<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------------------
FORM 10-K
----------------------------------
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------ --------------
COMMISSION FILE NUMBER: 000-27003
HeadHunter.NET, Inc.
(Exact Name of Registrant As Specified in Its Charter)
Georgia 582403177
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
333 Research Court, Suite 200
Norcross, Georgia 30092
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (770) 349-2400
---------------------------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of Each Class Name of Exchange on Which Registered
- ------------------- ------------------------------------
<S> <C>
None None
</TABLE>
---------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price for the Common Stock on March 21,
2000 as reported by the Nasdaq National Market System, was approximately
$67,972,725. The shares of Common Stock held by each officer and director and by
each person known to the Registrant who owns 5% or more of the outstanding
Common Stock have been excluded in that such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes. As of March 21, 2000, the
Registrant had outstanding 10,909,500 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
None.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Stock and Related Shareholder
Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K
Signatures
Financial Statements
Exhibits
2
<PAGE> 3
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Annual Report on Form 10-K
contains forward-looking statements that involve risks and uncertainties. These
forward-looking statements include, among other things, statements regarding our
anticipated costs and expenses, our capital needs and financing plans, product
and service development, our growth strategies, market demand for our products
and services, relationships with our strategic marketing alliances, and
competition. These forward-looking statements include, among others, those
statements including the words "expects," "anticipates," "intends," "believes"
and similar language. Our actual results may differ significantly from those
projected in the forward-looking statements. Factors that might cause or
contribute to such differences include, but are not limited to, those discussed
in the section "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Factors That May Affect Future Results of Operations."
You should carefully review the risks described in this Annual Report on Form
10-K, Exhibit 99.1 to this Annual Report on Form 10-K and other reports and
documents we file from time to time with the Securities and Exchange Commission,
including Quarterly Reports on Form 10-Q and current reports on Form 8-K . You
are cautioned not to place undue reliance on the forward-looking statements,
which speak only as of the date of this Annual Report on Form 10-K. We undertake
no obligation to publicly release any revisions to the forward-looking
statements or reflect events or circumstances after the date of this document.
3
<PAGE> 4
PART I
ITEM 1. BUSINESS.
We provide a leading online recruiting service to employers, recruiters
and job seekers via our web site at www.headhunter.net. Our web site enables
employers and recruiters to advertise job opportunities and review resumes and
enables job seekers to identify, research and evaluate a broad range of job
opportunities.
We commenced operations of our web site in October 1996 through one of our
predecessors, HNET, Inc., a Georgia corporation. In October 1997, HNET, Inc.
contributed all of the assets related to the operation of our web site to
HeadHunters, L.L.C., a Delaware limited liability company, which operated our
web site until July 1998. In July 1998, HeadHunter.NET, Inc. was incorporated in
Georgia and assumed operations of the web site.
Our web site provides employers and recruiters with:
- access to a large number of job seekers;
- the ability to improve the placement and increase the exposure of
advertised job opportunities by paying an upgrade fee to elevate the
position of a job opportunity in a search result; and
- the ability to track, measure and analyze the results of their online
recruiting efforts through detailed statistics we provide in billing
statements and on our web site.
Our web site provides job seekers with:
- detailed and current information regarding a large number of
geographically dispersed job opportunities representing a wide variety of
industries and occupations;
- access to job opportunities posted by recruiters, as well as employers,
which increases the breadth of available job opportunities; and
- the ability to conduct highly focused job searches using our advanced
search capabilities.
We generate our revenues primarily from fees paid by employers and
recruiters to post job opportunities and to improve the position of their job
opportunities in search results. We also generate revenues from employers and
recruiters who pay an additional fee to exclusively review recently submitted or
reserved resumes. In addition, we derive revenues from the sale of banner
advertising.
4
<PAGE> 5
OUR SERVICES
We offer three paid services, which enable employers and recruiters to: (1)
post job opportunities; (2) upgrade job postings; and (3) access resumes. 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. They can post job opportunities and
instantly update, change or remove them online. Each job posting is available to
the large number of job seekers who use our web site and is also cross-posted to
other web sites with which we have relationships. Employers and recruiters who
post job opportunities with us 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. They can also receive online applications from job seekers who
respond to job opportunities posted on our web site.
Upgrading Job Opportunities. Due to the breadth of job opportunities on our
web site, a single 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 upgrades. We list job postings in a search result according to the
amount of upgrade fees paid for each job opportunity. The higher the upgrade fee
paid for a job opportunity, the closer it appears to the top of the list in a
search result. These upgrades are purchased in 30-day increments for an
additional fee and can be increased at any time.
VIP Resume. Until February 3, 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. Employers and recruiters could purchase access to our VIP Resume
Reserve for periods of three months or one year for an additional fee.
Beginning on February 3, 2000 employers and recruiters had to pay a fee to
review any complete resumes.
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 for job
postings and upgrades. Employers and recruiters paid an annual or
quarterly fee for access to the VIP Resume Reserve and now pay an annual
or quarterly access fee to review the entire pool of resumes held in VIP
Resume.
- Reach Hire. Reach Hire provides employers and recruiters with a package
of services tailored to meet their needs. This service is designed for
employers and recruiters that regularly post multiple job opportunities
on our web site. Reach Hire participants receive monthly billing
statements containing statistical information that they can use to track
and measure the success of their online recruiting efforts. In addition,
we provide Reach Hire participants with a link from their job posting to
their web site, so that job seekers can easily click-through for more
information about them. Employers and recruiters using this service may
also establish company profiles containing key information about them,
which job seekers may access from a job posting. Through our Reach Hire
service, employers and recruiters can also establish job banks listing
all of their job opportunities posted on our web site. In addition, they
can automatically post a large number of job opportunities on our web
site at one time. Reach Hire participants pay a negotiated monthly fee
for the package of services they choose.
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 to reach job seekers. Until February 3,
2000 job seekers could also request that we hold their resume in the VIP
Resume Reserve to be viewed only by those employers and recruiters who choose
to purchase that service. Now access to all resumes is limited to only those
employers and recruiters paying a quarterly or annual access fee. We offer an
online monthly newsletter called CareerBytes, which provides online career
advice and information for job seekers.
5
<PAGE> 6
SALES
As of December 31, 1999, we employed 52 full-time sales personnel located in
Atlanta, Chicago, Dallas, San Francisco, New York City and Washington DC. We
plan to continue to rapidly expand our direct sales and telesales efforts by
increasing the size of our existing sales force by opening additional sales
offices in major metropolitan areas, such as Boston and Los Angeles in order to
further penetrate those markets.
Our sales force engages in a blend of direct sales and telesales to reach
prospective employers and recruiters. We work closely with employers and
recruiters in order to customize service packages to meet their online
recruiting needs. By taking a consultative approach, we believe that we are able
to build and maintain stronger relationships with the employers and recruiters
that utilize our services. 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 gives us a better understanding of
that market's particular recruiting needs, we plan to place a greater emphasis
on direct sales as we increase the number of our sales personnel and open new
sales offices.
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. 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, NBCi's Snap, Looksmart, Dogpile and
GoTo.com, that enable us to target potential job seekers and allow them to
click-through to 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
- :60 spot radio and traffic reports in top 10 markets
- national and select local daily newspapers like USA Today
and the New York Times; business weeklies, recruitment
magazines, and vertical industry trade publications; and
- outdoor billboards, buses, and airport advertising.
6
<PAGE> 7
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 to 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.
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, Career Path and Career Mosaic, 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 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 continue to 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.
7
<PAGE> 8
GOVERNMENT REGULATION
There are an increasing number of laws and regulations pertaining to the
Internet, including laws or regulations 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. 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. See Exhibit 99.1 Risk Factors - "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."
Privacy Concerns. Government agencies are considering adopting regulations
regarding the collection and use of personal identifying information obtained
from individuals when accessing web sites. 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 of proposed regulatory 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 trademark. There can be
no assurance that our domain name will not lose its value, or that we will not
have to obtain entirely new domain names in addition to or in lieu of our
current domain names if reform efforts result in a restructuring in the current
system.
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. 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.
8
<PAGE> 9
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, patent 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 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.
In addition, we 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.
EMPLOYEES
As of December 31, 1999, we had 122 full-time employees, most of whom are
based at our executive offices. Of these employees, 82 are in sales and
marketing, 25 are in technology and operations and 15 are performing general and
administrative functions. None of our employees are represented by a labor union
and we consider our employee relations to be good.
ITEM 2. PROPERTIES.
In March 2000, we moved our executive offices to 333 Research Court, in
Norcross, Georgia. We also lease office space in Chicago, Dallas, San Francisco,
New York City, Boston and Washington DC to support our sales personnel located
in those cities. We plan to evaluate lease options for additional office space
to expand our direct sales and telephone sales efforts in select major
metropolitan markets.
ITEM 3. 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
9
<PAGE> 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS.
(a) The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "HHNT." The price per share reflected in the table below
represents the range of low and high closing sale prices for the Company's
Common Stock as reported by the Nasdaq National Market for each of the quarters
since our initial public offering:
<TABLE>
<CAPTION>
FISCAL PERIOD HIGH PRICE LOW PRICE
- ------------- ---------- ---------
1999
<S> <C> <C>
From August 19, 1999 - September 30, 1999........ $ 19.19 $ 10.13
From September 30, 1999 - December 31, 1999...... $ 15.50 $ 10.63
</TABLE>
The closing sale price of our Common Stock as reported by the Nasdaq
National Market on March 21, 2000 was $19.8125. The number of shareholders of
record of our Common Stock as of March 21, 2000 was 38.
We do not intend to declare or pay cash dividends in the foreseeable
future. Our management anticipates that all of our earnings and other cash
resources, if any, will be retained by us for investment in our business.
