31, 1998. The expense relates to an allocation of Bernard
Hodes Group executive costs based on the amount of time spent on CareerMosaic
matters. As the core CareerMosaic business expanded significantly during 1998,
and CareerMosaic continued without a dedicated management team, the executive
time from Bernard Hodes Group increased their involvement as well.
LIQUIDITY AND CAPITAL RESOURCES
The annual losses and negative annual cash flows to date have been funded
by the Bernard Hodes Group. Net cash used in operating activities was $3.7
million and $2.0 million for the 3 months ended March 31, 2000 and the 12 months
ended December 31, 1999, respectively. Net cash used in operating activities
primarily consisted of the net loss for the periods.
Net cash used in investing activities were for capital expenditures and the
acquisition of the careers.com domain name. In total, the cash used in investing
activities was $330,000 and $2.0 million for the three months ended March 31,
2000 and the 12 months ended December 31, 1999, respectively. The amount
invested in the careers.com domain name in September 1999 was $1.3 million. The
investments in capital purchases relate to telecommunications and computer
equipment required to build CareerMosaic's infrastructure. At March 31, 2000,
CareerMosaic had no material commitments for capital expenditures other than in
the ordinary course of business.
Net cash provided by financing activities was $4.1 million and $4.0 million
for the three months ended March 31, 2000 and the 12 months ended December 31,
1999, respectively. The financing activities represents the cash invested by
Bernard Hodes Group in order to fund the ongoing operations of CareerMosaic.
CareerMosaic has incurred losses and negative annual cash flows as a result
of efforts to build its network infrastructure, increase staffing, build brand
awareness and further develop its web site design and functionality.
CareerMosaic expects to continue to focus on increasing its customer base and
expanding its operations through aggressive advertising and marketing campaigns,
additions to its sales force, and further technological enhancements to its web
site. There can be no assurance that growth in revenue or the customer base will
continue. CareerMosaic has been funded by the Bernard Hodes Group and will be
funded by HeadHunter.NET subsequent to the date of the merger.
If CareerMosaic completes the merger with HeadHunter.NET, Bernard Hodes
Group has agreed to contribute $5 million in cash to CareerMosaic. If received,
the addition of these funds will enable CareerMosaic to further accelerate
CareerMosaic's sales and marketing efforts and other strategic initiatives.
CareerMosaic estimates these additional funds coupled with funding to be
provided by HeadHunter.NET will position CareerMosaic with sufficient capital
resources to meet CareerMosaic's anticipated operating and capital expenditure
needs for at least the next 12 months. There can be no assurance that the merger
will be completed as it is subject to a number of conditions.
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QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
Due to the fact that CareerMosaic does not have any short or long term
investments, CareerMosaic believes that the exposure to market rate fluctuations
is minimal. CareerMosaic does not employ any derivative financial instruments,
other financial instruments or derivative commodity instruments to hedge any
market risks and does not currently plan to employ them in the future.
RECENT ACCOUNTING PRONOUNCEMENTS
CareerMosaic does not believe that any new accounting pronouncements will
have a material impact on its financial statements.
CAREERMOSAIC PRINCIPAL STOCKHOLDERS
Bernard Hodes Group beneficially owns 100% of the outstanding capital stock
of CareerMosaic. The remaining authorized shares of CareerMosaic have been
reserved for issuance to various entities and individuals, including employees
of Bernard Hodes Group and CareerMosaic, who, as a result of such issuances, may
beneficially own an aggregate of up to 2,334,900 shares, or approximately 12.7%
of HeadHunter.NET common stock, after giving effect to the merger, assuming no
change in the number of outstanding shares of HeadHunter.NET common stock
between the date of this proxy statement/prospectus and the merger. None of
these other stockholders will acquire beneficial ownership over 5% of
HeadHunter.NET in the merger. No stockholder vote is acquired to approve the
merger. Bernard Hodes Group will beneficially own at least 5,165,100 shares, or
approximately 28.0% of HeadHunter.NET common stock, after giving effect to the
merger, assuming no change in the number of outstanding shares of HeadHunter.NET
common stock between the date of this proxy statement/prospectus and the merger.
Bernard Hodes Group presently intends to reduce its stock ownership in
HeadHunter.NET following the merger consistent with its intent not to exert
influence over the management or policies of HeadHunter.NET. Under the terms of
the merger agreement, Bernard Hodes Group will have the right to sell under this
proxy statement/prospectus that number of shares of HeadHunter.NET it owns that
would reduce its share ownership to less than 20% of the outstanding shares of
HeadHunter.NET.
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DESCRIPTION OF HEADHUNTER.NET CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 45,500,000 shares of common stock,
$0.01 par value per share, 7,500,000 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, of which 500,000 shares have been designated junior
participating preferred stock in connection with the shareholder protection
rights agreement.
As of June 8, 2000, the record date of the annual meeting, we had
shares of common stock outstanding held by shareholders
of record, and no shares of Class A preferred stock, Class B serial preferred
stock or junior participating outstanding. Upon the closing of the merger
(assuming no change in the number of outstanding shares of HeadHunter.NET common
stock between the date of the proxy statement/prospectus and the merger), we
will have 18,446,033 shares of common stock outstanding and no shares of Class A
preferred stock, Class B serial preferred stock or junior participating
preferred stock outstanding.
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 our common stock are entitled to receive ratably such
dividends as may be declared by our board of directors, in its sole discretion,
out of funds legally available for distribution. If a dividend or other
distribution is paid on shares of common stock or Class A preferred stock, then
a like dividend or distribution of equal value shall be paid on all outstanding
shares of common stock and Class A preferred stock. Holders of common stock are
further entitled to share ratably in any distribution of our assets, after
payment of all of our debts and other liabilities, upon our liquidation,
dissolution or winding up. 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 HeadHunter.NET.
Our common stock trades on the Nasdaq National Market under the symbol
"HHNT."
PREFERRED STOCK
Class A Preferred Stock. Upon the closing of our initial public offering
in August 1999, each then outstanding share of Class A stock automatically
converted into one share of common stock.
Class B Serial Preferred Stock. Our 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 of these
shares 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. On
April 15, 2000, our board of directors designated 500,000 shares of Junior
Participating preferred stock in connection with the adoption of the shareholder
protection rights plan. The issuance of Class B serial preferred stock could
have the effect of delaying, deferring or preventing a change in control or
change in management of HeadHunter.NET, may discourage bids for our common stock
at a premium over the market price of our common stock and may adversely affect
the market price and the voting and other rights of holders of our common stock.
We have no present plans to issue any shares of Class B serial preferred stock.
SHAREHOLDER PROTECTION RIGHTS AGREEMENT
On April 15, 2000, HeadHunter.NET and American Stock Transfer & Trust
Company entered into a shareholder protection rights agreement and our board of
directors declared a dividend of one preferred stock purchase right for each
outstanding share of HeadHunter.NET common stock. The dividend was payable on
April 27, 2000 to the HeadHunter.NET shareholders of record on that date. Each
right entitles the registered
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holder to purchase from HeadHunter.NET one one-thousandth of a share of
HeadHunter.NET junior participating preferred stock at a price of $200 per one
one-thousandth of a share, subject to adjustment. American Stock Transfer &
Trust Company serves as HeadHunter.NET's right agent.
Generally, each right only becomes exercisable if an "acquiring person"
acquires 15% or more of the outstanding common stock of HeadHunter.NET (other
than the rights held by the acquiring person which terminate). Each exercisable
right will automatically become a right to buy at the exercise price of $200
that number of HeadHunter.NET common stock having a market value of twice the
exercise price. HeadHunter.NET may substitute cash, property, a reduction in the
exercise price, HeadHunter.NET junior participating preferred stock or other
securities having a value equal to the HeadHunter.NET common stock which would
otherwise be issuable. HeadHunter.NET may not consolidate or merge with, or sell
50% or more of its assets or earning power to, any person, if HeadHunter.NET's
board of directors is controlled by the acquiring person, unless proper
provision is made so that each exercisable right would thereafter become a right
to buy, for the exercise price, that number of shares of common stock of such
other person having a market value of twice the exercise price. For a more
detailed discussion of the shareholder protection rights plan, see the
discussion under the heading "Other Agreements -- Shareholder Protection Rights
Agreement."
The provisions of the shareholder protection rights plan could have the
effect of preventing, hindering, or delaying a change in control of
HeadHunter.NET or a change in management.
PROVISIONS OF OUR ARTICLES OF INCORPORATION, BYLAWS AND GEORGIA LAW REGARDING
SHAREHOLDERS' RIGHTS AND RELATED MATTERS
Shareholders' rights and related matters are governed by our articles of
incorporation and bylaws and the Georgia Business Corporation Code, referred to
as the Georgia Code. The provisions of our articles of incorporation, bylaws and
Georgia law summarized below could have the effect of preventing, hindering, or
delaying a change in control of HeadHunter.NET or a change in management.
Classified Board of Directors; Removal of Directors
Our board of directors is divided into three classes of directors, each
serving staggered three-year terms. As a result, approximately one-third of our
board of directors will be elected each year. 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 all shares entitled to vote for the election of directors. The
classification of directors, together with the limitation on the removal of
directors, and the ability of 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.
Advance Notice of Shareholder Proposals and Director Nominations
Our bylaws provide that any shareholder proposals or director nominations
must be provided to us 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 to
the shareholders. Such provision may discourage or preclude a shareholder from
bringing matters that could otherwise be viewed as favorable before the
shareholders at an annual meeting or from making nominations for directors at an
annual meeting.
Anti-Takeover Provisions and Georgia Law
We have elected in our bylaws to be subject to the provisions of the
business combination statute of the Georgia Code, which generally restrict a
company from entering into specified business combinations with an interested
shareholder, which is defined as either any person or entity that, with its
affiliates, is the beneficial owner of at least 10% of a company's voting stock,
or that company's affiliates which have, in the two years
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prior to the date in question, been the beneficial owner of at least 10% of the
company's voting stock, for a period of five years after the date on which such
shareholder became an interested shareholder, unless:
- its board of directors approves the business combination or the
transaction in which the shareholder became an interested shareholder,
prior to the date the shareholder became an interested shareholder;
- the interested shareholder acquires 90% of the company's voting stock in
the same transaction in which it exceeds 10%, excluding voting stock held
by officers, directors, their affiliates, subsidiaries or specified
employee stock plans of the company; or
- subsequent to becoming an interested shareholder, such shareholder
acquires 90% of the company's voting stock, excluding certain shares, and
the business combination is approved by the holders of a majority of the
voting stock entitled to vote thereon.
The Georgia Code also contains provisions that impose certain fair price
and other procedural requirements applicable to specified business combinations
with any person who owns 10% or more of the common stock. These statutory
requirements restrict business combinations with, and accumulations of shares of
voting stock of, some Georgia corporations. The fair price statute applies only
if a corporation elects to be covered by its restrictions. We have elected to be
covered by the fair price statute.
Ability to Consider Other Constituencies
Our articles of incorporation permit our board of directors to consider the
interests of our employees, customers, suppliers and creditors, the communities
in which our offices or other establishments are located and all other factors
the directors consider pertinent, in addition to considering the effects of any
actions on us and our shareholders, when determining what is in the best
interests of our corporation. 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 our shareholders.
INDEMNIFICATION AND LIMITATION OF LIABILITY
Our articles of incorporation eliminate the personal liability of our
directors to HeadHunter.NET or our shareholders for monetary damages for any
breach of duty as a director; provided, however, that we cannot eliminate or
limit the liability of a director for:
- any appropriation in violation of such director's duties of any business
opportunity of HeadHunter.NET;
- acts or omissions which involve intentional misconduct or a knowing
violation of law;
- unlawful corporate distributions; or
- any transaction from which the director receives an improper personal
benefit.
In addition, if at any time the Georgia Code is amended to authorize
further elimination or limitation of the personal liability of a director, then
the liability of each of our directors shall be eliminated or limited to the
fullest extent permitted by such provisions, as so amended, without further
action by the shareholders, unless otherwise required. 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
HeadHunter.NET.
Under our bylaws, we must indemnify any director or officer who was, is or
is threatened to be made, a party to any legal proceeding, whether civil,
criminal, administrative or investigative (including any action or suit by or in
our right) because such person is or was a director or officer, against
liability incurred in such
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proceeding. Our bylaws do not require such indemnification for any liability
incurred in a proceeding in which the director or officer is adjudged liable to
us or is subjected to injunctive relief in our favor for:
- any appropriation, in violation of such director's or officer's duties,
of any business opportunity of HeadHunter.NET;
- acts or omissions which involve intentional misconduct or a knowing
violation of law;
- unlawful corporate distributions; or
- any transaction from which such officer or director received an improper
personal benefit.
In addition, our bylaws provide that we 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 the conditions contained in our bylaws, and may
indemnify and advance expenses to our employees or agents who are not also
directors or officers to the same extent that we could to a director.
We have entered into separate indemnity agreements with each of our
directors and certain of our executive officers, under which we agree to
indemnify them and to advance them 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 any of our
directors, officers, employees or other agents as to which indemnification is
being sought, nor are we aware of any pending or threatened litigation that may
result in claims for indemnification by any director, officer, employee or other
agent.
REGISTRATION RIGHTS
Under a contribution agreement dated July 15, 1998, we granted to ITC
Holding Company and Warren L. Bare registration rights regarding their shares of
common stock. If we undertake any registered public offering of our common
stock, other than this offering or an offering registered on Form S-8 or S-4, we
must provide written notice to ITC Holding Company and Mr. Bare not less than 30
days prior to the proposed filing date of such registration statement. At
either's written request, we shall include in such registered offering, all
shares of common stock as are set forth in the written request provided by them
within 15 days after receipt of the written notice from us; provided, however,
that if our managing underwriters advise us 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, we shall include in such
registered offering first, the primary shares of common stock that we propose to
sell, and second, the shares of common stock requested to be included in such
offering, pro rata between ITC Holding Company and Mr. Bare on the basis of the
number of shares of common stock requested to be included by each.
In addition, at the effective time of the merger, Bernard Hodes Group, ITC
Holding Company and HeadHunter.NET will enter into a registration rights
agreement. Under this agreement, Bernard Hodes Group will have registration
rights regarding shares of HeadHunter.NET common stock received by Bernard Hodes
Group in the merger and ITC Holding Company will have registration rights
regarding shares of HeadHunter.NET common stock held by, or issuable upon
exercise of options or warrants beneficially owned by, ITC Holding Company at
the effective time of the merger. For a more complete discussion of the
registration rights granted under this agreement, see "Other
Agreements -- Registration Rights Agreement."
TRANSFER AGENT AND REGISTRAR
Our transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.
SELLING STOCKHOLDER
This proxy statement/prospectus also relates to the potential offer from
time to time following the merger by Bernard Hodes Group of up to of the
HeadHunter.NET shares received in the merger, which
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represents % of HeadHunter.NET common stock, after giving effect to the
merger and assuming no change in the number of outstanding shares of
HeadHunter.NET common stock between the date of this proxy statement/prospectus
and the merger. See "Plan of Distribution".
PLAN OF DISTRIBUTION
This proxy statement/prospectus is intended to be used to comply with the
prospectus delivery requirements of the Securities Act of 1933 in connection
with any offers or resales. Bernard Hodes Group may sell shares from time to
time, although the registration does not necessarily mean that any of Bernard
Hodes Group's shares will be offered or sold. HeadHunter.NET will not receive
any of the proceeds of the sale of the shares offered by the Bernard Hodes
Group. The distribution of shares pursuant to this proxy statement/prospectus
may be effected from time to time:
- in transactions (which may include block sales) on the Nasdaq National
Market or such other national securities exchange or automated
interdealer quotation system on which shares of HeadHunter.NET common
stock are then listed,
- in negotiated transactions, or
- through a combination of such methods of sale, at fixed prices, that may
be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices, or at negotiated prices.
Bernard Hodes Group may sell shares directly to purchasers or through
underwriters, agents or broker-dealers by one or more of the following means:
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus;
- a block trade in which the broker or dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
- an exchange distribution in accordance with the rules of the exchange or
automated interdealer quotation system on which HeadHunter.NET common
stock is then listed; and
- the writing of options on or other contractual agreements relating to the
shares.
In connection with distributions of the shares by the Bernard Hodes Group
or otherwise, Bernard Hodes Group may enter into hedging transactions with
broker-dealers or others prior to or after the effective time of the merger.
Such broker-dealers may engage in short sales of HeadHunter.NET shares or other
transactions in the course of hedging the positions assumed by such persons in
connection with such hedging transactions or otherwise.
Any such underwriters, agents or broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the Bernard Hodes Group
and/or the purchasers of the shares for which such underwriters, agents or
broker-dealers may act as agents or to whom they sell as principals, or both. If
required by applicable law at the time a particular offer of shares is made, the
terms and conditions of such transaction will be set forth in a supplement to
this prospectus. Bernard Hodes Group and any underwriters, agents or
broker-dealers who act in connection with the sale of the shares hereunder may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act of 1933, and any compensation received by them might be deemed to
be underwriting discounts and commissions under the Securities Act of 1933.
Bernard Hodes Group will pay all applicable stock transfer taxes, transfer fees
and brokerage commissions or underwriting or other discounts.
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PROPOSAL 2
ELECTION OF DIRECTORS
HeadHunter.NET's board of directors has nominated J. Douglas Cox, Donald W.
Weber and Kimberley E. Thompson for election as Class II directors to hold
office until the 2003 annual meeting of HeadHunter.NET shareholders and until
their successors have been elected and qualified.
HeadHunter.NET's board of directors believes that all of the nominees will
be available and able to serve as directors. However, if the merger closes, in
accordance with the merger agreement, J. Douglas Cox, Donald W. Weber and
Michael G. Misikoff will resign effective as of the closing date and Bernard
Hodes Group will have the right to designate three directors to HeadHunter.NET's
board of directors. Bernard Hodes Group has told us that it presently expects to
designate the directors prior to the effective time of the merger or shortly
thereafter.
HeadHunter.NET's board of directors currently consists of seven directors
divided into three classes, with three directors currently in Class I, three
directors in Class II and one director in Class III. The terms of Messrs. Cox
and Weber and Ms. Thompson expire at the annual meeting. The terms of the Class
III and Class I directors expire at the annual meetings of HeadHunter.NET
shareholders in 2001 and 2002, respectively. Generally, directors hold office
until the annual meeting of HeadHunter.NET shareholders in the year in which the
term of their Class expires and until their successors have been duly elected
and qualified. However, if the directors appoint individuals to fill vacancies
on the board of directors, such appointed directors serve until the next annual
meeting of HeadHunter.NET shareholders.
The amended and restated bylaws of HeadHunter.NET provide that the classes
shall constitute, as nearly as possible, one-third of the total number of
directors constituting the entire board. The current classes do not comply with
that provision as a result of the resignation of Warren L. Bare, a former Class
III director, and the recent reduction in the size of the board of directors
from eight to seven members. In the event the merger occurs, the combination of
resignations and appointments discussed above will be made such that no class
has fewer than two directors. Likewise, should the merger agreement be
terminated prior to closing, then the current board will take such measures as
are necessary to reconstitute itself in a similar manner.
For more information about HeadHunter.NET's Executive Officers and
Directors nominees and continuing directors, see "Information Regarding
HeadHunter.NET -- HeadHunter.NET Management" on pages 88 through 95.
THE HEADHUNTER.NET BOARD OF DIRECTORS RECOMMENDS THAT
HEADHUNTER.NET SHAREHOLDERS VOTE FOR THE APPROVAL OF THE NOMINEES.
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PROPOSAL 3
APPROVAL OF THE
2000 QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
On December 23 1999, HeadHunter.NET's board of directors adopted, subject
to shareholder approval at the annual meeting, the HeadHunter.NET, Inc. 2000
Qualified Employee Stock Purchase Plan. The plan became effective as of January
3, 2000. However, if not approved by shareholders at the annual meeting, the
plan will be terminated, any and all contributions to the plan shall cease, and
any cash balances credited to participants' accounts shall be promptly
distributed to them.
A summary of the plan is set forth below. The summary is qualified in its
entirety by reference to the full text of the plan, which is attached to this
proxy statement/prospectus as Annex D.
GENERAL
The purpose of the plan is to enhance the proprietary interest, through
ownership of HeadHunter.NET common stock, among our employees designated by us
as eligible to participate in the plan.
ADMINISTRATION
The plan will be administered by the HeadHunter.NET compensation committee.
Subject to the express provisions of the plan, the compensation committee has
authority to interpret and construe the provisions of the plan, to adopt rules
and regulations for administering the plan, and to make all other determinations
necessary or advisable for administering the plan. The compensation committee
will select from time to time an administrator to operate and perform the
day-to-day administration of the plan and maintain records of the plan.
STOCK SUBJECT TO THE PLAN
A maximum of 50,000 shares of HeadHunter.NET common stock will be made
available for purchase by participants under the plan, subject to appropriate
adjustment for stock dividends, stock split or combination of shares,
recapitalization or other changes in HeadHunter.NET's capitalization. The shares
issuable under the plan may be issued out of authorized but unissued shares or
may be shares issued and later acquired by HeadHunter.NET. All cash received or
held by HeadHunter.NET under the plan may be used by HeadHunter.NET for any
corporate purpose.
ELIGIBILITY; GRANT AND EXERCISE OF OPTIONS
All of our employees who are regularly scheduled to work at least 20 hours
each week and at least five months each calendar year are eligible to
participate in the plan. As of May 8, 2000, there were approximately 184 persons
eligible to participate in the plan.
An eligible employee may elect to become a participant in the plan by
filing with the Administrator a request form which authorizes a regular payroll
deduction from the employee's paycheck. A participants' request form authorizing
a payroll deduction will remain effective from offering period to offering
period until amended or canceled. Offering periods are the three-month periods
beginning January 1, April 1, July 1 and October 1 of each year during which
options to purchase HeadHunter.NET common stock are outstanding under the plan;
provided that the first offering period began on January 3, 2000 and will end on
June 30, 2000. A participant's payroll deduction must be in any whole percentage
from one to ten percent of such participant's base compensation payable each pay
period, and at any other time an element of base compensation is payable. A
participant may not make cash contributions or payments to the plan.
A book account will be established for each participant, to which the
participant's payroll deductions will be credited, until these amounts are
either withdrawn, distributed or used to purchase HeadHunter.NET common stock,
as described below. No interest will be credited on these cash amounts. Whole
shares of
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HeadHunter.NET common stock will be held in the participant's account until
distributed as described below.
On the first day of each offering period each eligible employee is granted
an option to purchase on the last day of the offering period at the price
described below, the number of full shares of HeadHunter.NET common stock which
the cash credited to the participant's account at that time will purchase at the
purchase price. An employee may not be granted an option for an offering period
if immediately after the grant, he or she would own five percent or more of the
total combined voting power or value of all classes of HeadHunter.NET stock. A
participant cannot receive options that, in combination with options under other
plans qualified under Section 423 of the Internal Revenue Code, would result
during any calendar year in the purchase of shares having an aggregate fair
market value of more than $25,000. The maximum number of shares of
HeadHunter.NET common stock that may be purchased by any participant in the plan
during any one offering period is 1,000 shares.
Unless the cash credited to a participant's account is withdrawn or
distributed, his or her option to purchase shares of HeadHunter.NET common stock
will be deemed to have been exercised automatically on the last day of the
offering period. The cash balance, if any, remaining in the participant's
account at the end of an offering period will be refunded to the participant,
without interest. The purchase price will be 85% of the fair market value of the
HeadHunter.NET common stock on the first trading day of the offering period.
Since the shares will be purchased at less than market value, employees will
receive a benefit from participating in the plan.
Options granted under the plan are not transferable by the participant
other than by will or by the laws of descent and distribution and are
exercisable only by the participant during his or her lifetime.
NO EMPLOYMENT RIGHTS
Neither the establishment of the plan, nor the grant of any options
thereunder, nor the exercise thereof will be deemed to give to any employee the
right to be retained in our employ or to interfere with our right to discharge
any employee or otherwise modify the employment relationship at any time.
TERMINATION OF EMPLOYMENT
If a participant terminates employment, the cash balance in the
participant's account will be returned to the participant (or his or her
beneficiary in the case of the participant's death) in cash, without interest,
as soon as practicable, and certificates for the shares of HeadHunter.NET common
stock credited to the participant's account will be distributed as soon as
practicable or other appropriate evidence of ownership effected.
AMENDMENT AND TERMINATION OF THE PLAN
The compensation committee may amend the plan, in whole or in part, at any
time; provided, however, that no amendment may (a) affect any right or
obligation with respect to any grant previously made, unless required by law, or
(b) unless previously approved by our shareholders, where such approval is
necessary to satisfy the Internal Revenue Code, the rules of any stock exchange
on which the HeadHunter.NET common stock is listed, or the requirements
necessary to meet any exemption from the application of federal securities laws,
(i) materially affect the eligibility requirements, (ii) increase the number of
shares of HeadHunter.NET common stock eligible for purchase under the plan, or
(iii) materially increase the benefits to participants. The plan may be
terminated by the compensation committee at any time, in which event the
administrator will terminate all contributions to the plan. Cash balances then
credited to participants' accounts will be distributed as soon as practicable,
without interest.
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FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY AND TO PARTICIPANTS
The plan is designed to qualify as an Employee Stock Purchase plan under
Section 423 of the Internal Revenue Code. A general summary of the federal
income tax consequences regarding the plan is stated below.
Neither the grant nor the exercise of options under the plan will have a
tax impact on the participant or HeadHunter.NET. If any participant disposes of
the HeadHunter.NET common stock acquired upon the exercise of his options after
at least two years from the date of grant and one year from the date of
exercise, then the participant must treat as ordinary income the amount by which
the lesser of (i) the fair market value of the HeadHunter.NET common stock at
the time of disposition or (ii) the fair market value of the HeadHunter.NET
common stock at the date of grant, exceeds the purchase price. Any gain in
addition to this amount will be treated as a capital gain. If a participant
holds HeadHunter.NET common stock at the time of his or her death, the holding
period requirements are automatically deemed to have been satisfied and he or
she will realize ordinary income in the amount by which the lesser of (i) the
fair market value of the HeadHunter.NET common stock at the time of death or
(ii) the fair market value of the HeadHunter.NET common stock at the date of
grant exceeds the purchase price. HeadHunter.NET will not be allowed a deduction
if the holding period requirements are satisfied. If a participant disposes of
HeadHunter.NET common stock before expiration of two years from the date of
grant and one year from the date of exercise, then the participant must treat as
ordinary income the excess of the fair market value of the HeadHunter.NET common
stock on the date of exercise of the option over the purchase price. Any
additional gain will be treated as long-term or short-term capital gain or loss,
as the case may be. HeadHunter.NET will be allowed a deduction equal to the
amount of ordinary income recognized by the participant.
The above discussion is intended to summarize the applicable provisions of
the Internal Revenue Code which are in effect as of January 1, 2000. The tax
consequences of participating in the plan may vary with respect to individual
situations. Accordingly, participants should consult with their tax advisors in
regard to the tax consequences of participating in the plan as to both federal
and state income tax considerations.
BENEFITS TO NAMED EXECUTIVE OFFICERS AND OTHERS
Participation in the plan is voluntary. Consequently, it is not presently
possible to determine either the benefits or amounts that will be received by
any person or group pursuant to the plan, or that would have been received if
the plan had been in effect during the last fiscal year.
ADDITIONAL INFORMATION
The closing price of the HeadHunter.NET common stock on the Nasdaq National
Market on May 18, 2000 was $11.69.
THE HEADHUNTER.NET BOARD OF DIRECTORS RECOMMENDS THAT
HEADHUNTER.NET SHAREHOLDERS VOTE FOR THE APPROVAL OF THE PLAN.
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PROPOSAL 4
RATIFICATION OF SELECTION OF AUDITORS
HeadHunter.NET's board of directors has selected Arthur Andersen LLP to
conduct the annual audit of the financial statements of HeadHunter.NET for the
fiscal year ending December 31, 2000. The ratification by the shareholders of
the selection of Arthur Andersen LLP as independent auditors is not required by
law or by the bylaws of HeadHunter.NET. The HeadHunter.NET board of directors,
consistent with the practice of most publicly held corporations, is nevertheless
submitting this selection to the shareholders. If this selection is not ratified
at the annual meeting, the HeadHunter.NET board of directors intends to
reconsider its selection of independent auditors for the fiscal year ending
December 31, 2000.
Representatives of Arthur Andersen LLP will be presented at the annual
meeting with an opportunity to make statements, if they so desire, and to
respond to appropriate questions with respect to that firms' audit of
HeadHunter.NET's financial statements for the fiscal year ended December 31,
2000.
THE HEADHUNTER.NET BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF
THE SELECTION OF ARTHUR ANDERSEN LLP AS INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2000. RATIFICATION OF ARTHUR ANDERSEN LLP REQUIRES THAT THE
VOTES CAST IN FAVOR OF RATIFICATION EXCEED THE VOTES CAST AGAINST RATIFICATION
AT THE ANNUAL MEETING AT WHICH A QUORUM IS PRESENT.
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SHAREHOLDER PROPOSALS
Proposals of our shareholders intended to be presented at the 2001
HeadHunter.NET annual meeting must be received by HeadHunter.NET at its
principal executive offices no later than February , 2001, in order to be
considered for inclusion in our proxy statement and form of proxy for that
meeting. These proposals must comply with the requirements as to form and
substance established by the Securities and Exchange Commission and the
procedural requirements in our bylaws in order to be included in the proxy
statement. A shareholder who wishes to make a proposal at the 2001 annual
meeting without including the proposal in HeadHunter.NET's proxy statement and
form of proxy relating to that meeting must deliver such proposal to the
Secretary of HeadHunter.NET at HeadHunter.NET's principal executive offices by
March , 2001. If the shareholder fails to give notice by this date, then
the persons named as proxies in the proxies solicited by the HeadHunter.NET
board of directors for the 2001 annual meeting may exercise discretionary voting
power regarding any such proposal.
LEGAL MATTERS
The validity of the shares of HeadHunter.NET common stock to be issued in
connection with the merger will be passed upon by Alston & Bird LLP.
EXPERTS
The consolidated financial statements of HeadHunter.NET, Inc. and
subsidiaries as of December 31, 1998 and 1999 and for the ten month period ended
October 31, 1997 and the two month period ended December 31, 1997 included in
this proxy statement/prospectus have been so included in reliance on the report
of Arthur Andersen LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of CareerMosaic Inc. as of December 31, 1998 and
1999 and for the years then ended included in this proxy statement/prospectus
have been so included in reliance on the report of Arthur Anderson LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
Representatives of Arthur Andersen LLP are expected to be present at the
HeadHunter.NET annual meeting with the opportunity to make a statement, if they
desire to do so, and to be available to respond to appropriate questions.
WHERE YOU CAN FIND MORE INFORMATION
HeadHunter.NET files annual, quarterly and current reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that
HeadHunter.NET files with the Securities and Exchange Commission at the
Securities and Exchange Commission's public reference room at 450 Fifth Street,
Washington, D.C. 20549, or at the public reference rooms in New York, New York
and Chicago, Illinois. Please call the Securities and Exchange Commission at
1-800-SEC-0330 for further information on the public reference rooms. Securities
and Exchange Commission filings made by issuers which file electronically are
also available to the public from commercial document retrieval services and at
the web site maintained by the Securities and Exchange Commission at
http://www.sec.gov.
HeadHunter.NET filed with the Securities and Exchange Commission a
registration statement (which contains this proxy statement/prospectus) on Form
S-4 under the Securities Act of 1933, as amended, to register with the
Securities and Exchange Commission (1) the HeadHunter.NET common stock issuable
pursuant to the merger agreement and (2) the resale by Bernard Hodes Group of
HeadHunter.NET common stock. This proxy statement/prospectus does not contain
all the information you can find in the registration statement or the exhibits
and schedules to the registration statement. For further information with
respect to HeadHunter.NET, CareerMosaic and the HeadHunter.NET common stock,
please refer to the registration
119
<PAGE> 127
statement, including the exhibits and schedules. You may inspect and copy the
registration statement, including the exhibits and schedules, as described
above. Statements contained in this proxy statement/prospectus about the
contents of any contract or other document are not necessarily complete, and
HeadHunter.NET refers you, in each case, to the copy of such contract or other
document filed as an exhibit to the registration statement and/or included as an
annex to this proxy statement/prospectus.
The rules of the Securities and Exchange Commission require us to provide
an annual report to shareholders who receive this proxy statement/prospectus. We
will also provide copies of the annual report to brokers, dealers, banks, voting
trustees and their nominees for the benefit of their beneficial owners of
record. Additional copies of the annual report, along with copies of our annual
report on Form 10-K for the fiscal year ended December 31, 1999 (not including
documents incorporated by reference) are available without charge to
shareholders upon written request to HeadHunter.NET at 333 Research Court, Suite
200, Norcross, Georgia 30092, Attention: Mark W. Partin, Chief Financial
Officer.
HeadHunter.NET has supplied all information contained in this proxy
statement/prospectus relating to HeadHunter.NET, and CareerMosaic, Omnicom
Group, and Bernard Hodes Group have supplied all information contained or
incorporated by reference in this proxy statement/prospectus relating to
CareerMosaic.
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus to vote on the merger.
HeadHunter.NET has not authorized anyone to provide you with information that is
different from what is contained in this proxy statement/prospectus. This proxy
statement/prospectus is dated June , 2000. You should not assume that the
information contained in this proxy statement/prospectus is accurate as of any
other date, and neither the mailing of the proxy statement/prospectus to
HeadHunter.NET shareholders nor the issuance of HeadHunter.NET common stock in
the merger shall create any implication to the contrary.
120
<PAGE> 128
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HEADHUNTER.NET, INC.
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1999 and
1998...................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1999 and 1998, the Two Months Ended December
31, 1997, and the Ten Months Ended October 31, 1997....... F-4
Consolidated Statements of Shareholders' Equity (Deficit)
for the Years Ended December 31, 1999 and 1998, the Two
Months Ended December 31, 1997, and the Ten Months Ended
October 31, 1997.......................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998, the Two Months Ended December
31, 1997, and the Ten Months Ended October 31, 1997....... F-6
Notes to Consolidated Financial Statements.................. F-7
Unaudited Condensed Consolidated Balance Sheets as of March
31, 2000 and December 31, 1999............................ F-17
Unaudited Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 2000 and 1999........ F-18
Unaudited Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 2000 and 1999........ F-19
Unaudited Condensed Notes to Financial Statements........... F-20
CAREER MOSAIC INC.
Report of Independent Public Accountants.................... F-22
Balance Sheets as of December 31, 1998 and 1999 and March
31, 2000 (unaudited)...................................... F-23
Statements of Operations for the Years Ended December 31,
1998 and 1999 and the Three Months Ended March 31, 1999
and 2000 (unaudited)...................................... F-24
Statements of Stockholder's Equity (Deficit) for the Years
Ended December 31, 1998 and 1999 and the Three Months
Ended March 31, 2000 (unaudited).......................... F-25
Statements of Cash Flows for the Years Ended December 31,
1998 and 1999 and the Three Months Ended March 31, 1999
and 2000 (unaudited)...................................... F-26
Notes to Financial Statements............................... F-27
</TABLE>
F-1
<PAGE> 129
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To HeadHunter.NET, Inc. and Subsidiaries:
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, 1999 and 1998 and the related
consolidated statements of operations, shareholders' equity (deficit), and cash
flows for the years ended December 31, 1999 and 1998, the two months ended
December 31, 1997, and the ten months ended October 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, 1999 and 1998 and the results of their operations and their cash
flows for the years ended December 31, 1999 and 1998, the two months ended
December 31, 1997, and the ten months ended October 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
January 26, 2000
F-2
<PAGE> 130
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
SUCCESSOR COMPANY
--------------------------
1999 1998
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 16,938,708 $ 254,937
Short-term investments.................................... 4,125,084 0
Accounts receivable:
Trade, net of allowance for doubtful accounts of
$209,475 and $37,346 in 1999 and 1998, respectively... 1,846,813 296,654
Prepaid expenses and other................................ 561,418 195,110
------------ -----------
Total current assets.............................. 23,472,023 746,701
PROPERTY AND EQUIPMENT, NET................................. 1,749,711 447,325
INTANGIBLE ASSETS, NET...................................... 1,197,071 782,631
OTHER NONCURRENT ASSETS..................................... 560,939 248,523
------------ -----------
Total assets...................................... $ 26,979,744 $ 2,225,180
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 614,058 $ 397,425
Short-term borrowings -- affiliates (Notes 3 and 4)....... 0 3,500,000
Accrued interest -- affiliates (Note 4)................... 0 100,100
Other accrued expenses.................................... 1,409,923 128,098
Customer deposits......................................... 131,356 27,936
Deferred revenue.......................................... 80,483 39,564
------------ -----------
Total current liabilities......................... 2,235,820 4,193,123
------------ -----------
COMMITMENTS AND CONTINGENCIES (NOTE 8)
SHAREHOLDERS' EQUITY (DEFICIT):
Convertible Class A preferred stock, $.01 par value;
7,500,000 shares authorized and no shares issued and
outstanding in 1999; 2,800,000 shares authorized,
issued, and outstanding in 1998........................ 0 28,000
Class B serial preferred stock, $.01 par value; 5,000,000
shares authorized, no shares issued and outstanding in
1999 and 1998.......................................... 0 0
Common stock, $.01 par value; 45,500,000 shares authorized
and 10,802,833 shares issued and outstanding in 1999;
50,200,000 shares authorized, 2,200,000 shares issued
and outstanding in 1998................................ 108,028 22,000
Additional paid-in capital................................ 64,784,569 4,507,859
Stock warrants (Note 3)................................... 341,834 341,834
Accumulated deficit....................................... (36,478,292) (4,522,260)
Deferred compensation (Note 6)............................ (4,012,215) (2,345,376)
------------ -----------
Total shareholders' equity (deficit).............. 24,743,924 (1,967,943)
------------ -----------
Total liabilities and shareholders' equity........ $ 26,979,744 $ 2,225,180
============ ===========
</TABLE>
F-3
<PAGE> 131
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998,
THE TWO MONTHS ENDED DECEMBER 31, 1997, AND THE TEN MONTHS ENDED OCTOBER 31,
1997
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
SUCCESSOR COMPANY ------------
------------------------------------------ TEN
TWO MONTHS MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, OCTOBER 31,
1999 1998 1997 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES..................................... $ 9,253,954 $ 1,099,868 $ 29,591 $124,437
------------ ----------- --------- --------
COSTS AND EXPENSES:
Costs of revenues.......................... 147,275 86,963 2,906 29,390
Marketing and selling...................... 9,898,815 2,719,330 41,123 23,301
General and administrative................. 3,786,728 1,714,756 126,268 95,967
Stock compensation expense................. 5,528,114 205,574 0 0
Depreciation and amortization.............. 528,256 276,706 41,912 10,099
------------ ----------- --------- --------
Total costs and expenses........... 19,889,188 5,003,329 212,209 158,757
------------ ----------- --------- --------
OPERATING LOSS............................... (10,635,234) (3,903,461) (182,618) (34,320)
OTHER INCOME (EXPENSE)....................... 379,198 (442,407) 6,226 (843)
------------ ----------- --------- --------
NET LOSS........................... $(10,256,036) $(4,345,868) $(176,392) $(35,163)
============ =========== ========= ========
LOSS PER SHARE:
Basic and diluted.......................... $ (5.90) $ (1.98) $ (0.08)
============ =========== =========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted.......................... 5,412,135 2,200,000 2,200,000
============ =========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 132
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998,
THE TWO MONTHS ENDED DECEMBER 31, 1997, AND THE TEN MONTHS ENDED OCTOBER 31,
1997
<TABLE>
<CAPTION>
CONVERTIBLE CLASS A RETAINED
-------------------------------------------- ADDITIONAL EARNINGS
PREFERRED STOCK COMMON STOCK PAID-IN STOCK (ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL WARRANTS DEFICIT)
---------- ------- ---------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY:
Balance, December 31, 1996........ 0 $ 0 260 $ 260 $ 5,040 $ 0 $ 50,200
Capital contribution............. 0 0 0 0 30,000 0 0
Dividends........................ 0 0 0 0 0 0 (121,941)
Net loss......................... 0 0 0 0 0 0 (35,163)
---------- ------- ---------- -------- ----------- -------- ------------
Balance, October 31, 1997......... 0 0 260 260 35,040 0 (106,904)
---------- ------- ---------- -------- ----------- -------- ------------
- -----------------------------------------------------------------------------------------------------------------------
SUCCESSOR COMPANY:
Initial capitalization of
Headhunters, L.L.C............. 0 0 0 0 2,000,000 0 0
Acquisition of Predecessor
Company........................ 0 0 (260) (260) (35,040) 0 106,904
Reorganization (Note 1).......... 2,800,000 28,000 2,200,000 22,000 (43,091) 0 0
Net loss......................... 0 0 0 0 0 0 (176,392)
---------- ------- ---------- -------- ----------- -------- ------------
Balance, December 31, 1997........ 2,800,000 28,000 2,200,000 22,000 1,956,909 0 (176,392)
Issuance of stock warrants....... 0 0 0 0 0 341,834 0
Issuance of stock options........ 0 0 0 0 2,550,950 0 0
Amortization of deferred
compensation................... 0 0 0 0 0 0 0
Net loss......................... 0 0 0 0 0 0 (4,345,868)
---------- ------- ---------- -------- ----------- -------- ------------
Balance, December 31, 1998........ 2,800,000 28,000 2,200,000 22,000 4,507,859 341,834 (4,522,260)
Conversion of short-term
borrowings to convertible Class
A preferred stock.............. 2,333,333 $23,333 0 $ 0 $25,176,663 0 $(21,699,996)
Issuance of Class A preferred
stock.......................... 271,167 2,712 0 0 2,925,891 0 0
Conversion of Class A preferred
stock to common stock.......... (5,404,500) (54,045) 5,404,500 54,045 0 0 0
Sale of common stock, net of
offering expenses.............. 0 0 3,140,000 31,400 28,327,389 0 0
Issuance of common stock for
acquisition.................... 0 0 25,000 250 356,000 0 0
Issuance of stock options........ 0 0 0 0 3,441,100 0 0
Amortization of deferred
compensation................... 0 0 0 0 0 0 0
Exercise of stock options........ 0 0 33,333 333 49,667 0 0
Net loss......................... 0 0 0 0 0 0 (10,256,036)
---------- ------- ---------- -------- ----------- -------- ------------
Balance, December 31, 1999........ 0 $ 0 10,802,833 $108,028 $64,784,569 $341,834 $(36,478,292)
========== ======= ========== ======== =========== ======== ============
<CAPTION>
DEFERRED
COMPENSATION TOTAL
------------ ------------
<S> <C> <C>
PREDECESSOR COMPANY:
Balance, December 31, 1996........ $ 0 $ 55,500
Capital contribution............. 0 30,000
Dividends........................ 0 (121,941)
Net loss......................... 0 (35,163)
----------- ------------
Balance, October 31, 1997......... 0 (71,604)
----------- ------------
- ----------------------------------------------------------------------------------------------------------------
SUCCESSOR COMPANY:
Initial capitalization of
Headhunters, L.L.C............. 0 2,000,000
Acquisition of Predecessor
Company........................ 0 71,604
Reorganization (Note 1).......... 0 6,909
Net loss......................... 0 (176,392)
----------- ------------
Balance, December 31, 1997........ 0 1,830,517
Issuance of stock warrants....... 0 341,834
Issuance of stock options........ (2,550,950) 0
Amortization of deferred
compensation................... 205,574 205,574
Net loss......................... 0 (4,345,868)
----------- ------------
Balance, December 31, 1998........ (2,345,376) (1,967,943)
Conversion of short-term
borrowings to convertible Class
A preferred stock.............. $ 0 $ 3,500,000
Issuance of Class A preferred
stock.......................... 0 2,928,603
Conversion of Class A preferred
stock to common stock.......... 0 0
Sale of common stock, net of
offering expenses.............. 0 28,358,789
Issuance of common stock for
acquisition.................... 0 356,250
Issuance of stock options........ (3,441,100) 0
Amortization of deferred
compensation................... 1,774,261 1,774,261
Exercise of stock options........ 0 50,000
Net loss......................... 0 (10,256,036)
----------- ------------
Balance, December 31, 1999........ $(4,012,215) $ 24,743,924
=========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 133
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998,
TWO MONTHS ENDED DECEMBER 31, 1997, AND THE TEN MONTHS ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
PREDECESSOR
COMPANY
SUCCESSOR COMPANY -----------
----------------------------------------------- TEN
YEAR YEAR TWO MONTHS MONTHS
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, OCTOBER 31,
1999 1998 1997 1997
------------ ----------------- ------------ -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(10,256,036) $(4,345,868) $(176,392) $(35,163)
------------ ----------- --------- --------
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization........................... 528,256 276,706 41,912 10,099
Amortization of debt issuance costs..................... 0 341,834 0 0
Compensation expense.................................... 5,528,114 205,574 0 0
Changes in operating assets and liabilities:
Accounts receivable................................... (1,550,159) (287,789) 1,918 10,783
Due from affiliates................................... 0 5,100 (5,100) 0
Interest receivable................................... (65,650) 0 0 0
Prepaid expenses...................................... (300,658) (181,690) (13,420) 0
Other assets.......................................... 77,940 (244,293) (4,230) 0
Accounts payable...................................... 216,633 316,802 71,248 741
Accrued expenses...................................... 1,181,725 228,198 0 2,548
Customer deposits..................................... 103,420 27,936 0 0
Deferred revenue...................................... 40,919 27,789 11,775 0
------------ ----------- --------- --------
Total adjustments................................... 5,760,540 716,167 104,103 24,171
------------ ----------- --------- --------
Net cash used in operating activities............... (4,495,496) (3,629,701) (72,289) (10,992)
------------ ----------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments....................... (4,125,084) 0 0 0
Purchase of Internet domain name.......................... 0 (35,000) 0 0
Purchases of property and equipment....................... (1,627,462) (434,351) (73,722) (14,830)
Long-term investments..................................... (401,726) 0 0 0
Acquisition............................................... (250,000) 0 0 0
------------ ----------- --------- --------
Net cash used in investing activities............... (6,404,272) (469,351) (73,722) (14,830)
------------ ----------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Equity contribution....................................... 0 0 1,100,000 30,000
Proceeds from issuance of convertible Class A preferred
stock................................................... 406,750 0 0 0
Proceeds from issuance of common stock.................... 27,176,789 0 0 0
Short-term borrowings..................................... 0 3,500,000 0 0
Dividends paid (Note 4)................................... 0 0 (100,000) (21,941)
------------ ----------- --------- --------
Net cash provided by financing activities........... 27,583,539 3,500,000 1,000,000 8,059
------------ ----------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................................. $ 16,683,771 $ (599,052) $ 853,989 $(17,763)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 254,937 853,989 0 25,973
------------ ----------- --------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 16,938,708 $ 254,937 $ 853,989 $ 8,210
============ =========== ========= ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................. $ 73,700 $ 18,165 0 $ 0
============ =========== ========= ========
Initial noncash equity contributions (Note 1)............. $ 0 $ 0 $ 900,000 $ 0
============ =========== ========= ========
Conversion of short-term borrowings to equity............. $ 3,500,000 $ 0 $ 0 $ 0
============ =========== ========= ========
Stock issued in connection with acquisition............... $ 356,250 $ 0 $ 0 $ 0
============ =========== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 134
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998, AND 1997, AND OCTOBER 31, 1997
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 goodwill, and $100,000 in dividends payable.
On July 13, 1998, HeadHunter.NET, Inc. (the "Company" or the "Successor
Company") was incorporated under the laws of the state of Georgia.
On July 15, 1998, HNI's sole shareholder and ITC reorganized LLC and HNI as
follows (the "Reorganization"):
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 interests.
NATURE OF BUSINESS
HeadHunter.NET provides a leading on-line recruiting service via its web
site at www.HeadHunter.NET. Employers and recruiters use the web site to
advertise job opportunities and review resumes. Job seekers use the web site to
identify, research, and evaluate a broad range of job opportunities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION
The accompanying consolidated financial statements have been prepared on
the accrual basis of accounting. The 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 differ from those 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 generally will not be comparable to
that of the Company with respect to the items described below.
F-7
<PAGE> 135
As a result of ITC's acquisition of a majority interest in LLC, the
statements of operations for the Successor Period include amortization of
goodwill. 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"
basis with respect to the Company. Accordingly, the depreciation of property and
equipment for the Successor Period is based on the newly established cost basis
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 amounts 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
Revenues consist of job posting revenues, upgrading revenues, and resume
reserve revenues and advertising revenues. Job posting revenues, upgrading
revenues, and resume reserve revenues are recognized over the service period.
Advertising revenues are recognized in the month that the advertising
impressions are delivered.
DEFERRED REVENUE
Deferred revenue represents the liability for advance billings to
customers. Such amounts are recognized as revenues when the related services are
provided.
CASH AND CASH EQUIVALENTS
The Company considers all short-term, highly liquid investments with an
original maturity of three months or less to be cash equivalents. Cash and cash
equivalents are stated at cost, which approximates fair value.
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.
Property and equipment and estimated useful lives for the Company's assets as of
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998 ESTIMATED LIVES
---------- -------- -------------------
<S> <C> <C> <C>
Telecommunications and computer equipment... $1,785,614 $376,558 Three Years
Furniture and fixtures...................... 370,947 152,539 Three to Five Years
---------- --------
Total property and equipment...... 2,156,561 529,097
Accumulated depreciation.................... (406,850) (81,772)
---------- --------
Total property and equipment,
net............................. $1,749,711 $447,325
========== ========
</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. Depreciation expense was $325,076, $77,994, and $9,279 for the years
ended December 31, 1999 and 1998 and the two months ended December 31, 1997,
respectively.
F-8
<PAGE> 136
INTANGIBLE ASSETS
Intangible assets consist of the following amounts for December 31, 1999
and 1998:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Goodwill.................................................... $1,288,896 $ 978,976
Acquired intangibles........................................ 307,700 0
Domain name................................................. 35,000 35,000
---------- ----------
1,631,596 1,013,976
Accumulated amortization.................................... (434,525) (231,345)
---------- ----------
$1,197,071 $ 782,631
========== ==========
</TABLE>
The Company has classified as goodwill the cost in excess of fair value of
the net liabilities acquired in a transaction accounted for as a purchase (Note
1). Goodwill includes all rights to the HeadHunter.NET Web site and is being
amortized on a straight-line basis over a period of five years.
In December 1999, the Company recorded $309,920 and $300,000 to goodwill
and intangible assets, respectively, for the purchase of the All In One Submit
business. The Company is amortizing these assets on a straight-line basis over a
period of five years. In July 1998, the Company acquired the rights to the
Internet domain name, www.Headhunter.com, for $35,000. The Company is amortizing
the intangible asset 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 December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Deposits.................................................... $159,213 $248,523
Long-term investments....................................... 401,726 0
-------- --------
$560,939 $248,523
======== ========
</TABLE>
INCOME TAXES
The sole shareholder of HNI elected for the Predecessor Company to be taxed
under the S corporation status of the Internal Revenue Code (the "Code"). 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 utilizes the
liability method of accounting for income taxes. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. At the date of the Reorganization (Note 1), there were no
material effects on the Company's financial statements related to tax
consequences of the Reorganization.
F-9
<PAGE> 137
ADVERTISING COSTS
The Company expenses the costs of advertising as incurred. Advertising
expenses included in marketing and selling expenses were $4,291,017 and
$1,627,011 for the years ended December 31, 1999 and 1998, respectively, $28,240
for the two months ended December 31, 1997, and $2,632 for the ten months ended
October 31, 1997. Prepaid advertising costs of approximately $276,000 and
$405,000 were recorded as assets in the accompanying consolidated balance sheets
as of December 31, 1999 and 1998, respectively.
SOURCES OF SUPPLIES
The Company relies on local telephone companies and other companies to
provide data communications capacity. Although management feels that 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 the Company
expands its network infrastructure and sells 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.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade receivables. The
Company's cash investment polices limit investments to short-term, low-risk
instruments. Concentrations of credit risk with respect to trade receivables are
limited due to advance billings to customers for services and the ability to
terminate service on delinquent accounts. In addition, the number of customers
comprising the customer base mitigates the concentration of credit risk. The
carrying amount of the Company's receivables approximates their fair value.
SEGMENTAL DISCLOSURES
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 131, "Segmental Disclosures," effective December 31, 1998. The statement had
no effect, as the Company has only one operating business segment.
STOCK-BASED COMPENSATION PLANS
The Company accounts for its stock-based compensation plans under
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees." Effective in 1997, the Company adopted the disclosure option of
SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 requires
that companies that do not choose to account for stock-based compensation as
prescribed by this statement shall disclose the pro forma effects on earnings
and earnings per share as if SFAS No. 123 had been adopted. Additionally,
certain other disclosures are required with respect to stock compensation and
the assumptions used to determine the pro forma effects of SFAS No. 123.
NET LOSS PER SHARE
The Company follows SFAS No. 128, "Earnings Per Share." That statement
requires the disclosure of basic net income (loss) per share and diluted net
income (loss) per share. Basic net income (loss) per share is computed by
dividing net income (loss) available to common shareholders by the weighted
average number of common shares outstanding during the period and does not
include any other potentially dilutive securities. Diluted net income (loss) per
share gives effect to all potentially dilutive securities. The Company has
presented basic and diluted loss per share in accordance with SFAS No. 128. As
the Company had a net
F-10
<PAGE> 138
loss in all periods presented, basic and diluted loss per share is the same. Net
loss per share is not shown for the Predecessor Company, as it is not
comparable.
In January 1999, a one-time noncash distribution was recorded in
conjunction with the conversion of the loan and security agreement to equity
(Note 3). The following table represents a reconciliation of the net loss per
the statements of operations to the net loss attributable to common
shareholders:
<TABLE>
<S> <C>
Net loss................................................... $(10,256,036)
Distribution to a preferred shareholder.................... (21,699,996)
------------
Net loss available to common shareholders.................. $(31,956,032)
============
Weighted average shares outstanding........................ 5,412,135
============
Net loss per share............................... $ (5.90)
============
</TABLE>
COMPREHENSIVE LOSS
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income." Comprehensive income represents the change in equity of a business
during a period, except for investments by owners and distributions to owners.
The Company does not have any other components of comprehensive loss. For the
years ended December 31, 1999 and 1998 and the two months ended December 31,
1997, total comprehensive loss is equal to the net loss.
3. CREDIT AGREEMENT
On October 31, 1997, the Company entered into a revolving credit agreement
(the "Credit Agreement") with ITC, which allowed the Company to draw up to
$1,000,000 at an interest rate approximating ITC's cost of debt capital.
On July 16, 1998, the Company, ITC, and ITC Service Company, an affiliate
of ITC, amended and restated the Credit Agreement, pursuant to which ITC made
available to the Company an additional revolving line of credit of up to $2.5
million. Principal amounts outstanding under the credit facility incurred
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 (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 of $1.50 per share, which was amended and restated to $625,000 of common
stock at a price of $1.50 per share in October 1998. This warrant vested upon
issuance and is exercisable for a term of ten years. In connection with the
warrant issued to ITC Service Company, the estimated $342,000 fair value of the
warrant was calculated under the Black-Scholes option pricing model at the date
of grant and was included in stock warrants and interest expense. The
assumptions used in the Black-Scholes calculation were as follows: risk-free
interest rate, 5.52%; expected dividend yield, 0%; expected lives, three years;
and expected volatility, 79%. Short-term borrowings under the Credit Agreement
were $3,500,000 for the year ended December 31, 1998.
On January 28, 1999, the Company and ITC Service Company entered into a
revolving loan and security agreement (the "Loan and Security Agreement"),
pursuant to which ITC Service Company made available to the Company a revolving
line of credit of up to $3 million which is payable in full the earlier of (i)
December 31, 1999, (ii) the closing of an initial public offering of the
Company's common stock at a minimum aggregate offering price of $20 million, or
(iii) any sale, transfer, or exchange of the Company's common stock, not
requiring registration under the Securities and Exchange Commission, in excess
of $20 million. Principal amounts outstanding under the credit facility bear
interest at a fixed rate of 11% per annum. Upon completion of the initial public
offering, the Company repaid the outstanding balance and canceled the Loan and
Security Agreement.
In conjunction with the Loan and Security Agreement, the principal balance
of $3.5 million outstanding under the Credit Agreement was converted into
2,333,333 shares of the Company's Convertible Class A preferred stock at a price
of $1.50 per share. As this represented an extinguishment of debt among related
F-11
<PAGE> 139
parties, it was accounted for as a capital transaction. The difference between
the estimated fair value $(10.80) and the conversion price was recorded to
accumulated deficit as a one-time noncash distribution to -- ITC Service
Company, a preferred shareholder, with an offsetting amount recorded to
additional paid-in capital.
4. RELATED-PARTY TRANSACTIONS
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.
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. Internet access and
long-distance telephone charges totaled $119,100 and $72,028 for the years ended
December 31, 1999 and 1998, respectively.
Short-term borrowings under a revolving credit agreement with ITC (Note 3)
were $0 and $3,500,000 for the years ended December 31, 1999 and 1998,
respectively. Accrued interest related to the revolving credit agreement was $0
and $100,100 at December 31, 1999 and 1998, respectively.
The Company utilizes an entity for insurance coverage that is related to
ITC through common ownership. Insurance expense related to this entity for the
years ended December 31, 1999 and 1998 was $258,854 and $8,928, respectively.
5. SHAREHOLDERS' EQUITY
During August 1999, the Company completed the sale of 3,000,000 shares of
its common stock to the public at an offering price of $10 a share.
In January 1999, the Company decreased the authorized number of common
stock, par value $.01, from 50,200,000 to 45,500,000 shares and increased the
number of Convertible Class A preferred shares to 7,500,000. The Class A
preferred stock is entitled to one vote per share owned of record on all matters
which shareholders are entitled to vote. Upon the closing of the initial public
offering, each share of Class A preferred stock then outstanding was
automatically converted into one share of common stock and there were no shares
of Class A preferred stock outstanding as of December 31, 1999. The Company has
also authorized 5,000,000 shares of Class B serial preferred stock. The
Company's board of directors has the authority to issue 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 HNI'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 Convertible Class A preferred
stock. The sole shareholder of HNI received 2,200,000 shares of the Company's
common stock, $.01 par value, and 50,000 shares of the Company's Convertible
Class A preferred stock in return for the contribution of 100% of HNI.
During 1999, the Company sold 271,167 and 140,000 shares of Convertible
Class A preferred stock and common stock, respectively, to certain executive
officers, key employees, and directors at $1.50 and $2 per share, respectively.
In accordance with APB No. 25, the Company recognized $3,753,853 in compensation
expense in 1999 related to the difference between the purchase price and the
estimated fair value of $10.80 with the offset to additional paid-in capital.
6. EMPLOYEE BENEFIT PLANS
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"). At the plan's inception,
the Company reserved 500,000 shares of its common stock for issuance in
connection with options and awards granted under the Incentive Plan. In April
1999, the
F-12
<PAGE> 140
Company increased the common shares reserved for issuance in connection with
options and awards granted under the Incentive Plan to 1,000,000 shares.
The Company may grant options and awards to officers and employees of the
Company, a parent or subsidiary, and to nonemployee directors and consultants to
the Company. The Incentive Plan authorizes the granting of awards to eligible
participants in the form of (i) options to purchase shares of the Company's
common stock, which may be incentive stock options or nonqualified stock
options, (ii) stock appreciation rights, (iii) performance shares, (iv)
restricted stock awards, (v) dividend equivalents, or (vi) other stock-based
awards. The Incentive Plan is administered by the Company's board of directors
or the board's compensation committee in accordance with its term. The options
vest ratably over five years from the date of grant. The options expire ten
years from the date of grant.
A summary of the status of the Company's stock options at December 31, 1999
and 1998 and changes during the year then ended is presented in the following
table:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
PRICE PER
SHARES SHARE
--------- ---------
<S> <C> <C>
Outstanding at December 31, 1997............................ 0 $0.00
Granted................................................... 550,750 0.87
Forfeited................................................. (68,500) (0.43)
--------- -----
Outstanding at December 31, 1998............................ 482,250 0.93
--------- -----
Granted................................................... 1,018,750 7.95
Forfeited................................................. (91,500) (1.31)
Exercised................................................. (33,333) (1.50)
--------- -----
Outstanding at December 31, 1999............................ 1,376,167 $6.02
========= =====
Exercisable at December 31, 1999 and 1998................... 0 $ 0
========= =====
</TABLE>
During 1998 and 1999, the Company granted options with exercise prices
below the fair value at the date of grant. The estimated fair value for options
granted February 1998 to July 1999 was $10.80. Accordingly, the Company
recognized deferred compensation of $3.4 million and $2.5 million for options
granted during the year-ended December 31, 1999 and 1998, respectively. The
Company amortizes deferred compensation over five years, the vesting period of
the options. The Company recognized $1,774,261 and $205,574 of compensation
expense for the years ended December 31, 1999 and 1998, respectively, related to
option grants.
The following table summarizes information about stock options outstanding
at December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED AVERAGE WEIGHTED AVERAGE
AVERAGE EXERCISE EXERCISE
RANGE OF OPTIONS REMAINING PRICE OF OPTIONS OPTIONS PRICE OF OPTIONS
EXERCISE PRICES OUTSTANDING LIFE OUTSTANDING EXERCISABLE EXERCISABLE
- --------------- ----------- --------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$1.50 -- $2.00................... 820,167 3.00 $ 1.32 0 $0
$10.80 -- $14.25................. 556,000 3.81 12.35 0 0
</TABLE>
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123
The Company accounts for its stock-based compensation plans in accordance
with APB No. 25, "Accounting for Stock Issued to Employees." SFAS No. 123
encourages but does not require the use of a fair value-based method of
accounting for stock-based compensation plans under which the fair value of
stock options is determined on the date of grant and expensed over the vesting
period of the stock options. While the Company has elected to continue to apply
the provisions of APB No. 25, under which no compensation cost has been
recognized by the Company, SFAS No. 123 requires pro forma disclosure of net
loss and loss per share as if the fair value-based method under SFAS No. 123 had
been adopted. The value of all options for
F-13
<PAGE> 141
shares of the Company's common stock to employees of the Company has been
determined under the market value method using Black-Scholes valuation
principles and the following assumptions:
<TABLE>
<CAPTION>
1999 1998
------------- ----------
<S> <C> <C>
Risk-free interest rate.................................... 4.53% - 6.24% 5.3%
Expected dividend yield.................................... 0% 0%
Expected lives............................................. Five Years Five Years
Expected volatility........................................ 94% 79%
</TABLE>
The total value of options granted during the years ended December 31, 1999
and 1998 was computed as approximately $7.3 million and $300,000, respectively,
which would be amortized on a pro forma basis over the vesting period of the
options. No options were granted in 1997. If the Company had accounted for these
plans in accordance with SFAS No. 123, the Company's net loss for the year ended
December 31, 1999 would have increased as follows:
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
Net loss:
As reported.............................................. $(10,256,036) $(4,345,868)
Pro forma................................................ (11,895,815) (4,374,078)
Net loss per share:
As reported:
Basic and diluted..................................... (5.90) (1.98)
Pro forma:
Basic and diluted..................................... (6.20) (1.50)
</TABLE>
7. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and income tax purposes. Significant components of the Company's
deferred tax assets and liabilities for federal and state income taxes as of
December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 2,672,993 $1,029,386
Accumulated amortization.................................. 127,928 61,692
Allowance for doubtful accounts........................... 83,790 14,938
Deferred compensation..................................... 791,934 0
Deferred revenues......................................... 32,193 15,826
Other..................................................... 35,391 20,912
----------- ----------
Total deferred tax assets......................... 3,744,229 1,142,754
Deferred tax liabilities:
Accelerated depreciation.................................. 27,628 16,354
----------- ----------
Net deferred tax asset...................................... 3,716,601 1,126,400
Valuation allowance....................................... (3,716,601) (1,126,400)
----------- ----------
Net deferred taxes.......................................... $ 0 $ 0
=========== ==========
</TABLE>
The Company's net operating loss carryforward will expire in the years 2018
through 2019 unless utilized. Due to the fact that the Company is unable to
conclude that it is more likely than not that its deferred tax assets will be
recognized, the Company has provided a 100% valuation allowance against its net
deferred tax assets. In addition, the Company's ability to recognize the benefit
from the net operating loss carryforwards may be limited under the Code, as the
ownership of the Company has changed more than 50%, as defined.
F-14
<PAGE> 142
A reconciliation of the income tax provision computed at statutory tax
rates to the income tax provision for the years ended December 31, 1999 and 1998
is as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Income tax benefit at statutory rate........................ (34)% (34)%
State and local income taxes................................ (6) (6)
Increase in valuation allowance............................. 40 40
--- ---
Total income tax provision........................ 0% 0%
=== ===
</TABLE>
Prior to the Reorganization (Note 1), LLC, as a limited liability company,
was treated as a partnership for tax purposes. Therefore, through June 1998, the
income tax benefits generated by LLC were recorded by its members. Following the
Reorganization (Note 1), the Company recognized the income tax benefits
generated by its subsidiary in the accompanying statements of operations.
8. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Lease expense relates to the lease of office space for the administrative
office and sales offices. At December 31, 1999, future minimum lease payments
under these noncancellable operating leases are as follows:
<TABLE>
<S> <C>
2000........................................................ $ 554,602
2001........................................................ 559,764
2002........................................................ 500,732
2003........................................................ 417,332
2004........................................................ 386,265
----------
$2,418,695
==========
</TABLE>
Rental expense under the operating lease amounted to $198,898 and $40,050
for the years ended December 31, 1999 and 1998, respectively.
PURCHASE COMMITMENTS
The Company has entered into various agreements with Internet companies to
purchase a minimum of approximately $3.2 million in banner advertisements in
2000. Purchase commitments under the agreements are being expensed as the
advertisements are incurred.
LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceedings. The Company,
from time to time, may be subject to legal proceedings and claims in the
ordinary course of business, including 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.
9. ACQUISITIONS
ALL IN ONE SUBMIT, ACQUISITION
In December 1999, the Company purchased all of the assets of All In One
Submit, a division of Chicago Computer Guide, Inc. Chicago Computer Guide may
receive up to 100,000 shares of HeadHunter.NET common stock based on an earn-out
provision and cash consideration of approximately $300,000. Excess purchase
price over fair value of net assets acquired of approximately $300,000 as of
December 31, 1999 has been recorded as goodwill and will be amortized on a
straight-line basis over five years. This transaction has been accounted for as
a purchase.
F-15
<PAGE> 143
The following unaudited pro forma results of operations for the year ended
December 31, 1999 assume the acquisition, accounted for as purchase, occurred as
of January 1, 1999:
<TABLE>
<S> <C>
Revenues.................................................... $ 9,398,682
============
Net loss.................................................... $(10,190,525)
============
Basic and diluted net loss per share........................ $ (1.87)
============
</TABLE>
10. SUBSEQUENT EVENTS (UNAUDITED)
On April 15, 2000, the Company entered into an Agreement and Plan of Merger
with Career Mosaic Inc. ("CareerMosaic"), an indirect subsidiary of the
marketing communications firm, Omnicom Group Inc. The Company will issue 7.5
million shares in connection with the merger of CareerMosaic into a wholly owned
subsidiary of the Company. The merger is subject to certain closing conditions,
including regulatory approvals, approval by the Company's shareholders and
attainment of certain revenue goals for the quarter ended June 30, 2000.
On April 15, 2000, the Company and American Stock Transfer & Trust Company
entered into a shareholder protection rights agreement and the Company's board
of directors declared a dividend of one preferred stock purchase right for each
outstanding share of the Company's common stock. The dividend was payable on
April 27, 2000 to the Company's shareholders of record on that date. Each right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of the Company junior participating preferred stock at a price of
$200 per one one-thousandth of a share, subject to adjustment. American Stock
Transfer & Trust Company serves as the Company's right agent.
In connection with the CareerMosaic merger, the following agreements will
be entered into upon completion of the merger:
Credit Agreement between the Company and Omnicom Finance, Inc. wherein
Omnicom Finance will provide a revolving line of credit of up to $10,000,000 to
the Company. The revolving line of credit will terminate and the outstanding
principal and unpaid interest will become payable upon the earlier of (1) the
first anniversary of the effective time of the merger or (2) any public offering
by the Company which results in gross cash proceeds of at least $30,000,000.
Administrative Services Agreement between the Company and Bernard Hodes
Group Inc. ("BHG") to facilitate the combination of the Company and
CareerMosaic, wherein BHG will provide specific transitional and administrative
services to the Company for a period of one year after the effective time of the
merger. For such services, the Company will pay a monthly or hourly fee based on
the services provided and will reimburse BHG for all reasonable out of pocket
expenses incurred in connection with the services provided.
Agency Agreement between the Company and BHG under which BHG may sell the
Company's recruiting services at rates prescribed by the Company. BHG will pay
to HeadHunter a percentage of all gross billings attributable to HeadHunter
services that it sells, which percentage will be adjusted quarterly based on the
immediately preceding quarter's annualized gross billings. BHG is not obligated
to sell the Company's services. The agreement has an initial term of two years
and will automatically renew for an additional two years unless either party
gives written notice at least 60 days prior to the end of the term. Either party
may terminate this agreement upon 30 days written notice.
F-16
<PAGE> 144
HEADHUNTER.NET, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............................. $ 13,576,977 $ 16,938,708
Short-term investments................................. 5,503,901 4,125,084
Accounts receivable:
Trade, net of allowances for doubtful accounts of
$324,865 and $209,475 for March 31, 2000 and
December 31, 1999, respectively..................... 3,667,844 1,846,813
Prepaid expenses and other............................. 1,069,670 561,418
------------ ------------
Total current assets.............................. 23,818,392 23,472,023
PROPERTY AND EQUIPMENT, NET................................. 3,390,193 1,749,711
INTANGIBLE ASSETS, NET...................................... 1,164,658 1,197,071
OTHER NONCURRENT ASSETS..................................... 575,581 560,939
------------ ------------
Total assets...................................... $ 28,948,824 $ 26,979,744
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 1,724,984 $ 614,058
Accrued expenses.......................................... 3,510,641 1,409,923
Customer deposits......................................... 203,840 131,356
Deferred revenue.......................................... 3,492,516 80,483
------------ ------------
Total current liabilities......................... 8,931,981 2,235,820
------------ ------------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.01 par value, 45,500,000 shares authorized
and 10,802,833 shares issued and outstanding at
December 31, 1999, 45,500,000 shares authorized and
10,912,700 issued and outstanding at March 31, 2000.... 109,097 108,028
Additional Paid-in Capital................................ 64,899,582 64,784,569
Stock Warrants............................................ 341,834 341,834
Accumulated Deficit....................................... (41,576,517) (36,478,292)
Deferred Compensation..................................... (3,757,153) (4,012,215)
------------ ------------
Total shareholders' equity........................ 20,016,843 24,743,924
------------ ------------
Total liabilities and shareholders' equity........ $ 28,948,824 $ 26,979,744
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
F-17
<PAGE> 145
HEADHUNTER.NET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
2000 1999
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES:
Service Revenue........................................... $ 5,678,127 $ 666,897
Advertising Revenue....................................... 701,426 161,130
----------- -----------
Total Revenues.................................... 6,379,553 828,027
----------- -----------
COST OF REVENUES............................................ 86,876 25,433
----------- -----------
Gross profit................................................ 6,292,677 802,594
OPERATING EXPENSES:
Marketing and Selling Expenses............................ 9,250,433 1,232,350
General and Administrative Expenses....................... 1,865,842 492,269
Stock Compensation Expense................................ 255,062 2,861,676
Depreciation and Amortization............................. 297,137 88,895
----------- -----------
Operating loss.................................... (5,375,797) (3,872,596)
OTHER INCOME (EXPENSE):..................................... 277,572 (9,423)
----------- -----------
NET LOSS.................................................... $(5,098,225) $(3,882,019)
=========== ===========
NET LOSS PER SHARE:
Basic and diluted net loss per share...................... $ (0.47) $ (11.63)
=========== ===========
Weighted average common shares outstanding................ 10,851,196 2,200,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
F-18
<PAGE> 146
HEADHUNTER.NET, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
2000 1999
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(5,098,225) $(3,882,019)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization and depreciation.......................... 297,137 88,895
Compensation Expense................................... 255,062 2,861,676
Changes in working capital:
Increase in current assets............................. (2,343,925) (43,153)
Increase (Decrease) in current liabilities............. 6,696,161 (220,681)
----------- -----------
Net cash used in operating activities............. (193,790) (1,195,282)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments........................ (1,378,817) 0
Purchase of property and equipment........................ (1,855,206) (100,482)
Acquisition............................................... (50,000) 0
----------- -----------
Net cash used in investing activities............. (3,284,023) (100,482)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Class A preferred stock......... 0 406,750
Proceeds from issuance of Common Stock to Officers and key
employees.............................................. 116,082 0
Proceeds from short-term borrowings....................... 0 800,000
----------- -----------
Net cash provided by financing activities......... 116,082 1,206,750
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (3,361,731) (89,014)
CASH AND CASH EQUIVALENTS, beginning of period.............. 16,938,708 254,937
----------- -----------
CASH AND CASH EQUIVALENTS, end of period.................... $13,576,977 $ 165,923
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Conversion of short-term borrowings to convertible Class A
preferred stock........................................ $ -- $ 3,500,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
F-19
<PAGE> 147
HEADHUNTER.NET, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
(UNAUDITED)
1. The accompanying unaudited interim condensed consolidated financial
statements have been prepared by management of HeadHunter.NET, Inc. ("the
Company") in accordance with rules and regulations of the Securities and
Exchange Commission ("SEC"). Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to Article 10 of Regulation S-X of the SEC. The accompanying unaudited
condensed financial statements reflect, in the opinion of management, all
adjustments necessary to achieve a fair statement of the Company's financial
position and results for the interim periods presented. All such adjustments are
of a normal and recurring nature. These condensed financial statements should be
read in conjunction with the Company's Annual Report on Form 10-K for the year
ended December 31, 1999, as amended.
2. Basic loss per common share ("EPS") was computed by dividing net loss
attributable to common shareholders by the weighted average number of shares of
common stock outstanding for the period then ended. The effect of the Company's
stock options (using the treasury stock method) was excluded in the computation
of diluted EPS for the three months ended March 31, 2000 and the year ended
March 31, 1999, as it is anti-dilutive.
In January 1999, a one-time non-cash charge to accumulated deficit of $21.7
million was recorded in conjunction with the conversion of the loan and security
agreement from debt to equity. This conversion was accounted for as a
distribution to the Class A preferred shareholders and therefore, an increase in
net loss attributable to common shareholders. The following table represents a
reconciliation of the net loss per the statement of operations to the net loss
attributable to common shareholders:
<TABLE>
<S> <C>
Net Loss.................................................... $ (3,882,019)
Distribution to preferred shareholders...................... (21,699,996)
------------
Net loss available to common shareholders......... $(25,582,015)
============
Weighted average shares outstanding......................... 2,200,000
============
Net loss per share................................ $ (11.63)
============
</TABLE>
3. On August 24, 1999, the Company completed its initial public offering of
3,000,000 shares of common stock at an offering price of $10.00 per share. Net
proceeds from the offering were approximately $27.0 million after deducting
underwriters' discounts and commissions and expenses of the offering. The
Company used a portion of the proceeds to pay off all of its long-term debt, a
$250,000 payment in December 1999 for the acquisition of All In One Submit and
for general corporate purposes including sales and marketing initiatives. On
September 7, 1999, the underwriters exercised their over-allotment option to
purchase an additional 450,000 shares at $9.30 per share. All of these shares
were sold by two selling shareholders and the Company did not receive any
proceeds as a result of the sale.
SUBSEQUENT EVENT
4. On April 15, 2000, the Company entered into an Agreement and Plan of
Merger with Career Mosaic Inc. ("CareerMosaic"), an indirect subsidiary of the
marketing communications firm, Omnicom Group Inc. The Company will issue 7.5
million shares for CareerMosaic's assets. The merger is subject to certain
closing conditions, including regulatory approvals, approval by the Company's
shareholders and attainment of certain revenue goals for the quarter ended June
30, 2000.
F-20
<PAGE> 148
In connection with the merger, the following agreements will be entered
into upon completion of the merger:
Credit Agreement between the Company and Omnicom Finance, Inc. wherein
Omnicom Finance will provide a revolving line of credit of up to $10,000,000 to
the Company. The revolving line of credit will terminate and the outstanding
principal and unpaid interest will become payable upon the earlier of (1) the
first anniversary of the effective time of the merger or (2) any public offering
by the Company which results in gross cash proceeds of at least $30,000,000.
Administrative Services Agreement between the Company and Bernard Hodes
Group Inc. ("BHG") to facilitate the combination of the Company and
CareerMosaic, wherein BHG will provide specific transitional and administrative
services to the Company for a period of one year after the effective time of the
merger. For such services, the Company will pay a monthly or hourly fee based on
the services provided and will reimburse BHG for all reasonable out of pocket
expenses incurred in connection with the services provided.
Agency Agreement between the Company and BHG under which BHG may sell the
Company's recruiting services at rates prescribed by the Company. BHG will pay
to the Company a percentage of all gross billings attributed to the Company
services that it sells, which percentage will be adjusted quarterly based on the
immediately preceding quarter's annualized gross billings. BHG is not obligated
to sell the Company's services. The agreement has an initial term of two years
and will automatically renew for an additional two years unless either party
gives written notice at least 60 days prior to the end of the term. Either party
may terminate this agreement upon 30 days written notice.
F-21
<PAGE> 149
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholder of Career Mosaic Inc.:
We have audited the accompanying balance sheets of CAREER MOSAIC INC. (a
subsidiary of Bernard Hodes Group Inc., a wholly owned subsidiary of Omnicom
Group Inc., as of October 28, 1999, an unincorporated division of Bernard Hodes
Group Inc. prior to October 28, 1999) as of December 31, 1998 and 1999 and the
related statements of operations, stockholder's equity (deficit), and cash flows
for the years then ended. 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 auditing standards generally
accepted in the United States. 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 Career Mosaic Inc. as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States.
/s/ Arthur Andersen LLP
New York, New York
May 15, 2000
F-22
<PAGE> 150
CAREER MOSAIC INC.
BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
AND MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- MARCH 31,
1998 1999 2000
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable, net of allowance for doubtful
accounts of $40,000 as of December 31, 1998 and 1999
and March 31, 2000, respectively..................... $1,077,010 $1,422,238 $ 1,385,121
Prepaid expenses........................................ 382,951 463,696 318,011
---------- ---------- -----------
Total current assets............................ 1,459,961 1,885,934 1,703,132
OTHER ASSETS.............................................. -- 265,573 265,573
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$63,359, $232,434 and $315,993 as of December 31, 1998
and 1999 and March 31, 2000, respectively............... 124,922 667,368 913,320
INTANGIBLES, net of accumulated amortization of $77,667,
$188,667 and $265,167 as of December 31, 1998 and 1999
and March 31, 2000, respectively........................ 152,333 1,341,333 1,264,833
---------- ---------- -----------
Total assets.................................... $1,737,216 $4,160,208 $ 4,146,858
========== ========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable........................................ $ 109,185 $ 268,292 $ 87,255
Accrued expenses........................................ 179,247 357,181 1,920,510
Due to parent company................................... -- 2,032,255 6,095,557
Deferred revenue........................................ 1,408,265 1,721,172 1,617,332
---------- ---------- -----------
Total current liabilities....................... 1,696,697 4,378,900 9,720,654
---------- ---------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY (DEFICIT):
Parent's net investment in division..................... 40,519 -- --
Common stock, $1.00 par value; 0, 10,000 and 10,000
shares authorized at December 31, 1998 and 1999, and
March 31, 2000, respectively; 0, 100 and 100 shares
issued and outstanding at December 31, 1998 and 1999
and March 31, 2000, respectively..................... -- 100 100
Additional paid-in capital.............................. -- 664,346 664,346
Accumulated deficit..................................... -- (883,138) (6,238,242)
---------- ---------- -----------
Total stockholder's equity (deficit)............ 40,519 (218,692) (5,573,796)
---------- ---------- -----------
Total liabilities and stockholder's equity
(deficit)..................................... $1,737,216 $4,160,208 $ 4,146,858
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-23
<PAGE> 151
CAREER MOSAIC INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999
AND THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- ------------------------
1998 1999 1999 2000
----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES..................................... $ 8,005,300 $13,636,170 $3,037,902 $ 3,630,922
----------- ----------- ---------- -----------
OPERATING EXPENSES:
Marketing and selling...................... 3,917,307 6,402,685 1,377,451 4,997,251
General and administrative................. 3,860,667 7,083,566 1,090,917 3,246,177
Depreciation and amortization.............. 91,314 280,075 25,548 160,059
Allocated parent company expenses.......... 1,330,289 2,049,778 472,140 541,449
----------- ----------- ---------- -----------
Total operating expenses........... 9,199,577 15,816,104 2,966,056 8,944,936
----------- ----------- ---------- -----------
OPERATING (LOSS) INCOME...................... (1,194,277) (2,179,934) 71,846 (5,314,014)
INTEREST EXPENSE-AFFILIATE................... -- (31,083) -- (41,090)
----------- ----------- ---------- -----------
(LOSS) INCOME BEFORE INCOME TAXES............ (1,194,277) (2,211,017) 71,846 (5,355,104)
INCOME TAX BENEFIT........................... 189,350 -- -- --
----------- ----------- ---------- -----------
NET (LOSS) INCOME............................ $(1,004,927) $(2,211,017) $ 71,846 $(5,355,104)
=========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-24
<PAGE> 152
CAREER MOSAIC INC.
STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999
AND THE THREE MONTHS ENDED MARCH 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PARENT'S TOTAL
NET COMMON STOCK ADDITIONAL STOCKHOLDER'S
INVESTMENT IN --------------- PAID-IN ACCUMULATED EQUITY
DIVISION SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
------------- ------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1997...... $ 649,305 -- $ -- $ -- $ -- $ 649,305
Net advances to division........ 396,141 -- -- -- -- 396,141
Net loss........................ (1,004,927) -- -- -- -- (1,004,927)
----------- --- ---- -------- ----------- -----------
BALANCE, December 31, 1998...... 40,519 -- -- -- -- 40,519
Net advances to division........ 1,951,806 -- -- -- -- 1,951,806
Incorporation of Career
Mosaic........................ (664,446) 100 100 664,346 -- --
Net loss........................ (1,327,879) -- -- -- (883,138) (2,211,017)
----------- --- ---- -------- ----------- -----------
BALANCE, December 31, 1999...... -- 100 100 664,346 (883,138) (218,692)
Net loss (unaudited)............ -- -- -- -- (5,355,104) (5,355,104)
----------- --- ---- -------- ----------- -----------
BALANCE, March 31, 2000
(unaudited)................... $ -- 100 $100 $664,346 $(6,238,242) $(5,573,796)
=========== === ==== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-25
<PAGE> 153
CAREER MOSAIC INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1999
AND THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- -----------------------
1998 1999 1999 2000
----------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income.......................... $(1,004,927) $(2,211,017) $ 71,846 $(5,355,104)
----------- ----------- --------- -----------
Adjustments to reconcile net (loss) income
to net cash (used in) provided by
operating activities:
Depreciation and amortization........... 91,314 280,075 25,548 160,059
Changes in operating assets and
liabilities:
Accounts receivable................... (406,273) (345,228) (211,047) 37,117
Prepaid expenses...................... (17,783) (80,745) (11,849) 145,685
Other assets.......................... -- (265,573) -- --
Accounts payable and accrued
expenses........................... 11,600 337,041 177,342 1,382,292
Deferred revenue...................... 998,137 312,907 149,427 (103,840)
----------- ----------- --------- -----------
Total adjustments.................. 676,995 238,477 129,421 1,621,313
----------- ----------- --------- -----------
Net cash (used in) provided by
operating activities............. (327,932) (1,972,540) 201,267 (3,733,791)
----------- ----------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures....................... (68,209) (711,521) (15,039) (329,511)
Purchase of intangibles.................... -- (1,300,000) -- --
----------- ----------- --------- -----------
Net cash used in investing
activities....................... (68,209) (2,011,521) (15,039) (329,511)
----------- ----------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net advances to division................... 396,141 1,951,806 (186,228) --
Change in due to parent.................... -- 2,032,255 -- 4,063,302
----------- ----------- --------- -----------
Net cash provided by (used in)
financing activities............. 396,141 3,984,061 (186,228) 4,063,302
----------- ----------- --------- -----------
NET INCREASE IN CASH......................... -- -- -- --
CASH, BEGINNING OF YEAR...................... -- -- -- --
----------- ----------- --------- -----------
CASH, END OF YEAR............................ $ -- $ -- $ -- $ --
=========== =========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-26
<PAGE> 154
CAREER MOSAIC INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
ORGANIZATION
Career Mosaic Inc. ("CareerMosaic" or the "Company") was incorporated in
the state of Delaware on October 28, 1999 and is a wholly owned subsidiary of
Bernard Hodes Group Inc. ("BHG" or the "Parent Company"), which is a wholly
owned subsidiary of Omnicom Group Inc. ("Omnicom"). Prior to October 28, 1999,
the Company operated as an unincorporated division of BHG.
On April 15, 2000, HeadHunter.NET, Inc. ("HeadHunter") entered into an
agreement to acquire the outstanding common stock of the Company.
NATURE OF BUSINESS
CareerMosaic provides on-line recruiting services via its web site at
www.careermosaic.com. Employers and recruiters use the web site to advertise job
opportunities and review resumes. Job seekers use the web site to identify,
research and evaluate a broad range of job opportunities.
The Company has incurred annual losses and negative annual 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 marketing and selling, general and
administrative expenses, and capital expenditures will continue to increase
significantly, all of which will have a negative impact on near term financial
and operating results. There can be no assurance that growth in the Company's
revenue or customer base will continue or that the Company will be able to
achieve or sustain profitability and/or positive cash flow. The Company has been
funded to date by Omnicom and will be funded by HeadHunter subsequent to the
acquisition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRESENTATION
The financial statements of the Company have been derived from the
consolidated financial statements of BHG and have been prepared to present the
financial position, results of operations, and cash flows of the Company on a
stand-alone basis. Accordingly, the accompanying financial statements include
certain administrative costs and expenses, which have been allocated to the
Company by BHG. These costs have been allocated on a pro rata basis based
primarily on employee headcount and revenues, and represent management's best
estimates of what such expenses would have been had the Company been operated as
a separate entity. In the opinion of management, the accompanying interim
financial statements contain all material adjustments necessary to present
fairly the financial position, results of operations and cash flows for the
interim periods presented.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts 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
Revenues consist of job posting revenues, resume subscription revenues and
advertising revenues. Job posting revenues and resume subscription revenues are
recognized after substantial completion of services.