During 1999, we did not sell any securities which were not registered
under the Securities Act of 1933 except for:
- The issuance on December 17, 1999 of 25,000 shares of Common Stock
to Chicago Computer Guide, Inc. in connection with the acquisition
of substantially all of the assets of Chicago Computer Guide's All
In One Submit business. In addition, we may issue up to an
additional 75,000 shares of Common Stock to Chicago Computer Guide
if certain revenue levels are met during 2000. These issuances were
and will be exempt from registration under Sections 4(2) and 4(6) of
the Securities Act and Regulation D.
- The sales to certain of our executive officers and directors of
140,000 shares of Common Stock at a per share price of $2.00 on May
2, 1999, which sales were exempt from registration under Sections
4(2) and 4(6) of the Securities Act and Regulation D.
- The sale to certain of our executive officers and directors of a
total of 271,167 shares of Class A Preferred Stock at a per share
price of $1.50 on January 29, 1999, which sales were exempt from
registration under Sections 4(2) and 4(6) of the Securities Act and
Regulation D. These shares converted into an equal number of shares
of Common Stock in connection with our initial public offering on
August 19, 1999.
- The issuance of 2,333,333 shares of Class A Preferred Stock to ITC
Holding Company, Inc. on January 29, 1999 in connection with the
conversion of approximately $3.5 million of debt at a conversion
rate of $1.50 per share, which was outstanding under our prior
credit facility with ITC Service Company, which issuance was exempt
from registration under Sections 3(a)(9) and 4(2) of the Securities
Act and Regulation D. These shares converted into an equal number of
shares of Common Stock in connection with our initial public
offering on August 19, 1999.
10
<PAGE> 11
(b) On August 19, 1999, the registration statement relating to our
initial public offering of our Common Stock (File No.333-80915) was declared
effective. First Union Capital Markets Corp., J.C. Bradford & Co., Wachovia
Securities, Inc. and DLJdirect, Inc. were the managing underwriters of the
offering. On August 24, 1999, we closed the offering. The number of shares
registered, the aggregate price of the shares registered, the number of shares
sold and the aggregate offering price of the shares sold were as follows:
<TABLE>
<CAPTION>
Shares of Common Aggregate Price of Number of Aggregate Price
Registered Shares Registered Shares Sold of Shares Sold
---------------- ------------------ ----------- --------------
<S> <C> <C> <C>
3,000,000 $30,000,000 3,000,000 $30,000,000
</TABLE>
We incurred the following expenses with respect to the offering through
December 31, 1999, none of which were direct or indirect payments to (i) our
directors, officers or their associates, (ii) persons owning 10% or more of any
class of equity security of the Company or (iii) our affiliates:
<TABLE>
<CAPTION>
Underwriting
Discounts
And Underwriters'
Commissions Finders' Fees Expenses Other Expenses Total Expenses
- ------------ ------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
$2,100,000 $0 $0 $900,000 $3,000,000
</TABLE>
The net proceeds from the offering to us after deducting the foregoing
discounts, commissions, fees and expenses were approximately $27.0 million. The
Company used a portion of the proceeds to pay off approximately $2.2 million of
long-term debt due to ITC and $250,000 was paid in December 1999 in connection
with the acquisition of All In One Submit. The balance of the proceeds will be
used for working capital and general corporate purposes, including possible
acquisitions and sales and marketing initiatives. Other than the repayment of
long-term debt to ITC, no proceeds were paid to our affiliates, other than
payments to our officers in accordance with our compensation structure. 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.
ITEM 6. SELECTED 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 and December 31, 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 Annual Report on Form 10-K. You should read the selected financial data
together with our financial statements and related notes and the section of the
Annual Report on Form 10-K entitled "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
and unaudited pro forma net loss per 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
11
<PAGE> 12
December 31, 1999 includes 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, 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 TO OUR COMPANY | OUR COMPANY
------------------------------------------ | --------------------------------------------
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) $ (1.90)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted .................. 2,200,000 2,200,000 5,412,135
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR TO |
OUR COMPANY | OUR COMPANY
------------------------ | ----------------------------------------
AT DECEMBER 31, | AT DECEMBER 31,
------------------------ | ----------------------------------------
1995 1996 | 1997 1998 1999
----------- ----------- | ----------- ------------ ------------
<S> <C> <C> | <C> <C> <C>
BALANCE SHEET DATA: |
Cash and cash equivalents............... $ 14,326 $ 25,973 | $ 853,989 $ 254,937 $ 16,938,708
Working capital (deficit)............... 31,214 33,706 | 788,976 (3,446,422) 21,236,203
Total assets............................ 43,030 58,550 | 1,922,915 2,225,180 26,979,744
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
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the
financial statements and related notes included elsewhere in this Annual Report
on Form 10-K. 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, but not limited to, those set forth on Exhibit 99.1 to this
Annual Report on Form 10-K.
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 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
12
<PAGE> 13
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, Inc. 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 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 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 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 and improve the placement of a job opportunity
by purchasing our upgrade service, which elevates the position of a job
opportunity in 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. As a result of this
pricing change and the growth of our sales force, revenue from upgrade fees has
continued to grow as a percentage of our revenues.
On June 1, 1999, we began to charge employers and recruiters a fee to post
job opportunities on our web site. Employers and recruiters can post job
opportunities by paying a flat fee which currently is approximately $20 per job
opportunity for a 30-day basic listing. Employers and recruiters who want to
improve the placement of their jobs in a search result in order to increase the
visibility and exposure of their job opportunity can pay an additional fee.
Upgrades are purchased for 30-day periods and start at $25 per job opportunity,
with increases in $25 increments. We generally provide favorable pricing terms
to employers and recruiters that post a significant number of job opportunities.
13
<PAGE> 14
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, upgrade 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 December 31, 1999, we had approximately $80,483 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 policy.
Accordingly, we have an extremely limited operating history on which you can
base an evaluation of our company. 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 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 December 31, 1999, we had an accumulated
deficit of approximately $36.5 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 Notes 2 and 3 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.
14
<PAGE> 15
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
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 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 $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
1999. 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 effort.
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 primarily due 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 of approximately $1.0 million created upon the formation of
HeadHunters, L.L.C.
15
<PAGE> 16
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,
$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.
Cost 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 expenses 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 and increased outstanding balance under the credit
facility with ITC.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited statement of operations data for
our eight 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
------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
STATEMENT OF 1998 1998 1998 1998 1999 1999 1999 1999
OPERATIONS DATA: --------- --------- ------------ ----------- ----------- ----------- ------------ -----------
- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues ................ $ 79,569 $ 198,482 $ 392,577 $ 429,240 $ 828,027 $ 1,584,928 $ 2,892,653 $ 3,948,345
Costs and expenses:
Costs of revenues ..... 18,220 19,319 26,201 23,223 25,433 34,822 33,372 53,749
Marketing and selling . 158,549 349,831 1,220,301 990,649 1,232,352 1,647,577 2,939,547 4,079,339
General and
administrative ...... 189,018 478,373 687,851 359,514 492,270 714,236 1,156,159 1,424,063
Stock compensation
expense ............. -- 32,705 95,113 77,756 2,861,676 1,688,912 488,763 488,763
Depreciation and
amortization ........ 55,080 63,003 74,062 84,561 88,895 109,347 134,484 195,531
--------- --------- ------------ ----------- ----------- ----------- ------------ -----------
Total costs and
expenses ............ 420,867 943,231 2,103,528 1,535,703 4,700,626 4,194,894 4,752,225 6,241,445
--------- --------- ------------ ----------- ----------- ----------- ------------ -----------
Operating loss .......... (341,298) (744,749) (1,710,951) (1,106,463) (3,872,599) (2,609,966) (1,859,571) (2,293,100)
Other income (expense) . 7,533 11 (165,683) (284,268) (9,423) (31,492) 107,112 313,001
--------- --------- ------------ ----------- ----------- ----------- ------------ -----------
Net loss ................ $(333,765) $(744,738) $ (1,876,634) $(1,390,731) $(3,882,022) $(2,641,458) $ (1,752,459) $(1,980,098)
========= ========= ============ =========== =========== =========== ============ ===========
</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 December 31, 1999, we had approximately $16.9 million in cash and
cash equivalents. Net cash used in operating activities was $4.5 million and
$3.6 million for the twelve months ended December 31, 1999 and December 31,
1998, respectively. Net cash used in operating activities primarily
consisted of the net loss for the periods and increases in accounts
receivable.
16
<PAGE> 17
Net cash used in investing activities were for capital expenditures and
the December 1999 acquisition of the assets of the All In One Submit
business and totaled approximately $6.4 million and $500,000 for the twelve
months ended December 31, 1999 and December 31, 1998, respectively.
Investing activities in 1999 included the purchase of $4.1 million 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.
Net cash provided by financing activities was $27.6 million and $3.5
million for the twelve months ended December 31, 1999 and 1998,
respectively. The increase relates to net proceeds received from the
completion of our initial public offering in August 1999.
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.
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.
RECENT ACCOUNTING PRONOUNCEMENTS
We do not believe that any new accounting pronouncements will have a material
impact on our financial statements.
YEAR 2000 COMPUTER ISSUES
The year 2000 issue refers to the potential failures that computer
systems may incur as a result of the date change from 1999 to 2000, such as the
inability of such computer systems to properly recognize date-sensitive data
resulting in the creation of erroneous information or system failure. These
problems generally arise from the fact that most computer hardware and software
has historically used only two digits to identify the year in a date, often
meaning that the computer will recognize a code of "00" as the year 1900 rather
than the year 2000.
17
<PAGE> 18
To address our year 2000 issues we formed a Program Office consisting of
three members, which had overall responsibility and authority for our year 2000
plan and which reported periodically to our board of directors about our
progress towards achieving year 2000 readiness.