F-27
<PAGE> 155
CAREER MOSAIC INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Advertising revenues are recognized in the month that the advertising
impressions are delivered. In 1998 and 1999, revenues from the Parent Company
accounted for approximately 53% and 42% of revenues, respectively (Note 6).
Agency commissions represent discounts given to agencies who work on behalf
of the Company to secure job postings. The Company records the discount as a
deduction from revenues in the accompanying financial statements.
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>
Telecommunications and computer equipment................... Three years
Furniture and fixtures...................................... Ten years
</TABLE>
Gains or losses on disposal of property and equipment are recognized in
operations in the year of disposition.
INTERNAL USE SOFTWARE
Effective for fiscal year 1999, the Company adopted the American Institute
of Certified Public Accountants' Statement of Position ("SOP") 98-1 "Accounting
for the Costs of Computer Software Developed or Obtained for Internal Use." The
statement requires capitalization of certain costs incurred in the development
of internal use software, including external direct material and service costs.
Prior to adoption of SOP 98-1, the Company expensed these costs as incurred.
Capitalized costs are amortized over a period of three years. The adoption of
SOP 98-1 did not have a material effect on the financial statements.
WEB SITE DEVELOPMENT COSTS
The Company accounts for web site development costs based on the nature of
such costs. The Company's primary web site development costs relate to site
content. Costs for internally developed content are expensed as incurred.
Purchased content is expensed over the period the Company receives the content.
INTANGIBLE ASSETS
Intangible assets and the related useful lives and accumulated amortization
at December 31, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1998 1999
-------- ----------
<S> <C> <C>
Domain names................................................ $200,000 $1,500,000
Other intangibles........................................... 30,000 30,000
-------- ----------
230,000 1,530,000
Less accumulated amortization............................... (77,667) (188,667)
-------- ----------
Intangible assets, net...................................... $152,333 $1,341,333
======== ==========
</TABLE>
In May 1997, the Company acquired the rights to various Internet domain
names and trademarks for $200,000. The Company is amortizing the intangibles on
a straight-line basis over a period of five years.
F-28
<PAGE> 156
CAREER MOSAIC INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In September 1999, the Company acquired the rights to the Internet domain
name, www.careers.com, for $1,300,000. The Company is amortizing the intangible
asset on a straight-line basis over a period of five years.
LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to Be
Disposed of," the Company reviews its recorded long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments, including accounts receivables,
accounts payable and Due to parent, approximate fair value due to their
short-term nature.
DEFERRED REVENUE
Deferred revenue represents a liability for advance billings to customers.
Such amounts are recognized as revenues when the related services are provided.
INCOME TAXES
The Company is not a separate taxable entity and the consolidated income
tax returns of Omnicom include the Company. For purposes of these financial
statements, income taxes allocated to the Company have been computed and
recorded on a separate return basis based on the statutory rates in effect (Note
7).
Income taxes are accounted for under SFAS No. 109, "Accounting for Income
Taxes." Under this method, deferred tax assets and liabilities are determined
based on differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
ADVERTISING COSTS
The Company expenses the costs of advertising as incurred. Advertising
expenses included in marketing and selling expenses in the accompanying
statements of operations were $3,577,307 and $5,615,917 for the years ended
December 31, 1998 and 1999, respectively.
SOURCES OF SUPPLIES
The Company relies on third-party networks, local and long-distance
telephone companies, and other companies to provide data and telecommunications
capacity. Although management feels alternative telecommunications facilities
could be found in a timely manner, disruption of these services for more than a
brief period could have an adverse effect on operating results.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of trade receivables.
Concentrations of credit risk with respect to trade receivables are limited due
to advance billings to customers for services and the ability to terminate
service on delinquent accounts. In addition, the number of customers comprising
the customer base mitigates the concentration of credit risk.
F-29
<PAGE> 157
CAREER MOSAIC INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," is effective for all fiscal years beginning after June 15, 2000.
Management believes this statement will not have a material impact on the
Company's financial statements.
In 1998, the Company was subject to the provisions of SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." Neither statement had any impact on
the Company's financial statements as the Company does not have any
"comprehensive income" type earnings (losses) and the Company has only one
operating business segment. The Company will continue to review these statements
over time, in particular SFAS No. 131, to determine if any additional
disclosures are necessary based on evolving circumstances.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1998 and
1999, respectively:
<TABLE>
<CAPTION>
1998 1999
-------- ---------
<S> <C> <C>
Telecommunications and computer equipment................... $152,967 $ 864,488
Furniture and fixtures...................................... 35,314 35,314
-------- ---------
188,281 899,802
Less accumulated depreciation and amortization.............. (63,359) (232,434)
-------- ---------
Property and equipment, net................................. $124,922 $ 667,368
======== =========
</TABLE>
Depreciation expense was $45,314 and $169,075 for the years ended December 31,
1998 and 1999, respectively.
4. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company has operating lease agreements, which relate to the lease of
office space. Rental expense attributable to these operating leases was $253,329
and $294,251 for the years ended December 31, 1998 and 1999, respectively.
At December 31, 1999, the Company's minimum rental commitments under
noncancelable operating leases with initial or remaining terms of more than one
year were as follows:
<TABLE>
<S> <C>
2000........................................................ $278,292
2001........................................................ 212,466
2002........................................................ 55,716
2003........................................................ 41,787
2004 and thereafter......................................... --
--------
Total minimum lease payments...................... $588,261
========
</TABLE>
PURCHASE COMMITMENTS
The Company has entered into an agreement with an Internet company to
purchase a minimum of approximately $3.6 million in banner advertisements in
2000. Purchase commitments under the agreement are being expensed as the
advertisements are incurred.
F-30
<PAGE> 158
CAREER MOSAIC INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
LEGAL PROCEEDINGS
The Company is not currently a party to any legal proceedings. The Company,
from time to time, may be subject to legal proceedings and claims in the
ordinary course of business, including claims of alleged infringement of
trademarks and other intellectual property of third parties by the Company.
5. EMPLOYEE SAVINGS PLAN
The Company participates in an employee savings plan (the "Savings Plan")
of the Parent Company. The Savings Plan qualifies as a deferred salary
arrangement under Section 401(k) of the Internal Revenue Code. Under the Savings
Plan, participating employees may defer a portion of their pretax earnings up to
the Internal Revenue Service annual contribution limit. The Company has not made
any material contributions to the Savings Plan for the years ended December 31,
1998 and 1999.
6. RELATED-PARTY TRANSACTIONS
Services provided to the Company by the Parent Company include support in
major functional areas, such as accounting, human resources, legal, risk
management, payroll, sales and marketing and taxes. Such expenses, included in
the accompanying statements of operations, have been allocated to the Company
based on the relative level of time incurred for the respective service. Rent
expense has been allocated based on the Company's proportionate amount of space
occupied. Senior management salaries have been allocated to the Company based on
the percentage of time devoted by said management personnel to the Company.
Management believes the basis for these allocations is reasonable.
In 1998 and 1999, the Company utilized its Parent Company as one of its
agents. In addition to the 20% commission discount granted to its non-affiliated
agents (Note 2), the Company provided an additional discount of 30% to the
Parent Company. The additional discount is also recorded as a deduction from
revenue in the accompanying statements of operations. Revenues, net of the
agency discount, from the Parent Company were approximately $4.2 million and
$5.6 million for the years ended December 31, 1998 and 1999, respectively.
The Due to Parent Company account in the accompanying balance sheets
represents funds advanced to CareerMosaic by the Parent Company. Interest
charged to the Company varies on a monthly basis. Interest expense of $31,083
and $41,090 is included in the accompanying statements of operations for the
period from incorporation to December 31, 1999 and the three months ended March
31, 2000, respectively. The amounts are based on an average interest rate of
5.37% and 5.79% for the period from incorporation to December 31, 1999 and the
three months ended March 31, 2000, respectively.
7. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and income tax purposes. As discussed in Note 2, the Company is
included in the consolidated return of Omnicom. No tax-sharing arrangement
exists between Omnicom and the Company.
The benefit for income taxes is attributable to the following:
<TABLE>
<CAPTION>
1998 1999
--------- -----------
<S> <C> <C>
Current..................................................... $(189,349) $ --
Deferred.................................................... (354,059) (1,011,666)
Increase in valuation allowance............................. 354,059 1,011,666
--------- -----------
Income tax benefit........................................ $(189,349) $ --
========= ===========
</TABLE>
F-31
<PAGE> 159
CAREER MOSAIC INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The income tax benefit reflected for 1998 represents a carryback of the
loss generated in 1998 to offset income recognized by the company in 1997. No
receivable for this benefit has been reflected since no tax sharing agreement
exists between the company and Omnicom.
Significant components of the Company's deferred tax assets and liabilities
for federal and state income taxes as of December 31, 1998 and 1999 are as
follows:
<TABLE>
<CAPTION>
1998 1999
--------- -----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 342,913 $ 1,319,983
Allowance for doubtful accounts........................... 18,396 18,396
Accumulated amortization.................................. 22,280 62,036
--------- -----------
Total deferred tax assets......................... 383,589 1,400,415
--------- -----------
Deferred tax liabilities:
Accelerated depreciation.................................. 4,342 9,502
--------- -----------
Net deferred asset.......................................... 379,247 1,390,913
Valuation allowance......................................... (379,247) (1,390,913)
--------- -----------
Net deferred taxes................................ $ -- $ --
========= ===========
</TABLE>
The Company's federal, state and local net operating loss carryforwards
("NOLs") of $2,870,152 as of December 31, 1999 would expire beginning in the
year 2018 for federal NOLs and 2013 for state and local NOLs. Since the
Company's losses have been included in the consolidated income tax returns of
Omnicom, no loss carryforwards are available to the Company. As a result the
Company has provided a 100% valuation allowance against the NOL portion of the
deferred tax asset. As the Company is unable to conclude that it is more likely
than not that the remaining deferred tax assets will be recognized, the Company
also has provided a 100% valuation allowance against these deferred tax assets.
A reconciliation of the income tax benefit computed at statutory tax rates
to the income tax benefit recorded for the years ended December 31, 1998 and
1999 is as follows:
<TABLE>
<CAPTION>
1998 1999
----- -----
<S> <C> <C>
Income tax benefit at statutory rate........................ (34.0)% (34.0)%
State and local income taxes, net of federal benefit........ (12.0) (12.0)
Other....................................................... 0.5 0.4
Change in valuation allowance............................... 29.6 45.6
----- -----
Income tax provision...................................... (15.9)% 0.0%
===== =====
</TABLE>
9. SUBSEQUENT EVENTS
On April 15, 2000 HeadHunter and the Company were parties to an Agreement
and Plan of Merger pursuant to which the Company shall merge with and into a
wholly owned subsidiary of HeadHunter. In the merger, each share of common stock
of the Company will be converted into 750 shares of HeadHunter's common stock.
An aggregate of 7.5 million shares of HeadHunter common stock will be issued to
the stockholders of the Company in the merger. This transaction is subject to
certain closing conditions, including regulatory approvals, approval by
HeadHunter's shareholders and attainment of certain revenue goals for the
quarter ended June 30, 2000.
F-32
<PAGE> 160
CAREER MOSAIC INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Additional agreements will be entered into in connection with the merger,
and a summary of the key terms follows:
Credit Agreement between HeadHunter and Omnicom Finance, Inc. wherein
Omnicom Finance, Inc. will provide a revolving line of credit of up to
$10,000,000 to HeadHunter. The revolving line of credit will terminate and the
outstanding principal and unpaid interest will become payable upon the earlier
of (1) the first anniversary of the effective time of the merger or (2) any
public offering by HeadHunter which results in gross cash proceeds to HeadHunter
of at least $30,000,000.
Administrative Services Agreement between HeadHunter and the Parent Company
to facilitate the combination of HeadHunter and the Company. The Parent Company
will provide specific transitional and administrative services to HeadHunter for
a period of one year after the effective time of the merger. For such services,
HeadHunter will pay a monthly or hourly fee based on the services provided and
will reimburse the Parent Company for all reasonable out of pocket expenses
incurred in connection with the services provided.
Agency Agreement between HeadHunter and the Parent Company under which the
Parent Company may sell HeadHunter's recruiting services at rates prescribed by
HeadHunter. The Parent Company will pay to HeadHunter a percentage of all gross
billings attributable to HeadHunter services that it sells, which percentage
will be adjusted quarterly based on the immediately preceding quarter's
annualized gross billings. The Parent Company is not obligated to sell
HeadHunter services. The agreement has an initial term of two years and will
automatically renew for an additional two years unless either party gives
written notice at least 60 days prior to the end of the term. Either party may
terminate this agreement upon 30 days written notice.
Immediately prior to the merger, Bernard Hodes Group will issue an
additional 9,900 shares of CareerMosaic stock.
F-33
<PAGE> 161
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OMNICOM GROUP INC.,
BERNARD HODES GROUP INC.,
CAREER MOSAIC INC.,
HEADHUNTER.NET, INC.,
RESUME ACQUISITION CORPORATION
AND
ITC HOLDING COMPANY, INC.
DATED AS OF APRIL 15, 2000
A-1
<PAGE> 162
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PREAMBLE............................................................... A-6
ARTICLE 1 -- TRANSACTIONS AND TERMS OF MERGER.......................... A-6
1.1 Merger...................................................... A-6
1.2 Time and Place of Closing................................... A-6
1.3 Effective Time.............................................. A-6
ARTICLE 2 -- TERMS OF MERGER........................................... A-7
2.1 Charter..................................................... A-7
2.2 Bylaws...................................................... A-7
2.3 Directors and Officers...................................... A-7
ARTICLE 3 -- MANNER OF CONVERTING SHARES............................... A-7
3.1 Conversion of Shares........................................ A-7
3.2 Anti-Dilution Provisions.................................... A-7
3.3 Fractional Shares........................................... A-7
ARTICLE 4 -- EXCHANGE OF SHARES........................................ A-8
4.1 Exchange Procedures......................................... A-8
4.2 Rights of Former Career Mosaic Shareholders................. A-8
ARTICLE 5 -- OTHER AGREEMENTS.......................................... A-8
5.1 Directors of HeadHunter.NET................................. A-8
5.2 Shareholder Protection Rights Agreement..................... A-9
5.3 Shareholders' Agreement..................................... A-9
5.4 Administrative Services Agreement........................... A-9
5.5 Registration Rights Agreement............................... A-9
5.6 Credit Agreement............................................ A-9
5.7 Agency Agreement............................................ A-9
5.8 Access to Information; Audit Cooperation.................... A-9
5.9 Non-Competition Agreement................................... A-9
5.10 Indemnity Agreements........................................ A-9
5.11 BHA and ITC Indemnity Agreement............................. A-9
5.12 Support Agreement........................................... A-9
5.13 Amended and Restated Bylaws................................. A-9
ARTICLE 6 -- REPRESENTATIONS AND WARRANTIES OF HEADHUNTER.NET AND
MERGER SUB........................................................... A-10
6.1 Organization, Standing, and Power........................... A-10
6.2 Authority; No Breach By Agreement........................... A-10
6.3 Capital Stock............................................... A-11
6.4 HeadHunter.NET Subsidiaries................................. A-11
6.5 SEC Filings; Financial Statements........................... A-11
6.6 Absence of Undisclosed Liabilities.......................... A-12
6.7 Absence of Certain Changes or Events........................ A-12
6.8 Tax Matters................................................. A-12
6.9 Assets...................................................... A-13
6.10 Intellectual Property....................................... A-13
6.11 Environmental Matters....................................... A-14
6.12 Compliance with Laws........................................ A-14
6.13 Labor Relations............................................. A-15
6.14 Employee Benefit Plans...................................... A-15
6.15 Material Contracts.......................................... A-16
</TABLE>
A-2
<PAGE> 163
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
6.16 Legal Proceedings........................................... A-17
6.17 Reports..................................................... A-17
6.18 Statements True and Correct................................. A-17
6.19 Regulatory Matters.......................................... A-17
6.20 Privacy; Web Site........................................... A-17
6.21 Opinion of Financial Advisor................................ A-17
6.22 Brokers, Etc................................................ A-18
6.23 Voting Requirements......................................... A-18
ARTICLE 7 -- REPRESENTATIONS AND WARRANTIES OF OMNICOM, BHA AND CAREER
MOSAIC............................................................... A-18
7.1 Organization, Standing, and Power........................... A-18
7.2 Authority; No Breach By Agreement........................... A-18
7.3 Capital Stock............................................... A-19
7.4 Subsidiaries................................................ A-19
7.5 Financial Statements........................................ A-19
7.6 Absence of Undisclosed Liabilities.......................... A-19
7.7 Absence of Certain Changes or Events........................ A-19
7.8 Tax Matters................................................. A-20
7.9 Assets...................................................... A-20
7.10 Intellectual Property....................................... A-21
7.11 Environmental Matters....................................... A-21
7.12 Compliance with Laws........................................ A-22
7.13 Labor Relations............................................. A-23
7.14 Employee Benefit Plans...................................... A-23
7.15 Material Contracts.......................................... A-24
7.16 Legal Proceedings........................................... A-25
7.17 Reports..................................................... A-25
7.18 Statements True and Correct................................. A-25
7.19 Regulatory Matters.......................................... A-25
7.20 Ownership of HeadHunter.NET Common Stock.................... A-25
7.21 Privacy; Web Site........................................... A-26
7.22 Brokers, Etc. .............................................. A-26
ARTICLE 8 -- CONDUCT OF BUSINESS PENDING CONSUMMATION.................. A-26
8.1 Covenants of HeadHunter.NET................................. A-26
8.2 Negative Covenants of HeadHunter.NET........................ A-26
8.3 Omnicom, BHA and Career Mosaic Covenants.................... A-27
8.4 Adverse Changes in Condition................................ A-29
8.5 Reports..................................................... A-29
8.6 No Solicitation by HeadHunter.NET........................... A-29
ARTICLE 9 -- ADDITIONAL AGREEMENTS
9.1 Registration Statement; Proxy Statement; Shareholder
Approval.................................................... A-30
9.2 Listing..................................................... A-31
9.3 Applications; Antitrust Notification........................ A-31
9.4 Filings with State Offices.................................. A-31
9.5 Agreement as to Efforts to Consummate....................... A-31
9.6 Investigation and Confidentiality........................... A-31
9.7 Press Releases.............................................. A-31
9.8 Tax Treatment............................................... A-32
9.9 Indemnification, Exculpation and Insurance.................. A-32
9.10 Fees and Expenses........................................... A-32
9.11 Certain Employee Matters.................................... A-32
</TABLE>
A-3
<PAGE> 164
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 10 -- INDEMNIFICATION.......................................... A-33
10.1 Agreement of Omnicom to Indemnify........................... A-33
10.2 Agreement of HeadHunter.NET to Indemnify.................... A-33
10.3 Procedures for Indemnification.............................. A-33
10.4 Third Party Claims.......................................... A-34
10.5 Exclusive Remedy............................................ A-35
10.6 Survival.................................................... A-35
10.7 Limitations as to Amount.................................... A-35
10.8 Tax Effect and Insurance.................................... A-35
ARTICLE 11 -- CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE........ A-36
11.1 Conditions to Obligations of Each Party..................... A-36
11.2 Conditions to Obligations of Omnicom, BHA and Career
Mosaic...................................................... A-36
11.3 Conditions to Obligations of HeadHunter.NET and Merger
Sub......................................................... A-37
ARTICLE 12 -- TERMINATION.............................................. A-37
12.1 Termination................................................. A-37
12.2 Effect of Termination....................................... A-38
ARTICLE 13 -- MISCELLANEOUS............................................ A-38
13.1 Definitions................................................. A-38
13.2 Brokers and Finders......................................... A-43
13.3 Entire Agreement............................................ A-43
13.4 Amendments.................................................. A-43
13.5 Waivers..................................................... A-43
13.6 Assignment.................................................. A-44
13.7 Notices..................................................... A-44
13.8 Governing Law; Jurisdiction................................. A-45
13.9 Counterparts................................................ A-45
13.10 Captions; Articles and Sections............................. A-45
13.11 Interpretations............................................. A-45
13.12 Severability................................................ A-45
13.13 Specific Performance........................................ A-45
</TABLE>
A-4
<PAGE> 165
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
5.2 -- Shareholder Protection Rights Agreement
5.3 -- Shareholders' Agreement
5.4 -- Administrative Services Agreement
5.5 -- Registration Rights Agreement
5.6 -- Credit Agreement
5.7 -- Agency Agreement
5.9 -- Non-Competition Agreement
5.10 -- Indemnity Agreement (Directors)
5.11 -- Indemnity Agreement (ITC and BHA)
5.12 -- Support Agreement
5.13 -- Amended and Restated Bylaws
11.1(b) -- Regulatory Consents
</TABLE>
A-5
<PAGE> 166
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of April 15, 2000, by and among OMNICOM GROUP INC. ("Omnicom"), BERNARD
HODES GROUP INC. ("BHA"), CAREER MOSAIC INC., a wholly owned subsidiary of BHA
("Career Mosaic"), HEADHUNTER.NET, INC. ("HeadHunter.NET"), RESUME ACQUISITION
CORPORATION, a wholly owned subsidiary of HeadHunter.NET ("Merger Sub"), and ITC
HOLDING COMPANY, INC., a shareholder of HeadHunter.NET ("ITC") solely for the
purposes of the covenants contained in Sections 5.3, 5.5, 5.11 and 5.12 hereof.
PREAMBLE
The respective boards of directors of BHA, Career Mosaic, HeadHunter.NET
and Merger Sub are of the opinion that the transactions described herein are in
the best interests of the parties to this Agreement and their respective
shareholders. This Agreement provides for the combination of HeadHunter.NET and
the Career Mosaic Business (as defined in Section 13.1 hereof) pursuant to the
formation of Merger Sub as a wholly owned subsidiary of HeadHunter.NET, and the
merger of Career Mosaic with and into Merger Sub. At the effective time of such
merger, the outstanding shares of the capital stock of Career Mosaic shall be
converted into the right to receive shares of HeadHunter.NET common stock as set
forth herein. As a result, the stockholders of Career Mosaic shall become
shareholders of HeadHunter.NET, and Merger Sub shall continue to conduct
business as a wholly owned subsidiary of HeadHunter.NET. The transactions
described in this Agreement are subject to the approval of the shareholders of
HeadHunter.NET, expiration of the required waiting period under the HSR Act and
the satisfaction of certain other conditions described in this Agreement. It is
the intention of the parties hereto that the Merger (as defined below) for
federal income taxes shall qualify as a "reorganization" within the meaning of
Section 368(a)(2)(D) of the Internal Revenue Code.
Certain terms used in this Agreement are defined in Section 13.1 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants, and agreements set forth herein, the parties hereto
agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, Career Mosaic shall be merged with and into Merger Sub in
accordance with the provisions of Section 251 of the DGCL, and with the effect
provided in the DGCL (the "Merger"). Merger Sub shall be the Surviving
Corporation resulting from the Merger and shall be a wholly owned subsidiary of
HeadHunter.NET. The Merger shall be consummated pursuant to the terms of this
Agreement, which has been approved and adopted by the respective Boards of
Directors of BHA, Career Mosaic, HeadHunter.NET, Merger Sub and ITC, and by
HeadHunter.NET, as sole shareholder of Merger Sub, and BHA and the other
stockholders of Career Mosaic, as stockholders of Career Mosaic.
1.2 Time and Place of Closing. The closing of the transactions
contemplated hereby (the "Closing") will take place at 9:00 A.M. on the date
that the Effective Time occurs (or the immediately preceding day if the
Effective Time is earlier than 9:00 A.M.), or at such other time as the parties,
acting through their authorized officers, may mutually agree. The Closing shall
be held at such location as may be mutually agreed upon by the parties.
1.3 Effective Time. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Certificate of
Merger reflecting the Merger shall become effective with the Secretary of State
of the State of Delaware (the "Effective Time"). Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in writing by each
party, the parties shall use their commercially reasonable best efforts to cause
the Effective Time to occur on the first business day following
A-6
<PAGE> 167
the latest to occur of (i) the effective date (including expiration of any
applicable waiting period) of the last required Consent of any Regulatory
Authority having authority over and approving or exempting the Merger or (ii)
the date on which the shareholders of HeadHunter.NET approve this Agreement, or
such later date within 30 days thereof as may be specified by the parties.
ARTICLE 2
TERMS OF MERGER
2.1 Charter. The Certificate of Incorporation of Merger Sub in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended or repealed.
2.2 Bylaws. The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended or repealed.
2.3 Directors and Officers. The directors of Merger Sub in office
immediately prior to the Effective Time, together with such additional persons
as may thereafter be elected, shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of Merger Sub in office immediately
prior to the Effective Time, together with such additional persons as may
thereafter be elected, shall serve as the officers of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation.
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of the parties hereto or the shareholders thereof, the shares of the constituent
corporations shall be converted as follows:
(a) Each share of Merger Sub common stock issued and outstanding
immediately prior to the Effective Time shall continue to be outstanding.
(b) Each share of Career Mosaic common stock issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and
shall be converted into and exchanged for the right to receive 750 shares
of HeadHunter.NET common stock (as adjusted, if applicable, pursuant to
Section 3.2, the "Exchange Ratio").
(c) Each share of HeadHunter.NET common stock issued and outstanding
immediately prior to the Effective Time shall remain issued and
outstanding.
3.2 Anti-Dilution Provisions. In the event HeadHunter.NET changes the
number of shares of its common stock issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, reclassification,
combination, share exchange, recapitalization, issuance or exercise of rights or
common stock under the Rights Plan or other similar event and the record date
therefor (in the case of a stock dividend) or the effective date thereof (in the
case of a stock split, reclassification, combination, share exchange,
recapitalization or other similar event for which a record date is not
established) shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted.
3.3 Fractional Shares. Notwithstanding any other provision of this
Agreement, each holder of shares of Career Mosaic common stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of HeadHunter.NET common stock shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of HeadHunter.NET common stock multiplied by the average market value for
shares of HeadHunter.NET common stock for the ten (10) trading days immediately
prior to the Effective Time. The market value for HeadHunter.NET common stock
shall be the last sale price each day of such common stock on the Nasdaq
National Market (as reported by Bloomberg's Financial Service). No such holder
will be entitled to dividends, voting rights or any other rights as a
shareholder in respect of any fractional shares.
A-7
<PAGE> 168
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures. After the Effective Time, each stockholder of
Career Mosaic shall deliver to HeadHunter.NET the certificate(s) which
represented shares of Career Mosaic common stock outstanding immediately prior
to the Effective Time and shall promptly upon surrender thereof receive in
exchange therefor the consideration provided in Section 3.1. Such certificate(s)
shall be duly endorsed as HeadHunter.NET may reasonably require. In the event of
a transfer of ownership of shares of Career Mosaic common stock represented by
certificates that are not registered in the transfer records of Career Mosaic,
the consideration provided in Section 3.1 may be issued to a transferee if the
certificate(s) representing such shares are delivered to HeadHunter.NET,
accompanied by all documents required to evidence such transfer and by evidence
satisfactory to HeadHunter.NET that any applicable stock transfer taxes have
been paid. If any certificate shall have been lost, stolen, mislaid or
destroyed, upon receipt of (i) an affidavit of that fact from the holder
claiming such certificate to be lost, mislaid, stolen or destroyed and (ii) any
other documents necessary to evidence and effect the bona fide exchange thereof,
HeadHunter.NET shall cause to be issued to such holder the consideration into
which the shares represented by such lost, stolen, mislaid or destroyed
certificate shall have been converted. To the extent required by Section 3.4,
each holder of shares of Career Mosaic common stock issued and outstanding at
the Effective Time also shall receive, upon surrender of the certificate, cash
in lieu of any fractional share of HeadHunter.NET common stock to which such
holder may be otherwise entitled (without interest). HeadHunter.NET shall not be
obligated to deliver the consideration to which any former holder of Career
Mosaic common stock is entitled as a result of the Merger until such holder
surrenders such holder's certificate for exchange as provided in this Section
4.1(a). Any other provision of this Agreement notwithstanding, neither
HeadHunter.NET, nor the Surviving Corporation shall be liable to a holder of
Career Mosaic common stock for any amounts paid or property delivered in good
faith to a public official pursuant to any applicable abandoned property,
escheat or similar Law.
4.2 Rights of Former Career Mosaic Shareholders. At the Effective Time,
the stock transfer books of Career Mosaic shall be closed as to holders of
Career Mosaic common stock immediately prior to the Effective Time and no
transfer of Career Mosaic common stock by any such holder shall thereafter be
made or recognized. Until surrendered for exchange in accordance with the
provisions of Section 4.1, each certificate theretofore representing shares of
Career Mosaic common stock shall from and after the Effective Time represent for
all purposes only the right to receive the consideration provided in Section 3.1
in exchange therefor. To the extent permitted by Law, former stockholders of
record of Career Mosaic shall be entitled to vote after the Effective Time at
any meeting of HeadHunter.NET shareholders the number of whole shares of
HeadHunter.NET common stock into which their respective shares of Career Mosaic
common stock are converted, regardless of whether such holders have exchanged
their certificates for certificates representing HeadHunter.NET common stock in
accordance with the provisions of this Agreement.
ARTICLE 5
OTHER AGREEMENTS
5.1 Directors of HeadHunter.NET. At the Effective Time, (i) the written
resignations of J. Douglas Cox, Donald W. Weber and Michael G. Misikoff, dated
as of the date of this Agreement, shall become effective, (ii) the Board of
Directors of HeadHunter.NET shall set the size of the Board of Directors of
HeadHunter.NET at seven (7) members with three members to serve as Class I
directors, two members to serve as Class II members and two members to serve as
Class III directors and (iii) the Board of Directors shall fill the vacancies on
the Board of Directors by appointing or electing (A) one individual designated
by BHA (who shall have been approved by HeadHunter.NET, such approval not to be
unreasonably withheld or delayed) to serve as a Class I director, (B) one
individual designated by BHA, who may be any officer or director of BHA or
Omnicom or any other person if such person is approved by HeadHunter.NET (such
approval not to be unreasonably withheld or delayed), to serve as a Class II
director and (C) one individual designated by BHA, who may be any officer or
director of BHA or Omnicom or any other person if such person is approved by
HeadHunter.NET (such approval not to be unreasonably withheld or delayed), to
A-8
<PAGE> 169
serve as a Class III director, with Robert M. Montgomery, Jr. and Burton B.
Goldstein, Jr. each continuing to serve as a Class I director, Kimberley E.
Thompson continuing to serve as a Class II director and William H. Scott, III
continuing to serve as a Class III director.
5.2 Shareholder Protection Rights Agreement. Simultaneously with the
execution of this Agreement, HeadHunter.NET has adopted and approved a
Shareholder Protection Rights Agreement in the form as Exhibit 5.2 attached
hereto (the "Rights Plan"). Prior to the Effective Time, HeadHunter.NET agrees
not to amend or terminate the Rights Plan or waive any material provision
thereof or redeem the rights issued thereunder without the prior written consent
of BHA.
5.3 Shareholders' Agreement. At the Effective Time, HeadHunter.NET,
Omnicom, BHA and ITC shall enter into a Shareholders' Agreement in substantially
the form as Exhibit 5.3 attached hereto.
5.4 Administrative Services Agreement. At the Effective Time, BHA and
HeadHunter.NET shall enter into an Administrative Services Agreement in
substantially the form as Exhibit 5.4 attached hereto (the "Services Agreement);
5.5 Registration Rights Agreement. At the Effective Time, BHA, ITC and
HeadHunter.NET shall enter into a Registration Rights Agreement in substantially
the form as Exhibit 5.5 attached hereto.
5.6 Credit Agreement. At the Effective Time, Omnicom Finance, Inc. shall
enter into a Credit Agreement (the "Credit Agreement") with HeadHunter.NET in
substantially the form as Exhibit 5.6 attached hereto.
5.7 Agency Agreement. At the Effective Time, BHA and HeadHunter.NET shall
enter into a Agency Agreement (the "Agency Agreement") in substantially the form
as Exhibit 5.7 attached hereto.
5.8 Access to Information; Audit Cooperation. From the date of this
Agreement until the Effective Time, Omnicom, BHA and Career Mosaic shall afford
HeadHunter.NET and its officers, employees, accountants, consultants, legal
counsel and other representatives full and complete access during normal
business hours to the properties, books, records, contracts, facilities,
premises and equipment comprising or relating to the Transferred Assets, the
Transferred Liabilities and the Career Mosaic Business. From the date of this
Agreement until the Effective Time, HeadHunter.NET and Merger Sub shall afford
BHA and its officers, employees, accountants, consultants, legal counsel and
other representatives full and complete access during normal business hours to
the properties, books, records, contracts, facilities, premises and equipment of
HeadHunter.NET. Omnicom, BHA and Career Mosaic shall cooperate with and assist
HeadHunter.NET and its officers, employees, accountants, consultants, legal
counsel and other representatives in preparing, in accordance with the SEC
requirements in connection with the Merger: (i) audited financial statements of
the Career Mosaic Business for the last three (3) fiscal years; (ii) unaudited
financial statements for any interim periods since the end of the last fiscal
year; and (iii) any other report, proxy statement or other document, all as
related to the Career Mosaic Business or the Transferred Assets.
5.9 Non-Competition Agreement. At the Effective Time, HeadHunter.NET and
BHA shall enter into a Non-Competition Agreement substantially in the form of
Exhibit 5.9 attached hereto.
5.10 Indemnity Agreements. At the Effective Time, HeadHunter.NET shall
enter into an Indemnity Agreement, in substantially the form as Exhibit 5.10
attached hereto, with each of the director nominees and directors named in
Section 5.1 of this Agreement.
5.11 BHA and ITC Indemnity Agreement. At the Effective Time,
HeadHunter.NET shall enter into an Indemnity Agreement, in substantially the
form as Exhibit 5.11 attached hereto, with each of BHA and ITC.
5.12 Support Agreement. Simultaneously with the execution and delivery of
this Agreement, BHA, ITC and Robert M. Montgomery, Jr. have executed and
delivered a Support Agreement in the form of Exhibit 5.12 attached hereto.
5.13 Amended and Restated Bylaws. At the Effective Time, HeadHunter.NET
shall have amended its Bylaws in the form of Exhibit 5.13 attached hereto (the
"Amended Bylaws").
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF HEADHUNTER.NET AND MERGER SUB
HeadHunter.NET and Merger Sub, jointly and severally, hereby represent and
warrant to BHA and Career Mosaic as follows:
6.1 Organization, Standing, and Power. Each of HeadHunter.NET and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the Laws of the State of Georgia and Delaware, respectively, and has the
corporate power and authority to carry on its business as now conducted and to
own, lease and operate its Assets. Each of HeadHunter.NET and Merger Sub is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a HeadHunter.NET Material Adverse Effect. The minute books and
other organizational documents for each of HeadHunter.NET and Merger Sub have
been made available to Omnicom, BHA and Career Mosaic for their review and,
except as disclosed in Section 6.1 of the HeadHunter.NET Disclosure Memorandum,
are true and complete in all material respects as in effect as of the date of
this Agreement and accurately reflect in all material respects all amendments to
such organizational documents and all proceedings of the Board of Directors and
shareholders thereof.
6.2 Authority; No Breach By Agreement. (a) Each of HeadHunter.NET and
Merger Sub has the corporate power and authority necessary to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of each of HeadHunter.NET and
Merger Sub, subject, in the case of performance only, to any required approval
of this Agreement by the holders of HeadHunter.NET common stock. The Board of
Directors of HeadHunter.NET has taken all action necessary to render the
limitations on business combinations contained in Sections 14-2-1111 and
14-2-1132 of the GBCC (or any similar provision) inapplicable to the Merger.
This Agreement represents a legal, valid and binding obligation of each of
HeadHunter.NET and Merger Sub, enforceable against each of them in accordance
with its terms, except in all cases as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, receivership,
conservatorship, moratorium or similar Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceeding may be brought.
(b) Neither the execution and delivery of this Agreement by HeadHunter.NET
or Merger Sub, nor the consummation by HeadHunter.NET or Merger Sub of the
transactions contemplated hereby, nor compliance by HeadHunter.NET or Merger Sub
with any of the provisions hereof, will (i) conflict with or result in a breach
of any provision of the Articles of Incorporation of HeadHunter.NET, the
Certificate of Incorporation of Merger Sub or the Bylaws of HeadHunter.NET or
Merger Sub, or (ii) constitute or result in a Default under, or require any
Consent pursuant to, or result in the creation of any Lien on any Asset of
HeadHunter.NET under, any Contract or Permit of HeadHunter.NET, where such
Default or Lien, or any failure to obtain such Consent, is reasonably likely to
have, individually or in the aggregate, a HeadHunter.NET Material Adverse
Effect, or, (iii) subject to receipt of the requisite Consents referred to in
Section 11.1(b), constitute or result in a Default under, or require any Consent
pursuant to, any Law or Order applicable to HeadHunter.NET or any of its
material Assets, or to Merger Sub.
(c) Other than in connection or compliance with applicable Laws, and rules
of the NASD and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, a HeadHunter.NET Material Adverse Effect, no notice to, filing
with, or Consent of, any public body or authority is necessary for the
consummation by HeadHunter.NET or Merger Sub of the Merger and the other
transactions contemplated in this Agreement.
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6.3 Capital Stock. (a) The authorized capital stock of HeadHunter.NET
consists of (i) 45,500,000 shares of HeadHunter.NET common stock, of which
10,912,700 shares are issued and outstanding as of the date of this Agreement,
(ii) 7,500,000 shares of Class A Preferred Stock, none of which are issued and
outstanding, and (iii) 5,000,000 shares of Class B Serial Preferred Stock,
500,000 shares of which will be designated as Junior Participating Preferred
Stock in connection with the adoption of the Rights Plan, none of which are
issued and outstanding. All of the issued and outstanding shares of capital
stock of HeadHunter.NET are, and all of the shares of common stock of
HeadHunter.NET to be issued in connection with the Merger, when issued in
accordance with the terms of this Agreement, will be, duly and validly issued
and outstanding, fully paid and nonassessable. None of the outstanding shares of
capital stock of HeadHunter.NET has been, and none of the shares of
HeadHunter.NET common stock to be issued in connection with the Merger will be,
issued in violation of any preemptive rights of the current or past shareholders
of HeadHunter.NET. The authorized capital stock of Merger Sub consists of 1,000
shares of common stock, of which 1,000 shares are issued and outstanding as of
the date of this Agreement, all of which are owned of record and beneficially by
HeadHunter.NET.
(b) Except as set forth in Section 6.3(a), pursuant to the Rights Plan or
as disclosed in Section 6.3(b) of the HeadHunter.NET Disclosure Memorandum,
there are no shares of capital stock or other equity securities of
HeadHunter.NET outstanding and no outstanding Equity Rights relating to the
capital stock of HeadHunter.NET. All outstanding stock options listed on Section
6.3(b) of the HeadHunter.NET Disclosure Memorandum will, in accordance with
their terms or by action of the HeadHunter.NET Board of Directors, vest fully
upon the Effective Time of the Merger, except for the stock options held by
Robert M. Montgomery, Jr. to purchase up to 310,000 shares of HeadHunter.NET
common stock, which shall vest in accordance with their respective original
terms.
6.4 HeadHunter.NET Subsidiaries. HeadHunter.NET has disclosed in Section
6.4 of the HeadHunter.NET Disclosure Memorandum all of its subsidiaries
(identifying the Law under which such entity is organized, each jurisdiction in
which it is qualified and/or licensed to transact business, and the amount and
nature of the ownership interest therein). Except as disclosed in Section 6.4 of
the HeadHunter.NET Disclosure Memorandum, HeadHunter.NET, or one of its wholly
owned subsidiaries, owns all of the issued and outstanding shares of capital
stock (or other equity interests) of each of HeadHunter.NET's subsidiaries. No
capital stock (or other equity interest) of any HeadHunter.NET subsidiary is or
may become required to be issued by reason of any Equity Rights, and there are
no Contracts by which any HeadHunter.NET subsidiary is bound to issue additional
shares of its capital stock (or other equity interests) or Equity Rights or by
which any HeadHunter.NET subsidiary is or may be bound to transfer any shares of
capital stock (or other equity interests). All of the outstanding shares of
capital stock (or other equity interests) of each HeadHunter.NET subsidiary are
fully paid and nonassessable and are owned free and clear of any Lien. Except as
disclosed in Section 6.4 of the HeadHunter.NET Disclosure Memorandum, each
HeadHunter.NET subsidiary is duly organized, validly existing, and (as to
corporations) in good standing under the Laws of the jurisdiction in which it is
incorporated or organized, and has the corporate power and authority necessary
for it to own, lease, and operate its Assets and to carry on its business as now
conducted.
6.5 SEC Filings; Financial Statements. (a) HeadHunter.NET has timely filed
and made available to Omnicom, BHA and Career Mosaic all SEC Documents required
to be filed by HeadHunter.NET since August 19, 1999, the effective date of the
registration statement on Form S-1 filed with the SEC by HeadHunter.NET in
connection with its initial public offering (the "HeadHunter.NET SEC Reports").
The HeadHunter.NET SEC Reports (i) at the time filed, complied in all material
respects with the applicable requirements of the Securities Laws and other
applicable Laws and (ii) did not, at the time they were filed (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such HeadHunter.NET SEC Reports or
necessary in order to make the statements in such HeadHunter.NET SEC Reports, in
light of the circumstances under which they were made, not misleading.
(b) Each of the HeadHunter.NET Financial Statements (including, in each
case, any related notes) contained in the HeadHunter.NET SEC Reports, as
amended, including any HeadHunter.NET SEC Reports
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filed after the date of this Agreement until the Effective Time, complied or
will comply as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto; was or will be prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited interim statements, as permitted by Form 10-Q of
the SEC); and fairly presented or will present in all material respects the
consolidated financial position of HeadHunter.NET and its subsidiaries as at the
respective dates and the consolidated results of operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or will be subject to normal and recurring year-end adjustments which were
not or are not expected to be material in amount or effect.
6.6 Absence of Undisclosed Liabilities. Neither HeadHunter.NET nor any of
its subsidiaries has any Liabilities that are reasonably likely to have,
individually or in the aggregate, a HeadHunter.NET Material Adverse Effect,
except Liabilities which are accrued or reserved against in the consolidated
balance sheets of HeadHunter.NET included in the HeadHunter.NET Financial
Statements or reflected in the notes thereto, or which have arisen in the
ordinary course of business since the latest date covered by the HeadHunter.NET
Financial Statements.
6.7 Absence of Certain Changes or Events. Since December 31, 1999, except
as disclosed in the HeadHunter.NET Financial Statements filed with the SEC prior
to the date hereof or as disclosed in Section 6.7 of the HeadHunter.NET
Disclosure Memorandum, (i) there have been no events, changes, or occurrences
which have had, or are reasonably likely to have, individually or in the
aggregate, a HeadHunter.NET Material Adverse Effect, and (ii) neither
HeadHunter.NET nor Merger Sub has taken any action, or failed to take any
action, prior to the date of this Agreement, which action or failure, if taken
after the date of this Agreement, would represent or result in a material breach
or violation of any of their respective covenants contained herein.
6.8 Tax Matters. (a) All Tax Returns required to be filed by or on behalf
of HeadHunter.NET have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
December 31, 1999, except to the extent that all such failures to file, taken
together, are not reasonably likely to have a HeadHunter.NET Material Adverse
Effect, and all Tax Returns filed are complete and accurate to the Knowledge of
HeadHunter.NET. All Taxes shown on filed Tax Returns have been paid. There is no
audit examination, deficiency or Litigation with respect to any Taxes, except as
reserved against in the HeadHunter.NET Financial Statements or as disclosed in
Section 6.8 of the HeadHunter.NET Disclosure Memorandum. There are no Liens with
respect to Taxes upon any of HeadHunter.NET's Assets, except for Liens for taxes
not yet due and payable and any Liens which are not reasonably likely to have a
HeadHunter.NET Material Adverse Effect.
(b) HeadHunter.NET has not executed an extension or waiver of any statute
of limitations on the assessment or collection of any Tax due that is currently
in effect.
(c) The provision for any Taxes due or to become due for HeadHunter.NET for
the period or periods through and including the date of the HeadHunter.NET
Financial Statements that has been made and is reflected on such HeadHunter.NET
Financial Statements is adequate in accordance with GAAP to cover all such
Taxes.
(d) Deferred Taxes of HeadHunter.NET have been provided adequately for in
accordance with GAAP.
(e) HeadHunter.NET is not a party to any Tax allocation or sharing
agreement and HeadHunter.NET has not been a member of an affiliated group filing
a consolidated federal income Tax Return (other than a group the common parent
of which was HeadHunter.NET) and does not have any Liability for Taxes of any
Person (other than HeadHunter.NET and its subsidiaries) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
Law) as a transferee or successor or by Contract or otherwise.
(f) HeadHunter.NET is in compliance with, and its records contain all
information and documents (including properly completed IRS Forms W-9) necessary
to comply with, all applicable information reporting and Tax withholding
requirements under federal, state and local Tax Laws.
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(g) Except as disclosed in Section 6.8 of the HeadHunter.NET Disclosure
Memorandum, HeadHunter.NET has not made any payments, is not obligated to make
any payments, and is not a party to any Contract that could obligate it to make
any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
(h) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of HeadHunter.NET that occurred during or after any Taxable
Period in which HeadHunter.NET incurred a net operating loss that carries over
to any Taxable Period ending after December 31, 1999.
(i) HeadHunter.NET has no and has not had in any foreign country a
permanent establishment, as defined in any applicable tax treaty or convention
between the United States and such foreign country.
6.9 Assets. (a) Except as disclosed in Section 6.9 of the HeadHunter.NET
Disclosure Memorandum or as disclosed or reserved against in the HeadHunter.NET
Financial Statements filed with the SEC prior to the date hereof, HeadHunter.NET
and its subsidiaries have good and marketable title, free and clear of all
Liens, to all of their respective Assets, except for any such Liens or other
defects of title which are not reasonably likely to have a HeadHunter.NET
Material Adverse Effect. All tangible properties used in the businesses of
HeadHunter.NET and its subsidiaries are in good condition, reasonable wear and
tear excepted, and are usable in the ordinary course of business consistent with
past practices.
(b) All Assets which are material to HeadHunter.NET's business on a
consolidated basis held under leases or subleases by HeadHunter.NET or its
subsidiaries are held under valid Contracts enforceable in accordance with their
respective terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other Laws affecting the
enforcement of creditors' rights generally and except that the availability of
the equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be brought), and
each such Contract is in full force and effect.
(c) The Assets of HeadHunter.NET and its subsidiaries include all Assets
required to operate the business of HeadHunter.NET as presently conducted.
6.10 Intellectual Property. HeadHunter.NET or its subsidiaries own or have
a valid license to use all of the Intellectual Property material to the conduct
of HeadHunter.NET's business. HeadHunter.NET or any subsidiary thereof is the
owner of or has a license to any Intellectual Property sold or licensed to a
third party by HeadHunter.NET or any subsidiary thereof in connection with
HeadHunter.NET's business operations, and HeadHunter.NET has the right to convey
by sale or license any Intellectual Property so conveyed. HeadHunter.NET is not
in Default under any of its Intellectual Property licenses, except for Defaults
which are not reasonably likely to have, individually or in the aggregate, a
HeadHunter.NET Material Adverse Effect. No proceedings have been instituted, or
are pending or, to the Knowledge of HeadHunter.NET, threatened, which challenge
the rights of HeadHunter.NET with respect to Intellectual Property used, sold or
licensed by HeadHunter.NET in the course of its business, nor has any person
claimed or alleged any rights to such Intellectual Property. The conduct of the
business of HeadHunter.NET does not infringe any Intellectual Property of any
other person. HeadHunter.NET is not aware of any third party infringement of any
of the Intellectual Property used in the course of its business. Except as
disclosed in Section 6.10 of the HeadHunter.NET Disclosure Memorandum,
HeadHunter.NET is not obligated to pay any recurring royalties to any Person
with respect to any such Intellectual Property. Except as disclosed in Section
6.10 of the HeadHunter.NET Disclosure Memorandum, every officer, director, or
employee of HeadHunter.NET is a party to a Contract which requires such officer,
director or employee to assign any interest in any Intellectual Property to
HeadHunter.NET and to keep confidential any trade secrets, proprietary data,
customer information or other business information of HeadHunter.NET, and no
such officer, director or employee is party to any Contract with any Person
other than HeadHunter.NET which requires such officer, director or employee to
assign any interest in any Intellectual Property to any Person other than
HeadHunter.NET or to keep confidential any trade secrets, proprietary data,
customer information or other business information of any Person other than
HeadHunter.NET. Except as disclosed in Section 6.10 of the HeadHunter.NET
Disclosure Memorandum, no officer, director or employee of HeadHunter.NET is
party to any Contract
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which restricts or prohibits such officer, director or employee from engaging in
activities competitive with any Person, including HeadHunter.NET.
6.11 Environmental Matters. (a) To the Knowledge of HeadHunter.NET,
HeadHunter.NET, its Participation Facilities and its Operating Properties are,
and have been, in compliance with all Environmental Laws, except for violations
which are not reasonably likely to have, individually or in the aggregate, a
HeadHunter.NET Material Adverse Effect.
(b) There is no Litigation pending or, to the knowledge of HeadHunter.NET,
threatened before any court, governmental agency, or authority or other forum in
which HeadHunter.NET or any of its Operating Properties or Participation
Facilities (or HeadHunter.NET in respect of such Operating Property or
Participation Facility) has been or, with respect to threatened Litigation, may
be named as a defendant (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release,
discharge, spillage, or disposal into the environment of any Hazardous Material,
whether or not occurring at, on, under, adjacent to, or affecting (or
potentially affecting) a site owned, leased, or operated by HeadHunter.NET or
any of its Operating Properties or Participation Facilities, except for such
Litigation pending or threatened that is not reasonably likely to have,
individually or in the aggregate, a HeadHunter.NET Material Adverse Effect.
(c) During the period of (i) HeadHunter.NET's ownership or operation of any
of its current properties, (ii) HeadHunter.NET's participation in the management
of any Participation Facility, or (iii) HeadHunter.NET's holding of a security
interest in a Operating Property, there have been no releases, discharges,
spillages or disposals of Hazardous Material in, on, under, adjacent to or
affecting such properties, except such as are not reasonably likely to have,
individually or in the aggregate, a HeadHunter.NET Material Adverse Effect.
Prior to the period of (i) HeadHunter.NET's ownership or operation of any of its
respective current properties, (ii) HeadHunter.NET's participation in the
management of any Participation Facility, or (iii) HeadHunter.NET's holding of a
security interest in Operating Property, to the Knowledge of HeadHunter.NET,
there were no releases, discharges, spillages, or disposals of Hazardous
Material in, on, under, or affecting any such property, Participation Facility
or Operating Property, except such as are not reasonably likely to have,
individually or in the aggregate, a HeadHunter.NET Material Adverse Effect.
6.12 Compliance with Laws. HeadHunter.NET has in effect all Permits
necessary for it to own, lease or operate its material Assets and to carry on
its business as now conducted, except for those Permits the absence of which are
not reasonably likely to have, individually or in the aggregate, a
HeadHunter.NET Material Adverse Effect, and there has occurred no Default under
any such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a HeadHunter.NET Material Adverse Effect.
Except as disclosed in Section 6.12 of the HeadHunter.NET Disclosure Memorandum,
HeadHunter.NET:
(a) is not in Default under any of the provisions of its Articles of
Incorporation or Bylaws;
(b) is not in Default under any Laws, Orders or Permits applicable to
its business or employees conducting its business, except for Defaults
which are not reasonably likely to have, individually or in the aggregate,
a HeadHunter.NET Material Adverse Effect; or
(c) has not received any notification or communication from any agency
or department of federal, state or local government or any Regulatory
Authority or the staff thereof (i) asserting that HeadHunter.NET is not in
compliance with any of the Laws or Orders which such governmental authority
or Regulatory Authority enforces, where such noncompliance is reasonably
likely to have, individually or in the aggregate, a HeadHunter.NET Material
Adverse Effect, (ii) threatening to revoke any Permits, the revocation of
which is reasonably likely to have, individually or in the aggregate, a
HeadHunter.NET Material Adverse Effect, or (iii) requiring HeadHunter.NET
to enter into or consent to the issuance of a cease and desist order,
formal agreement, directive, commitment or memorandum of understanding, or
to adopt any Board resolution or similar undertaking, which materially
restricts the
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conduct of its business or in any manner relates to its capital adequacy,
its credit or reserve policies, its management or the payment of dividends.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to
Omnicom, BHA and Career Mosaic.
6.13 Labor Relations. HeadHunter.NET is not the subject of any Litigation
asserting that it or any of its subsidiaries has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it to bargain with any labor organization as to
wages or conditions of employment, nor is HeadHunter.NET party to any collective
bargaining agreement, nor is there any strike or other labor dispute involving
HeadHunter.NET, pending or, to the Knowledge of HeadHunter.NET, threatened, or
to the Knowledge of HeadHunter.NET, is there any activity involving
HeadHunter.NET's employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
6.14 Employee Benefit Plans. (a) HeadHunter.NET has disclosed in Section
6.14 of the HeadHunter.NET Disclosure Memorandum, and has delivered or made
available to Omnicom, BHA and Career Mosaic prior to the execution of this
Agreement copies in each case of, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plan, all other written employee programs,
arrangements or agreements, all medical, vision, dental or other health plans,
all life insurance plans, and all other employee benefit plans or fringe benefit
plans, including "employee benefit plans" as that term is defined in Section
3(3) of ERISA, currently adopted, maintained by, sponsored in whole or in part
by, or contributed to by HeadHunter.NET or ERISA Affiliate thereof for the
benefit of employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries and under which employees, retirees,
dependents, spouses, directors, independent contractors or other beneficiaries
are eligible to participate (collectively, the "HeadHunter.NET Benefit Plans").
Any of the HeadHunter.NET Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "HeadHunter.NET ERISA Plan." Each HeadHunter.NET ERISA Plan which is also a
"defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code) is referred to herein as an "HeadHunter.NET Pension Plan." No
HeadHunter.NET Pension Plan is or has been a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(b) All HeadHunter.NET Benefit Plans are in compliance in all material
respects with the applicable terms of ERISA, the Internal Revenue Code and any
other applicable Laws. Each HeadHunter.NET ERISA Plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code has received a
favorable determination letter from the Internal Revenue Service, and
HeadHunter.NET is not aware of any circumstances likely to result in revocation
of any such favorable determination letter. To the Knowledge of HeadHunter.NET,
HeadHunter.NET has not engaged in a transaction with respect to any
HeadHunter.NET Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject HeadHunter.NET to a Tax
imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of
ERISA.
(c) No HeadHunter.NET Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA. Since the date of the most
recent actuarial valuation, there has been (i) no material change in the
financial position of any HeadHunter.NET Pension Plan, (ii) no change in the
actuarial assumptions with respect to any HeadHunter.NET Pension Plan, and (iii)
no increase in benefits under any HeadHunter.NET Pension Plan as a result of
plan amendments or changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, a HeadHunter.NET Material Adverse Effect or
materially adversely affect the funding status of any such plan. Neither any
HeadHunter.NET Pension Plan nor any "single-employer plan," within the meaning
of Section 4001(a)(15) of ERISA, currently or formerly maintained by
HeadHunter.NET, or the single-employer plan of any entity which is considered
one employer with HeadHunter.NET under Section 4001 of ERISA or Section 414 of
the Internal Revenue Code or Section 302 of ERISA (an "ERISA
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Affiliate") has an "accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Internal Revenue Code or Section 302 of
ERISA, which is reasonably likely to have a HeadHunter.NET Material Adverse
Effect. HeadHunter.NET has not provided, and is not required to provide,
security to a HeadHunter.NET Pension Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by HeadHunter.NET with respect to any ongoing, frozen or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a HeadHunter.NET
Material Adverse Effect. HeadHunter.NET has not incurred any withdrawal
Liability with respect to a multiemployer plan under Subtitle B of Title IV of
ERISA (regardless of whether based on contributions of an ERISA Affiliate),
which Liability is reasonably likely to have a HeadHunter.NET Material Adverse
Effect. No notice of a "reportable event," within the meaning of Section 4043 of
ERISA for which the 30-day reporting requirement has not been waived, has been
required to be filed for any HeadHunter.NET Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 6.14 of the HeadHunter.NET Disclosure
Memorandum, HeadHunter.NET has no Liability for retiree health and life benefits
under any of the HeadHunter.NET Benefit Plans and there are no restrictions on
the rights of HeadHunter.NET to amend or terminate any such retiree health or
benefit Plan without incurring any Liability thereunder, which Liability is
reasonably likely to have a HeadHunter.NET Material Adverse Effect.
(f) Except as disclosed in Section 6.14 of the HeadHunter.NET Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of HeadHunter.NET from
HeadHunter.NET under any HeadHunter.NET Benefit Plan or otherwise, (ii) increase
any benefits otherwise payable under any HeadHunter.NET Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit, where such payment, increase, or acceleration is reasonably likely to
have, individually or in the aggregate, a HeadHunter.NET Material Adverse
Effect.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of HeadHunter.NET and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been adequately reflected on the HeadHunter.NET Financial Statements to the
extent required by and in accordance with GAAP.
6.15 Material Contracts. Except as disclosed in Section 6.15 of the
HeadHunter.NET Disclosure Memorandum or otherwise reflected in the
HeadHunter.NET Financial Statements, neither HeadHunter.NET nor any of its
Assets, businesses or operations, is a party to, or is bound or affected by, or
receives benefits under any Contract or amendment thereto that would constitute
a "material contract" as defined in Item 601(b)(10) of Regulation S-K under the
1933 Act, which is not filed as an exhibit to HeadHunter.NET's registration
statement on Form S-1 which was declared effective on August 19, 1999 or to the
most recent Annual Report on Form 10-K filed by HeadHunter.NET (collectively,
all Contracts which constitute "material contracts" for HeadHunter.NET under
Item 601(b)(10) of Regulation S-K under the 1933 Act, the "HeadHunter.NET
Contracts"). With respect to each HeadHunter.NET Contract and except as
disclosed in Section 6.15 of the HeadHunter.NET Disclosure Memorandum: (i) the
Contract is in full force and effect; (ii) HeadHunter.NET is not in Default
thereunder, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a HeadHunter.NET Material Adverse Effect;
(iii) HeadHunter.NET has not repudiated or waived any material provision of any
such Contract; (iv) no other party to any such Contract is, to the Knowledge of
HeadHunter.NET, in material Default in any respect, and (v) no other party to
such Contract has, to the Knowledge of HeadHunter.NET, repudiated or waived any
material provision thereunder.
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6.16 Legal Proceedings. There is no Litigation instituted, pending or, to
the Knowledge of HeadHunter.NET, threatened against HeadHunter.NET, or against
any director, employee or employee benefit plan of HeadHunter.NET, or against
any Asset, interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a HeadHunter.NET Material Adverse Effect, nor
are there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against HeadHunter.NET, that are
reasonably likely to have, individually or in the aggregate, a HeadHunter.NET
Material Adverse Effect. Section 6.16 of the HeadHunter.NET Disclosure
Memorandum contains a summary of all Litigation as of the date of this Agreement
to which HeadHunter.NET is a party and which names HeadHunter.NET as a defendant
or cross-defendant or for which HeadHunter.NET has any potential Liability.
6.17 Reports. Since the date of HeadHunter.NET's organization
HeadHunter.NET has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with Regulatory Authorities (except for failures to file reports or
statements which are not reasonably likely to have, individually or in the
aggregate, a HeadHunter.NET Material Adverse Effect). As of their respective
dates, each of such reports and documents, including the financial statements,
exhibits, and schedules thereto, complied in all material respects with all
applicable Laws. As of its respective date, each such report and document did
not, in all material respects, 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 made therein, in light of the circumstances under which they
were made, not misleading.
6.18 Statements True and Correct. None of the information supplied or to
be supplied by HeadHunter.NET or Merger Sub for inclusion in the Registration
Statement to be filed by HeadHunter.NET with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by HeadHunter.NET or Merger Sub for inclusion in the Proxy Statement to
be mailed to HeadHunter.NET's shareholders in connection with the Shareholders'
Meeting, and any other documents to be filed by HeadHunter.NET with the SEC or
any other Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with respect
to the Proxy Statement, when first mailed to the shareholders of HeadHunter.NET
or at the time of the Shareholders' Meeting, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All documents that
HeadHunter.NET and Merger Sub are responsible for filing with any Regulatory
Authority in connection with the transactions contemplated hereby, including the
Registration Statement and the Proxy Statement, will comply as to form in all
material respects with the provisions of applicable Law.
6.19 Regulatory Matters. Neither HeadHunter.NET nor Merger Sub has taken
or agreed to take any action and neither has Knowledge of any fact or
circumstance that is reasonably likely to materially impede or delay receipt of
any Consents of Regulatory Authorities referred to in Section 11.1(b) or result
in the imposition of a condition or restriction of the type referred to in the
last sentence of such Section.
6.20 Privacy; Web Site. HeadHunter.NET has complied with the terms of the
privacy policy stated on its web site. No web site owned by HeadHunter.NET
contains content or links to other web sites which contain content that is
illegal, obscene or defamatory. No personally identifiable data with respect to
users of HeadHunter.NET's web sites have been provided to third parties without
the consent of such users.
6.21 Opinion of Financial Advisor. HeadHunter.NET has received the opinion
of First Union Securities, Inc., dated the date of this Agreement, to the effect
that, as of such date, the consideration to be received by HeadHunter.NET in the
Merger is fair from a financial point of view to HeadHunter.NET, a signed copy
of which has been or promptly will be delivered to BHA.
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6.22 Brokers, Etc. No broker, investment banker, financial advisor or
other Person, other than First Union Securities, Inc., the fees, commissions and
expenses of which will be paid by HeadHunter.NET, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission, or the
reimbursement of expenses, in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of HeadHunter.NET or
any of its subsidiaries. HeadHunter.NET has furnished to BHA true and complete
copies of all agreements under which any such fees, commissions or expenses are
payable and all indemnification and other agreements related to the engagement
of the persons to whom such fees, commissions or expenses are payable.
6.23 Voting Requirements. The affirmative vote of the holders of a
majority of the voting power of all outstanding shares of HeadHunter.NET common
stock at the Shareholders' Meeting to adopt this Agreement is the only vote of
the holders of any class or series of HeadHunter.NET's capital stock necessary
to approve and adopt this Agreement and the transactions contemplated hereby or
thereby.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF OMNICOM, BHA AND CAREER MOSAIC
Omnicom, BHA and Career Mosaic, jointly and severally, hereby represent and
warrant to HeadHunter.NET and Merger Sub (i) as of the date of this Agreement
with respect to Sections 7.1, 7.2, 7.3, 7.4, 7.9(c), 7.9(d), 7.10, 7.13, 7.18,
7.19, 7.20, 7.21 and 7.22 and (ii) as of the date that Arthur Andersen LLP
delivers Career Mosaic Financial Statements to HeadHunter.NET as contemplated in
Section 11.3(e) of this Agreement (the "Delivery Date") with respect to Sections
7.5, 7.6, 7.7, 7.8, 7.9(a), 7.9(b), 7.11, 7.12, 7.14, 7.15, 7.16, and 7.17, as
follows:
7.1 Organization, Standing, and Power. Each of Omnicom, BHA and Career
Mosaic is a corporation duly organized, validly existing, and in good standing
under the Laws of the States of New York, Delaware and Delaware, respectively.
Each of Omnicom, BHA and Career Mosaic has the corporate power and authority to
carry on its business as now conducted and to own, lease and operate its Assets.
Career Mosaic is duly qualified or licensed to transact business as a foreign
corporation in good standing in the States of the United States and foreign
jurisdictions where the character of its Assets or Liabilities, including the
Transferred Assets and Transferred Liabilities, or the nature or conduct of its
business, including the Career Mosaic Business, requires it to be so qualified
or licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have individually or in the
aggregate, an Career Mosaic Business Material Adverse Effect. The minute books
and other organizational documents for Omnicom and BHA (with respect to the
Transferred Assets or Career Mosaic Business) and Career Mosaic have been made
available to HeadHunter.NET for its review and, except as disclosed in Section
7.1 of the Career Mosaic Disclosure Memorandum, are true and complete in all
material respects as in effect as of the date of this Agreement and accurately
reflect in all material respects all amendments to such organizational documents
and all proceedings of the Board of Directors and shareholders thereof.
7.2 Authority; No Breach By Agreement. (a) Each of Omnicom, BHA and Career
Mosaic has the corporate power and authority necessary to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated herein, including the
Merger, have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of Omnicom, BHA and Career Mosaic. This Agreement
represents a legal, valid, and binding obligation of each of Omnicom, BHA and
Career Mosaic, enforceable against each in accordance with its terms, except in
all cases as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, conservatorship, moratorium or similar
Laws affecting the enforcement of creditors' rights generally and except that
the availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding may
be brought.
(b) Neither the execution and delivery of this Agreement by Omnicom, BHA or
Career Mosaic, nor the consummation by any of them of the transactions
contemplated hereby, nor compliance by them with any of
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the provisions hereof, will (i) conflict with or result in a breach of any
provision of their respective Certificates of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset used in, or necessary for, the
operation of the Career Mosaic Business (including the Transferred Assets)
under, any Contract or Permit of any of them, or (iii) subject to receipt of the
requisite Consents referred to in Section 11.1(b), constitute or result in a
Default under, or require any Consent pursuant to, any Law or Order applicable
to Omnicom, BHA or Career Mosaic, the Career Mosaic Business or any of the
Assets used in, or necessary for, the operation of the Career Mosaic Business
(including the Transferred Assets).
(c) Other than in connection or compliance with applicable Laws, rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
or under the HSR Act, and other than Consents, filings or notifications which,
if not obtained or made, are not reasonably likely to have, individually or in
the aggregate, an Career Mosaic Business Material Adverse Effect, no notice to,
filing with, or Consent of, any public body or authority is necessary for the
consummation of the Merger and the other transactions contemplated in this
Agreement.
7.3 Capital Stock. (a) The authorized capital stock of Career Mosaic
consists of 10,000 shares of common stock, of which (i) 100 shares are issued
and outstanding as of the date of this Agreement and (ii) 10,000 shares will be
issued and outstanding immediately prior to the Effective Time. All of the
issued and outstanding shares of capital stock of Career Mosaic are duly and
validly issued and outstanding, fully paid and nonassessable. None of the
outstanding shares of Career Mosaic capital stock has been issued in violation
of any preemptive rights of the current or past shareholders of Career Mosaic.
(b) Except as set forth in Section 7.3(a), or as disclosed in Section 7.3
of the Career Mosaic Disclosure Memorandum, there are no shares of capital stock
or other equity securities of Career Mosaic outstanding and no outstanding
Equity Rights relating to the capital stock of Career Mosaic.
7.4 Subsidiaries. Career Mosaic has no subsidiaries. There are no
Contracts relating to the rights of BHA to vote or to dispose of any shares of
the capital stock of Career Mosaic. All of the shares of outstanding capital
stock of Career Mosaic are fully paid and nonassessable and are owned by BHA and
the other stockholders free and clear of any Lien.
7.5 Financial Statements. The Career Mosaic Financial Statements
(including, in each case, any related notes) are or will be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements),
and fairly present or will present in all material respects the financial
position of Career Mosaic (or the Career Mosaic Business) as at the respective
dates and the results of operations and cash flows for the periods indicated,
except that unaudited interim financial statements will be subject to normal and
recurring year-end adjustments which are not expected to be material in amount
or effect.
7.6 Absence of Undisclosed Liabilities. Neither Career Mosaic nor the
Career Mosaic Business has any Liabilities that are reasonably likely to have,
individually or in the aggregate, an Career Mosaic Business Material Adverse
Effect, except Liabilities which are accrued or reserved against in the balance
sheets of Career Mosaic or the Career Mosaic Business included in the Career
Mosaic Financial Statements or reflected in the notes thereto, or which have
arisen in the ordinary course of business since the latest date covered by the
Career Mosaic Financial Statements.
7.7 Absence of Certain Changes or Events. Since December 31, 1999, except
as disclosed in the Career Mosaic Financial Statements or as disclosed in
Section 7.7 of the Career Mosaic Disclosure Memorandum, (i) there have been no
events, changes, or occurrences which have had, or are reasonably likely to
have, individually or in the aggregate, an Career Mosaic Business Material
Adverse Effect, and (ii) neither Omnicom, BHA nor Career Mosaic has taken any
action, or failed to take any action, prior to the date of this Agreement, which
action or failure, if taken after the date of this Agreement, would represent or
result in a material breach or violation of any of their respective covenants
contained herein.
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7.8 Tax Matters. (a) All Tax Returns required to be filed by or on behalf
of Career Mosaic, or with respect to the Career Mosaic Business, or for which
Career Mosaic could be held primarily liable, have been timely filed or requests
for extensions have been timely filed, granted, and have not expired for periods
ended on or before December 31, 1999, except to the extent that all such
failures to file, taken together, are not reasonably likely to have an Career
Mosaic Business Material Adverse Effect, and all such Tax Returns filed are
complete and accurate to the Knowledge of Omnicom, BHA and Career Mosaic. All
Taxes shown on filed Tax Returns have been paid. There is no audit examination,
deficiency or Litigation with respect to any Taxes, except as reserved against
in the Career Mosaic Financial Statements or as disclosed in Section 7.8 of the
Career Mosaic Disclosure Memorandum. There are no Liens with respect to Taxes
upon any of Career Mosaic's Assets (including the Transferred Assets), except
for Liens for taxes not yet due and payable and any Liens which are not
reasonably likely to have an Career Mosaic Business Material Adverse Effect.
(b) Except as set forth in Section 7.8(b) of the Career Mosaic Disclosure
Memorandum, Career Mosaic has not, and neither Omnicom nor BHA with respect to
the Career Mosaic Business or any Transferred Assets has, executed an extension
or waiver of any statute of limitations on the assessment or collection of any
Tax due or for which Career Mosaic would be liable that is currently in effect.
(c) The provision for any Taxes due or to become due for Career Mosaic or
with respect to the Career Mosaic Business for the period or periods through and
including the date of the Career Mosaic Financial Statements that has been made
and is reflected on such Career Mosaic Financial Statements is adequate in
accordance with GAAP to cover all such Taxes.
(d) Deferred Taxes of Career Mosaic, and deferred Taxes related to the
Career Mosaic Business or Transferred Assets, have been provided adequately for
in accordance with GAAP.
(e) Career Mosaic is not a party to any Tax allocation or sharing agreement
and Career Mosaic has not been a member of an affiliated group filing a
consolidated federal income Tax Return and does not have any Liability for Taxes
of any Person (in each case, other than as a member of Omnicom' consolidated
group) under Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign Law) as a transferee or successor or by Contract or
otherwise.
(f) Career Mosaic is in compliance with, and its records contain all
information and documents (including properly completed IRS Forms W-9) necessary
to comply with, all applicable information reporting and Tax withholding
requirements under federal, state and local Tax Laws.
(g) Except as disclosed in Section 7.8 of the Career Mosaic Disclosure
Memorandum, Career Mosaic has not made any payments, is not obligated to make
any payments, and is not a party to any Contract that could obligate it to make
any payments that would be disallowed as a deduction under Section 280G or
162(m) of the Internal Revenue Code.
(h) There has not been an ownership change, as defined in Internal Revenue
Code Section 382(g), of Career Mosaic that occurred during or after any Taxable
Period in which Career Mosaic incurred a net operating loss that carries over to
any Taxable Period ending after December 31, 1999.
(i) Career Mosaic has no and has not had in any foreign country a permanent
establishment, as defined in any applicable tax treaty or convention between the
United States and such foreign country.
7.9 Assets. (a) Except as disclosed in Section 7.9 of the Career Mosaic
Disclosure Memorandum or as disclosed or reserved against in the Career Mosaic
Financial Statements, Career Mosaic has good and marketable title, free and
clear of all Liens, to all of its Assets, including all of the Transferred
Assets, except for any such Liens or other defects of title which are not
reasonably likely to have an Career Mosaic Business Material Adverse Effect. All
tangible properties used in the Career Mosaic Businesses are in good condition,
reasonable wear and tear excepted, and are usable in the ordinary course of
business consistent with past practices.
(b) All Assets (including Transferred Assets) which are material to the
Career Mosaic Business held under leases or subleases by Career Mosaic are held
under valid Contracts enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
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reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the discretion
of the court before which any proceedings may be brought), and each such
Contract is in full force and effect.
(c) Except for the Assets related to the provision of services under the
Administrative Services Agreement which are not primarily used in the conduct of
the Career Mosaic Business, the Assets of Career Mosaic include all Assets
required to operate the Career Mosaic Business as presently conducted. Neither
Omnicom nor BHA has retained any Asset which is necessary for, or is used in,
the operation of the Career Mosaic Business. Except for Assets related to the
provision of services under the Administrative Services Agreement which are not
primarily used in the conduct of the Career Mosaic Business, the Transferred
Assets constituted all of the Assets which were necessary for, or which were
used primarily in, the operation of the Career Mosaic Business in all material
respects as it was conducted at the time that BHA contributed the Transferred
Assets to Career Mosaic.
7.10 Intellectual Property. Career Mosaic owns or has a valid license to
use all of the Intellectual Property (i) material to the conduct of the Career
Mosaic Business or (ii) included in the Transferred Assets. Career Mosaic is the
owner of or has a license to any Intellectual Property sold or licensed to a
third party by Career Mosaic in connection with the Career Mosaic Business, and
Career Mosaic has the right to convey by sale or license any Intellectual
Property so conveyed. Career Mosaic is not in Default under any of its
Intellectual Property licenses, except for Defaults which are not reasonably
likely to have, individually or in the aggregate, an Career Mosaic Business
Material Adverse Effect. No proceedings have been instituted, or are pending or,
to the Knowledge of Omnicom, BHA and Career Mosaic, threatened, which challenge
the rights of BHA or Career Mosaic with respect to Intellectual Property used,
sold or licensed in the course of the Career Mosaic Business, nor has any person
claimed or alleged any rights to such Intellectual Property. The conduct of the
Career Mosaic Business does not infringe any Intellectual Property of any other
person. Neither Omnicom, BHA nor Career Mosaic is aware of any third party
infringement of any of the Intellectual Property used in, or necessary for, the
operation of the Career Mosaic Business. Except as disclosed in Section 7.10 of
the Career Mosaic Disclosure Memorandum, Career Mosaic is not obligated to pay
any recurring royalties to any Person with respect to any such Intellectual
Property. Except as disclosed in Section 7.10 of the Career Mosaic Disclosure
Memorandum, every officer, director, or employee of Career Mosaic and every
employee of BHA materially related to the operation of the Career Mosaic
Business is a party to a Contract which requires such officer, director or
employee to assign to BHA or Career Mosaic any interest in any Intellectual
Property, which is included in the Transferred Assets or which is used in or
necessary for the operation of the Career Mosaic Business, and to keep
confidential any trade secrets, proprietary data, customer information or other
business information of Career Mosaic or which relates to the Career Mosaic
Business or Transferred Assets (such Contracts collectively, the "IP Assignment
Contracts"). All IP Assignment Contracts have been assigned to Career Mosaic. No
officer, director or employee of Career Mosaic and no employee of Omnicom or BHA
related to the operation of the Career Mosaic Business is party to any Contract
with any Person other than Career Mosaic which requires such officer, director
or employee to (i) assign to any Person other than Career Mosaic any interest in
any Intellectual Property which is used in or necessary for the operation of the
Career Mosaic Business or included in the Transferred Assets, or (ii) keep
confidential any trade secrets, proprietary data, customer information or other
business information of any Person other than Career Mosaic. Except as disclosed
in Section 7.10 of the Career Mosaic Disclosure Memorandum, no officer, director
or employee of Career Mosaic or any employee of Omnicom or BHA related to the
operation of the Career Mosaic Business is party to any Contract which restricts
or prohibits such officer, director or employee from engaging in activities
competitive with any Person.
7.11 Environmental Matters. (a) To the Knowledge of Omnicom, BHA and
Career Mosaic, Career Mosaic, its Participation Facilities and its Operating
Properties are, and have been, in compliance with all Environmental Laws, except
for violations which are not reasonably likely to have, individually or in the
aggregate, an Career Mosaic Business Material Adverse Effect.
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(b) There is no Litigation pending or threatened before any court,
governmental agency, or authority or other forum in which Career Mosaic or any
of its Operating Properties or Participation Facilities (or Career Mosaic in
respect of such Operating Property or Participation Facility) has been or, with
respect to threatened Litigation, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or (ii)
relating to the release, discharge, spillage, or disposal into the environment
of any Hazardous Material, whether or not occurring at, on, under, adjacent to,
or affecting (or potentially affecting) a site owned, leased, or operated by
Omnicom, BHA, Career Mosaic or any of their respective Operating Properties or
Participation Facilities, except for such Litigation pending or threatened that
is not reasonably likely to have, individually or in the aggregate, an Career
Mosaic Business Material Adverse Effect.
(c) During the period of (i) Career Mosaic's ownership or operation of any
of its current properties, (ii) Career Mosaic's participation in the management
of any Participation Facility, or (iii) Career Mosaic's holding of a security
interest in a Operating Property, there have been no releases, discharges,
spillages or disposals of Hazardous Material in, on, under, adjacent to or
affecting such properties, except such as are not reasonably likely to have,
individually or in the aggregate, an Career Mosaic Business Material Adverse
Effect. Prior to the period of (i) Career Mosaic's ownership or operation of any
of its respective current properties, (ii) Career Mosaic's participation in the
management of any Participation Facility, or (iii) Career Mosaic's holding of a
security interest in Operating Property, to the Knowledge of Omnicom, BHA and
Career Mosaic, there were no releases, discharges, spillages, or disposals of
Hazardous Material in, on, under, or affecting any such property, Participation
Facility or Operating Property, except such as are not reasonably likely to
have, individually or in the aggregate, an Career Mosaic Material Adverse
Effect.
7.12 Compliance with Laws. Career Mosaic has in effect all Permits
necessary for it to own, lease or operate its material Assets (including the
Transferred Assets) and to carry on the Career Mosaic Business as now conducted,
except for those Permits the absence of which are not reasonably likely to have,
individually or in the aggregate, an Career Mosaic Business Material Adverse
Effect, and there has occurred no Default under any such Permit, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, an Career Mosaic Business Material Adverse Effect. Except as
disclosed in Section 7.12 of the Career Mosaic Disclosure Memorandum, neither
Career Mosaic, nor Omnicom or BHA with respect to the Transferred Assets or
Career Mosaic Business:
(a) is in Default under any of the provisions of their respective
Certificates of Incorporation and Bylaws;
(b) is in Default under any Laws, Orders or Permits applicable to the
Career Mosaic Business or employees conducting the Career Mosaic Business,
except for Defaults which are not reasonably likely to have, individually
or in the aggregate, an Career Mosaic Business Material Adverse Effect; or
(c) has received any notification or communication from any agency or
department of federal, state or local government or any Regulatory
Authority or the staff thereof (i) asserting that Career Mosaic is not in
compliance with any of the Laws or Orders which such governmental authority
or Regulatory Authority enforces, where such noncompliance is reasonably
likely to have, individually or in the aggregate, an Career Mosaic Business
Material Adverse Effect, (ii) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, an Career Mosaic Business Material Adverse Effect, or (iii)
requiring Career Mosaic to enter into or consent to the issuance of a cease
and desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which materially restricts the conduct of the Career Mosaic Business or in
any manner relates to its capital adequacy, its credit or reserve policies,
its management or the payment of dividends.
Copies of all material reports, correspondence, notices and other documents
relating to any inspection, audit, monitoring or other form of review or
enforcement action by a Regulatory Authority have been made available to
HeadHunter.NET.
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7.13 Labor Relations. Neither Career Mosaic nor the Career Mosaic Business
is the subject of any Litigation asserting that an unfair labor practice (within
the meaning of the National Labor Relations Act or comparable state law) has
been committed or seeking to compel the bargaining with any labor organization
as to wages or conditions of employment. Neither Career Mosaic nor Omnicom or
BHA with respect to the employees associated with the Career Mosaic Business are
party to any collective bargaining agreement. There is no strike or other labor
dispute involving Career Mosaic or the Career Mosaic Business, pending or, to
the Knowledge of Omnicom, BHA and Career Mosaic, threatened, or to the Knowledge
of Omnicom, BHA and Career Mosaic, is there any activity involving employees of
Career Mosaic or employees of BHA primarily associated with the Career Mosaic
Business seeking to certify a collective bargaining unit or engaging in any
other organization activity.
7.14 Employee Benefit Plans. (a) Career Mosaic has disclosed in Section
7.14 of the Career Mosaic Disclosure Memorandum, and has delivered or made
available to HeadHunter.NET prior to the execution of this Agreement copies in
each case of, all pension, retirement, profit-sharing, deferred compensation,
stock option, employee stock ownership, severance pay, vacation, bonus, or other
incentive plan, all other written employee programs, arrangements, or agreements
all medical, vision, dental or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including "employee
benefit plans" as that term is defined in Section 3(3) of ERISA, currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
Career Mosaic, Omnicom and BHA (with respect to employees associated with the
Career Mosaic Business) or ERISA Affiliate thereof for the benefit of employees,
retirees, dependents, spouses, directors, independent contractors or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors or other beneficiaries are eligible to
participate (collectively, the "Career Mosaic Benefit Plans"). Any of the Career
Mosaic Benefit Plans which is an "employee pension benefit plan," as that term
is defined in Section 3(2) of ERISA, is referred to herein as a "Career Mosaic
ERISA Plan." Each Career Mosaic ERISA Plan which is also a "defined benefit
plan" (as defined in Section 414(j) of the Internal Revenue Code) is referred to
herein as an "Career Mosaic Pension Plan." No Career Mosaic Pension Plan is or
has been a multiemployer plan within the meaning of Section 3(37) of ERISA.
(b) All Career Mosaic Benefit Plans are in compliance in all material
respects with the applicable terms of ERISA, the Internal Revenue Code and any
other applicable Laws. Each Career Mosaic ERISA Plan which is intended to be
qualified under Section 401(a) of the Internal Revenue Code has received a
favorable determination letter from the Internal Revenue Service, and neither
Omnicom, BHA nor Career Mosaic is aware of any circumstances likely to result in
revocation of any such favorable determination letter. To the Knowledge of BHA
and Career Mosaic, Career Mosaic has not engaged in a transaction with respect
to any Career Mosaic Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject Career Mosaic to a Tax
imposed by either Section 4975 of the Internal Revenue Code or Section 502(i) of
ERISA.
(c) No Career Mosaic Pension Plan has any "unfunded current liability," as
that term is defined in Section 302(d)(8)(A) of ERISA, and the fair market value
of the assets of any such plan exceeds the plan's "benefit liabilities," as that
term is defined in Section 4001(a)(16) of ERISA. Since the date of the most
recent actuarial valuation, there has been (i) no material change in the
financial position of any Career Mosaic Pension Plan, (ii) no change in the
actuarial assumptions with respect to any Career Mosaic Pension Plan, and (iii)
no increase in benefits under any Career Mosaic Pension Plan as a result of plan
amendments or changes in applicable Law which is reasonably likely to have,
individually or in the aggregate, an Career Mosaic Material Adverse Effect or
materially adversely affect the funding status of any such plan. Neither any
Career Mosaic Pension Plan nor any "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by Career Mosaic,
or the single-employer plan of any entity which is considered one employer with
Career Mosaic under Section 4001 of ERISA or Section 414 of the Internal Revenue
Code or Section 302 of ERISA (an "ERISA Affiliate") has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA, which is reasonably likely to
have an Career Mosaic Business Material Adverse Effect. Career
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Mosaic has not provided, and is not required to provide, security to an Career
Mosaic Pension Plan or to any single-employer plan of an ERISA Affiliate
pursuant to Section 401(a)(29) of the Internal Revenue Code.
(d) No Liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by Career Mosaic with respect to any ongoing, frozen or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have an Career Mosaic
Business Material Adverse Effect. Career Mosaic has not incurred any withdrawal
Liability with respect to a multiemployer plan under Subtitle B of Title IV of
ERISA (regardless of whether based on contributions of an ERISA Affiliate),
which Liability is reasonably likely to have an Career Mosaic Business Material
Adverse Effect. No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Career Mosaic Pension Plan or by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(e) Except as disclosed in Section 7.14 of the Career Mosaic Disclosure
Memorandum, Career Mosaic has no Liability for retiree health and life benefits
under any of the Career Mosaic Benefit Plans and there are no restrictions on
the rights of Career Mosaic to amend or terminate any such retiree health or
benefit Plan without incurring any Liability thereunder, which Liability is
reasonably likely to have an Career Mosaic Business Material Adverse Effect.
(f) Except as disclosed in Section 7.14 of the Career Mosaic Disclosure
Memorandum, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, or
otherwise) becoming due to any director or any employee of Career Mosaic from
Career Mosaic under any Career Mosaic Benefit Plan or otherwise, (ii) increase
any benefits otherwise payable under any Career Mosaic Benefit Plan, or (iii)
result in any acceleration of the time of payment or vesting of any such
benefit, where such payment, increase, or acceleration is reasonably likely to
have, individually or in the aggregate, an Career Mosaic Business Material
Adverse Effect.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including entitlements under any executive compensation,
supplemental retirement, or employment agreement) of employees and former
employees of Career Mosaic and their respective beneficiaries, other than
entitlements accrued pursuant to funded retirement plans subject to the
provisions of Section 412 of the Internal Revenue Code or Section 302 of ERISA,
have been adequately reflected on the Career Mosaic Financial Statements to the
extent required by and in accordance with GAAP.