Our overall plan to achieve year 2000 readiness included the following
phases with respect to our information technology and non-information technology
systems:
- assessment of repair requirements, which included creating awareness
of the issue throughout our company and assessment of all systems,
significant business processes and external interfaces and
dependencies;
- remediation, which included updating or modifying systems which were
identified as critical to our efforts to become year 2000 ready;
- testing of systems which were altered or replaced as part of our
efforts to become year 2000 ready; and
- contingency planning.
Prior to December 31, 1999 we completed the assessment and remediation
phases of our plan with respect to our critical internal information technology
systems, the non-critical information technology systems and non-information
technology systems. We consider any information technology systems to be
"critical" if the failure of such system would result in a significant portion
of our users being unable to access our web site, or prevent us from billing
customers.
We completed our testing phase with respect to all of our critical
information technology and non-information technology systems prior to December
31, 1999.
During the course of our year 2000 plan, we reviewed publicly available
disclosures and in some cases requested written certification from the third
parties who provide hardware and software that comprise our critical information
technology systems or who operate third party systems on which we rely. Our
third party vendors and providers indicated that their hardware, software or
systems were year 2000 ready. Some examples of the types of critical third party
vendors and providers are companies that host our servers and companies that
provide us with connections to the Internet.
At December 31, 1999, we had incurred approximately $254,000 in costs
associated with the year 2000 issue and the implementation of our year 2000
plan. We expensed as incurred all costs associated with our year 2000 compliance
program.
We did not experience an interruption in, or a failure of, normal
business activities or operations as a result of the year 2000 problem.
We developed contingency plans with respect to our critical information
technology and non-information technology systems. In our normal course of
operations, we maintain redundant systems for our critical information
technology systems, which includes power supply, servers and telecommunications
connections, and prior to the beginning of calendar year 2000, we tested the
functionality of these redundancies.
18
<PAGE> 19
The discussion above is a "Year 2000 Readiness Disclosure" as defined
in the Year 2000 Information and Readiness Disclosure Act of 1998, however,
compliance with this act does not preclude any claims against us that arise
under the federal securities laws.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 December 31, 1999, we held $4.1
million in short term investments in high grade instruments having maturities
less than one year.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our financial statements are submitted as a separate section of this
Annual Report on Form 10-K beginning on page 30.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
19
<PAGE> 20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors and executive officers of HeadHunter.NET and certain information
about them are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- -----------------------------------
<S> <C> <C>
William H. Scott, III............ 52 Chairman of the Board of Directors
Robert M. Montgomery, Jr. ....... 42 President, Chief Executive Officer and Director
Warren L. Bare................... 34 Vice Chairman of the Board and Director
Mark W. Partin................... 32 Chief Financial Officer and Assistant Secretary
Judith G. Hackett................ 39 Senior Vice President - Marketing
Jay M. Myer...................... 37 Senior Vice President - Corporate Marketing and Sales
James R. Canfield................ 40 Vice President of Sales
C. Eric Presley ................. 33 Vice President of Technology
Mark W. Fouraker................. 38 Vice President of Site Operations
Burton B. Goldstein, Jr.......... 52 Director
Donald W. Weber.................. 63 Director
J. Douglas Cox .................. 49 Director
Michael G. Misikoff ............. 47 Director
Kimberley E. Thompson............ 42 Director
</TABLE>
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(LAMBDA)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 has served as Chairman of the Board and
a director of InterCall's United Kingdom division. From 1986 to 1991, Mr.
Montgomery served in various capacities with Telecom USA (which was purchased by
MCI Communications Corp.), including President of the Conference Calling
Division. Currently, Mr. Montgomery serves as a director of InterCall, Inc.
Warren L. Bare founded HeadHunter.NET in October 1995 and has served as a
member of our board of directors since inception. Mr. Bare has served as our
Vice Chairman of the board since March 1999 and currently serves as a consultant
to HeadHunter.NET. Since September 1 1999, Mr. Bare has served as Chief
Executive Officer of InJesus.com, an Internet company providing communications
tools for churches. From October 1995 to January 1999, Mr. Bare served as our
President and from October 1995 to March 1999, Mr. Bare served as our Chief
Executive Officer. From 1992 to October 1995, Mr. Bare served as the Director of
Technology at United Systems, Inc., an Atlanta-based software development and
consulting company. Prior to 1992, Mr. Bare held management and technical
positions at Progress Software Corporation and Computer Advisory Services.
20
<PAGE> 21
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 the audit division of Arthur Andersen
LLP.
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 -- Sales and Corporate
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 1995 to 1987, Mr. Myer was Vice President of Sales at Network
Imaging, a database object management company. From 1993 to 1995, Mr. Myer was
Area Vice Present of Legent Corporation, a Software Company now owned by
Computer Associates.
James R. Canfield has served as our Vice President of Sales since September
1998. From May 1998 to August 1998, Mr. Canfield served as Vice President of
Sales and Marketing for Abaxis, Inc., a manufacturer of point-of-care blood
analyzers. From December 1994 to May 1998, Mr. Canfield served in various
positions, including Director of Sales, Director of Marketing, Vice President of
Sales and Marketing Idexx Informatics, and Vice President/General Manager Idexx
Veterinary Services at Idexx Laboratories, Inc., a manufacturer and distributor
of animal health diagnostic products. From December 1989 to December 1994, Mr.
Canfield served as Area Manager Microscan Division, Area Vice President Baxter
Diagnostics and Region Vice President Baxter Distribution for Baxter Healthcare
Corporation, a multinational medical products company.
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.
21
<PAGE> 22
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
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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of the copies of reports furnished to the Company,
or written representations that no annual forms (Form 5) were required, the
Company believes that, during the 1999 fiscal year, all filing requirements of
its officers, directors and 10% or greater shareholders for reporting to the
Securities and Exchange Commission their ownership and changes in ownership of
Common Stock (as required pursuant to Section 16(a) of the Securities Exchange
Act of 1934) were complied with, except for the following: Jay M. Myer filed a
late Form 3 in March 2000, which was due in December 1999.
22
<PAGE> 23
ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to any person who has served as Chief
Executive Officer and our four most highly compensated executive officers (our
"named executive officers") for services rendered to us during the year ended
December 31, 1999. Except as set forth in the table below, no other executive
officer's salary and bonus exceeded $100,000 during the year ended December 31,
1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
----------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) 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 25,000 366,667 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 60,000 1,125
Senior Vice President -- Marketing
James R. Canfield....................... 1999 91,662 39,128 110,000 737
Vice President of Sales
C. Eric Presley......................... 1999 87,500 20,459 60,000 803
Vice President of Technology
</TABLE>
- -------------
(1) Mr. Bare served as our President from October 1995 to January 1999 and our
Chief Executive Officer from October 1995 to 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.
23
<PAGE> 24
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF
TOTAL POTENTIAL REALIZABLE
NUMBER OF 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%($)
---- ---------- ---------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Montgomery, Jr.... 100,000 11.0% 1.50 01/07/09 2,291,000 3,564,000
Robert M. Montgomery, Jr.... 100,000 11.0% 1.50 04/29/09 2,291,000 3,564,000
Robert M. Montgomery, Jr.... 200,000 22.1% 11.81 10/28/09 2,646,000 5,428,000
Mark W. Partin ............. 100,000 11.0% 2.00 04/29/09 2,241,000 3,514,000
Judith G. Hackett .......... 10,000 0.01% 11.81 10/28/09 132,300 271,400
James R. Canfield .......... 10,000 0.01% 11.81 10/28/09 132,300 271,400
C. Eric Presley ............ 10,000 0.01% 11.81 10/28/09 132,300 271,400
</TABLE>
The above table sets forth summary information concerning individual grants
of stock options made during the year ended December 31, 1999 to each of the
executive officers named in the Summary Compensation Table. We granted all
options at the market value on the date of grant as determined by our board of
directors. Amounts reported in the "Potential Realizable Value Rates of Stock
Price Appreciation for Options Terms" columns represent hypothetical amounts
that may be realized on exercise of options immediately prior to the expiration
of their term assuming the specified compounded rates of appreciation of our
common stock over the term of the options. These numbers are calculated based on
rules promulgated by the SEC and do not reflect our estimate of future stock
price growth. Actual gains, if any, on stock option exercises and common stock
holdings are dependent on the timing of such exercises and the future
performance of our common stock. We cannot assure you that we can achieve the
rates of appreciation assumed in this table or that the individuals in this
table will receive the amounts reflected.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NAME SHARES VALUE REALIZED NUMBER OF VALUE OF
ACQUIRED ON ($) SECURITIES UNEXERCISED IN-THE-
EXERCISE UNDERLYING MONEY OPTIONS AT
UNEXERCISED FY-END ($)
OPTIONS AT FY-END
(#)
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Robert M. Montgomery, Jr. 33,333 $383,330 0/ 0/
376,667 $2,380,671
</TABLE>
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the Compensation Committee in July 1998, our board of
directors determined executive compensation. 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, from inception through November 1999, our directors have served without
compensation, except for reimbursement of out-of-pocket expenses for each
meeting attended. Beginning in December 1999, our directors are generally paid
$500 for physical attendance at board meetings and $200 for attendance via
telephone at board meetings. 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 per share exercise prices of $0.40, $0.40, $0.40, $1.40, $1.40,
$2.00, and $2.00, respectively. Directors are eligible to receive options and
awards under the HeadHunter.NET, Inc. 1998 Long-Term Incentive Plan.
EMPLOYMENT AGREEMENTS
Our board of directors and Compensation Committee periodically review such
salaries and bonuses 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 contains provisions requiring payments to an
officer upon severance or a change-of-control of our company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information regarding the beneficial
ownership of our Common Stock as of March 21, 2000 with respect to: (1) each
of our directors, (2) our Chief
24
<PAGE> 25
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>
SHARES
NAME BENEFICIALLY OWNED PERCENTAGE
- ---- ------------------ ----------
<S> <C> <C>
ITC Holding Company, Inc.(1)............................ 5,508,000 48.6%
Warren L. Bare(2)....................................... 1,800,000 16.5
William H. Scott, III(3)(6)............................. 5,511,300 48.6
Robert M. Montgomery, Jr................................ 238,333 2.2
Mark W. Partin.......................................... 20,000 *
Judith G. Hackett....................................... 10,000 *
James R. Canfield(4).................................... 100,000 *
C. Eric Presley(5)..................................... 27,000 *
J. Douglas Cox.......................................... 4,000 *
Burton B. Goldstein, Jr................................. 17,267 *
Donald W. Weber(6)...................................... 5,529,000 48.8
Michael G. Misikoff..................................... 21,000 *
Kimberley E. Thompson(6)................................ 5,512,000 48.6
All directors and executive officers as a group (13
persons)................................................ 7,773,900 68.5
</TABLE>
- ----------------
* Less than 1%
(1) 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 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.
(2) Mr. Bare resigned as President in January 1999 and as Chief Executive
Officer in March 1999. Mr. Bare's address is 1430 Boundary Boulevard,
Suwanee, Georgia 30024.
(3) Includes 300 shares held by Mr. Scott's spouse.
(4) Includes 30,000 shares held in an individual retirement account.
(5) Includes 20,000 shares subject to options exercisable within 60 days.
(6) Includes 5,508,000 shares beneficially owned by ITC, with respect to which
Messrs. Scott and Weber, and Ms. Thompson, as executive officers and/or
directors of ITC, may be deemed to be the beneficial owner. Messrs. Scott
and Weber, and Ms. Thompson disclaim beneficial ownership of all such
shares.
25
<PAGE> 26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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.
On January 28, 1999, we entered into a loan and security agreement with ITC
pursuant to which ITC made available to us a revolving line of credit of up to
$3.0 million. Principal amounts outstanding under the credit facility bear
interest at an annual rate of 11%. The credit facility was paid in full with a
portion of the net proceeds from our initial public offering in August 1999. The
total amount of principal and interest repaid under such credit facility was
$2.2 million.
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. All of these shares converted into an equal number of
shares of Common Stock in connection with our initial public offering on August
19, 1999.
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.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) Financial Statements and Schedule
(1) The financial statements are submitted as a separate section
of this Annual Report on Form 10-K beginning on page 30.
(2) Financial statement schedules required to be included in this
Annual Report on Form 10-K are submitted as a separate section
beginning immediately after our financial statements.
(3) The exhibits required by Item 601 of Regulations S-K are
listed in the Exhibit Index in subpart (c) below.
(b) Reports on Form 8-K.
None.
26
<PAGE> 27
(c) Exhibits.
The following exhibits are filed as part of, or are incorporated
by reference into, this report on Form 10-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <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
the Registrant's Current Report on Form 8-K
filed on January 3, 2000)
3.1 -- Articles of Incorporation, as amended
(incorporated by reference from Exhibit 3.1 of
the Registrant's registration statement on
Form S-1, Registration No. 333-80915)
3.2 -- Bylaws (incorporated by reference from Exhibit
3.2 of the Registrant's registration statement
on Form S-1, Registration No. 333-80915)
4.1 -- Specimen common stock certificate
(incorporated by reference from Exhibit 4.1 of
the Registrant'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)
10.1 -- HeadHunter.NET, Inc. 1998 Long-Term Incentive
Plan, as amended (incorporated by reference
from Exhibit 10.1 of the Registrant'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
of the Registrant'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 of the Registrant'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 of the
Registrant'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 of the Registrant'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
of the Registrant'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 of the
Registrant'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
10.9 -- Severance letter between HeadHunter.NET and
Warren Bare dated February 24, 1999
(incorporated by reference from Exhibit 10.16
of the Registrant's registration statement on
Form S-1, Registration No. 333-80915)
10.10 -- 2000 Qualified Employee Stock Purchase Plan
(incorporated by reference from Exhibit 4.3
of the Registrant's registration statement on
Form S-8, Registration No. 333-94027)
10.11 -- NBCI Promotion Agreement dated December 9,
1999 between HeadHunter.NET and NBCInternet,
Inc.+
21.1 -- Subsidiaries of the Company (incorporated by
reference from Exhibit 21.1 of the
Registrant's registration statement on Form
S-1, Registration No. 333-80915)
23.1 -- Consent of Arthur Andersen LLP
27.1 -- Financial Data Schedule (for SEC use only)
99.1 -- Risk Factors
</TABLE>
- ----------
+ Confidential treatment has been requested for certain portions which have
been blanked out in the copy of the exhibit filed with the Securities and
Exchange Commission. The omitted information has been filed separately with
the Securities and Exchange Commission pursuant to the application for
confidential treatment.
27
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
HeadHunter.NET, INC.
By: /s/ Robert M. Montgomery, Jr.
----------------------------------------
Date: March 28, 2000 Robert M. Montgomery, Jr.
President and Chief Executive Officer
By: /s/ Mark W. Partin
----------------------------------------
Date: March 28, 2000 Mark W. Partin
Chief Financial Officer and
Assistant Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert M. Montgomery, Jr. and Mark W.
Partin, and each of them, his true and lawful attorneys-in-fact and agents, with
the full power of substitution and resubstitution for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments to this
Report, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each of said
attorney-in-fact or his substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ William H. Scott, III Chairman of the Board and Director March 28, 2000
- --------------------------------
William H. Scott, III
/s/ Robert M. Montgomery, Jr President, Chief Executive Officer March 28, 2000
- -------------------------------- and Director
Robert M. Montgomery, Jr
</TABLE>
28
<PAGE> 29
<TABLE>
<S> <C> <C>
/s/ Warren L. Bare Vice Chairman of the Board March 28, 2000
- -------------------------------- and Director
Warren L. Bare
/s/ Mark W. Partin Chief Financial Officer March 28, 2000
- -------------------------------- and Assistant Secretary
Mark W. Partin
/s/ Burton B. Goldstein, Jr. Director March 28, 2000
- --------------------------------
Burton B. Goldstein, Jr.
/s/ Donald W. Weber Director March 28, 2000
- --------------------------------
Donald W. Weber
/s/ J. Douglas Cox Director March 28, 2000
- --------------------------------
J. Douglas Cox
/s/ Michael G. Misikoff Director March 28, 2000
- --------------------------------
Michael G. Misikoff
/s/ Kimberley E. Thompson Director and Secretary March 28, 2000
- --------------------------------
Kimberley E. Thompson
</TABLE>
29
<PAGE> 30
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998, AND 1997 AND OCTOBER 31, 1997
TABLE OF CONTENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Consolidated Balance Sheets--December 31, 1999 and 1998 32
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 33
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 34
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 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 36
</TABLE>
30
<PAGE> 31
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.
Atlanta, Georgia
January 26, 2000
31
<PAGE> 32
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> ASSETS <C> <C>
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>
32
<PAGE> 33
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
Successor Company | Company
------------------------------------------------- | -----------
Two Months | Ten 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 $ (1.90) $ (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.
33
<PAGE> 34
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
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------------- ---------------------- PAID-IN STOCK
SHARES AMOUNT SHARES AMOUNT CAPITAL WARRANTS
---------- -------- ---------- --------- ------------ -----------
PREDECESSOR COMPANY:
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 0 $ 0 260 $ 260 5,040 0
Capital contribution 0 0 0 0 30,000 0
Dividends 0 0 0 0 0 0
Net loss 0 0 0 0 0 0
---------- -------- ---------- --------- ------------ -----------
Balance, October 31, 1997 0 0 260 260 35,040 0
---------- -------- ---------- --------- ------------ -----------
______________________________________________________________________________________________________________________________
SUCCESSOR COMPANY:
Initial capitalization of Headhunters, L.L.C 0 0 0 0 2,000,000 0
Acquisition of Predecessor Company 0 0 (260) (260) (35,040) 0
Reorganization (Note 1) 2,800,000 28,000 2,200,000 22,000 (43,091) 0
Net loss 0 0 0 0 0 0
---------- -------- ---------- --------- ------------ -----------
Balance, December 31, 1997 2,800,000 28,000 2,200,000 22,000 1,956,909 0
Issuance of stock warrants 0 0 0 0 0 341,834
Issuance of stock options 0 0 0 0 2,550,950 0
Amortization of deferred compensation 0 0 0 0 0 0
Net loss 0 0 0 0 0 0
---------- -------- ---------- --------- ------------ -----------
Balance, December 31, 1998 2,800,000 28,000 2,200,000 22,000 4,507,859 341,834
Conversion of short-term borrowings to
convertible Class A preferred stock 2,333,333 $ 23,333 0 $ 0 $ 25,176,663 0
Issuance of Class A preferred stock 271,167 2,712 0 0 2,925,891 0
Conversion of Class A preferred stock to
common stock (5,404,500) (54,045) 5,404,500 54,045 0 0
Sale of common stock, net of offering expenses 0 0 3,140,000 31,400 28,327,389 0
Issuance of common stock for acquisition 0 0 25,000 250 356,000 0
Issuance of stock options 0 0 0 0 3,441,100 0
Amortization of deferred compensation 0 0 0 0 0 0
Exercise of stock options 0 0 33,333 333 49,667 0
Net loss 0 0 0 0 0 0
---------- -------- --------- --------- ------------ -----------
Balance, December 31, 1999 0 $ 0 10,802,833 $ 108,028 $ 64,784,569 $ 341,834
========== ======== ========== ========= ============ ===========
<CAPTION>
RETAINED
EARNINGS
(ACCUMULATED DEFERRED
DEFICIT) COMPENSATION TOTAL
------------- ------------ ------------
PREDECESSOR COMPANY:
<S> <C> <C> <C>
Balance, December 31, 1996 50,200 0 $ 55,500
Capital contribution 0 0 30,000
Dividends (121,941) 0 (121,941)
Net loss (35,163) 0 (35,163)
------------ ----------- ------------
Balance, October 31, 1997 (106,904) 0 (71,604)
------------ ----------- ------------
_____________________________________________________________________________________________
SUCCESSOR COMPANY:
Initial capitalization of Headhunters, L.L.C 0 0 2,000,000
Acquisition of Predecessor Company 106,904 0 71,604
Reorganization (Note 1) 0 0 6,909
Net loss (176,392) 0 (176,392)
------------ ----------- ------------
Balance, December 31, 1997 (176,392) 0 1,830,517
Issuance of stock warrants 0 0 341,834
Issuance of stock options 0 (2,550,950) 0
Amortization of deferred compensation 0 205,574 205,574
Net loss (4,345,868) 0 (4,345,868)
------------ ----------- ------------
Balance, December 31, 1998 (4,522,260) (2,345,376) (1,967,943)
Conversion of short-term borrowings to
convertible Class A preferred stock $(21,699,996) $ 0 $ 3,500,000
Issuance of Class A preferred stock 0 0 2,928,603
Conversion of Class A preferred stock to
common stock 0 0 0
Sale of common stock, net of offering expenses 0 0 28,358,789
Issuance of common stock for acquisition 0 0 356,250
Issuance of stock options 0 (3,441,100) 0
Amortization of deferred compensation 0 1,774,261 1,774,261
Exercise of stock options 0 0 50,000
Net loss (10,256,036) 0 (10,256,036)
------------ ----------- ------------
Balance, December 31, 1999 $(36,478,292) $(4,012,215) $ 24,743,924
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
34
<PAGE> 35
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
Successor Company | Company
---------------------------------------------- | -----------
YEAR Year Two Months | Ten 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.