7.15 Material Contracts. Except as disclosed in Section 7.15 of the Career
Mosaic Disclosure Memorandum or otherwise reflected in the Career Mosaic
Financial Statements, neither Career Mosaic nor any of its Assets or the Career
Mosaic Business, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting or retirement
Contract, (ii) any Contract relating to the borrowing of money by Career Mosaic
or the guarantee by Career Mosaic of any such obligation, (iii) any Contract
which prohibits or restricts (A) the engagement of the Career Mosaic Business or
(B) competition with any other Person, (iv) any Contract between Omnicom, BHA or
any Affiliate thereof on one hand, and Career Mosaic on the other, (v) any
Contract involving Intellectual Property used in the operation of the Career
Mosaic Business or included in the Transferred Assets (other than Contracts
entered into in the ordinary course of the Career Mosaic Business, (vi) any
Contract relating to the purchase or sale of any goods or services, other than
Contracts entered into in the ordinary course of the Career Mosaic Business and
involving payments under any individual Contract not in excess of $100,000,
(vii) any other Contract that would be required to be filed as an exhibit to a
Form 10-K as of the date of this Agreement if Career Mosaic were required to
file a Form 10-K on such date (collectively, the "Career Mosaic Contracts"). The
Career Mosaic Contracts constitute all of the material Contracts necessary for,
or used in connection with, the operation of the Career Mosaic Business as
presently conducted. With respect to each Career Mosaic Contract and except as
disclosed in Section 7.15 of the Career Mosaic Disclosure Memorandum: (i) the
Contract is in full force and effect; (ii) Career Mosaic is not in Default
thereunder, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, an Career Mosaic Business Material Adverse
Effect; (iii) Career Mosaic has not repudiated or waived any material provision
of any such
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Contract; (iv) no other party to any such Contract is, to the Knowledge of
Omnicom, BHA and Career Mosaic, in Default in any respect, other than Defaults
which are not reasonably likely to have, individually or in the aggregate, an
Career Mosaic Business Material Adverse Effect, and (v) no other party to such
Contract has, to the Knowledge of Omnicom, BHA and Career Mosaic, repudiated or
waived any material provision thereunder. All Career Mosaic Contracts which were
included in the Transferred Assets have been assigned to Career Mosaic and all
Consents required in connection therewith have been obtained.
7.16 Legal Proceedings. There is no Litigation instituted, pending or, to
the Knowledge of Omnicom, BHA and Career Mosaic, threatened against Career
Mosaic, the Career Mosaic Business, or against any director, employee or
employee benefit plan of Career Mosaic, or against any Asset (including the
Transferred Assets), interest, or right of any of them, that is reasonably
likely to have, individually or in the aggregate, an Career Mosaic Business
Material Adverse Effect, nor are there any Orders of any Regulatory Authorities,
other governmental authorities, or arbitrators outstanding against Career Mosaic
or the Career Mosaic Business, that are reasonably likely to have, individually
or in the aggregate, an Career Mosaic Business Material Adverse Effect. Section
7.16 of the Career Mosaic Disclosure Memorandum contains a summary of all
Litigation as of the date of this Agreement to which (i) Career Mosaic is a
party and which names Career Mosaic as a defendant or cross-defendant or for
which Career Mosaic has any potential Liability, or (ii) the Transferred Assets
or the Career Mosaic Business is the subject.
7.17 Reports. Since the date of Career Mosaic's organization, Career
Mosaic has timely filed all reports and statements, together with any amendments
required to be made with respect thereto, that it was required to file with
Regulatory Authorities (except for failures to file reports or statements which
are not reasonably likely to have, individually or in the aggregate, an Career
Mosaic Business Material Adverse Effect). As of their respective dates, each of
such reports and documents complied in all material respects with all applicable
Laws. As of its respective date, each such report and document did not, in all
material respects, 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 made therein, in light of the circumstances under which they were
made, not misleading.
7.18 Statements True and Correct. None of the information supplied or to
be supplied by Omnicom, BHA or Career Mosaic for inclusion in the Registration
Statement to be filed by HeadHunter.NET with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein no misleading. None of the information supplied or to be
supplied by Omnicom, BHA or Career Mosaic for inclusion in the Proxy Statement
to be mailed to HeadHunter.NET's shareholders in connection with the
Shareholders' Meeting, and any other documents to be filed with the SEC or any
other Regulatory Authority in connection with the transactions contemplated
hereby, will, at the respective time such documents are filed, and with respect
to the Proxy Statement, when first mailed to the shareholders of HeadHunter.NET
or at the time of the Shareholders' Meeting, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Shareholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of any proxy for the Shareholders' Meeting. All documents that
Omnicom, BHA or Career Mosaic are responsible for filing with any Regulatory
Authority in connection with the transactions contemplated hereby will comply as
to form in all material respects with the provisions of applicable Law.
7.19 Regulatory Matters. Neither Omnicom, BHA nor Career Mosaic has taken
or agreed to take any action and has any Knowledge of any fact or circumstance
that is reasonably likely to materially impede or delay receipt of any Consents
of Regulatory Authorities referred to in Section 11.1(b) or result in the
imposition of a condition or restriction of the type referred to in the last
sentence of such Section.
7.20 Ownership of HeadHunter.NET Common Stock. As of the date of this
Agreement, neither Omnicom nor any of its majority owned subsidiaries (including
BHA) owns, and at the Effective Time neither Omnicom nor any of its majority
owned subsidiaries will own, of record or beneficially, any shares of
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HeadHunter.NET common stock nor does Omnicom or any of such subsidiaries
(including BHA) have any Equity Rights with respect to HeadHunter.NET capital
stock, except for the shares of HeadHunter.NET common stock to be received in
the Merger and no more than 100,000 shares owned pursuant to independently
trusteed employee plans of Omnicom and its majority owned subsidiaries.
7.21 Privacy; Web Site. Each of Omnicom, BHA and Career Mosaic have
complied with the terms of the privacy policy stated on the web site used in the
operation of the Career Mosaic Business at all times during which Omnicom, BHA
and Career Mosaic have operated the Career Mosaic Business. No web site used in
the operation of the Career Mosaic Business contains content or links to other
web sites which contain content that is illegal, obscene or defamatory. No
personally identifiable data with respect to users of the Career Mosaic
Business' web sites have been provided to third parties without the consent of
such user.
7.22 Brokers, Etc. No broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisors or other
similar fee or commission, or the reimbursement of expenses, in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of Omnicom, BHA or Career Mosaic.
ARTICLE 8
CONDUCT OF BUSINESS PENDING CONSUMMATION
8.1 Covenants of HeadHunter.NET. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, unless the
prior written consent of BHA shall have been obtained (which consent shall not
be unreasonably withheld or delayed), and except as otherwise expressly
contemplated herein, HeadHunter.NET shall and shall cause each of its
subsidiaries to (a) operate its business in all material respects only in the
ordinary course thereof, (b) use commercially reasonable best efforts to
preserve intact its business as conducted on the date hereof in all material
respects and its material Assets and maintain its material rights and
franchises, and (c) take no action which would (i) materially adversely affect
the ability of any party to obtain any Consents required for the transactions
contemplated hereby without imposition of a condition or restriction of the type
referred to in the last sentences of Section 11.1(b) or 11.1(c), or (ii)
materially adversely affect the ability of any party to perform its covenants
and agreements under this Agreement.
8.2 Negative Covenants of HeadHunter.NET. From the date of this Agreement
until the earlier of the Effective Time or the termination of this Agreement,
except as otherwise provided in this Agreement, unless the prior written consent
of BHA shall have been obtained (which consent shall not be unreasonably
withheld or delayed), HeadHunter.NET covenants that it will not do or agree or
commit to do, or permit any of its subsidiaries to do or agree or commit to do,
any of the following:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of HeadHunter.NET or its subsidiaries, except in connection
with the adoption of the Rights Plan or as otherwise required by this
Agreement, or
(b) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $2,000,000, except in the
ordinary course of the business of HeadHunter.NET consistent with past
practices or as contemplated in the Credit Agreement, or impose, or suffer
the imposition, on any Asset of HeadHunter.NET and its subsidiaries of any
Lien or permit any such Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of HeadHunter.NET or its subsidiaries or declare or pay
any dividend or make any other distribution in respect of HeadHunter.NET's
capital stock; or
(d) except for (1) this Agreement, (2) pursuant to the exercise of stock
options and warrants outstanding as of the date hereof and listed in
Section 6.3 of the HeadHunter.NET Disclosure Schedule (which, except as set
forth in Section 6.3(b), all shall fully vest upon the Effective Time of
the Merger) or in respect of up to 400,000 shares of HeadHunter.NET common
stock pursuant to stock options
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awarded after the date of this Agreement in the ordinary course of business
consistent with past practice to employees who are not directors or
officers of HeadHunter.NET (which shall vest in accordance with the terms
approved by the HeadHunter.NET Board of Directors, which shall not
accelerate as a result of the Effective Time), (3) as disclosed in Section
8.2(d) of the HeadHunter.NET Disclosure Memorandum and (4) pursuant to the
Rights Plan in accordance with its terms, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of HeadHunter.NET common stock or any
other capital stock of any subsidiary, or any stock appreciation rights, or
any option, warrant, or other Equity Right; or
(e) adjust, split, combine or reclassify any capital stock of
HeadHunter.NET or its subsidiaries or issue or authorize the issuance of
any other securities in respect of or in substitution for shares of
HeadHunter.NET common stock, or sell, lease, mortgage or otherwise dispose
of or otherwise encumber (x) any shares of capital stock of HeadHunter.NET
or its subsidiaries or (y) any material Asset other than in the ordinary
course of business for reasonable and adequate consideration; or
(f) grant any increase in compensation or benefits to the employees,
officers or directors of HeadHunter.NET, except in accordance with the
ordinary course of business consistent with past practice, subsection (d)
above or as required by Law; pay any severance or termination pay or any
bonus other than pursuant to written policies or written Contracts in
effect on the date of this Agreement; enter into or amend any severance
agreements with officers of HeadHunter.NET; grant any increase in fees or
other increases in compensation or other benefits to directors of
HeadHunter.NET; or enter into any other Contract or arrangement with any
director or officer of HeadHunter.NET or any other Person who, to the
Knowledge of HeadHunter.NET, is a relative of a director or officer of
HeadHunter.NET; or
(g) enter into or amend any employment Contract between HeadHunter.NET
and any Person (unless such amendment is required by Law) that
HeadHunter.NET does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time
on or after the Effective Time, except as otherwise contemplated in this
Agreement; or
(h) adopt any new employee benefit plan of HeadHunter.NET or terminate
or withdraw from, or make any material change in or to, any existing
employee benefit plans of HeadHunter.NET, other than as otherwise
contemplated in Section 9.10 of this Agreement, the acceleration of the
vesting of all options outstanding prior to the Effective Time (except as
otherwise provided in Section 6.3(b) of this Agreement), or any such change
that is required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax-qualified status of any such plan, or make
any distributions from such employee benefit plans, except as required by
Law or the terms of such plans; or
(i) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in Tax Laws or regulatory accounting requirements or
GAAP; or
(j) commence any Litigation other than in accordance with past practice,
or settle any Litigation involving any Liability of HeadHunter.NET for
material money damages or restrictions upon the operations of
HeadHunter.NET; or
(k) except in the ordinary course of business, as otherwise contemplated
by this Agreement or for advertising, marketing or co-branding agreements
under which HeadHunter.NET's aggregate annual payment obligations do not
exceed $2,000,000, enter into, modify, amend or terminate any material
Contract or waive, release, compromise or assign any material rights or
claims; or
(l) take any action that would cause the representations and warranties
of HeadHunter.NET and Merger Sub set forth in Article 6 to no longer be
true and correct in all material respects; or
(m) authorize, commit or agree to take any of the foregoing actions.
8.3 Omnicom, BHA and Career Mosaic Covenants. From the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, unless the prior written consent of the
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HeadHunter.NET shall have been obtained (which consent shall not be unreasonably
withheld or delayed), and except as otherwise expressly contemplated herein,
Omnicom, BHA and Career Mosaic shall (x) operate the Career Mosaic Business in
all material respects only in the ordinary course thereof, (y) use commercially
reasonable best efforts to preserve intact the Career Mosaic Business in all
material respects and the material Assets (including the Transferred Assets)
used in, or necessary for, the operation of the Career Mosaic Business, and
maintain the Career Mosaic Business' material rights and franchises, and (z)
take no action which would (i) materially adversely affect the ability of any
party to obtain any Consents required for the transactions contemplated hereby
without imposition of a condition or restriction of the type referred to in the
last sentences of Section 11.1(b) or 11.1(c) or (ii) materially adversely affect
the ability of any party to perform its covenants and agreements under this
Agreement. Omnicom, BHA and Career Mosaic each further covenants and agrees that
it will not do or agree or commit to do any of the following without the prior
written consent of HeadHunter.NET (which consent shall not be unreasonably
withheld or delayed):
(a) amend the Certificate of Incorporation or Bylaws of Career Mosaic,
or
(b) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $100,000 with respect to Career
Mosaic or the Career Mosaic Business, except in the ordinary course of the
Career Mosaic Business consistent with past practices or as otherwise
contemplated by this Agreement, or impose, or suffer the imposition, on any
Asset (including any Transferred Asset) of Career Mosaic or any Asset used
in, or necessary for, the operation of the Career Mosaic Business, of any
Lien or permit any such Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange, directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of Career Mosaic, or declare or pay any dividend or make
any other distribution in respect of the capital stock of Career Mosaic; or
(d) except for this Agreement or as disclosed in Section 8.3(d) of the
Career Mosaic Disclosure Memorandum, issue, sell, pledge, encumber,
authorize the issuance of, enter into any Contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional shares of capital stock of Career Mosaic, or
any stock appreciation rights, or any option, warrant, conversion, or other
right to acquire any such stock, or any security convertible into any such
stock; or
(e) adjust, split, combine or reclassify any shares of capital stock of
Career Mosaic or issue or authorize the issuance of any other securities in
respect of or in substitution for shares of such capital stock or sell,
lease, mortgage or otherwise dispose of or otherwise encumber any shares of
capital stock of Career Mosaic, or any Asset (including Transferred Assets)
used in, or necessary for, the operation of the Career Mosaic Business as
presently conducted, other than in the ordinary course of the Career Mosaic
Business for reasonable and adequate consideration; or
(f) grant any increase in compensation or benefits to the employees or
officers of Career Mosaic or individuals who are employees of the Career
Mosaic Business, except in accordance with the ordinary course of business
consistent with past practice or as required by Law; pay any severance or
termination pay or any bonus other than pursuant to written policies or
written Contracts in effect on the date of this Agreement or the provisions
of any applicable program or plan adopted prior to the date of this
Agreement; enter into or amend any severance agreements with officers of
Career Mosaic; grant any increase in fees or other increases in
compensation or other benefits to directors of Career Mosaic; or enter into
any other Contract or arrangement with any director or officer of Career
Mosaic or any Person who, to the Knowledge of Omnicom and BHA, is a
relative of a director or officer of HeadHunter.NET; or
(g) enter into or amend any employment Contract between Career Mosaic
and any Person (unless such amendment is required by Law) that Career
Mosaic does not have the unconditional right to terminate without Liability
(other than Liability for services already rendered or severance pay in the
ordinary course of business consistent with past practice), at any time on
or after the Effective Time; or
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(h) adopt any new employee benefit plan of Career Mosaic or which covers
employees who are associated with the Career Mosaic Business, or terminate
or withdraw from, or make any material change in or to, any existing
employee benefit plans of Career Mosaic other than any such change that is
required by Law or that, in the opinion of counsel, is necessary or
advisable to maintain the tax qualified status of any such plan, or make
any distributions from such employee benefit plans except as required by
Law or the terms of such plans; or
(i) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to
conform to changes in applicable Tax Laws or regulatory accounting
requirements or GAAP; or
(j) commence any Litigation other than in accordance with past practice,
settle any Litigation involving any Liability of Career Mosaic for material
money damages or restrictions upon the operations of any Career Mosaic; or
(k) except in the ordinary course of the Career Mosaic Business, enter
into, modify, amend or terminate any material Contract, or waive, release,
compromise or assign any material rights or claims; or
(l) purchase or otherwise acquire beneficial ownership of any shares of
HeadHunter.NET common stock or any Equity Rights with respect to
HeadHunter.NET capital stock; or
(m) sell, dispose or otherwise transfer any shares of Career Mosaic
common stock; or
(n) take any action that would cause the representations and warranties
of Omnicom, BHA and Career Mosaic set forth in Article 7 to no longer be
true and correct in all material respects; or
(o) authorize, commit or agree to take any of the foregoing actions.
8.4 Adverse Changes in Condition. Each party agrees to give written notice
promptly to the other parties upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a HeadHunter.NET Material Adverse Effect or an Career Mosaic Business
Material Adverse Effect, as the case may be, or (ii) would cause or constitute a
material breach of any of its representations, warranties or covenants contained
herein, and to use its reasonable efforts to prevent or promptly to remedy the
same.
8.5 Reports. Each party and its subsidiaries shall file all reports
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other parties copies
of all such reports promptly after the same are filed. If financial statements
are contained in any such reports filed with the SEC, such financial statements
will fairly present, in all material respects, the consolidated financial
position of the entity filing such statements as of the dates indicated and the
consolidated results of operations, changes in shareholders' equity and cash
flows for the periods then ended in accordance with GAAP (subject in the case of
interim financial statements to normal recurring year-end adjustments that are
not material). As of their respective dates, such reports filed with the SEC
will comply in all material respects with the Securities Laws and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statements contained in any other reports to another
Regulatory Authority shall be prepared in accordance with Laws applicable to
such reports.
8.6 No Solicitation by HeadHunter.NET. (a) Except as expressly permitted
by this Section 8.6, neither the Board of Directors of HeadHunter.NET nor any
committee thereof shall authorize or cause HeadHunter.NET to enter into any
letter of intent, agreement in principal, acquisition agreement or other similar
agreement (each, an "Acquisition Agreement") related to any Takeover Proposal,
unless such Acquisition Agreement would not prevent consummation of the
transactions contemplated by this Agreement and, if the transactions
contemplated by such Acquisition Agreement were consummated, holders of the
HeadHunter.NET common stock issuable in the Merger are treated in the same
manner as all other holders of HeadHunter.NET common stock.
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(b) HeadHunter.NET shall promptly advise BHA orally and in writing of any
request for information or of any Takeover Proposal, the material terms and
conditions of such request or Takeover Proposal and the identity of the person
making such request or Takeover Proposal. HeadHunter.NET will keep BHA informed
of the status and material details (including amendments or proposed amendments)
of any such request or Takeover Proposal. BHA shall maintain the confidentiality
of any such information regarding a Takeover Proposal provided to BHA by
HeadHunter.NET or its Affiliates.
(c) Nothing contained in this Section 8.6 shall prohibit HeadHunter.NET
from (i) taking and disclosing to its shareholders a position contemplated by
Rule 14e-2(a) promulgated under the 1934 Act or from making any disclosure to
HeadHunter.NET's shareholders (including with respect to the delivery by
HeadHunter.NET to BHA of a Notice of Takeover Proposal) if, in the good faith
judgment of the Board of Directors of HeadHunter.NET, after consultation with,
and in conformity with the advice of, outside counsel, failure so to disclose
would be inconsistent with its fiduciary obligations under applicable law or
(ii) after having consulted with and considered the advice of outside counsel,
reasonably determining in good faith that the making of a recommendation to its
shareholders for approval of the matters submitted for approval or the failure
to withdraw or modify such recommendation would constitute a breach of the
fiduciary duties of the members of the Board of Directors of HeadHunter.NET to
its shareholders under applicable law.
ARTICLE 9
ADDITIONAL AGREEMENTS
9.1 Registration Statement; Proxy Statement; Shareholder Approval. As soon
as reasonably practicable after execution of this Agreement (and in no event
later than 60 days following receipt of Career Mosaic Financial Statements which
comply in all material respects with the requirements of the applicable
Securities Laws for inclusion in the Registration Statement), HeadHunter.NET,
BHA and Career Mosaic jointly shall prepare and file the Registration Statement
with the SEC and each shall use its commercially reasonable best efforts to (i)
cause the Registration Statement to become effective under the 1933 Act, (ii)
take any action required to be taken under applicable state securities Laws in
connection with the issuance of the shares of HeadHunter.NET common stock upon
consummation of the Merger and (iii) register for resale by BHA in the
Registration Statement a number of shares of HeadHunter.NET common stock which
will reduce BHA's ownership of HeadHunter.NET common stock to less than 20% of
all shares outstanding on the filing date of the Registration Statement;
provided that (1) the Registration Statement only shall remain effective for a
period of one year after the date that the Registration Statement is declared
effective by the SEC, provided, that, BHA shall not sell any Resale Shares under
the Registration Statement if HeadHunter.NET furnishes BHA with written notice
that facts and circumstances which are not publicly available exist which
require HeadHunter.NET to prohibit sales under the Registration Statement for an
aggregate period of up to 90 days in any twelve month period and (2) any Person
who purchases an amount of the Resale Shares which equals at least 1% of the
total shares of HeadHunter.NET common stock outstanding on the date such Person
purchases such Resale Shares, BHA shall cause, as a condition to such sale, such
Person to enter into a written agreement in form and substance reasonably
satisfactory to HeadHunter.NET whereby such Person agrees to execute promptly
upon request a customary lock-up agreement in connection with any public
offering conducted by HeadHunter.NET within one year after the Effective Time.
In addition, HeadHunter.NET, to the extent permitted under applicable Securities
Laws, shall have the right, in its sole discretion, to file post-effective
amendments to the Registration Statement to, among other things, convert the
Registration Statement into a registration statement on Form S-3, or such other
appropriate form. HeadHunter.NET shall call a Shareholders' Meeting, to be held
as soon as reasonably practicable after the Registration Statement is declared
effective by the SEC, for the purpose of voting upon approval of the issuance of
the consideration in the Merger and such other matters as it deems appropriate.
In connection with the Shareholders' Meeting, (i) HeadHunter.NET shall prepare
and file with the SEC a Proxy Statement and mail such Proxy Statement to its
shareholders and (ii) the parties shall furnish to each other all information
concerning them that HeadHunter.NET may reasonably request in connection with
such Proxy Statement. The parties shall make all necessary filings with respect
to the Merger under the Securities Laws.
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9.2 Listing. HeadHunter.NET shall use its best efforts to list,
simultaneous with the Effective Time, on the Nasdaq National Market the shares
of HeadHunter.NET common stock issued to the holders of Career Mosaic common
stock pursuant to the Merger; and HeadHunter.NET shall give all notices and make
all filings with the NASD required in connection with the transactions
contemplated herein.
9.3 Applications; Antitrust Notification. The parties shall promptly
prepare and file applications with all Regulatory Authorities having
jurisdiction over the transactions contemplated by this Agreement seeking the
requisite Consents necessary to consummate the transactions contemplated by this
Agreement. To the extent required by the HSR Act, each of the parties will
promptly file with the United States Federal Trade Commission and the United
States Department of Justice the notification and report form required for the
transactions contemplated hereby and any supplemental or additional information
which may reasonably be requested in connection therewith pursuant to the HSR
Act and will comply in all material respects with the requirements of the HSR
Act. The parties shall deliver to each other copies of all filings,
correspondence and orders to and from all Regulatory Authorities in connection
with the transactions contemplated hereby.
9.4 Filings with State Offices. Upon the terms and subject to the
conditions of this Agreement, Merger Sub shall execute and file the Certificate
of Merger with the Secretary of State of the State of Delaware in connection
with the Closing.
9.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each party agrees to use, and to cause its
subsidiaries to use, its commercially reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper, or advisable under applicable Laws to consummate and make effective, as
soon as reasonably practicable after the date of this Agreement, the
transactions contemplated by this Agreement, including using its commercially
reasonable best efforts to lift or rescind any Order adversely affecting its
ability to consummate the transactions contemplated herein and to cause to be
satisfied the conditions referred to in Article 11; provided, that nothing
herein shall preclude either party from exercising its rights under this
Agreement. Each party shall use, and shall cause each of its subsidiaries to
use, its commercially reasonable best efforts to obtain all Consents necessary
or desirable for the consummation of the transactions contemplated by this
Agreement. Any withdrawal or modification of its recommendation about approval
of the Merger by the HeadHunter.NET Board of Directors pursuant to Section
8.6(c) hereof shall not be deemed to violate or breach this Section 9.5.
9.6 Investigation and Confidentiality. (a) Prior to the Effective Time,
each party shall keep the other parties reasonably apprised of all material
developments relevant to its business and to consummation of the Merger and
shall permit the other party to make or cause to be made such investigation of
the business and properties of it and its subsidiaries and of their respective
financial and legal conditions as the other party reasonably requests, provided
that such investigation shall be reasonably related to the transactions
contemplated hereby and shall not interfere unnecessarily with normal
operations. No investigation by a party shall affect the representations and
warranties of the other party.
(b) Each party shall, and shall cause its advisers and agents to, maintain
the confidentiality of all confidential information furnished to it by the other
party concerning its businesses, operations and financial positions. If this
Agreement is terminated prior to the Effective Time, each party shall promptly
return or certify the destruction of all documents and copies thereof, and all
work papers containing confidential information received from the other party.
(c) Each party agrees to give the other party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
party which it has discovered through the course of its investigation and which
represents, or is reasonably likely to represent, a material breach of any
representation, warranty, covenant or agreement of any other party.
9.7 Press Releases. Prior to the Effective Time, Omnicom, BHA, Career
Mosaic and HeadHunter.NET shall consult with each other as to the form and
substance of any press release or other public disclosure related to this
Agreement or any other transaction contemplated hereby; provided, that nothing
in this Section 9.7 shall be deemed to prohibit any party from making any
disclosure which it
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determines in good faith to be necessary or advisable in order to satisfy such
party's disclosure obligations imposed by Law.
9.8 Tax Treatment. Each of the parties undertakes and agrees to use its
reasonable efforts to cause the Merger, and to take no action, including merging
Merger Sub with or into HeadHunter.NET, which would cause the Merger not to
qualify as a "reorganization" within the meaning of Section 368(a)(2)(D) of the
Internal Revenue Code for federal income tax purposes.
9.9 Indemnification, Exculpation and Insurance. (a) HeadHunter.NET agrees
that any indemnification or other agreements of Career Mosaic as in effect on
the date hereof and as disclosed on Section 9.9(a) of the Career Mosaic
Disclosure Memorandum, which are for the benefit of individuals who are not
listed in Section 5.1 of this Agreement, shall be assumed by the Surviving
Corporation and HeadHunter.NET in the Merger, without further action, as of the
Effective Time and shall survive the Merger and shall continue in full force and
effect in accordance with their terms.
(b) In the event that the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and is not the
continuing or surviving Person of such consolidation or merger or (ii) transfers
or conveys all or substantially all of its properties and Assets to any Person,
then, and in each such case, HeadHunter.NET shall cause proper provision to be
made so that the successors and assigns of the Surviving Corporation assume the
obligations set forth in Section 9.9(a).
(c) For six years after the Effective Time, HeadHunter.NET shall cause all
director nominees named in Section 5.1 hereof to be covered under all director
and officer liability insurance coverage available to its directors and officers
at the Effective Time.
(d) The provisions of this Section 9.9 are intended to be for the benefit
of, and will be enforceable by, each indemnified party, his or her heirs and his
or her representatives and are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such Person may have by
contract or otherwise.
9.10 Fees and Expenses. Except as provided in this Section 9.10, all fees
and expenses incurred in connection with the Merger, this Agreement and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such fees or expenses, whether or not the Merger is consummated.
Without limiting the generality or effect of the foregoing, HeadHunter.NET and
Omnicom equally shall bear and pay the costs and expenses incurred in connection
with the filing and printing of the Registration Statement and Proxy Statement,
the mailing of the Proxy Statement and the filing fees for the premerger
notification and report forms under the HSR Act.
9.11 Certain Employee Matters. Following the Merger, HeadHunter.NET will
cause the Surviving Corporation to (i) honor all obligations under employment
and severance Contracts of Career Mosaic, the existence of which have been
disclosed to HeadHunter.NET in Schedule 7.15 of the Career Mosaic Disclosure
Memorandum and otherwise do not constitute a violation of this Agreement, in
accordance with the terms thereof without offset or deduction (other than
withholding Taxes required by Law to be withheld) and (ii) not take any action
during the period from the Closing Date to the first anniversary of the Closing
Date (the "First Anniversary Date") which results in the employees of Career
Mosaic immediately prior to the Effective Time set forth on Schedule 9.11 of the
Career Mosaic Disclosure Memorandum (the "Closing Date Employees") receiving
compensation and benefits that, in the aggregate, are less favorable than the
compensation and benefits to which other similarly situated employees of
HeadHunter.NET or its subsidiaries are entitled, provided, however, that nothing
herein will prohibit HeadHunter.NET from (a) taking any action required by Law
or (b) substituting, in accordance with applicable Law and the terms of any
applicable benefit plan, a benefit plan applicable to similarly situated Closing
Date Employees. To the extent that any benefit plan of HeadHunter.NET or any of
its subsidiaries becomes applicable to any Closing Date Employees,
HeadHunter.NET will grant, or cause to be granted, to such Closing Date
Employees credit for their service with BHA, Career Mosaic or their respective
Affiliates for the purpose of determining eligibility to participate and
nonforfeitability of benefits under such benefit plan and for purposes of
benefit accrual under vacation and severance pay plans. With respect to any
welfare benefit plan of HeadHunter.NET or its
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subsidiaries made available to Closing Date Employees, HeadHunter.NET will waive
or cause its subsidiaries to waive any waiting periods, pre-existing condition
exclusions and actively-at-work requirements to the extent such provisions were
inapplicable to any Closing Date Employee immediately before such plan was made
available and provide that any expenses incurred on or before the date such plan
was made available by any such individual or such individual's covered
dependents will be taken into account for purposes of satisfying applicable
deductible, coinsurance and maximum out-of-pocket provisions.
ARTICLE 10
INDEMNIFICATION
10.1 Agreement of Omnicom to Indemnify. Subject to the terms and
conditions of this Article 10, Omnicom and BHA, jointly and severally, agree to
indemnify, defend and hold harmless HeadHunter.NET and Merger Sub, and each of
their respective Affiliates, officers, directors, employees, agents and
representatives (collectively, the "HeadHunter.NET Indemnitees") from, against,
for and in respect of any and all Losses asserted against, or paid, suffered or
incurred by, a HeadHunter.NET Indemnitee and resulting from, based upon, or
arising out of:
(a) the material breach of any representation or warranty of Omnicom,
BHA or Career Mosaic contained in or made pursuant to this Agreement or in
the certificates referenced in Sections 11.3(c) and (f) in connection
herewith, regardless of whether HeadHunter.NET had Knowledge of such
inaccuracy, untruth, incompleteness or breach prior to the Effective Time;
and
(b) a material breach of any covenant of Omnicom, BHA or Career Mosaic
made in this Agreement; and
(c) any Loss arising out of any Tax Liability incurred by the Surviving
Corporation or HeadHunter.NET as the result of the failure of the
contribution by BHA of the Transferred Assets to Career Mosaic to qualify
for tax-free treatment under Section 351 of the Internal Revenue Code, or
any other Tax Liability for which the Surviving Corporation is liable as
the result of Career Mosaic being a member of the Omnicom affiliated group
filing a consolidated federal income Tax Return (other than a group the
common parent of which is HeadHunter.NET) under Treasury Regulation Section
1.1502-6.
10.2 Agreement of HeadHunter.NET to Indemnify. Subject to the terms and
conditions of this Article 10, HeadHunter.NET agrees to indemnify, defend and
hold harmless BHA, and each of their respective Affiliates, officers, directors,
employees, agents and representatives (collectively, the "BHA Indemnitees")
from, against, for and in respect of any and all Losses asserted against, or
paid, suffered or incurred by, a BHA Indemnitee and resulting from, based upon,
or arising out of:
(a) the material breach of any representation or warranty of
HeadHunter.NET or Merger Sub contained in or made pursuant to this
Agreement or in the certificates referenced in Sections 11.2(c) and (e) in
connection herewith, regardless of whether Omnicom, BHA or Career Mosaic
had Knowledge of such inaccuracy, untruth, incompleteness or breach prior
to the Effective Time; and
(b) a material breach of any covenant of HeadHunter.NET or Merger Sub
made in this Agreement.
10.3 Procedures for Indemnification. (a) An indemnification claim shall be
made by a HeadHunter.NET Indemnitee or BHA Indemnitee (hereinafter an
"Indemnitee"), as the case may be, by delivery of a written notice to the
indemnifying party specifying the basis on which indemnification is sought and
the amount of asserted Losses and, in the case of a Third Party Claim,
containing (by attachment or otherwise) information in reasonable detail as such
Indemnitee shall have concerning such Third Party Claim.
(b) If the indemnification claim involves a Third Party Claim, the
procedures set forth in Section 10.3 shall be observed by the Indemnitee and the
indemnifying party.
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(c) If the indemnification claim involves a matter other than a Third Party
Claim, the indemnifying party shall have 30 days to object to such
indemnification claim by delivery of a written notice of such objection to such
Indemnitee specifying in reasonable detail the basis for such objection. Failure
to timely so object shall constitute a final and binding acceptance of the
indemnification claim by the indemnifying party and the indemnification claim
shall be paid in accordance with subsection (d) hereof.
(d) Upon determination of the amount of an indemnification claim, whether
by agreement between the indemnifying party and the Indemnitee or by any final
adjudication, the indemnifying party shall pay the amount of such
indemnification claim within twenty (20) days of the date such amount is
determined.
10.4 Third Party Claims. The obligations and liabilities of the parties
hereunder with respect to a Third Party Claim shall be subject to the following
terms and conditions:
(a) The Indemnitee shall give the indemnifying party written notice of a
Third Party Claim promptly after receipt by the Indemnitee of notice
thereof, and the indemnifying party may undertake the defense, compromise
and settlement thereof by representatives of its own choosing reasonably
acceptable to the Indemnitee. The failure of the Indemnitee to notify the
indemnifying party of such claim shall not relieve the indemnifying party
of any liability that it may have with respect to such claim except to the
extent the indemnifying party demonstrates that the defense of such claim
is prejudiced by such failure. The assumption of the defense, compromise
and settlement of any such Third Party Claim by the indemnifying party
shall be an acknowledgment of the obligation of the indemnifying party to
indemnify the Indemnitee with respect to such claim hereunder. If the
Indemnitee desires to participate in, but not control, any such defense,
compromise and settlement, it may do so at its sole cost and expense. If,
however, the indemnifying party fails or refuses to undertake the defense
of such Third Party Claim within twenty (20) days after written notice of
such claim has been given to the indemnifying party by the Indemnitee, the
Indemnitee shall have the right to undertake the defense, compromise and
settlement of such claim with counsel of its own choosing. In the
circumstances described in the preceding sentence, the Indemnitee shall,
promptly upon its assumption of the defense of such claim, make an
indemnification claim which shall be deemed an indemnification claim that
is not a Third Party Claim for the purposes of the procedures set forth
herein.
(b) If, in the reasonable opinion of the Indemnitee, any Third Party
Claim or the litigation or resolution thereof involves an issue or matter
which could have a material adverse effect on the business, operations,
assets, properties or prospects of the Indemnitee (including, without
limitation, the administration of the tax returns and responsibilities
under the tax laws of the Indemnitee), the Indemnitee shall have the right
to control the defense, compromise and settlement of such Third Party Claim
undertaken by the indemnifying party, and the costs and expenses of the
Indemnitee in connection therewith shall be included as part of the
indemnification obligations of the indemnifying party hereunder. If the
Indemnitee shall elect to exercise such right, the indemnifying party shall
have the right to participate in, but not control, the defense, compromise
and settlement of such Third Party Claim at its sole cost and expense.
(c) No settlement of a Third Party Claim involving the asserted
liability of the indemnifying party under this Article shall be made
without the prior written consent by or on behalf of the indemnifying
party, which consent shall not be unreasonably withheld or delayed. Consent
shall be presumed in the case of settlements of $20,000 or less where the
indemnifying party has not responded within ten (10) business days of
notice of a proposed settlement. If the indemnifying party assumes the
defense of such a Third Party Claim, (a) no compromise or settlement
thereof may be effected by the indemnifying party without the Indemnitee's
consent unless (i) there is no finding or admission of any violation of law
or any violation of the rights of any person and no effect on any other
claim that may be made against the Indemnitee, (ii) the sole relief
provided is monetary damages that are paid in full by the indemnifying
party, and (iii) the compromise or settlement includes, as an unconditional
term thereof, the giving by the claimant or the plaintiff to the Indemnitee
of a release, in form and substance satisfactory to the Indemnitee, from
all liability in respect of such Third Party Claim, and (b) the Indemnitee
shall have no liability with respect to any compromise or settlement
thereof effected without its consent.
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(d) In connection with the defense, compromise or settlement of any
Third Party Claim, the parties to this Agreement shall execute such powers
of attorney as may reasonably be necessary or appropriate to permit
participation of counsel selected by any party hereto and, as may
reasonably be related to any such claim or action, shall provide access to
the counsel, accountants and other representatives of each party during
normal business hours to all properties, personnel, books, tax records,
contracts, commitments and all other business records of such other party
and will furnish to such other party copies of all such documents as may
reasonably be requested (certified, if requested).
10.5 Exclusive Remedy. The rights of the Indemnitees to indemnification
under this Article 10 are the exclusive rights and remedies against any other
party hereto for any claim based on an inaccuracy, untruth, incompleteness or
breach of any representation or warranty of any indemnifying party contained
herein or in any certificate, schedule or exhibit furnished by such party in
connection herewith, or based upon the failure of an indemnifying party to
perform any covenant, agreement or undertaking required by the terms hereof to
be performed by such indemnifying party.
10.6 Survival. Except as otherwise provided below, all representations,
warranties and covenants contained in this Agreement or in any certificate
delivered pursuant to this Agreement shall survive the Closing until April 1,
2001, notwithstanding any investigation conducted with respect thereto or any
knowledge acquired as to the accuracy or inaccuracy of any such representation
or warranty; provided, however that (i) any representation, warranty, covenant
or agreement made or to be performed by the indemnifying party contained in this
Agreement related to any Taxes, employee benefit plans or environmental issues
shall survive until the ninetieth (90th) day after the date upon which the
liability to which any such claim may relate is barred by all applicable
statutes of limitation and (ii) any representation or warranty contained in
Sections 6.1, 6.2, 6.3, 7.1, 7.2 and 7.3 shall survive indefinitely. Any claim
for indemnification under Sections 10.1(a), 10.1(b), 11.1(a) or 11.1(b) with
respect to any of such matters which is not asserted by a notice given as herein
provided specifically identifying the particular breach underlying such claim
and the facts and the Loss relating thereto, within such specified periods of
survival, may not be pursued and is hereby irrevocably waived.
10.7 Limitations as to Amount. No indemnifying party shall have any
liability with respect to the matters described in Sections 10.1(a) or 10.2(a)
until the total of all Losses with respect thereto exceeds $1,000,000, at which
time the Indemnitee shall be entitled to indemnification for the full amount of
all Losses (including the first $1,000,000). Notwithstanding any other provision
of this Agreement to the contrary, the indemnification obligations of Omnicom
and BHA, collectively, on the one hand, and of HeadHunter.NET and Merger Sub,
collectively, on the other hand, shall not exceed $35 million. The limitations
set forth in this Section 10.7 shall not apply to (i) an intentional
misrepresentation, (ii) an intentional breach of warranty, (iii) fraud of any
indemnifying party, (iv) an indemnification claim based on Section 10.1(c) or
(v) an indemnification claim based on a breach of the representations and
warranties set forth in Sections 6.8, 6.11, 6.14, 7.8, 7.11 and 7.14. The
indemnifying party shall be liable for all Losses with respect to any
indemnification claim based on subparagraphs (i)-(v) above and any amount
recovered under such subparagraphs shall not be counted against the $35 million
limit for purposes of any other indemnification claims.
10.8 Tax Effect and Insurance. The liability of the indemnifying party
with respect to any indemnification claim shall be reduced by the tax benefit if
and when actually realized and any insurance proceeds (net of collection costs)
received by the Indemnitee as a result of any Losses upon which such
indemnification claim is based, and shall include any tax detriment if and when
actually suffered by the Indemnitee as a result of such Losses or the receipt of
payment therefor. The amount of any such tax benefit or detriment shall be
determined by taking into account the effect, if any and to the extent
determinable, of timing differences resulting from the acceleration or deferral
of items of gain or loss resulting from such Losses and shall otherwise be
determined so that payment by the indemnifying party of the indemnification
claim, as adjusted to give effect to any such tax benefit or detriment, will
make the Indemnitee as economically whole as is reasonably practical with
respect to the Losses upon which the indemnification claim is based.
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ARTICLE 11
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
11.1 Conditions to Obligations of Each Party. The respective obligations
of each party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both parties pursuant to Section 13.5:
(a) Shareholder Approval. The shareholders of HeadHunter.NET shall have
approved the issuance of HeadHunter.NET common stock under this Agreement
as and to the extent required by Law, by the provisions of any governing
instruments, and by the rules of the NASD.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities listed on Exhibit
11.1(b) shall be in full force and effect and all waiting periods required
by Law shall have expired. No such Consent obtained from any Regulatory
Authority shall be conditioned or restricted in a manner which in the
reasonable judgment of the Board of Directors of any party would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, such party would not, in its reasonable judgment,
have entered into this Agreement.
(c) Consents and Approvals. Each party shall have obtained any and all
Consents and no such Consent shall be conditioned or restricted in a manner
which in the reasonable judgment of the Board of Directors of either party
would so materially adversely impact the economic or business benefits of
the transactions contemplated by this Agreement that, had such condition or
requirement been known, such party would not, in its reasonable judgment,
have entered into this Agreement.
(d) Legal Proceedings. No court or governmental or regulatory authority
of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any Law or Order (whether temporary, preliminary or permanent)
or taken any other action which prohibits, restricts or makes illegal
consummation of the transactions contemplated by this Agreement.
(e) Listing. All shares of HeadHunter.NET common stock to be issued to
the holders of Career Mosaic common stock in the Merger shall have been
approved for listing on the Nasdaq National Market.
11.2 Conditions to Obligations of Omnicom, BHA and Career Mosaic. The
obligations of Omnicom, BHA and Career Mosaic to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by them pursuant
to Section 13.5:
(a) Representations and Warranties. The representations and warranties
of HeadHunter.NET and Merger Sub set forth in Article 6 which are qualified
as to materiality shall be true and correct, and those not so qualified
shall be true and correct in all material respects, as of the date of this
Agreement and as of the Closing Date, as if made at and as of such time
(except to the extent expressly made as of an earlier date, in which case
as of such date).
(b) Performance of Covenants. Each and all of the covenants of
HeadHunter.NET and Merger Sub to be performed and complied with pursuant to
this Agreement and the other agreements contemplated hereby prior to the
Closing Date shall have been duly performed and complied with in all
material respects.
(c) Certificates. HeadHunter.NET shall have delivered to Omnicom, BHA
and Career Mosaic a certificate dated as of the Closing Date and signed on
HeadHunter.NET's behalf by an executive officer to the effect that the
conditions set forth in Sections 11.2(a) and (b) have been satisfied.
(d) Documents. HeadHunter.NET, Merger Sub and ITC shall have executed
and delivered all documents set forth in Article 5 of this Agreement (to
the extent that each is a party thereto).
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(e) Second Quarter Revenues. HeadHunter.NET shall have either publicly
announced or delivered to BHA a certificate executed by its Chief Financial
Officer certifying that HeadHunter.NET had net revenues (revenues reduced
by agency commissions) for the quarter ended June 30, 2000 of at least
$7.05 million, determined in accordance with GAAP.