35
<PAGE> 36
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.
36
<PAGE> 37
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.
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.
37
<PAGE> 38
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.
38
<PAGE> 39
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 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:
39
<PAGE> 40
<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 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.
40
<PAGE> 41
Beginning in January 1998, the Company entered into an agreement with
ITC(LAMBDA)DeltaCom, Inc. ("ITC(LAMBDA)DeltaCom") to serve as the Company's
Internet service provider and host of the Company's Web site.
ITC(LAMBDA)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
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.
41
<PAGE> 42
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>
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 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:
42
<PAGE> 43
<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 $ (1.90) $ (1.98)
Pro forma:
Basic and diluted (2.20) (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.
43
<PAGE> 44
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.
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:
Revenues $ 9,398,682
============
Net loss (10,190,525)
============
Basic and diluted net loss per share (1.87)
============
44
<PAGE> 45
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
II-7
<PAGE> 46
HEADHUNTER.NET, INC. AND SUBSIDIARIES
(SUCCESSOR COMPANY)
AND HNET, INC.
(PREDECESSOR COMPANY)
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>
II-8
<PAGE> 47
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C> <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
the Registrant's Current Report on Form 8-K
filed on January 3, 2000)
3.1 -- Articles of Incorporation, as amended
(incorporated by reference from Exhibit 3.1 of
the Registrant's registration statement on
Form S-1, Registration No. 333-80915)
3.2 -- Bylaws (incorporated by reference from Exhibit
3.2 of the Registrant's registration statement
on Form S-1, Registration No. 333-80915)
4.1 -- Specimen common stock certificate
(incorporated by reference from Exhibit 4.1 of
the Registrant'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)
10.1 -- HeadHunter.NET, Inc. 1998 Long-Term Incentive
Plan, as amended (incorporated by reference
from Exhibit 10.1 of the Registrant'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
of the Registrant'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 of the Registrant'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 of the
Registrant'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 of the Registrant'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
of the Registrant'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 of the
Registrant'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
10.9 -- Severance letter between HeadHunter.NET and
Warren Bare dated February 24, 1999
(incorporated by reference from Exhibit 10.16
of the Registrant's registration statement on
Form S-1, Registration No. 333-80915)
10.10 -- 2000 Qualified Employee Stock Purchase Plan
(incorporated by reference from Exhibit 4.3
of the Registrant's registration statement on
Form S-8, Registration No. 333-94027)
10.11 -- NBCI Promotion Agreement dated December 9,
1999 between HeadHunter.NET and NBCInternet,
Inc.+
21.1 -- Subsidiaries of the Company (incorporated by
reference from Exhibit 21.1 of the
Registrant's registration statement on Form
S-1, Registration No. 333-80915)
23.1 -- Consent of Arthur Andersen LLP
27.1 -- Financial Data Schedule (for SEC use only)
99.1 -- Risk Factors
</TABLE>
- ----------
+ Confidential treatment has been requested for certain portions which have
been blanked out in the copy of the exhibit filed with the Securities and
Exchange Commission. The omitted information has been filed separately with
the Securities and Exchange Commission pursuant to the application for
confidential treatment.
<PAGE> 1
EXHIBIT 10.8
333 RESEARCH COURT
LEASE AGREEMENT
THIS LEASE, made and entered into as of this ___ day of ___________,
1999, by and between AJ PARTNERS LIMITED PARTNERSHIP, AN ILLINOIS LIMITED
PARTNERSHIP (hereinafter referred to as the "Landlord") and HEADHUNTER.NET
(hereinafter referred to as the as the "Tenant");
W I T N E S S E T H:
1. PREMISES. The Landlord, for and in consideration of the rents,
covenants, agreements, and stipulations hereinafter mentioned, reserved, and
contained, to be paid, kept and performed by the Tenant, has leased and rented,
and by these presents does lease and rent, unto the said Tenant, and said Tenant
hereby agrees to lease and take upon the terms and conditions which hereinafter
appear, the following described property (hereinafter referred to as the
"Premises") containing approximately 17,000 RENTABLE SQUARE FEET on the SECOND
FLOOR of RESEARCH COURT (hereinafter referred to as the '"Building") and being
more fully described as 333 Research Court, Suite 200, Norcross, Gwinnett
County, Georgia 30092. The attached floor plan (Exhibit "A") represents an
approximation of the Premises to be leased pursuant to this Lease. (The above
square footage is an estimate of the square footage of the Premises. Landlord's
architect shall determine the exact square footage of the Premises upon
completion of the final floor plan.)
2. TERM. The term of this Lease shall be for a period of FIVE (5) YEARS
commencing on the 1ST day of DECEMBER, 1999 (hereinafter referred to as the
"Commencement Date"), and ending on the 30TH day of NOVEMBER, 2004, at midnight
(hereinafter referred to as the "Expiration Date") (such term being hereinafter
referred to as the "Term"), unless sooner terminated as may be hereinafter
provided. If the Commencement Date of the Lease should change for any reason, or
if the tenant improvements are not substantially complete on or before the
Commencement Date for any reason, in accordance with the Tenant Finish Agreement
attached hereto as Exhibit "B" (hereinafter referred to as the "Tenant Finish
Agreement"), Landlord shall not be liable or responsible for any claims,
damages, losses, penalties or liabilities in connection therewith or by reason
thereof, and this Lease shall not be void or voidable. After the occurrence of
the Commencement Date, Tenant and Landlord shall execute a certificate in the
form attached hereto as Exhibit "C" confirming the five (5) year term stating
the Commencement Date and the Expiration Date. In the event the Commencement
Date occurs other than the first (1st) day of a calendar month, then the
Expiration Date shall be five (5) years from the first day of the following
month.
<PAGE> 2
3. INTENTIONALLY DELETED.
4. EARLY POSSESSION. In the event the Premises are ready for
occupancy prior to the Commencement Date of the Term of this Lease and Tenant
chooses to occupy the Premises at that time, all terms, covenants and conditions
of this Lease shall be in full force and effect as of such date. The Expiration
Date shall remain November 30, 2004. Tenant shall pay a prorated share of the
Base Monthly Rental, as defined below, for any partial calendar month during
which Tenant occupies the Premises. By occupying the Premises as tenant, Tenant
shall be deemed to have accepted the same and acknowledges that the Premises are
in the condition required hereunder. So long as Tenant shall observe and perform
the covenants and agreements binding on it hereunder and subject to the terms
and provisions hereof, Tenant shall at all times during the Term peacefully and
quietly have and enjoy possession of the Premises,
5. BASE MONTHLY RENTAL. Tenant agrees to pay Landlord, by
payments to AJ Partners Limited Partnership, and delivered to Landlord c/o
Griffin Management Services, Inc., 800 Mount Vernon Highway, Suite 300, Atlanta,
Georgia 30328, promptly on the first day of each month in advance, during the
Term of this Lease, without deduction or set off, in legal tender, a monthly
rental according to the following schedule (hereinafter referred to as "Base
Monthly Rental"):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Rental Rate Per Base Monthly Rental Annual
Rentable Square Foot Amount Rental Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Months 1-12 $15.25 $21,604.17 $259,250.00
- --------------------------------------------------------------------------------
Months 13-24 $15.63 $22,144.27 $265,731.25
- --------------------------------------------------------------------------------
Months 25-36 $16.02 $22,697.88 $272,374.53
- --------------------------------------------------------------------------------
Months 37-48 $16.42 $23,265.32 $279,183.89
- --------------------------------------------------------------------------------
Months 49-60 $16.83 $23,846.96 $286,163.49
- --------------------------------------------------------------------------------
</TABLE>
If the Term commences on a day other than the first day of a month, or
terminates on a day other than the last day of a month, the Base Monthly Rental
for the first or last partial month shall be prorated based upon the actual
number of days in such a month.
Tenant hereby acknowledges that if any monthly payment of rent or any
monies due hereunder from Tenant shall not be received by Landlord within five
(5) days after such payment is due, then Tenant shall pay the Landlord a late
charge equal to 5% of such delinquent amount. Any amounts payable hereunder by
Tenant to Landlord which are not paid on or before the date due as provided in
this Lease shall bear interest at the rate of one and one-half percent (1 1/2%)
per month from said due date until paid. Said late charge and interest shall be
due without any requirement of Landlord to provide notice of failure to make
payments to Tenant.
2
<PAGE> 3
6. FIRST MONTH'S RENT AND SECURITY DEPOSIT. Upon execution of
this Lease, Tenant agrees to deposit with Landlord the sum of TWENTY-ONE
THOUSAND SIX HUNDRED FOUR AND 17/100 ($21,604.17) DOLLARS which represents the
first month's rent due. In addition, Tenant agrees to deposit with Landlord the
sum of TWENTY-THREE THOUSAND EIGHT HUNDRED FORTY-SIX AND 96/100 ($23,846.96)
DOLLARS, which sum shall be held by Landlord, without obligation for interest,
as security for the performance of Tenant's covenants and obligations under this
Lease, it being expressly understood and agreed that such deposit is not an
advance rental deposit or a measure of Landlord's damages in the event of
Tenant's default. Upon the occurrence of any event of default by Tenant,
Landlord may, from time to time, without prejudice to any other remedy provided
herein or provided by law, use such funds to the extent necessary to make good
any arrearage of rent or other payments due Landlord hereunder, and any other
damage, injury, expense or liability caused by such event of default; and Tenant
shall pay to Landlord on demand the amount so applied in order to restore the
security deposit to its original amount. Although the security deposit shall be
deemed the property of Landlord, any remaining balance of such deposit shall be
returned by Landlord to Tenant at such time after termination of this Lease that
all of Tenant's obligations under this Lease have been fulfilled. If, during the
Lease Term, Landlord, in Landlord's sole opinion, judgment and discretion, deems
itself insecure as to the performance or prospect of performance by Tenant as to
any of Tenant's obligations pursuant to this Lease, Tenant shall be required to
provide Landlord with an additional security deposit, in an amount and form
acceptable to Landlord. In the event the Landlord shall sell the Building, or
shall otherwise convey or dispose of its interest in this Lease, Landlord may
assign said security deposit or any balance thereof to assignee, whereupon
Landlord shall be released from all liability for the return or repayment of
such security deposit and Tenant shall look solely to the said assignee for the
return and repayment of said security deposit.
Said security deposit shall not be assigned or encumbered by Tenant
without the written consent of Landlord, and any assignment or encumbrance
without such consent shall not bind Landlord. In the event of any rightful and
permitted assignment of this Lease by Tenant, said security deposit shall be
deemed to be held by Landlord as a deposit made by the assignee, and Landlord
shall have no further liability with respect to the return of said security
deposit to the Tenant.
7. RETURNED CHECKS. Tenant shall be charged the sum of Fifteen
($15.00) Dollars for any check returned to Landlord by Tenant's bank for
non-payment of funds or other any reason whatsoever. Landlord may thereafter, at
its sole option, insist upon payment of any sums due hereunder (including,
without limitation, the Base Monthly Rental) by cashier's check or certified
funds only.
3
<PAGE> 4
8. ADDITIONAL RENT, OPERATING EXPENSE ADJUSTMENT. The Operating
Expense Base Year of the rentable area of the Building shall be the calendar
year of January 1, 2000 through December 31, 2000. The total rentable area of
the Building is 65,463 rentable square feet. If in any calendar year after the
Operating Expense Base Year during the term hereof, the Operating Expenses of
the rentable area of the Building should exceed the Operating Expenses of the
Base Year (such excess being hereinafter referred to as the "Operating Expense
Differential"), then as additional rent for the calendar year, Tenant shall pay
within thirty (30) days after written notice by Landlord of said amount being
due for each rentable square foot of floor space leased hereunder, and in any
expansion or extensions hereof For the purpose of this Paragraph 8, Operating
Expenses are defined in Exhibit "D" of this Lease.
If during any calendar year of the Lease, the occupancy of the rentable
area of the Building averages less than ninety-five percent (95%), then it is
agreed that the Operating Expense will be adjusted for such year so that all
such Operating Expenses shall be computed as though the rentable area of the
Building has been ninety-five percent (95%) occupied for such calendar year. all
such expense categories will be accounted for and reported in accordance with
generally accepted accounting principles.
At any time during the term of this Lease after the twelfth month
following the Commencement Date of this Lease, but not later than ten (10) days
prior to the date a rental payment is due, Landlord may deliver to Tenant a
written estimate of any additional rents which may be reasonably anticipated
hereunder, estimated divided by the number of months remaining in the calendar
year.
Statements showing the actual Operating Expenses of the Building and
Tenant proportionate share hereof (hereinafter referred to as "Statement of
Actual Adjustment" shall be delivered by Landlord to Tenant within one hundred
twenty (120) days after the end of any calendar year in which additional rental
was paid or due by Tenant under provisions hereof Within fifteen (15) days after
written notice by Landlord to Tenant of such Statement of Actual Adjustment,
Tenant shall pay to Landlord the amount of any rentals shown as being due and
unpaid thereon. Should such Statement of Actual Adjustment show the Tenant had
paid to Landlord an aggregate amount in excess of the additional rental due for
the preceding calendar year and Tenant is not then in default hereunder,
Landlord shall refund the amount of overpayment.
If the Term of this Lease begins on a day other than the first day of
the calendar year, or should this Lease terminate on a day other than the last
day of the calendar year, the amount shown as due by Tenant on the Statement of
Actual Adjustment shall reflect a pro-ration based on the proportion that the
number of days this Lease was in effect during such calendar year bears to 360.
The Landlord's right to recover Operating Expenses Adjustment shall survive the
termination of this Lease.
4
<PAGE> 5
9. USE OF PREMISE. The Premises shall be used for general office
purposes and no other purposes and in accordance with the Rules and Regulations
attached hereto and incorporated herein by this reference. The Tenant shall not
use, permit or allow the Premises to be used other than as strictly provided in
this Lease and shall not use, permit or allow the Premises or any part thereof
to be used for any immoral, improper, offensive, or unlawful purpose or
otherwise in violation of any federal, state or local statute, law, ordinance,
rule or regulation, including, without limitation, in violation of any zoning
ordinances; nor shall the Tenant permit any nuisance within the Premises or
permit the Premises to be used in any manner which will be a source of material
annoyance or in any way interfere with the peaceful possession, enjoyment and
proper use of other areas of the Building, nor shall the Premises be used in any
manner so as to vitiate the insurance or increase the rate of insurance on the
Premises or the Building, nor shall the Premises be used for any purpose which
would tend to lower the quality or character of the Building, create
unreasonable elevator loads or otherwise interfere with Building operations. In
no event shall Tenant be permitted to store any materials or vehicles outside of
the Premises in the parking lot or common areas of the Building. Not by way of
limitation of the foregoing but in addition thereto, neither the Premises nor
any portion thereof shall be used or occupied for any or all of the following:
governmental or quasi-governmental offices, spas, massage parlors, escort
services offices, retail sales purposes, classroom facility purposes, schools,
radio or television broadcasting or studio facilities, auto leasing or auto
sales offices, equipment or appliance repair shops, daycare centers, nurseries,
churches, or places of religious or quasi-religious worship, religious
facilities or offices of religious organizations, or retail or wholesale sale
purposes, medical research laboratories or offices for medical or quasi-medical
professionals providing medical treatments.
10. NO NUISANCE. Tenant shall conduct its business and control its
agents, contractors, customers, employees, invitees, licensees and visitors in
such a manner so as not to create any nuisance or interference with, annoy or
disturb any other tenant or Landlord in its operation of the Building.
11. ASSIGNMENT AND SUBLETTING. Tenant may sublease any or all of
the Premises to a subsidiary or affiliated corporation without Landlord's prior
written consent. Tenant may sublease portions of the Premises to others provided
such subtenant's operation is a part of the general operation of Tenant and
under the supervision and control of Tenant, and provided such operation is
within the purposes for which said Premises shall be used. Except as provided in
the preceding sentences, Tenant shall not voluntarily or involuntarily, whether
by operation of law or otherwise, assign, transfer, hypothecate or otherwise
encumber this Lease or any interest therein and shall not sublet or permit the
use by others of the Premises or any portion thereof without obtaining in each
instance Landlord's prior written consent. Landlord's, consent to one
5
<PAGE> 6
assignment, sublease, transfer or hypothecation shall not be deemed as a consent
to any other or further assignment, sublease, transfer or hypothecation. Any
such assignment, sublease, transfer or hypothecation without Landlord's prior
written consent shall be void and shall, at Landlord's option, constitute a
material breach of this Lease. No acceptance by Landlord of any rent or any
other sum of money from any assignee, sublessee or other category of transferee
shall release Tenant from any of its obligations hereunder or be deemed to
constitute Landlord's consent to any assignment, sublease, transfer or
hypothecation, and in any event, Tenant shall remain primarily liable on this
Lease for the entire Term hereof and shall in no way be released from the full
and complete performance of all the terms, conditions, covenants and agreements
contained herein.