11.3 Conditions to Obligations of HeadHunter.NET and Merger Sub. The
obligations of HeadHunter.NET and Merger Sub to perform this Agreement and
consummate the Merger and the other transactions contemplated hereby are subject
to the satisfaction of the following conditions, unless waived by HeadHunter.NET
pursuant to Section 13.5:
(a) Representations and Warranties. The representations and warranties
of Omnicom, BHA and Career Mosaic set forth in Article 7 of this Agreement
which are qualified as to materiality shall be true and correct, and those
not so qualified shall be true and correct in all material respects, as of
(1) the date of this Agreement or the Delivery Date (as specified in the
initial paragraph of Article 7), and (2) the Closing Date, as if made at
and as of such time (except to the extent expressly made as an earlier
date, in which case as of such date).
(b) Performance of Covenants. Each and all of the covenants of Omnicom,
BHA and Career Mosaic to be performed and complied with pursuant to this
Agreement and the other agreements contemplated hereby prior to the Closing
Date shall have been duly performed and complied with in all material
respects.
(c) Certificates. Omnicom shall have delivered to HeadHunter.NET a
certificate dated as of the Closing Date and signed on its behalf by an
executive officer, to the effect that the conditions set forth in Sections
11.3(a) and 11.3(b) have been satisfied.
(d) Documents. Omnicom, BHA and Career Mosaic shall have executed and
delivered all documents set forth in Article 5 of this Agreement (to the
extent that each is a party thereto).
(e) Career Mosaic Financial Statements. Arthur Andersen LLP shall have
delivered to HeadHunter.NET the Career Mosaic Financial Statements (not
including the unaudited interim financial statements for any period since
the end of the most recent year), in form and substance reasonably
satisfactory to HeadHunter.NET.
(f) Second Quarter Net Revenues. Career Mosaic shall have delivered to
HeadHunter.NET a certificate executed by its Chief Financial Officer
certifying that Career Mosaic had net revenues (revenues reduced by agency
commissions) for the quarter ended June 30, 2000 of at least $4.7 million,
determined in accordance with GAAP.
ARTICLE 12
TERMINATION
12.1 Termination. Notwithstanding any other provision of this Agreement,
and notwithstanding the approval of this Agreement by the shareholders of
HeadHunter.NET, this Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time:
(a) By mutual consent of HeadHunter.NET and BHA; or
(b) By any party (provided that the terminating party (and each of its
Affiliates which is a party hereto) is not then in material breach of any
representation, warranty or covenant contained in this Agreement) in the
event of a material breach by any other party (which is not an Affiliate of
the terminating party) of any representation or warranty contained in this
Agreement which cannot be or has not been cured within 30 days after the
giving of written notice to the breaching party of such breach; or
(c) By any party (provided that the terminating party (and each of its
Affiliates which is a party hereto) is not then in material breach of any
representation, warranty or covenant contained in this Agreement) in the
event of a material breach by any other party (which is not an Affiliate of
the
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terminating party) of any covenant contained in this Agreement which cannot
be or has not been cured within 30 days after the giving of written notice
to the breaching party of such breach; or
(d) By any party (provided that the terminating party (and each of its
Affiliates which is a party hereto) is not then in material breach of any
representation, warranty or covenant contained in this Agreement) in the
event (i) any Consent of any Regulatory Authority listed on Exhibit 11.1(b)
shall have been denied by final nonappealable action of such authority or
if any action taken by such authority is not appealed within the time limit
for appeal, or (ii) the shareholders of HeadHunter.NET fail to vote their
approval of the matters relating to this Agreement and the transactions
contemplated hereby at the Shareholders' Meeting where such matters were
presented to such shareholders for their approval; or
(e) By any party in the event that the Merger shall not have been
consummated by the date 120 days after the initial filing date of the
Registration Statement, if the failure to consummate the transactions
contemplated hereby on or before such date is not caused by any breach of
this Agreement by the terminating party (and each of its Affiliates which
is a party hereto); or
(f) By HeadHunter.NET, in the event that BHA has not provided the Career
Mosaic Financial Statements by June 30, 2000; or
(g) By BHA, in the event that HeadHunter.NET has not filed the
Registration Statement within 60 days of HeadHunter.NET's receipt of the
Career Mosaic Financial Statements; provided that (1) the Career Mosaic
Financial Statements on the date of delivery materially comply with the
requirements of Securities Laws applicable to financial statements to be
included in the Registration Statement and (2) BHA has not breached its
covenants contained in Sections 9.1 and 9.5 and such breach was a material
factor in HeadHunter.NET's inability to file the Registration Statement
within such 60-day period; or
(h) By BHA, in the event that the Board of Directors of HeadHunter.NET
shall have (i) taken any action prohibited by Section 8.6 of this Agreement
or (ii) failed to reaffirm its approval of the Merger and the transactions
contemplated by this Agreement (to the exclusion of any other specific
Takeover Proposal, which would prevent consummation of the Merger), or
shall have resolved not to reaffirm the Merger.
12.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 12.1, this Agreement shall
become void and have no effect, except that (i) the provisions of this Section
12.2, Article 13, Section 9.6(b) and Section 9.11 shall survive any such
termination and abandonment, and (ii) a termination pursuant to Sections 12.1(b)
or 12.1(c) shall not relieve the breaching party from Liability for an uncured
willful breach of a representation, warranty, covenant, or agreement giving rise
to such termination.
ARTICLE 13
MISCELLANEOUS
13.1 Definitions. (a) Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Affiliate" of a Person shall mean any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by
or under common control with such Person.
"Agreement" shall mean this Agreement and Plan of Merger, including the
Exhibits delivered pursuant hereto and incorporated herein by reference.
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"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"Career Mosaic Business" shall mean the business transferred by BHA to
Career Mosaic pursuant to the Contribution Agreement as conducted prior to
the effective date of the Contribution Agreement by BHA, and as now
conducted by Career Mosaic.
"Career Mosaic Business Material Adverse Effect" shall mean an event,
change or occurrence which, individually or together with any other event,
change or occurrence has a material adverse impact on (i) the financial
position, business or results of operations of the Career Mosaic Business
or (ii) the ability of Omnicom, BHA or Career Mosaic to perform their
respective obligations under this Agreement or to consummate the Merger or
the other transactions contemplated by this Agreement, which shall not
include actions and omissions of Omnicom, BHA or Career Mosaic taken with
the prior written Consent of HeadHunter.NET in contemplation of the
transactions contemplated hereby.
"Career Mosaic Disclosure Memorandum" shall mean the written information
entitled "Career Mosaic Disclosure Memorandum" delivered prior to the date
of this Agreement to HeadHunter.NET describing in reasonable detail the
matters contained therein and, with respect to each disclosure made
therein, specifically referencing each Section of this Agreement under
which such disclosure is being made. Information disclosed with respect to
one Section shall not be deemed to be disclosed for purposes of any other
Section not specifically referenced with respect thereto.
"Career Mosaic Financial Statements" shall mean the audited financial
statements prepared by Arthur Andersen LLP with respect to the Career
Mosaic Business for the three most recent fiscal years and the unaudited
financial statements prepared with respect to the Career Mosaic Business
for any interim periods since the end of the most recent fiscal year.
"Closing Date" shall mean the date on which the Closing occurs.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding, or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person.
"Default" shall mean (i) any breach or violation of, default under,
contravention of or conflict with any Contract, Law, Order or Permit, (ii)
any occurrence of any event that with the passage of time or the giving of
notice or both would constitute a breach or violation of, default under,
contravention of or conflict with any Contract, Law, Order or Permit, or
(iii) any occurrence of any event that with or without the passage of time
or the giving of notice would give rise to a right of any Person to
exercise any remedy or obtain any relief under, terminate or revoke,
suspend, cancel or modify or change the current terms of, or renegotiate,
or to accelerate the maturity or performance of, or to increase or impose
any Liability under, any Contract, Law, Order or Permit.
"DGCL" shall mean the Delaware General Corporation Law, as amended.
"Environmental Laws" shall mean all Laws relating to pollution or
protection of human health or the environment (including ambient air,
surface water, ground water, land surface or subsurface strata) and which
are administered, interpreted or enforced by the United States
Environmental Protection Agency and state and local agencies with
jurisdiction over, and including common law in respect of, pollution or
protection of the environment, including the Comprehensive Environmental
Response Compensation and Liability Act, as amended, 42 U.S.C. sec.sec.
9601, et seq. ("CERCLA"), the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. sec.sec. 6901, et seq. ("RCRA"), and other Laws
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relating to emissions, discharges, releases or threatened releases of any
Hazardous Material, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
any Hazardous Material.
"Equity Rights" shall mean all arrangements, calls, commitments,
Contracts, options, rights to subscribe to, scrip, understandings, warrants
or other binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the
capital stock of a Person or by which a Person is or may be bound to issue
additional shares of its capital stock or other Equity Rights.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code, as amended.
"Hazardous Material" shall mean (i) any hazardous substance, hazardous
material, hazardous waste, regulated substance or toxic substance (as those
terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products or oil
(and specifically shall include asbestos requiring abatement, removal or
encapsulation pursuant to the requirements of governmental authorities and
any polychlorinated biphenyls).
"HeadHunter.NET Disclosure Memorandum" shall mean the written
information entitled "HeadHunter.NET Disclosure Memorandum" delivered prior
to the date of this Agreement to Omnicom, BHA and Career Mosaic describing
in reasonable detail the matters contained therein and, with respect to
each disclosure made therein, specifically referencing each Section of this
Agreement under which such disclosure is being made. Information disclosed
with respect to one Section shall not be deemed to be disclosed for
purposes of any other Section not specifically referenced with respect
thereto.
"HeadHunter.NET Financial Statements" shall mean (i) the consolidated
balance sheets (including related notes and schedules) of HeadHunter.NET as
of December 31, 1998 and as of December 31, 1999, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for each of the three
fiscal years ended December 31, as filed by HeadHunter.NET in SEC Documents
filed prior to the date hereof, and (ii) the consolidated balance sheets of
HeadHunter.NET (including related notes and schedules) and related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) included in SEC Documents
filed with respect to periods ended subsequent to December 31, 1999.
"HeadHunter.NET Material Adverse Effect" shall mean an event, change or
occurrence which, individually or together with any other event, change or
occurrence, has a material adverse impact on (i) the financial position,
business, or results of operations of HeadHunter.NET and its subsidiaries,
taken as a whole, or (ii) the ability of HeadHunter.NET to perform its
obligations under this Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement, which shall not include
actions and omissions of HeadHunter.NET (or any of its subsidiaries) taken
with the prior written Consent of BHA in contemplation of the transactions
contemplated hereby.
"HSR Act" shall mean Section 7A of the Clayton Act, as added by Title II
of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations promulgated thereunder.
"Intellectual Property" shall mean copyrights, patents, trademarks,
service marks, service names, trade names, applications therefor,
technology rights and licenses, computer software (including any source or
object codes therefor or documentation relating thereto), trade secrets,
franchises, know-how, inventions, domain names, data, web site content,
user data and other intellectual property rights.
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"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Knowledge" as used with respect to a Person (including references to
such Person being aware of a particular matter) shall mean those facts that
are actually known, without independent investigation or verification, by
the chairman, president, chief financial officer, chief accounting officer,
chief operating officer, general counsel, any assistant or deputy general
counsel or any senior, executive or other vice president of such Person.
"Law" shall mean any code, law (including common law), ordinance,
regulation, reporting or licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities, or business, including those
promulgated, interpreted or enforced by any Regulatory Authority.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of
notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge, or claim of any nature whatsoever of, on, or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, and (ii) Liens which do not materially
impair the use of or title to the Assets subject to such Lien.
"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, governmental or other examination or
investigation, hearing, administrative or other proceeding relating to or
affecting a party, its business, its Assets (including Contracts related to
it), or the transactions contemplated by this Agreement.
"Losses" shall mean any and all demands, claims, actions or causes of
action, assessments, losses, diminution in value, damages (including
special and consequential damages, if asserted in a Third Party claim
only), liabilities, costs, and expenses, including interest, penalties,
cost of investigation and defense, and reasonable attorneys' and other
professional fees and expenses.
"Material" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Nasdaq National Market" shall mean the National Market System of the
National Association of Securities Dealers Automated Quotations System.
"Operating Property" shall mean any property owned, leased or operated
by the party in question or by any of its subsidiaries or in which such
party or subsidiary holds a security interest or other interest (including
an interest in a fiduciary capacity), and, where required by the context,
includes the owner or operator of such property, but only with respect to
such property.
"Order" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or
writ of any federal, state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or Regulatory Authority.
"Participation Facility" shall mean any facility or property in which
the party in question or any of its subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such
facility or property.
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"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities,
Assets or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting
in a representative capacity.
"Proxy Statement" shall mean the proxy statement used by HeadHunter.NET
to solicit the approval of its shareholders of the transactions
contemplated by this Agreement, which shall include the prospectus of
HeadHunter.NET relating to the issuance of the HeadHunter.NET common stock
to the holders of Career Mosaic common stock.
"Registration Statement" shall mean the Registration Statement on Form
S-4, or other appropriate form, including any pre-effective or
post-effective amendments or supplements thereto, filed with the SEC by
HeadHunter.NET under the 1933 Act with respect to the shares of
HeadHunter.NET common stock to be issued to the holders of Career Mosaic
common stock in the Merger.
"Regulatory Authorities" shall mean, collectively, the SEC, the NASD,
the Federal Trade Commission, the United States Department of Justice and
all other federal, state, county, local or other governmental or regulatory
agencies, authorities (including self-regulatory authorities),
instrumentalities, commissions, boards or bodies having jurisdiction over
the parties and their respective subsidiaries.
"Representative" shall mean any investment banker, financial advisor,
attorney, accountant, consultant or other representative engaged by a
Person.
"SEC Documents" shall mean all forms, proxy statements, registration
statements, reports, schedules and other documents filed, or required to be
filed, by a party or any of its subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of
HeadHunter.NET to be held pursuant hereto, including any adjournment or
adjournments thereof.
"Surviving Corporation" shall mean Merger Sub as the surviving
corporation resulting from the Merger.
"Takeover Proposal" shall mean any inquiry, proposal or offer from any
Person (other than Omnicom of an Affiliate thereof) relating to any direct
or indirect (i) sale, lease, exchange, transfer or other disposition
(including a contribution to a joint venture) of at least 30% of the Assets
of HeadHunter.NET and its subsidiaries, taken as a whole, or (ii) a merger,
reorganization, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution, tender offer, exchange offer or
other similar transaction the result of which is that HeadHunter.NET's
shareholders immediately prior to such transaction in the aggregate cease
to own at least 50% of the voting securities of the ultimate parent entity
resulting from such transaction.
"Tax Return" shall mean any report, return, information return or other
information required to be supplied to a taxing authority in connection
with Taxes, including any return of an affiliated or combined or unitary
group that includes a party or its subsidiaries.
"Tax" or "Taxes" shall mean any federal, state, county, local or foreign
taxes, charges, fees, levies, imposts, duties or other assessments,
including income, gross receipts, excise, employment, sales, use, transfer,
payroll, franchise, stamp, occupation, windfall profits, federal highway
use, customs duties, capital stock, paid-up capital, profits, withholding,
Social Security, single business and unemployment, disability, real
property, personal property, ad valorem, value added, alternative or add-on
minimum,
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estimated or other tax or of any kind whatsoever, imposed or required to be
withheld by the United States or any state, county, local or foreign
government or subdivision or agency thereof, including any interest,
penalties and additions imposed thereon or with respect thereto.
"Third Party Claim" shall mean any Litigation (including, without
limitation, a binding arbitration or an audit by any taxing authority) that
is instituted against an Indemnitee by a Person other than an indemnifying
party and which, if prosecuted successfully, would result in a Loss for
which such Indemnitee is entitled to indemnification hereunder.
"Transferred Assets" shall mean the Assets related to, used in or
necessary for, the conduct of the Career Mosaic Business which were
transferred by BHA to Career Mosaic under that certain Contribution and
Assumption Agreement dated as of the date of this Agreement and effective
as of January 1, 2000, between BHA and Career Mosaic (the "Contribution
Agreement").
"Transferred Liabilities" shall mean the Liabilities related to or used
in the Career Mosaic Business which were assumed by Career Mosaic under the
Contribution Agreement.
(b) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
13.2 Brokers and Finders. Except for First Union Securities, Inc., the
investment bankers for HeadHunter.NET and Merger Sub, the fees and expenses of
which shall be paid by HeadHunter.NET, each of the parties represents and
warrants that neither it nor any of its officers, directors, employees, or
Affiliates has employed any broker or finder or incurred any Liability for any
financial advisory fees, investment bankers' fees, brokerage fees, commissions
or finders' fees in connection with this Agreement or the transactions
contemplated hereby. In the event of a claim by any broker or finder based upon
his or its representing or being retained by or allegedly representing or being
retained by a party, such party agrees to indemnify and hold the other parties
harmless of and from any Liability in respect of any such claim.
13.3 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement.
13.4 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the parties upon the approval
of each of the parties, whether before or after shareholder approval of this
Agreement has been obtained.
13.5 Waivers. (a) Prior to or at the Effective Time, Omnicom, BHA or
Career Mosaic, each acting through its respective Board of Directors, chief
executive officer or other authorized officer, shall have the right to waive any
Default in the performance of any term of this Agreement by HeadHunter.NET or
Merger Sub, to waive or extend the time for the compliance or fulfillment by
HeadHunter.NET or Merger Sub of any and all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to the
obligations of Omnicom, BHA or Career Mosaic under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of Omnicom, BHA or Career Mosaic, as the case may be.
(b) Prior to or at the Effective Time, HeadHunter.NET or Merger Sub, each
acting through its respective Board of Directors, chief executive officer or
other authorized officer, shall have the right to waive any Default in the
performance of any term of this Agreement by Omnicom, BHA or Career Mosaic, to
waive or extend the time for the compliance or fulfillment by Omnicom, BHA or
Career Mosaic of any and all of its obligations under this Agreement, and to
waive any or all of the conditions precedent to the obligations of
HeadHunter.NET or Merger Sub under this Agreement, except any condition which,
if not
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satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of
HeadHunter.NET or Merger Sub.
(c) The failure of any party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this Agreement
in one or more instances shall be deemed to be or construed as a further or
continuing waiver of such condition or breach or a waiver of any other condition
or of the breach of any other term of this Agreement.
13.6 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any party hereto (whether by operation of Law or otherwise) without
the prior written consent of the other party. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
13.7 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by registered or certified mail, postage pre-paid, or by
courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
HeadHunter.NET or Merger Sub:
HeadHunter.NET, Inc.
333 Research Court, Suite 200
Norcross, Georgia 30092
Telecopy Number: (770) 349-2401
Attention: Chief Executive Office
Copy to Counsel:
Alston & Bird LLP
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Telecopy Number: (404) 881-7777
Attention: J. Vaughan Curtis, Esq.
Omnicom, BHA or Career Mosaic:
Omnicom Group Inc.
437 Madison Avenue
New York, New York 10022
Telecopy Number: (212) 817-6551
Attention: Randall J. Weisenburger
Copy to Counsel:
Jones Day Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Telecopy Number: (212) 755-7306
Attention: Thomas Bark, Esq.
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ITC:
ITC Holding Company, Inc.
3300 20th Avenue
P.O. Box 20
Valley, Alabama 36854
Telecopy Number: ( ) -
Attention: Chief Executive Officer
Copy to Counsel:
Kimberley E. Thompson, Esq.
4717 Dolphin Lane
Alexandria, Virginia 22309
Telecopy Number: (703) 619-9720
13.8 Governing Law; Jurisdiction. (a) This Agreement shall be governed by
and construed in accordance with the Laws of the State of Georgia, without
regard to any applicable conflicts of Laws principles thereof.
(b) The parties agree that any litigation arising out of this Agreement may
be brought only in any federal court located in the State of Delaware or in
Delaware state court (collectively, the "Permitted Courts"). In furtherance
thereof, each of the parties hereto (i) consents to submit itself to the
personal jurisdiction of any Permitted Court in the event any dispute arises out
of this Agreement or any of the transaction contemplated hereby, (ii) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request or leave from any such court, and (iii) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Permitted Court.
Notwithstanding the foregoing, nothing in this Agreement shall be construed as
prohibiting a party from seeking to enforce a judgment obtained in a Permitted
Court in a court in any other jurisdiction.
13.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
13.10 Captions; Articles and Sections. The captions contained in this
Agreement are for reference purposes only and are not part of this Agreement.
Unless otherwise indicated, all references to particular Articles or Sections
shall mean and refer to the referenced Articles and Sections of this Agreement.
13.11 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether under
any rule of construction or otherwise. No party to this Agreement shall be
considered the draftsman. The parties acknowledge and agree that this Agreement
has been reviewed, negotiated, and accepted by all parties and their attorneys
and shall be construed and interpreted according to the ordinary meaning of the
words used so as fairly to accomplish the purposes and intentions of all parties
hereto.
13.12 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
13.13 Specific Performance. The parties hereto agree that (i) irreparable
damage would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and (ii) the parties will be
entitled to an injunction to prevent material breaches of this Agreement and to
specific performance of the terms hereof, in addition to any other remedy to
which they may be entitled at law or in equity.
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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement as
of the day and year first above written.
OMNICOM GROUP INC.
By: /s/ RANDALL J. WEISENBURGER
------------------------------------
Name: Randall J. Weisenburger
----------------------------------
Executive Vice President and
Title: Chief Financial Officer
-----------------------------------
BERNARD HODES GROUP INC.
By: /s/ RANDALL J. WEISENBURGER
------------------------------------
Name: Randall J. Weisenburger
----------------------------------
Title: Duly Authorized
-----------------------------------
CAREER MOSAIC INC.
By: /s/ RANDALL J. WEISENBURGER
------------------------------------
Name: Randall J. Weisenburger
----------------------------------
Title: Duly Authorized
-----------------------------------
HEADHUNTER.NET, INC.
By: /s/ ROBERT M. MONTGOMERY, JR.
------------------------------------
Name: Robert M. Montgomery, Jr.
----------------------------------
Title: President and Chief Executive
Officer
-----------------------------------
RESUME ACQUISITION CORPORATION
By: /s/ ROBERT M. MONTGOMERY, JR.
------------------------------------
Name: Robert M. Montgomery, Jr.
----------------------------------
Title: President and Chief Executive
Officer
-----------------------------------
ITC HOLDING COMPANY, INC.
By: /s/ KIMBERLEY THOMPSON
------------------------------------
Name: Kimberley Thompson
----------------------------------
Title: Senior Vice President
-----------------------------------
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ANNEX B
FIRST UNION SECURITIES, INC.
CONFIDENTIAL
April 15, 2000
The Board of Directors
Headhunter.net, Inc.
6410 Atlantic Blvd., Suite 160
Norcross, GA 30071
Members of the Board:
You have asked First Union Securities, Inc. to advise you with respect to
the fairness, from a financial point of view, to the stockholders of
Headhunter.net, Inc. ("HHNT" or the "Company") of the consideration (the
"Consideration") to be issued by the Company pursuant to the terms of the
Agreement and Plan of Merger, dated as of April 15, 2000 (the "Merger
Agreement"), among Omnicom Group Inc., Bernard Hodes Group Inc., Career Mosaic
Inc. ("CareerMosaic"), HHNT, Resume Acquisition Corporation and ITC Holding
Company, Inc. ("ITC Holding"). As more fully described in the Merger Agreement,
CareerMosaic will be merged with and into Resume Acquisition Corporation and at
the effective time of such merger, the outstanding shares of the capital stock
of CareerMosaic will be converted into the right to receive shares of HHNT
common stock.
In arriving at our opinion, we have, among other things:
- Reviewed the financial terms and conditions of the Merger Agreement;
- Reviewed certain business, financial and other information, including
financial forecasts, regarding HHNT and CareerMosaic that was publicly
available or furnished to us by members of HHNT's and CareerMosaic's
management, and have discussed with such management teams their
respective company's business and prospects;
- Considered certain financial data related to HHNT and CareerMosaic and
(i) compared that data with similar data for publicly held companies in
businesses similar to those of HHNT and CareerMosaic and (ii) compared
HHNT's and CareerMosaic's data relative to one another;
- Considered the financial terms of certain other business combinations and
other transactions which have recently been effected; and
- Considered such other information, financial studies, analyses and
investigations as well as financial and economic and market criteria that
we deemed relevant.
In connection with our review, we have relied upon the accuracy and
completeness of the foregoing financial and other information, and we have not
assumed any responsibility for any independent verification of such information.
With respect to CareerMosaic's historical financial statements that we reviewed
and that we point out to you were unaudited, we have assumed that they present
fairly, in all material respects, the financial position of CareerMosaic as of
the date to which they refer and the results of its operations and its cashflows
for the respective periods then ended in conformity with generally accepted
accounting principles. With respect to HHNT's and CareerMosaic's financial
forecasts, we have assumed that they have been reasonably prepared and reflect
the best current estimates and judgments of HHNT's and CareerMosaic's management
teams as to the future financial performance of their respective companies. We
have discussed HHNT's and CareerMosaic's financial projections with the
respective management teams of HHNT and CareerMosaic, but we assume no
responsibility for and express no view as to HHNT's and CareerMosaic's financial
projections or the assumptions upon which they are based. In arriving at our
opinion, we have not
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Headhunter.net, Inc.
April 15, 2000
Page 2
conducted any physical inspection of the properties or facilities of HHNT or
CareerMosaic and have not made or been provided with any evaluations or
appraisals of the assets or liabilities of HHNT or CareerMosaic.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist and can be evaluated on the date of this opinion, and
the information made available to us as of the date hereof. You should
understand that, although subsequent developments may affect this opinion, we do
not have any obligation to update, revise or reaffirm this opinion.
In rendering our opinion, we have assumed that (i) the Merger will be
consummated on the terms described in the Merger Agreement that we reviewed,
without any waiver of any material terms or conditions and (ii) the voting,
standstill and lock-up agreements to be executed by ITC Holding will have no
adverse impact on the value of ITC Holding's interest in HHNT. Our opinion does
not address the relative merits of the Merger and any other business strategies
considered by HHNT's Board of Directors, nor does it address HHNT's Board of
Directors' decision to proceed with the Merger.
First Union Securities, Inc. is an investment banking firm and an affiliate
of First Union Corporation. We have been engaged to render financial advisory
services to HHNT in connection with the Merger and will receive a fee upon the
delivery of this opinion. In the ordinary course of our business, we and our
affiliates may actively trade or hold the securities of HHNT or Omnicom Group
Inc. ("Omnicom"), the ultimate parent of CareerMosaic, for our own account or
for the account of our customers and, accordingly, may at any time hold a long
or short position in such securities. We or our affiliates have in the past
provided investment banking and financial advisory services to HHNT unrelated to
the Merger, for which services we have received compensation. In addition, First
Union Securities, Inc. and its affiliates (including First Union Corporation and
its affiliates) may maintain relationships with HHNT and Omnicom.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of HHNT in its evaluation of the Merger
and do not constitute a recommendation to any holder of HHNT common stock as to
how such holder should vote with respect to the Merger. Our opinion may not be
published or otherwise used or referred to, nor shall any public reference to
First Union Securities, Inc. or First Union Corporation be made, without our
prior written consent; provided, however, that our opinion may be included in
its entirety in any communication by HHNT to its shareholders, or if required to
comply with applicable law, to the directors and shareholders of another party
to the Merger Agreement.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deem relevant, we are
of the opinion that, as of the date hereof, the Consideration is fair, from a
financial point of view, to the holders of HHNT common stock.
Very truly yours,
FIRST UNION SECURITIES, INC.
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ANNEX C
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made and entered into as
of , 2000, by and among HEADHUNTER.NET, INC., a Georgia corporation
(the "Company"), OMNICOM GROUP INC., a New York corporation ("Omnicom"), BERNARD
HODES GROUP INC., a Delaware corporation and wholly owned subsidiary of Omnicom
("BHA"), and ITC HOLDING COMPANY, INC., a Delaware corporation ("ITC") (Each of
Omnicom, BHA and ITC may be referred to individually as a "Shareholder" and
collectively as "Shareholders").
WHEREAS, pursuant to the terms of an Agreement and Plan of Merger, dated as
of April , 2000 (as the same may be amended, the "Acquisition Agreement"), by
and among the Company, Resume Acquisition Corporation, a Delaware corporation
and wholly owned subsidiary of the Company ("Merger Sub"), Omnicom, BHA and
Career Mosaic, Inc., a wholly owned subsidiary of BHA ("Career Mosaic"), Career
Mosaic will merge with and into Merger Sub (the "Acquisition"), with the result
that each of outstanding shares of common stock of Career Mosaic will be
converted into the right to receive shares of common stock of the Company (the
"Company Common Stock"); and
WHEREAS, the parties have reached certain agreements with respect to their
beneficial ownership of Company Common Stock after consummation of the
Acquisition;
NOW, THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the receipt and sufficiency of which is
acknowledged, the parties hereby agree as follows:
1. Definitions. (a) "Affiliate" shall have the meaning assigned thereto in
Rule 405, as presently promulgated under the Securities Act.
(b) "beneficially owns" (or comparable variations thereof) has the meaning
set forth in Rule 13d-3 as presently promulgated under the Exchange Act.
(c) "BHA Slate" shall mean the two persons named as members of the BHA
Slate in Section 3(b) hereof, as may be changed by BHA from time to time in
accordance with Section 3.
(d) "Equity Securities" means Voting Securities, Convertible Securities and
Rights to Purchase Voting Securities.
(e) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
(f) "Independent Slate" shall mean the three persons named as members of
the Independent Slate in Section 3(b) hereof, as may be changed by mutual
agreement of ITC and BHA from time to time in accordance with Section 3(d)
hereof.
(g) "ITC Slate" shall mean the two persons named as members of the ITC
Slate in Section 3(b) hereof, as may be changed by ITC from time to time in
accordance with Section 3.
(h) "Maximum Voting Percentage" shall mean 30% of the Voting Power of the
Company.
(i) "Person" means any individual, corporation, partnership, trust, other
entity or group (within the meaning of Section 13(d)(3) of the Exchange Act).
(j) "Restricted Group" means (i) any Shareholder, (ii) any and all Persons
directly or indirectly controlled by any Shareholder, (iii) if such Shareholder
is an individual, (a) any member of such Shareholder's family (including any
spouse, parent, sibling, child, grandchild or other lineal descendant, including
adoptive children), (b) the heirs, executors, personal representatives and
administrators of any of the foregoing Persons, (c) any trust established for
the benefit of any of the foregoing Persons and (d) any charitable foundations
established by any of the foregoing Persons, and (iv) any and all groups (within
the meaning of Section 13(d)(3) of the Exchange Act) of which any Shareholder or
any Person directly or
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indirectly controlled by such Shareholder is a member, other than any such group
not acting for the purpose of acquiring, holding or beneficially owning Equity
Securities.
(k) "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
(l) "Standstill Period" means the period beginning on the date of this
Agreement and ending on a date five years from the date of this Agreement.
(m) "Voting Power" means, with respect to any Outstanding Voting
Securities, the highest number of votes that the holders of all such Outstanding
Voting Securities would be entitled to cast for the election of directors or on
any other matter (except to the extent such voting rights are dependent upon
events or default or bankruptcy), assuming, for purposes of this computation,
the conversion or exchange into Voting Securities of Convertible Securities
(whether presently convertible or exchangeable or not) and the exercise of
Rights to Purchase Voting Securities (whether presently exercisable or not), in
either case to the extent that any such action would increase the number of such
votes.
(n) "Voting Securities" means the Company Common Stock and any other
securities of the Company of any kind or class having power generally to vote
for the election of directors; "Convertible Securities" means securities of the
Company which are convertible or exchangeable (whether presently convertible or
exchangeable or not) into Voting Securities; "Rights to Purchase Voting
Securities" means options, warrants and rights issued by the Company (whether
presently exercisable or not) to purchase Voting Securities or Convertible
Securities; and "Outstanding Voting Securities" means at any time the then
issued and outstanding Voting Securities, Convertible Securities (which shall be
counted at the maximum number of Voting Securities for which they can be
converted or exchanged) and Rights to Purchase Voting Securities (which shall be
counted at the maximum number of Voting Securities for which they can be
exercised).
2. Standstill Agreement. Each Restricted Group agrees, during the
Standstill Period, unless specifically invited in writing by the Board of
Directors of the Company, that such Restricted Group will not, either directly
or indirectly through a representative or otherwise, (a) effect or seek, offer
or propose (whether publicly or otherwise) to effect, or cause or participate in
or in any way assist any other person to effect or seek, offer or propose
(whether publicly or otherwise) to effect or participate in (i) any acquisition
of any securities (or beneficial ownership thereof) or assets of the Company or
any of its subsidiaries; (ii) any tender or exchange offer or merger or other
business combination involving the Company or any of its subsidiaries; (iii) any
recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company or any of its subsidiaries; or (iv) any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Exchange Act) or consents to vote any Voting Securities of the Company, (b)
form, join or in any way participate in a "group" (as defined under the Exchange
Act), (c) except by reason of an Affiliate serving on the Board of Directors of
the Company, otherwise act, alone or in concert with others, to seek to control
or influence the management, Board of Directors or policies of the Company, (d)
take any action which might force the Company to make a public announcement
regarding any of the types of matters set forth in (a) above, or (e) enter into
any discussions or arrangements with any third party with respect to any of the
foregoing. Each Restricted Group also agrees during any such period not to
request the Company (or its directors, officers, employees or agents), directly
or indirectly, to amend or waive any provision of this paragraph (including this
sentence); provided, however, that nothing will prohibit a Restricted Group or
member thereof from making a confidential proposal to the Board of Directors
with respect to any of the foregoing provided that the terms thereof are
conditioned upon the maintenance of such confidentiality by the Company.
3. Voting. (a) Until such time as a Restricted Group beneficially owns
Outstanding Voting Securities representing less than the lower of (1) 10% of the
Voting Power of all Outstanding Voting Securities or (2) 50% of the Voting Power
beneficially owned by such Restricted Group on the date hereof, at each meeting
of shareholders of the Company, each Restricted Group shall vote the Voting
Securities held by such Restricted Group (x) with respect to the election of
directors, in favor of the persons named in the ITC Slate, the BHA Slate and the
Independent Slate, (y) on all proposals of any other shareholder of the Company,
in accordance with the recommendation of the Board of Directors of the Company,
and (z) on all other matters
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that shall come before the shareholders of the Company for a vote, in its
discretion up to the Maximum Voting Percentage and, with respect to any Voting
Securities held in excess of the Maximum Voting Percentage, in proportion to how
all other Voting Securities which are not held by such Restricted Group are
voted.
(b) For purposes of this Section 3, until subsequently changed as provided
herein, the ITC Slate shall be Kimberley E. Thompson as a Class II director and
William H. Scott, III as a Class III director; the BHA Slate shall be an
individual designated by BHA, who may be any officer or director of BHA or
Omnicom or any other person designated by BHA if such person is approved by the
Company (such approval no to be unreasonably withheld or delayed) as a Class II
director and an individual designated by BHA, who may be any officer or director
of BHA or Omnicom or any other person designated by BHA if such person is
approved by the Company (such approval no to be unreasonably withheld or
delayed) as a Class III director; and the Independent Slate shall be Robert M.
Montgomery, Jr. as a Class I director, Burton B. Goldstein, Jr. as a Class I
director and an individual designated by BHA (who shall have been approved by
the Company, such approval not to be unreasonably withheld or delayed) as a
Class I director;
(c) Each of ITC and BHA may change the ITC Slate and the BHA Slate,
respectively, by written notice to the Board of Directors of the Company not
later than the end of any fiscal year of the Company immediately preceding the
next annual meeting of shareholders at which such director to be replaced would
otherwise stand for election. ITC and BHA jointly may change any member of the
Independent Slate by written notice to the Board of Directors of the Company not
later than the end of any fiscal year of the Company immediately preceding the
next annual meeting of shareholders at which such director to be replaced would
otherwise stand for election.
(d) In the event of any termination, death, disability, removal or
resignation of any director or in the event that either ITC or BHA elects to
change a member of its slate and causes its designee to resign as a director (a
"Former Director"), such vacancy shall be filled as follows: (i) If the Former
Director is a member of the ITC Slate or the BHA Slate, then ITC or BHA, as the
case may be, shall nominate a person to replace the Former Director (a
"Replacement Director") in writing to the Board of Directors; and (ii) if the
Former Director is a member of the Independent Slate, then ITC and BHA jointly
shall agree on a Replacement Director and nominate such Replacement Director to
the Board of Directors. If the Board of Directors shall fail to appoint any such
Replacement Director selected as set forth above to fill the unexpired term of a
Former Director, then such vacancy on the Board of Directors of the Company
shall remain until the next annual meeting of shareholders at which time such
Replacement Director shall be elected to the Board of Directors as a member of
the ITC Slate, the BHA Slate or the Independent Slate, as the case may be.
(e) ITC's right to designate the members of the ITC Slate and the
Independent Slate in Sections 3(b) and 3(d) will terminate on the date the
Restricted Group that includes ITC beneficially owns Outstanding Voting
Securities representing less than the lower of (i) 10% of the Voting Power of
all Outstanding Voting Securities or (ii) 50% of the Voting Power beneficially
owned by such Restricted Group on the date hereof. BHA's right to designate the
members of the BHA Slate and the Independent Slate in Sections 3(b) and 3(d)
will terminate on the date that Restricted Group that includes BHA beneficially
owns Outstanding Voting Securities representing less than the lower of (i) 10%
of the Voting Power of all Outstanding Voting Securities or (ii) 50% of the
Voting Power beneficially owned by such Restricted Group on the date hereof.
4. Miscellaneous.
(a) Notices.
(i) All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered by hand, by
facsimile transmission, by courier or overnight carrier or by registered or
certified mail, postage prepaid to the parties as follows:
(A) if to the Company, to HeadHunter.NET, Inc., 333 Research Court,
Suite 200, Atlanta, Georgia 30092, (770) 349-2401, Attention: Chief
Executive Officer, or at such other address as it may have furnished in
writing to the parties;
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(B) if to the Shareholders, at the addresses listed on Schedule I
hereto, or at such other addresses as may have been furnished the
Company in writing.
(ii) Any notice shall be deemed to have been delivered as of the date so
delivered.
(b) Reproduction of Documents. This Agreement and all documents relating
thereto, including, without limitation, any consents, waivers and modifications
which may hereafter be executed may be reproduced by the parties by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and the parties may destroy any original document so reproduced.
The parties hereto agree and stipulate that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made in the regular course of business) and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
(c) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties.
(d) Entire Agreement; Amendment and Waiver. This Agreement constitutes the
entire understanding of the parties hereto and supersedes all prior
understandings among such parties with respect to the subject matter hereof.
This Agreement may be amended, and the observance of any term of this Agreement
may be waived, with (and only with) the written consent of the parties.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
(f) Remedies. Each party, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. Each party agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees
to waive the defense in any action for specific performance that a remedy at law
would be adequate.
(h) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended and understood that all of the rights and privileges
of each party shall be enforceable to the fullest extent permitted by law.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
HEADHUNTER.NET, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
-------------------------------
OMNICOM GROUP INC.
By:
----------------------------------
Name:
---------------------------------
Title:
-------------------------------
BERNARD HODES GROUP INC.
By:
----------------------------------
Name:
---------------------------------
Title:
-------------------------------
ITC HOLDING COMPANY, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
-------------------------------
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SCHEDULE I
ITC:
3300 20th Avenue
P.O. Box 20
Valley, Alabama 36854
Omnicom:
437 Madison Avenue
New York, New York 10022
BHA:
555 Madison Avenue
New York, New York 10022
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ANNEX D
HEADHUNTER.NET, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
ARTICLE I
BACKGROUND
1.1 ESTABLISHMENT OF THE PLAN. HeadHunter.NET, Inc. (the "Corporation")
hereby establishes a stock purchase plan to be known as the "HeadHunter.NET,
Inc. 2000 Employee Stock Purchase Plan" (the "Plan"), as set forth in this
document. The Plan is intended to be a qualified employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended, and the regulations and rulings thereunder.
1.2 APPLICABILITY OF THE PLAN. The provisions of this Plan are applicable
only to certain individuals who, on or after January 1, 2000, are employees of
the Corporation and its subsidiaries participating in the Plan. The Committee
shall indicate from time to time which of its subsidiaries, if any, are
participating in the Plan.
1.3 PURPOSE. The purpose of the Plan is to enhance the proprietary
interest among the employees of the Corporation and its participating
subsidiaries through ownership of Common Stock of the Corporation.
ARTICLE II
DEFINITIONS
Whenever capitalized in this document, the following terms shall have the
respective meanings set forth below.
2.1 ADMINISTRATOR. Administrator shall mean the person or persons (who may
be officers or employees of the Corporation) selected by the Committee to
operate the Plan, perform day-to-day administration of the Plan, and maintain
records of the Plan.
2.2 BOARD. Board shall mean the Board of Directors of the Corporation.
2.3 CODE. Code shall mean the Internal Revenue Code of 1986, as amended
from time to time, and the regulations thereunder.
2.4 COMMITTEE. Committee shall mean a committee which consists of members
of the Board and which has been designated by the Board to have the general
responsibility for the administration of the Plan. Unless otherwise designated
by the Board, the Committee of the Board of Directors of the Corporation shall
serve as the Committee administering the Plan. Subject to the express provisions
of the Plan, the Committee shall have plenary authority in its sole and absolute
discretion to interpret and construe any and all provisions of the Plan, to
adopt rules and regulations for administering the Plan, and to make all other
determinations necessary or advisable for administering the Plan. The
Committee's determinations on the foregoing matters shall be conclusive and
binding upon all persons.
2.5 COMMON STOCK. Common Stock shall mean the common stock, par value
$.01, of the Corporation.
2.6 COMPENSATION. Compensation shall mean, for any Participant, for any
Offering Period, the Participant's gross wages for the respective period,
subject to appropriate adjustments that would exclude items such as non-cash
compensation and reimbursement of moving, travel, trade or business expenses.
2.7 CONTRIBUTION ACCOUNT. Contribution Account shall mean the bookkeeping
account established by the Administrator on behalf of each Participant, which
shall be credited with the amounts deducted from the Participant's Compensation
pursuant to Article VI. The Administrator shall establish a separate
Contribution Account for each Participant for each Offering Period.
2.8 CORPORATION. Corporation shall mean HeadHunter.NET, Inc., a Georgia
corporation.
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2.9 DIRECT REGISTRATION SYSTEM. Direct Registration System shall mean a
direct registration system approved by the Securities and Exchange Commission
and by the New York Stock Exchange, Inc. or any securities exchange on which the
Common Stock is then listed, whereby shares of Common Stock may be registered in
the holder's name in book-entry form on the books of the Corporation.
2.10 EFFECTIVE DATE. Effective Date shall mean the effective date of the
Plan, which shall be the effective date of the Corporation's registration
statement on Form S-8 filed under the Securities Act of 1933, as amended,
covering the shares to be issued under the Plan.
2.11 ELIGIBLE EMPLOYEE. An Employee eligible to participate in the Plan
pursuant to Section 3.1.
2.12 EMPLOYEE. Employee shall mean an individual employed by an Employer
who meets the employment relationship described in Treasury Regulation Sections
1.423-2(b) and Section 1.421-7(h).
2.13 EMPLOYER. Employer shall mean the Corporation and any Subsidiary
designated by the Committee as an employer participating in the Plan.