In the event Tenant should desire to assign this Lease or sublet the
Premises or any part thereof, Tenant shall give Landlord prior written notice,
which notice shall specify (a) the date on which Tenant desires to make such
assignment or sublease; (b) the name and business of the proposed assignee or
sublessee; (c) the amount and location of the space affected; (d) the proposed
effective date and duration of the subletting or assignment; and (e) the
proposed rental to be paid to Tenant by such subtenant or assignee. Landlord
shall then have a period of fifteen (15) days following receipt of such notice
within which to notify Tenant in writing that Landlord elects either (1) to
terminate this Lease as to the space so affected as of the date so specified by
Tenant, in which event Tenant will on that date be relieved of all further
obligations to pay rent hereunder as to such space; or (2) to permit Tenant to
assign or sublet such space, in which event if the proposed rental between
Tenant and subtenant is greater than the Base Monthly Rental as adjusted under
this Lease, then one hundred (100%) percent of such excess rental shall be
deemed additional rent owed by Tenant to Landlord under this Lease, and the
amount of such excess shall be paid by Tenant to Landlord in the same manner
that Tenant pays the Base Monthly Rental hereunder and in addition thereto; or
(3) to withhold consent to Tenant's assigning or subleasing such space, which
consent shall not be unreasonably withheld, provided the proposed assignee or
sublessee is reasonably satisfactory to Landlord as to credit and character and
will occupy the Premises for office purposes consistent with Paragraph 9 of this
Lease and to continue this Lease in full force and effect as to the entire
Premises. Requests for sublease or assignment shall be accompanied by a minimum
service fee of Three Hundred and No/100 ($300.00) Dollars and Tenant agrees to
reimburse Landlord for all legal fees and other expenses incurred by Landlord in
connection with the request.
12. HOLDING OVER. Should Tenant or any of its successors in
interest continue to hold the Premises after termination of this Lease, whether
such termination occurs by lapse of time or otherwise, with Landlord's
acquiescence, and without any distinct agreement between the parties, such
holding over shall constitute and be construed as a tenancy at sufferance at a
monthly rental equal to one and one-half (1 1/2) times the monthly rental
(including Base Monthly Rental and any adjusted and
6
<PAGE> 7
Additional Rent) provided herein at the time of such termination, if Landlord
elects to accept such rent. During such time as Tenant shall continue to hold
the Premises after the termination hereof, Tenant shall be regarded as a tenant
at sufferance and not a tenant at will; subject, however, to all the terms,
provisions, covenants and agreements on the part of Tenant hereunder. No
payments of money by Tenant to Landlord after the termination of this Lease
shall reinstate, continue, renew or extend the Tern and no extension of this
Lease after the termination hereof shall be valid unless and until the same
shall be reduced to writing and signed by both Landlord and Tenant. Tenant shall
be liable to Landlord for all damage which Landlord shall suffer by reason of
Tenant's holding over and Tenant shall indemnify, defend and hold Landlord
harmless against all claims made by any other tenant or prospective tenant
against Landlord resulting from delay by Landlord in delivering possession of
the Premises to such other tenant or prospective tenant. If Landlord accepts
rent pursuant to this paragraph, Landlord shall always have the right to
terminate Tenant's possession under this paragraph upon thirty (30) days prior
written notice to Tenant.
13. ALTERATIONS AND IMPROVEMENTS. (a) No alteration in, or
addition to, the Premises will be made without first obtaining Landlord's prior
written consent, which Landlord may grant or withhold for any reason or for no
reason, and any such work consented to, although paid for by Tenant, will be
done by Landlord;
(b) If Tenant's actions, omissions or occupancy of the
Premises shall cause the rate of fire or other insurance either on the Building
or the Premises to be increased, Tenant shall pay, as additional rent, the
amount of any such increase promptly upon demand by Landlord; and
(c) All erections, additions, fixtures and improvements,
whether temporary or permanent in character (except only the movable office
furniture of Tenant) made in or upon the Premises shall be and remain Landlord's
property and shall remain upon the Premises at the termination of this Lease by
lapse of time or otherwise, with no compensation to Tenant. Landlord reserves
the right to require Tenant to remove any such improvements or additions at the
termination hereof or within fifteen (15) days thereafter. Landlord may, at its
election, repair any damage to the Premises caused by or in connection with the
removal of any articles of personal property, business or trade fixtures,
alterations, improvements and installations, and all costs for such repairs
shall be at Tenant' s expense.
14. REPAIRS TO THE PREMISES. Landlord shall not be required to
make any repairs or improvements to the Premises, except structural repairs
necessary for safety and tenantability. Tenant shall, at its own cost and
expense, keep in good repair all portions of the Premises, including but not
limited to windows, interior glass, doors, interior walls and finish work,
floors and floor coverings, and supplemental or special
7
<PAGE> 8
heating and air conditioning systems, and shall take good care of the Premises
and its fixtures and permit no waste, except normal wear and tear with due
consideration for the purpose for which the Premises are leased. Tenant shall
maintain and replace, at its cost and expense, all light bulbs and fixtures in
the Premises that are not the Building's standard 2-foot by 4-foot fluorescent
light fixtures and bulbs therefor. Tenant shall indemnify Landlord against any
loss, damage, or expense arising by reason of any failure of Tenant so to keep
the Premises in good repair and tenantable condition or due to any act or
neglect of Tenant, its agents, employees, contractors, invitees, licensees,
tenants, or assignees. If Tenant fails to perform, or cause to be performed,
such maintenance and repairs, then at the option of Landlord, in its sole
discretion, any such maintenance or repair may be performed or caused to be
performed by Landlord and the cost and expense thereof charged to Tenant, and
Tenant shall pay the amount thereof to Landlord on demand as additional rental.
Tenant shall promptly report to Landlord in writing any damage to, or defective
condition in or about the Building or Premises known to Tenant.
15. LANDLORD'S RIGHT TO ENTER PREMISES. Tenant shall not change
the locks on any entrance to the Premises. Upon Tenant's written request to
Landlord, Landlord will make a reasonable change of locks on behalf of Tenant at
Tenant's sole cost and expense. Landlord and its agents, employees, and
contractors shall have the right to enter the Premises, at such times as
Landlord deems reasonably necessary, to make necessary repairs, additions,
alterations, and improvements to the Premises or the Building, including,
without limitation, the erection, use, and maintenance of pipes and conduits and
to show the Premises to prospective tenants and purchasers. Landlord shall also
be allowed to take into and through the Premises any and all needed materials
that may be required to make such repairs, additions, alterations, and
improvements, all without being liable to Tenant in any manner whatsoever.
During such time as work is being carried on in or about the Premises, provided
such work is carried out in a manner so as not to interfere unreasonably with
the conduct of Tenant's business therein, the rent provided herein shall in no
way abate, and Tenant waives any claim and cause of action against Landlord for
damages by reason of loss or interruption to Tenant's business and profits
therefrom because of the prosecution of any such work or any part thereof In the
event of emergency, or if otherwise necessary to prevent injury to persons or
damage to property, such entry to the Premises may be made by force without any
liability whatsoever on the part of Landlord for damage resulting from such
forcible entry. Landlord may card the Premises "For Rent" or "For Sale" 180 days
before the termination date of this Lease. Provided that Landlord does not
interfere with Tenant operations, upon 24-hour prior notification if possible,
(which may be given by telephone). Landlord and its agents may enter the
Premises at reasonable hours at any time to exhibit same to prospective tenants
or purchasers.
16. DEFAULT. a) The following events shall be deemed to be Events
of Default by Tenant under this Lease: (i) Tenant shall fail to pay any
installment of rent or
8
<PAGE> 9
any other charge or assessment against Tenant pursuant to the terms hereof when
due and shall not cure such failure within five (5) days after notice thereof to
Tenant; provided however, no such notice will be required in the event Tenant
has had two (2) or more Events of Default during any one year during the term of
this Lease; (ii) Tenant shall fail to comply with any term, provision, covenant
or warranty made under this Lease by Tenant, other than the payment of rent or
any other charge or assessment payable by Tenant, and shall not cure such
failure within fifteen (15) days after notice thereof to Tenant; (iii) any court
or competent jurisdiction shall enter, with regard to Tenant, a decree or order
for relief in an involuntary case under the federal bankruptcy laws, as now or
hereafter constituted, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or a decree or order appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
Tenant or for any substantial part of Tenant's property or for a decree or order
ordering the winding-up or liquidation of Tenant's affairs, and any such decree
or order shall continue unstayed and in effect for a period of thirty (30) days;
(iv) Tenant shall commence a voluntary case under the federal bankruptcy laws,
as now constituted or hereafter amended, or any other applicable federal or
state bankruptcy, insolvency or other similar law, or Tenant shall consent to
the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of Tenant or for
any substantial part of Tenant's property; (v) Tenant shall abandon or vacate
all of any portion of the Premises or fail to take possession thereof as
provided in this Lease. In the event Tenant shall remove its fixtures, equipment
or machinery or shall vacate the Premises or any part thereof prior to the
Expiration Date of this Lease, or shall discontinue or suspend the operation of
its business conducted on the Premises for a period of more than thirty (30)
consecutive days (except during any time when the Premises may be rendered
untenantable by reason of fire or other casualty), then in any such event Tenant
shall be deemed to have abandoned the Premises and Tenant shall be in default
under the terms of this Lease; or (vi) Tenant shall do or permit to be done
anything which creates a lien of any nature or whatsoever upon the Premises.