2.14 FAIR MARKET VALUE. Fair Market Value of a share of Common Stock, as
of any designated date, shall mean the closing sales price of the Common Stock
on the Nasdaq National Market on such date or on the last previous date on which
such stock was traded.
2.15 OFFERING DATE. Offering Date shall mean the first Trading Date of
each Offering Period.
2.16 OFFERING PERIOD. Offering Period shall mean the quarterly periods
beginning January 1, April 1, July 1 and October 1, respectively, of each year
during which offers to purchase Common Stock are outstanding under the Plan;
provided, however, that the initial Offering Period shall be the period
beginning on the Effective Date and ending on June 30, 2000. No payroll
deductions shall be taken until the Effective Date.
2.17 OPTION. Option shall mean the option to purchase Common Stock granted
under the Plan on each Offering Date.
2.18 PARTICIPANT. Participant shall mean any Eligible Employee who has
elected to participate in the Plan under Section 3.2.
2.19 PLAN. Plan shall mean the HeadHunter.NET, Inc. 2000 Employee Stock
Purchase Plan, as amended and in effect from time to time.
2.20 PURCHASE DATE. Purchase Date shall mean the last Trading Date of each
Offering Period.
2.21 PURCHASE PRICE. Purchase Price shall mean the purchase price of
Common Stock determined under Section 5.1.
2.22 REQUEST FORM. Request Form shall mean an Employee's authorization
either in writing on a form approved by the Administrator or through electronic
communication approved by the Administrator which specifies the Employee's
payroll deduction in accordance with Section 6.2, and contains such other terms
and provisions as may be required by the Administrator.
2.23 STOCK ACCOUNT. Stock Account shall mean the account established by
the Administrator on behalf of each Participant, which shall be credited with
shares of Common Stock purchased pursuant to the Plan and dividends thereon
until distributed in accordance with the terms of the Plan.
2.24 SUBSIDIARY. Subsidiary shall mean any present or future corporation
which is a "subsidiary corporation" of the Corporation as defined in Code
Section 424(f).
2.25 TRADING DATE. Trading Date shall mean a date on which shares of
Common Stock are traded on a national securities exchange (such as the New York
Stock Exchange), the Nasdaq National Market or in the over-the-counter market.
Except when otherwise indicated by the context, the definition of any term
herein in the singular may also include the plural.
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ARTICLE III
Eligibility and Participation
3.1 ELIGIBILITY. Each Employee who is an Employee regularly scheduled to
work at least 20 hours each week and at least five months each calendar year
shall be eligible to participate in the Plan as of the later of:
(a) the Offering Date immediately following the Employee's last date of
hire by an Employer; or
(b) the Effective Date.
On each Offering Date, Options will automatically be granted to all
Employees then eligible to participate in the Plan; provided, however, that no
Employee shall be granted an Option for an Offering Period if, immediately after
the grant, the Employee would own stock, and/or hold outstanding options to
purchase stock, possessing five percent or more of the total combined voting
power or value of all classes of stock of the Corporation or any Subsidiary. For
purposes of this Section, the attribution rules of Code Section 424(d) shall
apply in determining stock ownership of any Employee. If an Employee is granted
an Option for an Offering Period and such Employee does not participate in the
Plan for such Offering Period, such Option will be deemed never to have been
granted for purposes of applying the $25,000 annual limitation described in
Section 5.2.
3.2 INITIAL PARTICIPATION. An Eligible Employee having been granted an
Option under Section 3.1 may submit a Request Form to the Administrator to
participate in the Plan for an Offering Period. The Request Form shall authorize
a regular payroll deduction from the Employee's Compensation for the Offering
Period, subject to the limits and procedures described in Article VI. A
Participant's Request Form authorizing a regular payroll deduction shall remain
effective from Offering Period to Offering Period until amended or canceled
under Section 6.3.
3.3 LEAVE OF ABSENCE. For purposes of Section 3.1, an individual on a
leave of absence from an Employer shall be deemed to be an Employee for the
first 90 days of such leave. For purposes of this Plan, such individual's
employment with the Employer shall be deemed to terminate at the close of
business on the 90th day of the leave, unless the individual has returned to
regular employment with an Employer before the close of business on such 90th
day. Termination of any individual's leave of absence by an Employer, other than
on account of a return to employment with an Employer, shall be deemed to
terminate an individual's employment with the Employer for all purposes of the
Plan.
ARTICLE IV
STOCK AVAILABLE
4.1 IN GENERAL. Subject to the adjustments in Sections 4.2 and 4.3, an
aggregate of 50,000 shares of Common Stock shall be available for purchase by
Participants pursuant to the provisions of the Plan. These shares may be
authorized and unissued shares or may be shares issued and subsequently acquired
by the Corporation. If an Option under the Plan expires or terminates for any
reason without having been exercised in whole or part, the shares subject to
such Option that are not purchased shall again be available for subsequent
Option grants under the Plan. If the total number of shares of Common Stock for
which Options are exercised on any Purchase Date exceeds the maximum number of
shares then available under the Plan, the Committee shall make a pro rata
allocation of the shares available in as nearly a uniform manner as shall be
practicable and as it shall determine to be equitable; and the balance of the
cash credited to Participants' Contribution Accounts shall be distributed to the
Participants as soon as practicable.
4.2 ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION. In the event of a
stock dividend, stock split or combination of shares, recapitalization or other
change in the Corporation's capitalization, or other distribution with respect
to holders of the Corporation's Common Stock other than normal cash dividends,
an automatic adjustment shall be made in the number and kind of shares as to
which outstanding Options or portions thereof then unexercised shall be
exercisable and in the available shares set forth in Section 4.1, so that the
proportionate interest of the Participants shall be maintained as before the
occurrence of such event.
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This adjustment in outstanding Options shall be made without change in the total
price applicable to the unexercised portion of such Options and with a
corresponding adjustment in the Purchase Price per share; provided, however,
that in no event shall any adjustment be made that would cause any Option to
fail to qualify as an option pursuant to an employee stock purchase plan within
the meaning of Section 423 of the Code.
4.3 DISSOLUTION, LIQUIDATION, OR MERGER. Upon the dissolution or
liquidation of the Corporation, or upon a reorganization, merger, or
consolidation of the Corporation with one or more corporations in which the
Corporation is not the surviving corporation, or upon a sale of substantially
all of the property or stock of the Corporation to another corporation, the
holder of each Option then outstanding under the Plan shall be entitled to
receive at the next Purchase Date upon the exercise of such Option for each
share as to which such Option shall be exercised, as nearly as reasonably may be
determined, the cash, securities, or property which a holder of one share of the
Common Stock was entitled to receive upon and at the time of such transaction.
The Committee shall take such steps in connection with these transactions as the
Committee deems necessary or appropriate to assure that the provisions of this
Section shall thereafter be applicable, as nearly as reasonably may be
determined, in relation to the cash, securities, or property which the holder of
the Option may thereafter be entitled to receive. In lieu of the foregoing, the
Committee may terminate the Plan in accordance with Section 8.2.
ARTICLE V
OPTION PROVISIONS
5.1 PURCHASE PRICE. The Purchase Price of a share of Common Stock
purchased for a Participant pursuant to each exercise of an Option shall be 85
percent of the Fair Market Value of a share of Common Stock on the Purchase
Date.
5.2 CALENDAR YEAR $25,000 LIMIT. Notwithstanding anything else contained
herein, no Employee may be granted an Option for any Offering Period which
permits such Employee's rights to purchase Common Stock under this Plan and any
other qualified employee stock purchase plan (within the meaning of Code Section
423) of the Corporation and its Subsidiaries to accrue at a rate which exceeds
$25,000 of Fair Market Value of such Common Stock for each calendar year in
which an Option is outstanding at any time. For purposes of this Section, Fair
Market Value shall be determined as of the Offering Date.
5.3 OFFERING PERIOD LIMIT. Notwithstanding anything else contained herein,
the maximum number of shares of Common Stock that an Eligible Employee may
purchase in any Offering Period is 1,000 shares.
ARTICLE VI
PURCHASING COMMON STOCK
6.1 PARTICIPANT'S CONTRIBUTION ACCOUNT. The Administrator shall establish
a book account in the name of each Participant for each Offering Period. As
discussed in Section 6.2 below, a Participant's payroll deductions shall be
credited to the Participant's Contribution Account, without interest, until such
cash is withdrawn, distributed, or used to purchase Common Stock as described
below.
During such time, if any, as the Corporation participates in a Direct
Registration System, shares of Common Stock acquired upon exercise of an Option
shall be directly registered in the name of the Participant. If the Corporation
does not participate in a Direct Registration System, then until distribution is
requested by a Participant pursuant to Article VII, stock certificates
evidencing the Participant's shares of Common Stock acquired upon exercise of an
Option shall be held by the Corporation as the nominee for the Participant.
These shares shall be credited to the Participant's Stock Account. Certificates
shall be held by the Corporation as nominee for Participants solely as a matter
of convenience. A Participant shall have all ownership rights as to the shares
credited to his or her Stock Account, and the Corporation shall have no
ownership or other rights of any kind with respect to any such certificates or
the shares represented thereby.
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All cash received or held by the Corporation under the Plan may be used by
the Corporation for any corporate purpose. The Corporation shall not be
obligated to segregate any assets held under the Plan.
6.2 PAYROLL DEDUCTIONS; DIVIDENDS.
(a) Payroll Deductions. By submitting a Request Form at any time before an
Offering Period in accordance with rules adopted by the Committee, an Eligible
Employee may authorize a payroll deduction to purchase Common Stock under the
Plan for the Offering Period. The payroll deduction shall be effective on the
first pay period during the Offering Period commencing after receipt of the
Request Form by the Administrator. The payroll deduction shall be in any whole
percentage up to a maximum of ten percent (10%) of such Employee's Compensation
payable each pay period, and at any other time an element of Compensation is
payable. A Participant's payroll deduction shall not be less than one percent
(1%) of such Employee's Compensation payable each payroll period.
(b) Dividends. Cash dividends paid on Common Stock which is credited to a
Participant's Stock Account as of the dividend payment date shall be credited to
the Participant's Stock Account and paid to the Participant as soon as
practicable.
6.3 DISCONTINUANCE. A Participant may discontinue his or her payroll
deductions for an Offering Period by filing a new Request Form with the
Administrator. This discontinuance shall be effective on the first pay period
commencing at least 30 days after receipt of the Request Form by the
Administrator. A Participant who discontinues his or her payroll deductions for
an Offering Period may not resume participation in the Plan until the following
Offering Period.
Any amount held in the Participant's Contribution Account for an Offering
Period after the effective date of the discontinuance of his or her payroll
deductions will either be refunded or used to purchase Common Stock in
accordance with Section 7.1.
6.4 LEAVE OF ABSENCE; TRANSFER TO INELIGIBLE STATUS. If a Participant
either begins a leave of absence, is transferred to employment with a Subsidiary
not participating in the Plan, or remains employed with an Employer but is no
longer eligible to participate in the Plan, the Participant shall cease to be
eligible for payroll deductions to his or her Contribution Account pursuant to
Section 6.2. The cash standing to the credit of the Participant's Contribution
Account shall become subject to the provisions of Section 7.1.
If the Participant returns from the leave of absence before being deemed to
have ceased employment with the Employer under Section 3.3, or again becomes
eligible to participate in the Plan, the Request Form, if any, in effect
immediately before the leave of absence or disqualifying change in employment
status shall be deemed void and the Participant must again complete a new
Request Form to resume participation in the Plan.
6.5 AUTOMATIC EXERCISE. Unless the cash credited to a Participant's
Contribution Account is withdrawn or distributed as provided in Article VII, his
or her Option shall be deemed to have been exercised automatically on each
Purchase Date, for the purchase of the number of full shares of Common Stock
which the cash credited to his or her Contribution Account at that time will
purchase at the Purchase Price. If there is a cash balance remaining in the
Participant's Contribution Account at the end of an Offering Period representing
the exercise price for a fractional share of Common Stock, such balance may be
retained in the Participant's Contribution Account for the next Offering Period,
unless the Participant requests that it be refunded, without interest. Any other
cash balance remaining in the Participant's Contribution Account at the end of
an Offering Period shall be refunded to the Participant, without interest. The
amount of cash that may be used to purchase shares of Common Stock may not
exceed the Compensation restrictions set forth in Section 6.2.
Except as provided in the preceding paragraph, if the cash credited to a
Participant's Contribution Account on the Purchase Date exceeds the applicable
Compensation restrictions of Section 6.2 or exceeds the amount necessary to
purchase the maximum number of shares of Common Stock available during the
Offering Period, such excess cash shall be refunded to the Participant. Except
as provided in the preceding
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paragraph, the excess cash may not be used to purchase shares of Common Stock
nor retained in the Participant's Contribution Account for a future Offering
Period.
Each Participant shall receive a statement on an annual basis indicating
the number of shares credited to his or her Stock Account, if any, under the
Plan.
6.6 LISTING, REGISTRATION, AND QUALIFICATION OF SHARES. The granting of
Options for, and the sale and delivery of, Common Stock under the Plan shall be
subject to the effecting by the Corporation of any listing, registration, or
qualification of the shares subject to that Option upon any securities exchange
or under any federal or state law, or the obtaining of the consent or approval
of any governmental regulatory body deemed necessary or desirable for the
issuance or purchase of the shares covered.
ARTICLE VII
WITHDRAWALS; DISTRIBUTIONS
7.1 DISCONTINUANCE OF DEDUCTIONS; LEAVE OF ABSENCE; TRANSFER TO INELIGIBLE
STATUS. In the event of a Participant's complete discontinuance of payroll
deductions under Section 6.3 or a Participant's leave of absence or transfer to
an ineligible status under Section 6.4, the cash balance then standing to the
credit of the Participant's Contribution Account shall be --
(a) returned to the Participant, in cash, without interest, as soon as
practicable, upon the Participant's written request received by the
Administrator at least 30 days before the next Purchase Date; or
(b) held under the Plan and used to purchase Common Stock for the
Participant under the automatic exercise provisions of Section 6.5.
7.2 IN-SERVICE WITHDRAWALS. During such time, if any, as the Corporation
participates in a Direct Registration System, shares of Common Stock acquired
upon exercise of an Option shall be directly registered in the name of the
Participant and the Participant may withdraw certificates in accordance with the
applicable terms and conditions of such Direct Registration System. If the
Corporation does not participate in a Direct Registration System, (i) a
Participant may, while an Employee of the Corporation or any Subsidiary,
withdraw certificates for some or all of the shares of Common Stock credited to
his or her Stock Account at any time, upon 30 days' written notice to the
Administrator, and (ii) each Participant shall be permitted only one withdrawal
under this Section during each Offering Period. If a Participant requests a
distribution of only a portion of the shares of Common Stock credited to his or
her Stock Account, the Administrator will distribute the oldest securities held
in the Participant's Stock Account first, using a first in-first out
methodology. The Administrator may at any time distribute certificates for some
or all of the shares of Common Stock credited to a Participant's Stock Account,
whether or not the Participant so requests.
7.3 TERMINATION OF EMPLOYMENT FOR REASONS OTHER THAN DEATH. If a
Participant terminates employment with the Corporation and the Subsidiaries for
reasons other than death, the cash balance in the Participant's Contribution
Account shall be returned to the Participant in cash, without interest, as soon
as practicable. Certificates for the shares of Common Stock credited to his or
her Stock Account shall be distributed to the Participant as soon as
practicable, unless the Corporation then participates in a Direct Registration
System, in which case, the Participant shall be entitled to evidence of
ownership of such shares in such form as the terms and conditions of such Direct
Registration System permit.
7.4 DEATH. In the event a Participant dies, the cash balance in his or her
Contribution Account shall be distributed to the Participant's estate, in cash,
without interest, as soon as practicable. Certificates for the shares of Common
Stock credited to the Participant's Stock Account shall be distributed to the
estate as soon as practicable, unless the Corporation then participates in a
Direct Registration System, in which case, the estate shall be entitled to
evidence of ownership of such shares in such form as the terms and conditions of
such Direct Registration System permit.
D-6
<PAGE> 221
7.5 REGISTRATION. Whether represented in certificate form or by direct
registration pursuant to a Direct Registration System, shares of Common Stock
acquired upon exercise of an Option shall be directly registered in the name of
the Participant or, if the Participant so indicates on the Request Form, (a) in
the Participant's name jointly with a member of the Participant's family, with
the right of survivorship, (b) in the name of a custodian for the Participant
(in the event the Participant is under a legal disability to have stock issued
in the Participant's name), or (c) in a manner giving effect to the status of
such shares as community property. No other names may be included in the Common
Stock registration. The Corporation shall pay all issue or transfer taxes with
respect to the issuance or transfer of shares of such Common Stock, as well as
all fees and expenses necessarily incurred by the Corporation in connection with
such issuance or transfer.
ARTICLE VIII
AMENDMENT AND TERMINATION
8.1 AMENDMENT. The Committee shall have the right to amend or modify the
Plan, in full or in part, at any time and from time to time; provided, however,
that no amendment or modification shall:
(a) affect any right or obligation with respect to any grant previously
made, unless required by law, or
(b) unless previously approved by the stockholders of the Corporation,
where such approval is necessary to satisfy federal securities laws, the
Code, or rules of any stock exchange on which the Corporation's Common
Stock is listed:
(1) in any manner materially affect the eligibility requirements set
forth in Sections 3.1 and 3.3, or change the definition of Employer as
set forth in Section 2.13,
(2) increase the number of shares of Common Stock subject to any
options issued to Participants (except as provided in Sections 4.2 and
4.3), or
(3) materially increase the benefits to Participants under the Plan.
8.2 TERMINATION. The Committee may terminate the Plan at any time in its
sole and absolute discretion. The Plan shall be terminated by the Committee if
at any time the number of shares of Common Stock authorized for purposes of the
Plan is not sufficient to meet all purchase requirements, except as specified in
Section 4.1.
Upon termination of the Plan, the Administrator shall give notice thereof
to Participants and shall terminate all payroll deductions. Cash balances then
credited to Participants' Contribution Accounts shall be distributed as soon as
practicable, without interest.
ARTICLE IX
MISCELLANEOUS
9.1 SHAREHOLDER APPROVAL. The Plan shall be approved and ratified by the
stockholders of the Corporation, not later than 12 months after adoption of the
Plan by the Board of Directors of the Corporation, pursuant to Treasury
regulation Section 1.423-2(c). If for any reason such approval is not given by
such date, the Plan shall be null and void, and all payroll deductions to the
Plan shall cease. The cash balances and Common Stock credited to Participants'
accounts shall be promptly distributed to them; and any Common Stock
certificates issued and delivered to Participants prior to such date shall
remain the property of the Participants.
9.2 EMPLOYMENT RIGHTS. Neither the establishment of the Plan, nor the
grant of any Options thereunder, nor the exercise thereof shall be deemed to
give to any Employee the right to be retained in the employ of the Corporation
or any Subsidiary or to interfere with the right of the Corporation or any
Subsidiary to discharge any Employee or otherwise modify the employment
relationship at any time.
D-7
<PAGE> 222
9.3 TAX WITHHOLDING. The Administrator may make appropriate provisions for
withholding of federal, state, and local income taxes, and any other taxes, from
a Participant's Compensation to the extent the Administrator deems such
withholding to be legally required.
9.4 RIGHTS NOT TRANSFERABLE. Rights and Options granted under this Plan
are not transferable by the Participant other than by will or by the laws of
descent and distribution and are exercisable only by the Participant during his
or her lifetime.
9.5 NO REPURCHASE OF STOCK BY CORPORATION. The Corporation is under no
obligation to repurchase from any Participant any shares of Common Stock
acquired under the Plan.
9.6 GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of Georgia except to the extent such laws
are preempted by the laws of the United States.
9.7 SHAREHOLDER APPROVAL; REGISTRATION. The Plan was adopted by the Board
of Directors of the Corporation on December 23, 1999 to be effective as of the
Effective Date, provided that no payroll deductions may begin until a
registration statement on Form S-8 filed under the Securities Act of 1933, as
amended, covering the shares to be issued under the Plan, has become effective.
The Plan is subject to approval by the stockholders of the Corporation within 12
months of approval by the Board of Directors.
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<PAGE> 223
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
HeadHunter.NET's articles of incorporation eliminate the personal liability
of its directors to HeadHunter.NET or its shareholders for monetary damage for
any breach of duty as a director, provided that HeadHunter.NET cannot eliminate
or limit the liability of a director for:
- a breach of duty involving appropriation of a business opportunity of
HeadHunter.NET;
- an act or omission which involves intentional misconduct or a knowing
violation of law;
- any transaction from which the director receives an improper personal
benefit; or
- unlawful corporate distributions.
In addition, if at any time the Georgia Business Corporation Code is
amended to authorize further elimination or limitation of the personal liability
of a director, then the liability of each of HeadHunter.NET's directors shall be
eliminated or limited to the fullest extent permitted by such provisions, as so
amended, without further action by the shareholders, unless otherwise required.
HeadHunter.NET's bylaws require it to indemnify 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 our
right) because such person is or was one of its directors or officers, against
liability incurred by the director of officer in such proceeding except for any
liability incurred in a proceeding in which the director or officer is adjudged
liable to HeadHunter.NET or is subjected to injunctive relief in its favor for:
- a breach of duty involving appropriation of any business opportunity of
HeadHunter.NET;
- an act or omission which involves intentional misconduct or a knowing
violation of law;
- any transaction from which such officer or director received an improper
personal benefit; or
- unlawful corporate distributions.
HeadHunter.NET's board of directors also has the authority to extend to
employees and agents the same indemnification rights held by directors.
Indemnified persons would also be entitled to have HeadHunter.NET 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.
HeadHunter.NET has entered into separate indemnity agreements with each of
its directors and certain of its executive officers, whereby HeadHunter.NET
agrees to indemnify them and to advance them expenses in a manner and subject to
terms and conditions similar to those set forth in its articles of incorporation
and bylaws.
HeadHunter.NET maintains a standard form of officers' and directors'
liability insurance policy which provides coverage to its officers and directors
for certain liabilities, including certain liabilities which may arise out of
this registration statement.
If the merger closes, HeadHunter.NET will enter into indemnification
agreements with ITC Holding Company and Bernard Hodes Group under which
HeadHunter.NET agrees to indemnify them and to advance them expenses for any
liability or claim incurred by them as a result of an action or inaction of
HeadHunter.NET.
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<PAGE> 224
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
2.1 -- Purchase Agreement dated December 17, 1999 between
HeadHunter.NET, Chicago Computer Guide, Inc. and George
Scholomite (incorporated by reference from Exhibit 2.1 of
HeadHunter.NET's Current Report on Form 8-K filed on January
3, 2000)
2.2 -- Agreement and Plan of Merger dated April 15, 2000 among
HeadHunter.NET, Resume Acquisition Corporation, Omnicom
Group Inc., Bernard Hodes Group Inc., Career Mosaic Inc. and
ITC Holding Company, Inc. (incorporated by reference from
Exhibit 99.1 to HeadHunter.NET's Current Report on Form 8-K
filed on April 19, 2000)
2.3 -- Support Agreement dated April 15, 2000 among Bernard Hodes
Group Inc., HeadHunter.NET, Inc., ITC Holding Company, Inc.,
and Robert M. Montgomery, Jr. (incorporated by reference
from Exhibit 99.2 to HeadHunter.NET's Current Report on Form
8-K filed on April 19, 2000)
3.1 -- Articles of Incorporation, as amended (incorporated by
reference from Exhibit 3.1 to HeadHunter.NET's registration
statement on Form S-1, Registration No. 333-80915)
3.2 -- Amended and Restated Bylaws
4.1 -- Specimen common stock certificate (incorporated by reference
from Exhibit 4.1 to HeadHunter.NET's registration statement
on Form S-1, Registration No. 333-80915)
4.2 -- Article II of the Articles of Incorporation, as amended
(filed as part of Exhibit 3.1)
4.3 -- Shareholder Protection Rights Agreement dated April 15,
2000, between HeadHunter.NET, Inc. and American Stock
Transfer & Trust Company (incorporated by reference from
Exhibit 99.3 to HeadHunter.NET's Current Report on Form 8-K
filed on April 19, 2000).
5.1 -- Opinion of Alston & Bird LLP (to be filed by amendment).
10.1 -- HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan, as
amended (incorporated by reference from Exhibit 10.1 to
HeadHunter.NET's registration statement on Form S-1,
Registration No. 333-80915)
10.2 -- HeadHunters, L.L.C. Employee Common Unit Option Plan dated
January 14, 1998 (incorporated by reference from Exhibit
10.2 to HeadHunter.NET's registration statement on Form S-1,
Registration No. 333-80915)
10.3 -- Form of Indemnity Agreement between directors/executive
officers and HeadHunter.NET (incorporated by reference from
Exhibit 10.4 to HeadHunter.NET's registration statement on
Form S-1, Registration No. 333-80915)
10.4 -- Contribution Agreement dated July 15, 1998 among ITC Holding
Company, Inc., Warren L. Bare and HeadHunter.NET
(incorporated by reference from Exhibit 10.5 to
HeadHunter.NET's registration statement on Form S-1,
Registration No. 333-80915)
10.5 -- WorkLife's Internet Content Partners Agreement between
WorkLife Solutions, Inc. and HeadHunter.NET (incorporated by
reference from Exhibit 10.6 to HeadHunter.NET's registration
statement on Form S-1, Registration No. 333-80915)
10.6 -- Amended and Restated Stock Purchase Warrant between ITC
Service Company and HeadHunter.NET (incorporated by
reference from Exhibit 10.10 to HeadHunter.NET's
registration statement on Form S-1, Registration No.
333-80915)
10.7 -- Form of Non-Employee Director Non-Qualified Stock Option
Agreement (incorporated by reference from Exhibit 10.12 to
HeadHunter.NET's registration statement on Form S-1,
Registration No. 333-80915)
10.8 -- Lease Agreement between AJ Partners, L.P. and
HeadHunter.NET, as amended by the Tenant Acceptance
Agreement dated September 22, 1999 (incorporated by
reference from Exhibit 10.8 to HeadHunter.NET Annual Report
on Form 10-K filed on March 29, 2000)
10.9 -- Severance letter between HeadHunter.NET and Warren Bare
dated February 24, 1999 (incorporated by reference from
Exhibit 10.16 to HeadHunter.NET registration statement on
Form S-1, Registration No. 333-80915)
</TABLE>
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<PAGE> 225
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
10.10 -- 2000 Qualified Employee Stock Purchase Plan (incorporated by
reference from Exhibit 4.3 to HeadHunter.NET registration
statement on Form S-8, Registration No. 333-94027)
10.11 -- NBCI Promotion Agreement dated December 9, 1999 between
HeadHunter.NET and NBC Internet, Inc. (incorporated by
reference from Exhibit 10.11 to HeadHunter.NET Annual Report
on Form 10-K filed on March 29, 2000)
21.1 -- Subsidiaries of HeadHunter.NET
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Alston & Bird LLP (to be filed as part of Exhibit
5.1)
24.1 -- Power of Attorney (contained on page II-6)
99.1 -- Form of proxy card for HeadHunter.NET
99.2 -- Consent of First Union Securities, Inc.
</TABLE>
(b) Financial Statement Schedules
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULE
To HeadHunter.NET, Inc. and Subsidiaries:
We have audited in accordance with generally accepted auditing standards,
the financial statements of HEADHUNTER.NET, INC. AND SUBSIDIARIES (Successor
Company) AND HNET, INC. (Predecessor Company) as of December 31, 1999 and 1998
and for the years ended December 31, 1999 and 1998, the two months ended
December 31, 1997, and the ten months ended October 31, 1997, and have issued
our report thereon dated January 26, 2000. Our audits were made for the purpose
of forming an opinion on those statements taken as a whole. The schedule listed
under Schedule II herein as it relates to HeadHunter.NET, Inc. (Successor
Company) and HNET, Inc. (Predecessor Company) is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
Atlanta, Georgia
January 26, 2000
SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS FOR THE TEN MONTHS
ENDED OCTOBER 31, 1997, THE TWO MONTHS ENDED
DECEMBER 31, 1997, THE YEAR ENDED DECEMBER 31, 1998
AND THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
CHARGED TO
BEGINNING COSTS ENDING
DESCRIPTION AND BALANCES EXPENSE WRITE-OFFS BALANCE
- ----------- --------------- -------- ---------- --------
<S> <C> <C> <C> <C>
October 1997 allowance for doubtful accounts...... $ -- $ -- $ -- $ --
December 1997 allowance for doubtful accounts..... $ -- $ -- $ -- $ --
1998 allowance for doubtful accounts.............. $ -- $ 37,346 $ -- $ 37,346
1999 allowance for doubtful accounts.............. $37,346 $404,210 $232,081 $209,475
</TABLE>
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<PAGE> 226
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The Registrant hereby undertakes as follows:
(1) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(2) That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to this Registration Statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
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 Securities Act
of 1933 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
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<PAGE> 227
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this Registration Statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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<PAGE> 228
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of Georgia
on the 19th day of May, 2000.
HeadHunter.NET, Inc.
By: /s/ ROBERT M. MONTGOMERY, JR.
------------------------------------
Name: Robert M. Montgomery, Jr.
Title: Chief Executive Officer and
President
KNOW ALL MEN BY THESE PRESENTS that each of the undersigned officers and
directors of HeadHunter.NET, Inc., a Georgia corporation, for himself and not
for one another, does hereby constitute and appoint Robert M. Montgomery, Jr.
and Mark W. Partin, and each of them, a true and lawful attorney in his name,
place and stead, in any and all capacities, to sign his name to any and all
amendments, including post-effective amendments, to this registration statement,
and to sign a registration statement pursuant to Section 462(b) of the
Securities Act, and to cause the same (together with all exhibits) to be filed
with the SEC, granting unto said attorneys and each of them full power and
authority to do and perform any act and thing necessary and proper to be done in
the premises, as fully to all intents and purposes as the undersigned could do
if personally present, and each of the undersigned for himself hereby ratifies
and confirms all that said attorneys or any one of them shall lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ROBERT M. MONTGOMERY, JR. Chief Executive Officer, May 19, 2000
- ----------------------------------------------------- President and Director
Robert M. Montgomery, Jr. (Principal Executive Officer)
/s/ MARK W. PARTIN Chief Financial Officer May 19, 2000
- ----------------------------------------------------- (Principal Financial and
Mark W. Partin Accounting Officer)
/s/ WILLIAM H. SCOTT, III Chairman of the Board and May 19, 2000
- ----------------------------------------------------- Director
William H. Scott, III
/s/ BURTON B. GOLDSTEIN, JR. Director May 19, 2000
- -----------------------------------------------------
Burton B. Goldstein, Jr.
/s/ DONALD W. WEBER Director May 19, 2000
- -----------------------------------------------------
Donald W. Weber
/s/ J. DOUGLAS COX Director May 19, 2000
- -----------------------------------------------------
J. Douglas Cox
/s/ MICHAEL G. MISIKOFF Director May 19, 2000
- -----------------------------------------------------
Michael G. Misikoff
/s/ KIMBERLEY E. THOMPSON Director May 19, 2000
- -----------------------------------------------------
Kimberley E. Thompson
</TABLE>
II-6
<PAGE> 1
EXHIBIT 3.2
HEADHUNTER.NET, INC.
AMENDED AND RESTATED
BYLAWS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article I. OFFICES AND AGENT....................................................................1
Section 1.01 Registered Office and Agent..........................................1
Section 1.02 Other Offices........................................................1
Article II. MEETINGS OF SHAREHOLDERS............................................................1
Section 2.01 Annual Meetings......................................................1
Section 2.02 Special Meetings.....................................................1
Section 2.03 Place of Meetings....................................................1
Section 2.04 Notice of Meetings...................................................2
Section 2.05 Shareholder Nominations and Proposals................................2
Section 2.06 Voting Group.........................................................3
Section 2.07 Quorum for Voting Groups.............................................3
Section 2.08 Vote Required for Action.............................................4
Section 2.09 Voting for Directors.................................................4
Section 2.10 Voting of Shares.....................................................4
Section 2.11 Proxies..............................................................4
Section 2.12 Chairman of the Board................................................5
Section 2.13 Inspectors...........................................................5
Section 2.14 Adjournments.........................................................5
Section 2.15 Action by Shareholders Without a Meeting.............................6
Article III. THE BOARD OF DIRECTORS.............................................................6
Section 3.01 General Powers.......................................................6
Section 3.02 Number, Election and Term of Office..................................6
Section 3.03 Removal..............................................................7
Section 3.04 Vacancies............................................................7
Section 3.05 Compensation.........................................................8
Section 3.06 Committees...........................................................8
Article IV. MEETINGS OF THE BOARD OF DIRECTORS..................................................8
Section 4.01 Regular Meetings.....................................................8
Section 4.02 Special Meetings.....................................................8
Section 4.03 Place of Meetings....................................................8
Section 4.04 Notice of Meetings...................................................8
Section 4.05 Quorum...............................................................9
Section 4.06 Vote Required for Action.............................................9
Section 4.07 Participation by Conference Telephone................................9
Section 4.08 Adjournments.........................................................9
Section 4.09 Action by Directors Without a Meeting...............................10
Article V. MANNER OF NOTICE TO AND WAIVER OF NOTICE............................................10
Section 5.01 Manner of Notice....................................................10
Section 5.02 Waiver of Notice....................................................11
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Article VI. OFFICERS...........................................................................12
Section 6.01 Number and Duties...................................................12
Section 6.02 Appointment and Term................................................12
Section 6.03 Compensation........................................................12
Section 6.04 Chairman of the Board...............................................12
Section 6.05 President...........................................................12
Section 6.06 Vice Presidents.....................................................12
Section 6.07 Secretary...........................................................13
Section 6.08 Treasurer...........................................................13
Section 6.09 Bonds...............................................................13
Article VII. SHARES............................................................................13
Section 7.01 Authorization and Issuance of Shares................................13
Section 7.02 Share Certificates..................................................14
Section 7.03 Registered Owner....................................................14
Section 7.04 Transfers of Shares.................................................14
Section 7.05 Duty of Corporation to Register Transfer............................14
Section 7.06 Lost, Stolen, or Destroyed Certificates.............................15
Section 7.07 Record Date with Regard to Shareholder Action.......................15
Article VIII. DISTRIBUTIONS....................................................................15
Section 8.01 Authorization or Declaration........................................15
Section 8.02 Record Date With Regard to Distributions............................15
Article IX. INDEMNIFICATION....................................................................16
Section 9.01 Definitions.........................................................16
Section 9.02 Basic Indemnification Arrangement...................................17
Section 9.03 Advances for Expenses...............................................17
Section 9.04 Court-Ordered Indemnification and Advances for Expenses.............18
Section 9.05 Determination of Reasonableness of Expenses.........................18
Section 9.06 Indemnification of Employees and Agents.............................19
Section 9.07 Liability Insurance.................................................19
Section 9.08 Witness Fees........................................................20
Section 9.09 Report to Shareholders..............................................20
Section 9.10 Security for Indemnification Obligations............................20
Section 9.11 No Duplication of Payments..........................................20
Section 9.12 Subrogation.........................................................20
Section 9.13 Contract Rights.....................................................20
Section 9.14 Specific Performance................................................20
Section 9.15 Non-exclusivity, Etc................................................21
Section 9.16 Amendments..........................................................21
Section 9.17 Severability........................................................21
Article X. MISCELLANEOUS.......................................................................21
Section 10.01 Inspection of Records...............................................21
Section 10.02 Fiscal Year.........................................................22
Section 10.03 Corporate Seal......................................................22
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Section 10.04 Financial Statements................................................22
Section 10.05 Conflict with Articles of Incorporation.............................22
Article XI. AMENDMENTS.........................................................................22
Section 11.01 Power to Amend Bylaws...............................................22
Article XII. CERTAIN PROVISIONS OF GEORGIA LAW.................................................22
Section 12.01 Fair Price Requirements.............................................22
Section 12.02 Business Combinations...............................................22
</TABLE>
<PAGE> 5
ARTICLE I. OFFICES AND AGENT
SECTION 1.01 REGISTERED OFFICE AND AGENT
The corporation shall continuously maintain in the state of Georgia a registered
office that may be the same as any of the corporation's places of business. In
addition, the corporation shall continuously maintain a registered agent whose
business office is identical with the registered office. The registered agent
may be an individual who resides in the state of Georgia, a domestic corporation
or nonprofit domestic corporation, or a foreign corporation or nonprofit foreign
corporation authorized to transact business in the state of Georgia.
SECTION 1.02 OTHER OFFICES
In addition to having a registered office, the corporation may have other
offices, located in or out of the state of Georgia, as the corporation's board
of directors ("Board of Directors") may designate from time to time.
ARTICLE II. MEETINGS OF SHAREHOLDERS
SECTION 2.01 ANNUAL MEETINGS
The corporation shall hold a meeting of shareholders annually at a time
designated by the Board of Directors for the purpose of electing directors and
transacting any other business that may properly come before the shareholders.
If the corporation does not hold an annual meeting as provided in this Section,
any business, including the election of directors, that might properly have been
acted upon at an annual meeting may be acted upon by the shareholders at a
special meeting held in accordance with these bylaws or in accordance with a
court order.
SECTION 2.02 SPECIAL MEETINGS
Special meetings of shareholders may be called at any time by (i) the Board of
Directors, (ii) the Chairman of the Board of Directors, (iii) the President of
the corporation or (iv) the holders of two-thirds (2/3) of the votes entitled to
be cast on any issue proposed to be considered at such special meeting following
delivery by such holders to the Secretary of the corporation of a signed and
dated written request setting forth the purposes of such meeting.
SECTION 2.03 PLACE OF MEETINGS
The corporation may hold shareholders' meetings, both annual and special, at any
place in or out of the state of Georgia except that the corporation shall hold
any meeting at the place set forth in the notice of the meeting or, if the
meeting is held in accordance with a waiver of notice of the meeting, at the
place set forth in the waiver of notice. If no place is specified in the notice
or the waiver of notice, the corporation shall hold the meeting at the
corporation's principal office.
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<PAGE> 6
SECTION 2.04 NOTICE OF MEETINGS
The corporation shall notify shareholders of the date, time, and place of each
annual and special shareholders' meeting no fewer than ten (10) nor more than
sixty (60) days before the meeting date. Unless the Georgia Business Corporation
Code, as amended (the "Code"), or the articles of incorporation require
otherwise, the corporation shall notify only those shareholders entitled to vote
at the meeting who have not waived, in accordance with Section 5.02, the right
to receive notice. In the case of an annual meeting, the notice need not state
the purposes of the meeting unless the articles of incorporation or the Code
provide otherwise. Notice of a special meeting shall include a description of
the purpose or purposes for which the meeting is called. If not otherwise fixed
under Code Section 14-2-703 or 14-2-707, the record date for determining
shareholders entitled to notice of and entitled to vote at an annual or special
shareholders' meeting is the close of business on the day before the first
notice is delivered to shareholders.
SECTION 2.05 SHAREHOLDER NOMINATIONS AND PROPOSALS
(a) No proposal for a shareholder vote shall be submitted
by a shareholder (a "Shareholder Proposal") to the corporation's shareholders
unless the shareholder submitting such proposal (the "Proponent") shall have
filed a written notice setting forth with particularity (i) the names and
business addresses of the Proponent and all natural persons, corporations,
partnerships, trusts or any other type of legal entity or recognized ownership
vehicle (collectively, "Persons") acting in concert with the Proponent; (ii) the
name and address of the Proponent and the Persons identified in clause (i), as
they appear on the corporation's books (if they so appear); (iii) the class and
number of shares of the corporation beneficially owned by the Proponent and the
Persons identified in clause (i); (iv) a description of the Shareholder Proposal
containing all material information relating thereto; and (v) such other
information as the Board of Directors reasonably determines is necessary or
appropriate to enable the Board of Directors and shareholders of the corporation
to consider the Shareholder Proposal. The presiding officer at any shareholders'
meeting may determine that any Shareholder Proposal was not made in accordance
with the procedures prescribed in these bylaws or is otherwise not in accordance
with law, and if it is so determined, such officer shall so declare at the
meeting and the Shareholder Proposal shall be disregarded.
(b) Only persons who are selected and recommended by the
Board of Directors or the committee of the Board of Directors designated to make
nominations, or who are nominated by shareholders in accordance with the
procedures set forth in this Section 2.05, shall be eligible for election, or
qualified to serve, as directors. Nominations of individuals for election to the
Board of Directors of the corporation at any annual meeting or any special
meeting of shareholders at which directors are to be elected may be made by any
shareholder of the corporation entitled to vote for the election of directors at
that meeting by compliance with the procedures set forth in this Section 2.05.
Nominations by shareholders shall be made by written notice (a "Nomination
Notice"), which shall set forth (i) as to each individual nominated, (A) the
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<PAGE> 7
name, date of birth, business address and residence address of such individual;
(B) the business experience during the past five years of such nominee,
including his or her principal occupations and employment during such period,
the name and principal business of any corporation or other organization in
which such occupations and employment were carried on, and such other
information as to the nature of his or her responsibilities and level of
professional competence as may be sufficient to permit assessment of his or her
prior business experience; (C) whether the nominee is or has ever been at any
time a director, officer or owner of 5% or more of any class of capital stock,
partnership interests or other equity interest of any corporation, partnership
or other entity; (D) any directorships held by such nominee in any company with
a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or subject to the requirements of Section
15(d) of such Act or any company registered as an investment company under the
Investment Company Act of 1940, as amended; and (E) whether such nominee has
ever been convicted in a criminal proceeding or has ever been subject to a
judgment, order, finding or decree of any federal, state or other governmental
entity, concerning any violation of federal, state or other law, or any
proceeding in bankruptcy, which conviction, order, finding, decree or proceeding
may be material to an evaluation of the ability or integrity of the nominee; and
(ii) as to the Person submitting the Nomination Notice and any Person acting in
concert with such Person, (X) the name and business address of such Person, (Y)
the name and address of such Person as they appear on the corporation's books
(if they so appear), and (Z) the class and number of shares of the corporation
that are beneficially owned by such Person. A written consent to being named in
a proxy statement as a nominee, and to serve as a director if elected, signed by
the nominee, shall be filed with any Nomination Notice. If the presiding officer
at any shareholders' meeting determines that a nomination was not made in
accordance with the procedures prescribed by these bylaws, he shall so declare
to the meeting and the defective nomination shall be disregarded.
(c) Nomination Notices and Shareholder Proposals
shall be delivered to the Secretary of the corporation at the principal
executive office of the corporation (i) within 120 days prior to an annual
meeting of shareholders or (ii) within 10 days after the date that notice of a
special meeting is sent to shareholders.
SECTION 2.06 VOTING GROUP
The term "voting group" means all shares of one or more classes or series that
under the Code or the articles of incorporation are entitled to vote and be
counted together collectively on a matter at a meeting of shareholders. All
shares entitled by the Code or the articles of incorporation to vote generally
on the matter are for that purpose a single voting group.
SECTION 2.07 QUORUM FOR VOTING GROUPS
Shares entitled to vote as a separate voting group may take action on a matter
at a meeting of shareholders only if a quorum of those shares exists with
respect to that matter. Unless the Code or the articles of incorporation provide
otherwise, a majority of
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<PAGE> 8
the votes (as represented by person or by proxy) entitled to be cast on the
matter by the voting group constitutes a quorum of that voting group for action
on that matter. Once a share is represented for any purpose at a meeting, other
than solely to object to holding the meeting or to transacting business at the
meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
must be set for that adjourned meeting as provided in Section 7.7.
SECTION 2.08 VOTE REQUIRED FOR ACTION
If a quorum exists, action on a matter (other than the election of directors) by
a voting group is approved if the votes cast within the voting group favoring
the action exceed the votes cast opposing the action, unless the Code, the
articles of incorporation, or the bylaws require a greater number of affirmative
votes. If the Code or the articles of incorporation provide for voting by a
single voting group on a matter, action on that matter is taken when voted upon
by that voting group as provided in this Section and in Sections 2.06 and 2.07.
If the Code or the articles of incorporation provide for voting by two or more
voting groups on a matter, action on that matter is taken only when voted upon
by each of those voting groups counted separately as provided in this section
and in Sections 2.06 and 2.07. Action may be taken by one voting group on a
matter even though no action is taken by another voting group entitled to vote
on the matter.
SECTION 2.09 VOTING FOR DIRECTORS
Unless otherwise provided in the articles of incorporation or the Code,
directors are elected by a plurality of the votes cast by the shares entitled to
vote in the election at a meeting at which a quorum is present. Shareholders do
not have a right to cumulate their votes for directors unless the articles of
incorporation so provide.
SECTION 2.10 VOTING OF SHARES
Unless the Code or the articles of incorporation provide otherwise, each
outstanding share having voting rights is entitled to one vote on each matter
voted on at a meeting of shareholders. Shareholders voting their shares shall
vote their shares by voice vote or by show of hands unless (i) a qualified
voting shareholder, prior to any voting on a matter, demands a vote by ballot or
(ii) the presiding officer determines in his or her sole discretion to vote by
ballot. If a demand occurs or the presiding officer determines to do so,
shareholders shall vote by ballot. Each ballot shall state the name of the
shareholder voting and the number of shares voted by the shareholder. If a
ballot is cast by proxy, the ballot must also state the name of the proxy.
SECTION 2.11 PROXIES
(a) A shareholder may vote his or her shares in person or
by proxy. For a shareholder to vote shares by proxy, a shareholder or his or her
agent or attorney in fact shall appoint a proxy by executing a writing that
authorizes another person or persons to vote or otherwise act for the
shareholder by signing and dating an appointment form. An appointment of proxy
is effective when the corporate agent authorized to tabulate
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<PAGE> 9
votes receives an original or facsimile transmission of a signed appointment
form. The appointment of proxy is valid for only one meeting and any
adjournments, and the appointment form must specify that meeting. In any event,
the appointment is not valid for longer than eleven (11) months unless the
appointment form expressly provides for a longer period. The corporate secretary
shall file any appointment of proxy with the records of the meeting to which the
appointment relates.
(b) An appointment of proxy is revocable or irrevocable
as provided in the Code.
(c) If any person questions the validity of an
appointment of proxy, that person shall submit the appointment form for
examination to the secretary of the shareholders' meeting or to a proxy officer
or committee appointed by the person presiding at the meeting. The secretary,
proxy officer, or committee, as the case may be, will determine the appointment
form's validity. The secretary's reference in the meeting's minutes to the
regularity of the appointment of proxy will be prima facie evidence of the facts
stated in the minutes for establishing a quorum at the meeting and for all other
purposes.
SECTION 2.12 CHAIRMAN OF THE BOARD
The Chairman of the Board shall preside over every shareholders' meeting unless
the shareholders elect another person to preside at a meeting. The Chairman of
the Board may appoint any persons he or she deems necessary to assist with the
meeting.
SECTION 2.13 INSPECTORS
The corporation may appoint one or more inspectors to act at a shareholders'
meeting and to make a written report of the inspectors' determinations. Each
inspector shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of the inspector's
ability. The inspector shall: ascertain the number of shares outstanding and the
voting power of each; determine the shares represented at a meeting; determine
the validity of proxies and ballots; count all votes; and determine the result.
An inspector may be an officer or employee of the corporation.
SECTION 2.14 ADJOURNMENTS
Whether or not a quorum is present to organize a meeting, any meeting of
shareholders (including an adjourned meeting) may be adjourned by the holders of
a majority of the voting shares represented at the meeting to reconvene at a
specific time and place, but no later than 120 days after the date fixed for the
original meeting unless the requirements of the Code concerning the selection of
a new record date have been met. At any reconvened meeting within that time
period, any business may be transacted that could have been transacted at the
meeting that was adjourned. If notice of the adjourned meeting was properly
given, it shall not be necessary to give any notice of the reconvened meeting or
of the business to be transacted, if the date, time and place of the reconvened
meeting are announced at the meeting that was adjourned and before adjournment;
provided, however, that if a new record date is or must be fixed, notice of
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<PAGE> 10
the reconvened meeting must be given to persons who are shareholders as of the
new record date.
SECTION 2.15 ACTION BY SHAREHOLDERS WITHOUT A MEETING
Action required or permitted by the Code to be taken at a shareholders' meeting
may be taken without a meeting if the action is taken by at least two-thirds
(2/3) of all shareholders entitled to vote on the action. The action must be
evidenced by one or more written consents bearing the date of signature and
describing the action taken, signed by at least two-thirds (2/3) of all
shareholders entitled to take action without a meeting, and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
ARTICLE III. THE BOARD OF DIRECTORS
SECTION 3.01 GENERAL POWERS
All corporate powers shall be exercised by or under the authority of, and the
business and affairs of the corporation shall be managed under the direction of,
the Board of Directors, subject to any limitation set forth in the articles of
incorporation, bylaws approved by the shareholders, or agreements among the
shareholders that are otherwise lawful. No limitation upon the authority of a
director, whether contained in the articles of incorporation, bylaws, or an
agreement among shareholders, shall be effective against persons, other than
shareholders and directors, who do not have actual knowledge of the limitation.
SECTION 3.02 NUMBER, ELECTION AND TERM OF OFFICE
The number of directors of the corporation shall be seven (7) and may be
adjusted by resolution of the shareholders or of the Board of Directors from
time to time. Any resolution of the Board of Directors increasing or decreasing
the number of directors of the corporation shall require the affirmative vote of
at least two-thirds (2/3) of the entire Board of Directors. The directors shall
be divided into three classes, Class I, Class II and Class III, each consisting,
as nearly equal in number as possible, of one-third of the total number of
directors constituting the entire Board of Directors. At the annual shareholders
meeting of 1999, the terms of the initial Class I directors shall expire and a
new Class I shall be elected for a term expiring at the third annual meeting of
shareholders following their election and upon the election and qualification of
their respective successors; at the annual shareholders meeting of 2000, the
terms of the initial Class II directors shall expire and a new Class II shall be
elected for a term expiring at the third annual meeting of shareholders
following their election and upon the election and qualification of their
respective successor; and at the annual shareholders meeting of 2001, the terms
of the initial Class III directors shall expire and a new Class III shall be
elected for a term expiring at the third annual meeting of shareholders
following their election and upon the election and qualification of their
respective successor. At each succeeding annual meeting of shareholders,
successors to the class of directors whose term expires at the annual meeting of
shareholders shall be elected for a three-year term.
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<PAGE> 11
Except as provided in Section 3.04, a director shall be elected by the
affirmative vote of the holders of a plurality of the shares represented at the
meeting of shareholders at which the director stands for election and entitled
to elect such director.
The number of directors may be increased or decreased from
time to time as provided herein or by amendment to these bylaws and the articles
of incorporation of the corporation; provided, however, that any amendment to
the bylaws by the Board of Directors which increases or decreases the number of
directors of the corporation must be approved by the affirmative vote of at
least two-thirds (2/3) of the entire Board of Directors; provided further, that
the total number of directors at any time shall not be less than three provided,
however, that no decrease in the number of directors shall have the effect of
shortening the term of an incumbent director. In the event of any increase or
decrease in the authorized number of directors, each director then serving shall
continue as a director of the class of which he is a member until the expiration
of his current term, or his earlier resignation, retirement, disqualification,
removal from office or death, and the newly created or eliminated directorships
resulting from such increase or decrease shall be apportioned by the Board of
Directors among the three classes of directors so as to maintain such classes as
nearly equal as possible; provided, however, that any such additional directors
elected by the Board shall serve only for a term expiring at the next meeting of
the shareholders called for the purpose of electing directors. Each director
shall serve until his successor is elected and qualified or until his earlier
resignation, retirement, disqualification, removal from office, or death.
SECTION 3.03 REMOVAL
The shareholders may remove one or more directors only for cause and only by the
affirmative vote of the holders of at least two-thirds (2/3) of all votes
entitled to be cast in the election of such directors. If the director was
elected by a voting group of shareholders, only the shareholders of that voting
group may participate in the vote to remove the director. The shareholders may
remove a director only at a special meeting called for the purpose of removing
the director, and the meeting notice must state that the purpose, or one of the
purposes, of the meeting is removal of the director. For purposes of this
Section, "cause" shall mean only (i) conviction of a felony, (ii) declaration of
unsound mind by an order of a court, (iii) gross dereliction of duty, (iv)
commission of an action involving moral turpitude or (v) commission of an action
which constitutes intentional misconduct or a knowing violation of law if such
action results in an improper substantial personal benefit and a material injury
to the corporation.
SECTION 3.04 VACANCIES
If a vacancy occurs on the Board of Directors, the first to act of the
shareholders or the Board of Directors may fill the vacancy for the unexpired
term. But if the vacancy results from an increase in the number of directors in
the Board of Directors or the removal of a director by the corporation's
shareholders, and the Board of Directors acts first to fill this vacancy, the
director elected will serve a term continuing only until the next election of
directors by the shareholders and until the election and qualification of a
successor. Even if the directors remaining in office constitute fewer than a
quorum of
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the Board of Directors, the directors may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office. If the vacant
office was held by a director elected by a voting group of shareholders, only
the holders of shares of that voting group or the remaining directors elected by
that voting group are entitled to vote to fill the vacancy.
SECTION 3.05 COMPENSATION
Unless the articles of incorporation provide otherwise, the Board of Directors
may determine from time to time the compensation, if any, that directors may
receive for their services as directors. A director may also serve the
corporation in a capacity other than that of director and receive compensation
determined by the Board of Directors for services rendered in such other
capacity.
SECTION 3.06 COMMITTEES
The Board of Directors by resolution may create one or more committees and
appoint members of the Board of Directors to serve on such committees at the
discretion of the Board of Directors. Except as limited by the Code, each
committee will have the authority set forth in the resolution establishing such
committee.
ARTICLE IV. MEETINGS OF THE BOARD OF DIRECTORS
SECTION 4.01 REGULAR MEETINGS
The Board of Directors shall hold a regular meeting immediately after an annual
shareholders' meeting or a special shareholders' meeting held in lieu of an
annual meeting. In addition, the Board of Directors may schedule and hold other
meetings at regular intervals throughout the year.
SECTION 4.02 SPECIAL MEETINGS
The Board of Directors shall hold a special meeting upon the call of the
Chairman of the Board, the President or any two directors.
SECTION 4.03 PLACE OF MEETINGS
The Board of Directors may hold meetings, both regular and special, at any place
in or out of the state of Georgia. Regular meetings shall be held at the place
established from time to time for regular meetings. Special meetings shall be
held at the place set forth in the notice of the meeting or, if the special
meeting is held in accordance with a waiver of notice of the meeting, at the
place set forth in the waiver of notice.
SECTION 4.04 NOTICE OF MEETINGS
Unless the articles of incorporation provide otherwise, the corporation is not
required to give notice of the date, time, place, or purpose of a regular
meeting of the Board of Directors. The corporation shall, give at least one (1)
day's prior notice of the date, time, and place of a special meeting of the
Board of Directors. Notices of special meetings shall comply with Section 5.01
and may be waived in accordance with Section 5.02.
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SECTION 4.05 QUORUM
Unless the Code, the articles of incorporation, or these bylaws require a
greater number, a quorum of the Board of Directors consists of a majority of the
total number of directors that has been initially fixed in the articles of
incorporation or that has been later prescribed by resolution of the
shareholders or of the Board of Directors in accordance with Section 3.02.
SECTION 4.06 VOTE REQUIRED FOR ACTION
(a) If a quorum is present when a vote is taken, the
affirmative vote of a majority of directors present is the act of the Board of
Directors unless the Code, the articles of incorporation, or these bylaws
require the vote of a greater number of directors.
(b) A director who is present at a meeting of the Board
of Directors or a committee of the Board of Directors when corporate action is
taken is deemed to have assented to the action taken unless:
(i) he or she objects at the beginning of the
meeting (or promptly upon his or her arrival) to holding it or
transacting business at the meeting;
(ii) his or her dissent or abstention from the
action taken is entered in the minutes of the meeting; or
(iii) he or she delivers written notice of his or her
dissent or abstention to the presiding officer of the meeting before
its adjournment or to the corporation immediately after adjournment of
the meeting.
The right to dissent or abstain is not available to a director who votes in
favor of the action taken.
SECTION 4.07 PARTICIPATION BY CONFERENCE TELEPHONE
Any or all directors may participate in a meeting of the Board of Directors or
of a committee of the Board of Directors through the use of any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by this means
shall be deemed to be present in person at the meeting.
SECTION 4.08 ADJOURNMENTS
A majority of the directors present at a meeting may adjourn the meeting from
time to time. This right to adjourn exists whether or not a quorum is present at
the meeting and applies to regular as well as special meetings, including any
meetings that are adjourned and reconvened. If a meeting of the Board of
Directors is adjourned to a different date,
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time, or place, the corporation is not required to give notice of the new date,
time, or place or of the business to be transacted, if the new date, time, or
place is announced at the meeting before adjournment. At the meeting reconvened
after adjournment, the Board of Directors may transact any business that could
have been transacted at the meeting that was adjourned.
SECTION 4.09 ACTION BY DIRECTORS WITHOUT A MEETING
Any action required or permitted by the Code to be taken at any meeting of the
Board of Directors (or a committee of the Board of Directors) may be taken
without a meeting if the action is taken by all of the members of the Board of
Directors (or the committee, as the case may be). The action must be evidenced
by one or more written consents describing the action taken, signed by each of
the directors (or each of the directors serving on the committee, as the case
may be), and delivered to the corporation for inclusion in the minutes or filing
with the corporate records.
ARTICLE V. MANNER OF NOTICE TO AND WAIVER OF NOTICE
BY SHAREHOLDERS AND DIRECTORS
SECTION 5.01 MANNER OF NOTICE
(a) Whenever these bylaws require notice to be given to
any shareholder or director, the notice must comply with this Section 5.01 in
addition to any other section of these bylaws concerning notice and any
provision in the articles of incorporation.
(b) Notice to shareholders shall be in writing. Notice to
a director may be written or oral.
(c) Notice may be communicated in person; by telephone,
telegraph, teletype, facsimile, or other form of wire or wireless communication;
or by mail or private carrier. If these forms of personal notice are
impracticable, notice may be communicated by a newspaper of general circulation
in the area where published, or by radio, television, or other form of public
broadcast communication. Unless otherwise provided in the Code, the articles of
incorporation, or these bylaws, notice by facsimile transmission, telegraph, or
teletype shall be deemed to be notice in writing.
(d) Written notice to shareholders, if the notice is in a
comprehensible form, is effective when mailed, if mailed with first-class
postage prepaid and correctly addressed to the shareholder's address shown in
the corporation's current record of shareholders.
(e) Except as provided in subsection 5.01(d), written
notice, if in a comprehensible form, is effective at the earliest of the
following:
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(i) when received, or when delivered, properly
addressed, to the addressee's last known principal place of business or
residence;
(ii) five (5) days after its deposit in the mail, as
evidenced by the postmark, or such longer period as provided in the
articles of incorporation or these bylaws, if mailed with first-class
postage prepaid and correctly addressed; or
(iii) on the date shown on the return receipt, if
sent by registered or certified mail, return receipt requested, and the
receipt is signed by or on behalf of the addressee.
(f) Oral notice is effective when communicated if
communicated in a comprehensible manner.
(g) In calculating time periods for notice, when a period
of time measured in days, weeks, months, years, or other measurement of time is
prescribed for the exercise of any privilege or the discharge of any duty, the
first day shall not be counted but the last day shall be counted.
SECTION 5.02 WAIVER OF NOTICE
(a) A shareholder may waive any notice before or after
the date and time stated in the notice. Except as provided in subsection
5.02(b), the waiver must be in writing, be signed by the shareholder entitled to
the notice, and be delivered to the corporation for inclusion in the minutes or
filing with the corporate records.
(b) A shareholder's attendance at a meeting:
(i) waives objection to lack of notice or defective
notice of the meeting, unless the shareholder at the beginning of the meeting
objects to holding the meeting or transacting business at the meeting; and
(ii) waives objection to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter when it is presented.
(c) A shareholder's waiver of notice is not required to
specify the business transacted or the purpose of the meeting unless required by
the Code or these bylaws.
(d) A director may waive any notice before or after the
date and time stated in the notice. Except as provided in paragraph (e) of this
Section 5.02, the waiver must be in writing, signed by the director entitled to
the notice, and delivered to the corporation for inclusion in the minutes or
filing with the corporate records.
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(e) A director's attendance at or participation in a
meeting waives any required notice to him or her of the meeting unless the
director at the beginning of the meeting (or promptly upon his or her arrival)
objects to holding the meeting or transacting business at the meeting and does
not thereafter vote for or assent to action taken at the meeting.
ARTICLE VI. OFFICERS
SECTION 6.01 NUMBER AND DUTIES
The officers of the corporation shall consist of a Chairman of the Board,
President and a Secretary, and may include a Treasurer and one or more Vice
Presidents and Assistant Secretaries and any other officers as may be appointed
by the Board of Directors, as it determines, in its sole discretion, to be
necessary or desirable. The officers will have the authority and will perform
the duties as set forth in these bylaws. The other officers that are appointed
will have the authority and will perform the duties as established by the Board
of Directors from time to time.
SECTION 6.02 APPOINTMENT AND TERM
The Board of Directors appoints the individuals who will serve as officers of
the corporation. An individual may simultaneously hold more than one office. All
officers serve at the pleasure of the Board of Directors. The Board of Directors
may remove with or without cause any officer.
SECTION 6.03 COMPENSATION
The Board of Directors or a committee thereof will fix the compensation, if any,
of all corporate officers.
SECTION 6.04 CHAIRMAN OF THE BOARD
The Chairman of the Board shall preside at all meetings of shareholders and the
Board of Directors. The Chairman of the Board shall have such other powers and
duties as may be delegated to him or her from time to time by the Board of
Directors.
SECTION 6.05 PRESIDENT
The President will be the chief executive officer of the corporation and will
have general supervision of the business of the corporation. The President will
see that all orders and resolutions of the Board of Directors are carried into
effect. Unless the articles of incorporation, these bylaws, or a resolution of
the Board of Directors provides otherwise, the President may execute and deliver
on behalf of the corporation any contract, conveyance, or similar document not
requiring approval by the Board of Directors or shareholders as provided in the
Code. The President will have any other authority and will perform any other
duties that the Board of Directors may delegate to him or her from time to time.
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SECTION 6.06 VICE PRESIDENTS
In the case of absence or disability of the President, or at the direction of
the President, the Vice President, if any, will have the authority and perform
the duties of the President. A Vice President will have any other authority and
will perform any other duties that the Board of Directors may delegate to him or
her from time to time.
SECTION 6.07 SECRETARY
The Secretary will have responsibility for preparing minutes of the acts and
proceedings of all meetings of the shareholders, of the Board of Directors, and
of any committees of the Board of Directors. The Secretary will have authority
to give all notices required by the Code, other applicable law, or these bylaws.
The Secretary will have responsibility for the custody of the corporate books,
records, contracts, and other corporate documents. The Secretary will have
authority to affix the corporate seal to any lawfully executed document and will
sign any instruments that require his or her signature. The Secretary will
authenticate records of the corporation. The Secretary will have any other
authority and will perform any other duties that the Board of Directors may
delegate to him or her from time to time. In the case of absence or disability
of the Secretary, or at the direction of the President, any assistant secretary
has the authority and may perform the duties of the Secretary.
SECTION 6.08 TREASURER
The Treasurer, if any, will have responsibility for the custody of all funds and
securities belonging to the corporation and for the receipt, deposit, or
disbursement of funds and securities under the direction of the Board of
Directors. The Treasurer will cause to be maintained true accounts of all
receipts and disbursements and will make reports of these to the Board of
Directors, upon its request, and to the President, upon his or her request. The
Treasurer will have any other authority and will perform any other duties that
the Board of Directors may delegate to him or her from time to time.
SECTION 6.09 BONDS
The Board of Directors by resolution may require any or all of the officers,
agents, or employees of the corporation to give bonds to the corporation, with
sufficient surety or sureties, conditioned on the faithful performance of the
duties of their respective offices or positions, and to comply with any other
conditions that from time to time may be required by the Board of Directors.
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ARTICLE VII. SHARES
SECTION 7.01 AUTHORIZATION AND ISSUANCE OF SHARES
The Board of Directors may authorize shares of any class or series provided for
in the articles of incorporation to be issued for consideration deemed valid
under the provisions of the Code. In addition, before the corporation issues the
shares authorized by the Board of Directors, the Board of Directors must
determine that the consideration received or to be received for shares to be
issued is adequate. To the extent provided in the articles of incorporation, the
Board of Directors will determine the preferences, limitations, and relative
rights of such shares before their issuance.
SECTION 7.02 SHARE CERTIFICATES
The interest of each shareholder shall be represented by a certificate or
certificates representing shares of the corporation which shall be in such form
as Board of Directors may from time to time adopt. Share certificates shall be
numbered consecutively, shall be in registered form shall indicate the date of
issuance, the name of the corporation and that it is organized under the laws of
the State of Georgia, the name of the shareholder, and the number and class of
shares and the designation of the series, if any, represented by the
certificate. Each certificate shall be signed by any one of the Chairman of the
Board, the President, a Vice President, the Secretary or the Treasurer. The
corporate seal need not be affixed.
SECTION 7.03 REGISTERED OWNER
The corporation may treat the registered owner of any share of stock of the
corporation as the person exclusively entitled to vote that share and to receive
any dividend or other distribution with respect to that share and as the
exclusive owner of that share for all other purposes. Accordingly, the
corporation is not required to recognize any other person's equitable, or other,
claim to or interest in that share, whether or not the corporation has express
or other notice of the claim or interest, except as provided otherwise by law.
SECTION 7.04 TRANSFERS OF SHARES
The Board of Directors will designate a transfer agent to transfer shares on the
transfer books of the corporation when the agent is properly directed to do so.
The transfer agent will keep these books at his or her office. Only the person
named on a certificate, or his or her attorney-in-fact lawfully constituted by a
writing, may direct the transfer agent to transfer the share represented by that
certificate. Before the corporation issues a new certificate to the new owner of
the share, the old certificate must be surrendered to the corporation for
cancellation. In the case of a certificate claimed to have been lost, stolen, or
destroyed, the person making the claim must comply with Section 7.06.
SECTION 7.05 DUTY OF CORPORATION TO REGISTER TRANSFER
Notwithstanding any provision in Section 7.04, the corporation is not under a
duty to register the transfer of a share unless:
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(a) the certificate representing that share is endorsed
by the appropriate person or persons;
(b) reasonable assurance is given that the endorsement
or affidavit (in the case of a lost, stolen, or destroyed certificate) is
genuine and effective;
(c) the corporation either has no duty to inquire into
adverse claims or has discharged that duty;
(d) the requirements of any applicable law relating to
the collection of taxes for the proposed transfer have been met; and
(e) the transfer is in fact rightful or is to a bona fide
purchaser.
SECTION 7.06 LOST, STOLEN, OR DESTROYED CERTIFICATES
Any person claiming a share certificate has been lost, stolen, or destroyed must
make an affidavit or affirmation of that fact in the manner prescribed by the
Board of Directors. In addition, if the Board of Directors requires, the person
must give the corporation a bond of indemnity in a form and amount, and with one
or more sureties, satisfactory to the Board of Directors. Once the person has
satisfactorily completed these steps, the corporation will issue an appropriate
new certificate to replace the certificate alleged to have been lost, stolen, or
destroyed.
SECTION 7.07 RECORD DATE WITH REGARD TO SHAREHOLDER ACTION
The Board of Directors may fix a future date as the record date in order to
determine the shareholders entitled to notice of a shareholders' meeting, to
demand a special meeting, to vote, or to take any other action (except an action
provided for in Section 8.02). Any future date fixed as a record date may not be
more than seventy (70) days before the date on which the meeting is to be held
or the action requiring a determination of shareholders is to be taken. A
determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting. If the Board of Directors does not fix a future date as a record date,
the corporation will determine the record date in accordance with the Code.
ARTICLE VIII. DISTRIBUTIONS
SECTION 8.01 AUTHORIZATION OR DECLARATION
Subject to any restriction in the articles of incorporation, the Board of
Directors from time to time in its discretion may authorize or declare and the
corporation may make distributions to the shareholders in accordance with the
Code.
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SECTION 8.02 RECORD DATE WITH REGARD TO DISTRIBUTIONS
The Board of Directors may fix a future date as the record date in order to
determine shareholders entitled to a distribution (other than one involving a
purchase, redemption, or other reacquisition of the corporation's shares). If
the Board of Directors does not fix a future date as the record date, the
corporation will determine the record date in accordance with the Code.
ARTICLE IX. INDEMNIFICATION
SECTION 9.01 DEFINITIONS
As used in this Article, the term:
(a) "corporation" includes any domestic or foreign
predecessor entity of the corporation in a merger or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
(b) "director" or "officer" means an individual who is or
was a director or board-elected officer, respectively, of the corporation or
who, while a director or officer of the corporation, is or was serving at the
corporation's request as a director, officer, partner, trustee, employee, or
agent of another domestic or foreign corporation, partnership, joint venture,
trust, employee benefit plan, or other entity. A director or officer is
considered to be serving an employee benefit plan at the corporation's request
if his or her duties to the corporation also impose duties on, or otherwise
involve services by, the director or officer to the plan or to participants in
or beneficiaries of the plan. "Director" or "officer" includes, unless the
context otherwise requires, the estate or personal representative of a director
or officer.
(c) "disinterested director" or "disinterested officer"
means a director or officer, respectively who at the time of an evaluation
referred to in subsection 9.05(b) is not:
(i) A party to the proceeding; or
(ii) An individual having a familial, financial,
professional, or employment relationship with the person whose advance for
expenses is the subject of the decision being made with respect to the
proceeding, which relationship would, in the circumstances, reasonably be
expected to exert an influence on the director's or officer's judgment when
voting on the decision being made.
(d) "expenses" includes counsel fees.
(e) "liability" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to an
employee benefit plan), or reasonable expenses incurred with respect to a
proceeding.
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(f) "party" includes an individual who was, is, or is
threatened to be made a named defendant or respondent in a proceeding.
(g) "proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative or investigative and whether formal or informal.
(h) "reviewing party" shall mean the person or persons making
the determination as to reasonableness of expenses pursuant to Section 9.05 of
this Article, and shall not include a court making any determination under this
Article or otherwise.
SECTION 9.02 BASIC INDEMNIFICATION ARRANGEMENT
(a) The corporation shall indemnify an individual who is a
party to a proceeding because he or she is or was a director or officer against
liability incurred in the proceeding; provided, however that the corporation
shall not indemnify a director or officer under this Article for any liability
incurred in a proceeding in which the director or officer is adjudged liable to
the corporation or is subjected to injunctive relief in favor of the
corporation:
(i) For any appropriation, in violation of his or
her duties, of any business opportunity of the corporation;
(ii) For acts or omissions which involve intentional
misconduct or a knowing violation of law;
(iii) For the types of liability set forth in Section
14-2-832 of the Code; or
(iv) For any transaction from which he or she
received an improper personal benefit.
(b) If any person is entitled under any provision of this
Article to indemnification by the corporation for some portion of liability
incurred by him or her, but not the total amount thereof, the corporation shall
indemnify such person for the portion of such liability to which he or she is
entitled.
SECTION 9.03 ADVANCES FOR EXPENSES
(a) The corporation shall, before final disposition of a
proceeding, advance funds to pay for or reimburse the reasonable expenses
incurred by a director or officer who is a party to a proceeding because he or
she is a director or officer if he or she delivers to the corporation:
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(i) A written affirmation of his or her good
faith belief that his or her conduct does not constitute behavior of the kind
described in subsection 9.02(a) above; and
(ii) His or her written undertaking (meeting the
qualifications set forth below in subsection 9.03(b)) to repay any funds
advanced if it is ultimately determined that he or she is not entitled to
indemnification under this Article or the Code.
(b) The undertaking required by subsection 9.03(a)(2)
above must be an unlimited general obligation of the proposed indemnitee but
need not be secured and shall be accepted without reference to the financial
ability of the proposed indemnitee to make repayment. If a director or officer
seeks to enforce his or her rights to indemnification in a court pursuant to
Section 9.04 below, such undertaking to repay shall not be applicable or
enforceable unless and until there is a final court determination that he or she
is not entitled to indemnification, as to which all rights of appeal have been
exhausted or have expired.
SECTION 9.04 COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES
(a) A director or officer who is a party to a proceeding
because he or she is a director or officer may apply for indemnification or
advance for expenses to the court conducting the proceeding or to another court
of competent jurisdiction. For purposes of this Article, the corporation hereby
consents to personal jurisdiction and venue in any court in which is pending a
proceeding to which a director or officer is a party. Regardless of any
determination by the Reviewing Party as to the reasonableness of expenses, and
regardless of any failure by the Reviewing Party to make a determination as to
the reasonableness of expenses, such court's review shall be a de novo review.
After receipt of an application and after giving any notice it considers
necessary, the court shall:
(i) Order indemnification or advance for
expenses if it determines that the director or officer is entitled to
indemnification or advance for expenses; or
(ii) Order indemnification or advance for
expenses if it determines, in view of all the relevant circumstances, that it is
fair and reasonable to indemnify the director or officer, or to advance expenses
to the director or officer, even if the director or officer failed to comply
with the requirements for advance of expenses, or was adjudged liable in a
proceeding referred to in subsection 9.02(a)(4) above.
(b) If the court determines that the director or officer
is entitled to indemnification or advance for expenses, the corporation shall
pay the director's or officer's reasonable expenses to obtain court-ordered
indemnification or advance for expenses.
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SECTION 9.05 DETERMINATION OF REASONABLENESS OF EXPENSES
(a) The corporation acknowledges that indemnification of
a director or officer under Section 9.02 has been pre-authorized by the
corporation as permitted by Section 14-2-859(a) of the Code, and that pursuant
authority exercised under Section 14-2-856 of the Code, no determination need be
made for a specific proceeding that indemnification of the director or officer
is permissible in the circumstances because he or she has met a particular
standard of conduct. Nevertheless, except as set forth in subsection 9.05(b)
below, evaluation as to reasonableness of expenses of a director or officer for
a specific proceeding shall be made as follows:
(i) If there are two or more disinterested
directors, by the board of directors of the corporation by a majority vote of
all disinterested directors (a majority of whom shall for such purpose
constitute a quorum) or by a majority of the members of a committee of two or
more disinterested directors appointed by such a vote; or
(ii) If there are fewer than two disinterested
directors, by the board of directors (in which determination directors who do
not qualify as disinterested directors may participate); or
(iii) By the shareholders, but shares owned by or
voted under the control of a director or officer who at the time does not
qualify as a disinterested director or disinterested officer may not be voted on
the determination.
(b) Notwithstanding the requirement under subsection
9.05(a) that the Reviewing Party evaluate the reasonableness of expenses claimed
by the proposed indemnitee, any expenses claimed by the proposed indemnitee
shall be deemed reasonable if the Reviewing Party fails to make the evaluation
required by subsection 9.05(a) within sixty (60) days following the proposed
indemnitee's written request for indemnification or advance for expenses.
SECTION 9.06 INDEMNIFICATION OF EMPLOYEES AND AGENTS
The corporation may indemnify and advance expenses under this Article to an
employee or agent of the corporation who is not a director or officer to the
same extent and subject to the same conditions that a Georgia corporation could,
without shareholder approval under Section 14-2-856 of the Code, indemnify and
advance expenses to a director, or to any lesser extent (or greater extent if
permitted by law) determined by the board of directors, in each case consistent
with public policy.
SECTION 9.07 LIABILITY INSURANCE
The corporation may purchase and maintain insurance on behalf of an individual
who is a director, officer, employee or agent of the corporation or who, while a
director, officer, employee or agent of the corporation, serves at the
corporation's request as a director, officer, partner, trustee, employee or
agent of another domestic or foreign corporation,
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partnership, joint venture, trust, employee benefit plan, or other entity
against liability asserted against or incurred by him or her in that capacity or
arising from his or her status as a director, officer, employee, or agent,
whether or not the corporation would have power to indemnify or advance expenses
to him or her against the same liability under this Article or the Code.
SECTION 9.08 WITNESS FEES
Nothing in this Article shall limit the corporation's power to pay or reimburse
expenses incurred by a person in connection with his or her appearance as a
witness in a proceeding at a time when he or she is not a party.
SECTION 9.09 REPORT TO SHAREHOLDERS
To the extent and in the manner required by the Code from time to time, if the
corporation indemnifies or advances expenses to a director or officer in
connection with a proceeding by or in the right of the corporation, the
corporation shall report the indemnification or advance to the shareholders.
SECTION 9.10 SECURITY FOR INDEMNIFICATION OBLIGATIONS
The corporation may at any time and in any manner, at the discretion of the
board of directors, secure the corporation's obligations to indemnify or advance
expenses to a person pursuant to this Article.
SECTION 9.11 NO DUPLICATION OF PAYMENTS
The corporation shall not be liable under this Article to make any payment to a
person hereunder to the extent such person has otherwise actually received
payment (under any insurance policy, agreement or otherwise) of the amounts
otherwise payable hereunder.
SECTION 9.12 SUBROGATION
In the event of payment under this Article, the corporation shall be subrogated
to the extent of such payment to all of the rights of recovery of the
indemnitee, who shall execute all papers required and shall do everything that
may be necessary to secure such rights, including the execution of such
documents necessary to enable the corporation effectively to bring suit to
enforce such rights.
SECTION 9.13 CONTRACT RIGHTS.
The right to indemnification and advancement of expenses conferred hereunder to
directors and officers shall be a contract right and shall not be affected
adversely to any director or officer by any amendment of these bylaws with
respect to any action or inaction occurring prior to such amendment; provided,
however, that this provision shall not confer upon any indemnitee or potential
indemnitee (in his or her capacity as such) the right to consent or object to
any subsequent amendment of these bylaws.
SECTION 9.14 SPECIFIC PERFORMANCE
In any proceeding brought by or on behalf of an officer or director to
specifically enforce the provisions of this Article, the corporation hereby
waives the claim or defense therein
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that the plaintiff or claimant has an adequate remedy at law, and the
corporation shall not urge in any such proceeding the claim or defense that such
remedy at law exists. The provisions of this Section 9.15, however, shall not
prevent the officer or director from seeking a remedy at law in connection with
any breach of the provisions of this Article.
SECTION 9.15 NON-EXCLUSIVITY, ETC.
The rights of a director or officer hereunder shall be in addition to any other
rights with respect to indemnification, advancement of expenses or otherwise
that he or she may have under contract or the Georgia Business Corporation Code
or otherwise.
SECTION 9.16 AMENDMENTS
It is the intent of the corporation to indemnify and advance expenses to its
directors and officers to the full extent permitted by the Georgia Business
Corporation Code, as amended from time to time. To the extent that the Georgia
Business Corporation Code is hereafter amended to permit a Georgia business
corporation to provide to its directors greater rights to indemnification or
advancement of expenses than those specifically set forth hereinabove, this
Article shall be deemed amended to require such greater indemnification or more
liberal advancement of expenses to the corporation's directors and officers, in
each case consistent with the Georgia Business Corporation Code as so amended
from time to time. No amendment, modification or rescission of this Article, or
any provision hereof, the effect of which would diminish the rights to
indemnification or advancement of expenses as set forth herein shall be
effective as to any person with respect to any action taken or omitted by such
person prior to such amendment, modification or rescission.
SECTION 9.17 SEVERABILITY
To the extent that the provisions of this Article are held to be inconsistent
with the provisions of Part 5 of Article 8 of the Georgia Business Corporation
Code, such provisions of such Code shall govern. In the event that any of the
provisions of this Article (including any provision within a single section,
subsection, division or sentence) is held by a court of competent jurisdiction
to be invalid, void or otherwise unenforceable, the remaining provisions of this
Article shall remain enforceable to the fullest extent permitted by law.
ARTICLE X. MISCELLANEOUS
SECTION 10.01 INSPECTION OF RECORDS
The Board of Directors may determine what corporate records, other than those
specifically required by the Code to be made open to inspection, will be made
open to the right of inspection by the shareholders. In addition, the Board of
Directors may fix reasonable rules not in conflict with the Code regarding the
inspection of corporate records that are required by the Code or are permitted
by determination of the Board of Directors to be made open to inspection. The
right of inspection granted in Code Section 14-2-1602(c) is not available to any
shareholder owning two percent (2%) or less of the
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shares outstanding, unless the Board of Directors in its discretion grants prior
approval for the inspection to the shareholder.
SECTION 10.02 FISCAL YEAR
The Board of Directors may determine the fiscal year of the corporation and may
change the fiscal year from time to time as the Board of Directors deems
appropriate.
SECTION 10.03 CORPORATE SEAL
If the Board of Directors determines that the corporation should have a
corporate seal for the corporation, the corporate seal will be in the form the
Board of Directors from time to time determines.
SECTION 10.04 FINANCIAL STATEMENTS
In accordance with the Code, the corporation shall prepare and provide to the
shareholders such financial statements as may be required by the Code.
SECTION 10.05 CONFLICT WITH ARTICLES OF INCORPORATION
In the event that any provision of these bylaws conflicts with any provision of
the articles of incorporation, the provision in the articles of incorporation
will govern.
ARTICLE XI. AMENDMENTS
SECTION 11.01 POWER TO AMEND BYLAWS.
The Board of Directors may amend or repeal the bylaws or adopt new bylaws, but
any bylaws adopted by the Board of Directors may be altered, amended or
repealed, and new bylaws adopted, by the shareholders. The shareholders may
prescribe, by expressing in the action they take in adopting or amending any
bylaw or bylaws, that the bylaw or bylaws so adopted or amended shall not be
altered, amended or repealed by the Board of Directors.
ARTICLE XII. CERTAIN PROVISIONS OF GEORGIA LAW
SECTION 12.01 FAIR PRICE REQUIREMENTS.
All of the requirements of Article 11, Part 2, of the Code, included in Sections
14-2-1110 through 1113 (and any successor provisions thereto), shall be
applicable to the corporation with any business combination, as defined therein,
with any interested shareholder, as defined therein.
SECTION 12.02 BUSINESS COMBINATIONS.
All of the requirements of Article 11, Part 3, of the Code, included in Sections
14-2-1131 through 1133 (and any successor provisions thereto), shall be
applicable to the corporation in connection with any business combination, as
defined therein, with any interested shareholder, as defined therein.
-22-
<PAGE> 1
EXHIBIT 21.1
HEADHUNTER.NET, INC. SUBSIDIARIES
NAME OF SUBSIDIARY STATE OF ORGANIZATION
HeadHunters, L.L.C.(1) Delaware
HNET, Inc. Georgia
Resume Acquisition Corporation Delaware
(1) The Registrant directly holds a 55% equity interest in HeadHunters, L.L.C.
The remaining 45% equity interest is held by HNET, Inc., a wholly-owned
subsidiary of the Registrant.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion of our
reports on HeadHunter.NET, Inc. dated January 26, 2000 included in the
Company's Form 10-K dated March 30, 2000 (as amended by the Company's Form
10-K/A filed with the SEC on April 6, 2000) and our report on Career Mosaic
Inc. dated May 15, 2000 into this registration statement.
/s/ Arthur Andersen LLP
Atlanta, Georgia
May 18, 2000
<PAGE> 1
EXHIBIT 99.1
(HEADHUNTER.NET, INC. LOGO)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
HEADHUNTER.NET, INC.
The undersigned, having received the Notice of Annual Meeting and Proxy
Statement/Prospectus, hereby appoints ________ and __________ as proxies, each
with the power of substitution, and hereby authorizes each of them
to vote all shares of common stock of the undersigned at the 2000 Annual
Meeting of Shareholders of HeadHunter.NET, Inc., to be held at its executive
offices, 333 Research Court, Suite 200, Norcross, Georgia,
on July 27, 2000, at 9 a.m. (local time).
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION
IS GIVEN, THIS PROXY WILL BE VOTED "FOR" ALL OF THE BOARD OF DIRECTORS
NOMINEES LISTED IN PROPOSAL 2 AND "FOR" PROPOSALS 1, 3 AND 4. THE
PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS
CARD.
CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE
----------------------------------------------------
FOLD AND DETACH HERE
2000 ANNUAL MEETING OF SHAREHOLDERS OF HEADHUNTER.NET, INC.
[ X ] Please mark your
votes as in this
example
The Board of Directors recommends a vote FOR proposals 1, 2, 3 and 4.
FOR AGAINST ABSTAIN
1. To approve the issuance of 7.5 million
shares of HeadHunter.NET common [ ] [ ] [ ]
stock in the merger of CareerMosaic
into a wholly owned subsidiary of
HeadHunter.NET.
FOR WITHHELD
2. To elect three Class II directors to
serve until the 2003 Annual Meeting [ ] [ ]
of Shareholders. Nominees are:
J. Douglas Cox
Michael G. Misikoff
<PAGE> 2
Donald W. Weber
FOR, except vote withheld from the following nominee(s):
- -----------------------------------------------
FOR AGAINST ABSTAIN
3. To approve the HeadHunter. NET, Inc.
2000 Qualified Employee Stock [ ] [ ] [ ]
Purchase Plan.
FOR WITHHELD
4. To ratify the selection of Arthur
Andersen LLP as HeadHunter.NET's [ ] [ ]
independent auditors to serve for the
fiscal year ending December 31, 2000.
In their discretion, the proxies are authorized to vote upon such other business
that may properly come before the 2000 Annual Meeting of Shareholders and any
adjournments or postponements thereof.
Signature: __________________ Date: ________________ Signature: _______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership by authorized person.
<PAGE> 1
EXHIBIT 99.2
[LETTERHEAD OF FIRST UNION SECURITIES, INC.]
Board of Directors
HeadHunter.NET, Inc.
333 Research Court, Suite 200
Norcross, Georgia 30092
Members of the Board:
We hereby consent to the use of our opinion letter dated April 15, 2000,
to the Board of Directors of HeadHunter.NET, Inc. included as Annex B to the
joint proxy statement/prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger between Career Mosaic Inc.
and HeadHunter.NET, Inc., and to the references to such opinion in such joint
proxy statement/prospectus under the captions "SUMMARY OF THE PROXY
STATEMENT/PROSPECTUS--The Merger--Opinion of Financial Advisor" and "THE
MERGER--Opinion of Financial Advisor to HeadHunter.NET." In giving such consent,
we do not admit that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder, nor do we thereby admit that we are experts with respect to any part
of such Registration Statement within the meaning of the term "experts" as used
in the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
FIRST UNION SECURITIES, INC.
By: /s/ THOMAS H. TULIDGE, JR.
-----------------------------
Name: Thomas H. Tulidge, Jr.
Title: Managing Director
Richmond, Virginia
May 16, 2000