b) Upon the occurrence of any of the aforesaid Events of
Default, Landlord shall have the option to pursue any one or more of the
following causes of action without any notice or demand whatsoever: (i)
Terminate this Lease, in which event Tenant shall immediately surrender the
Premises to Landlord, but if Tenant fails to do so, Landlord may, without
prejudice to any other remedy which it may have for possession or arrearage in
rent, enter upon and take possession of the Premises and expel or remove Tenant
and its effects and any other person, by force if necessary, without being
liable for prosecution or any claim of damages therefor; and Tenant hereby
agrees to pay to Landlord on demand the amount of all loss and damage which
Landlord may suffer by reason of such termination, whether through inability to
relet the Premises or through decrease in rent or otherwise; or (ii) Terminate
this Lease and declare the entire amount of the rent required to be paid
hereunder by Tenant which, in Landlord's reasonable
9
<PAGE> 10
determination, would become due and payable during the remainder of the Lease
Term, discounted to present value by using a discount factor of eight percent
(8%) per annum, to be due and payable immediately. Upon the acceleration of such
amounts, Tenant agrees to pay the same at once together with all rents
theretofore due, at Landlord's address as provided herein; provided, however,
that such payment shall not constitute a penalty or forfeiture, but shall
constitute liquidated damages for Tenant's failure to comply with the terms and
provisions of this Lease (Landlord and Tenant agreeing that Landlord's actual
damages in such event are impossible to ascertain and that the amount set forth
above is a reasonable estimate thereof). Upon making such payment, Tenant shall
receive from Landlord all rents received by Landlord from other tenants renting
the Premises, or portion thereof, during the Lease Term (with appropriate
allocations of such rents in the event other tenants lease space in addition to
the Premises), provided that the monies to which Tenant shall so become entitled
shall in no event exceed the entire amount actually paid by Tenant to Landlord
pursuant to the preceding sentence, less all costs, expenses and attorney's fees
of Landlord incurred in connection with the termination of this Lease. Eviction
of Tenant and reletting of the Premises and the acceptance of such payment by
Landlord shall not constitute a waiver of any failure of Tenant thereafter
occurring to comply with any term, provision, condition or covenant of this
Lease; or (iii) Terminate Tenant's rights of possession (but not this Lease) and
enter upon and take possession of the Premises and expel or remove Tenant and
any other person who may be occupying the Premises or any portion thereof, by
entry (including the use of force if necessary), dispossessory suit or
otherwise, without thereby releasing Tenant from any liability hereunder,
without terminating this Lease, and without being liable to prosecution or any
claim for damages therefor, and Landlord may, but shall be under no obligation
to do so, relet the Premises or portion thereof as the agent of Tenant and
receive the rent therefor, and Tenant shall pay Landlord any deficiency that may
arise by reason of such reletting on demand at the office of Landlord; or (iv)
As agent of Tenant, do whatever Tenant is obligated to do by the provisions of
this Lease and Landlord may enter the Premises, by force if necessary, without
being liable to prosecution or any claims for damages therefor, in order to
accomplish this purpose on behalf of Tenant, and Tenant further agrees that
Landlord shall not be liable for any damages to Tenant from such action, unless
caused by the negligence of Landlord or otherwise; or (v) Dispossess the Tenant
by Summary Proceedings and receive all the rents and other charges up to the
time of such re-entry by dispossession and Landlord may relet the Premises or
any part or parts thereof, either in the name of Landlord or otherwise, but for
the account of Tenant, for a term which may, at Landlord's option, be less than
or exceed the period which would otherwise have constituted the balance of the
Lease Term and Tenant shall also pay Landlord, as liquidated damages for the
failure of Tenant to observe and perform said Tenant's covenants herein
contained, for each month of the period which would otherwise have constituted
the balance of the Lease Term, any deficiency between (i) the sum of one monthly
installment of rent and all charges that otherwise would have become due; and
10
<PAGE> 11
(ii) the net amount if any, of the monthly rents collected on account of the
Lease of the Premises for the balance of the Lease Term.
c) Any reletting of the Premises by Landlord in Landlord's
name or Tenant's name shall not terminate this Lease, shall not release Tenant
from any liability hereunder, and may be for such a term, rent amount and other
conditions as Landlord deems desirable, without advertisement and by private
negotiations. Tenant shall reimburse Landlord for all Landlord's costs, expenses
and attorney's fees in connection with such reletting, including, without
limitation, all commissions and advertising costs. No action taken by or on
behalf of Landlord shall be construed to be an acceptance of a surrender of the
Premises and no agreement to accept a surrender of the Premises shall be valid
unless in writing and executed by Landlord. In determining the amount of loss or
damage which Landlord may suffer by reason of termination of this Lease or the
deficiency arising by reason of any reletting of the Premises by Landlord as
provided above, allowance shall be made for expense of repossession and any
repairs or remodeling undertaken by Landlord following repossession and there
shall be added to the amount of rent due to Landlord as herein provided, all
costs and expenses incurred by Landlord in the enforcement of this Lease,
including, without limitation, the fees of Landlord's attorneys.
d) Notwithstanding anything herein to the contrary, no
termination of Tenant's right of possession of the Premises by dispossessory
action or otherwise shall release Tenant from the performance of Tenant's
obligations under this Lease, including, without limitation, the timely payment
of all rent reserved hereunder for the balance of the Lease Term following such
termination of Tenants right of possession.
17. LANDLORD'S SERVICES. Landlord shall render services and
supplies incidental to this Lease in accordance with and as described in this
paragraph, as follows:
(a) General cleaning and janitorial service required as a
result of normal, prudent use of the Premises and only on Mondays through
Fridays, inclusive, with New Year's Day, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, Christmas Day, and any other recognized bank holiday
(herein collectively referred to as the "Holidays") excepted.
(b) Electric current for Building standard tenant lighting and
small business machinery only from electric circuits designated by Landlord for
Tenant's use at Landlord's cost & expense. Tenant will not use any electrical
equipment which in Landlord's opinion will overload the wiring installations or
interfere with the reasonable use thereof by other users in the Building. If any
additional circuitry or wiring is required by Tenant, and Landlord approves the
installation of the same in writing, such work shall
11
<PAGE> 12
be performed at Tenant's expense by Landlords electrician or under Landlord's
control and supervision, and Tenant shall pay Landlord for such additional work
as billed.
(c) Seasonable air-conditioning and heating during normal
business hours (8:00 A.M. to 6:00 P.M.), Monday through Friday and 8:00 A.M.
until 1:00 P.M. Saturday, said heating or air-conditioning not being furnished
Sunday or Holidays. Should Tenant desire either heating or air-conditioning at
other times on a regular basis, Landlord agrees to provide same upon written
request by Tenant, but at Tenant's expense.
Landlord shall not be liable for any damages directly or indirectly
resulting from the installation, use or interruption of use of any equipment in
connection with the furnishing of services referred to in this paragraph, and
particularly any interruption in services by any cause beyond the immediate
control of Landlord, provided Landlord shall use reasonable diligence in the
restoration of such services.
18. TELEPHONE SERVICE. Tenant acknowledges and agrees that
securing and arranging for telephone service to the Premises is the sole
responsibility of Tenant and that Landlord has no responsibility or obligation
to provide or arrange such telephone service, nor to permit installation of any
facilities or equipment in the Building outside the Premises in connection with
providing telephone service to the Premises.
19. DESTRUCTION OF PREMISES. Should the Premises be so damaged by
fire or other cause that rebuilding or repairs cannot, in the estimation of
Landlord, be completed within one hundred eighty (180) days from the date of the
fire, or other cause of damage, then either Landlord or Tenant may terminate
this Lease by written notice to the other given within thirty (30) days of the
date of such damage or destruction, in which event rent shall be abated from the
date of such damage or destruction. However, if the damage or destruction is
such that rebuilding or repairs can be completed within one hundred eighty (180)
days, Landlord covenants and agrees, subject to the provisions of this
paragraph, to make such repairs with reasonable promptness and dispatch, and to
allow Tenant an abatement in the Base Monthly Rental for such time as the
Premises are untenantable or proportionately for such portion of the Premises as
shall be untenantable, and Tenant covenants and agrees that the terms of this
Lease shall not be otherwise affected. In no event shall Landlord be required to
repair or replace any trade fixtures, furniture, equipment or other property
belonging to Tenant nor shall Landlord be required to rebuild, repair or replace
any part of the partitions, fixtures, additions, or other improvements which may
have been placed in or about the Premises by Tenant; nor shall Landlord have any
obligation to incur any cost to repair, reconstruct or restore the Premises in
excess of insurance proceeds from the casualty necessitating such work that are
made available to Landlord, under its sole control, for such work.
Notwithstanding anything to the contrary contained in this paragraph, Landlord
shall not have any obligation whatsoever to repair, reconstruct or restore the
Premises when the damage
12
<PAGE> 13
resulting from any casualty contained under this paragraph occurs during the
last twelve (12) months of the Term of this Lease.
20. CONDEMNATION. If the whole of the Premises, or such portion
thereof, as will make Premises unusable for the purposes herein leased, be
condemned by any legally constituted authority for any public use or purpose,
then, in either of said events, the Term hereby granted shall cease from the
date when possession thereof is taken by public authorities, and rental shall be
accounted for as between Landlord and Tenant as of said date. Such termination,
however, shall be without prejudice to the rights of either Landlord or Tenant
to recover compensation and damage caused by condemnation from the condemnor;
provided, however, Tenant shall not be entitled to claim compensation for items
which would reduce Landlord's award.
21. INSURANCE. Tenant shall carry fire and extended coverage
insurance insuring Tenant's interest in its improvements and betterment to the
Premises and any and all furniture, equipment, supplies, and other property
owned, leased, held, or possessed by it and contained therein, against loss or
damage by fire, flood, windstorms, hail, earthquakes, explosion, riot, damage
from aircraft and vehicles, smoke damage, vandalism and malicious mischief and
such other risks as are from time to time covered under "extended coverage"
endorsements and special extended coverage endorsements commonly known as "all
risks" endorsements, such insurance coverage to be in an amount equal to the
full replacement value of such improvements and property.
Tenant also agrees to carry a policy or policies of workers' compensation and
commercial general liability insurance, including personal injury and property
damage, with contractual liability endorsement, in an amount of not less than
One Million and No/100 Dollars ($1,000,000.00) for the property damage and Two
Million and No/100 Dollars ($2,000,000.00) per occurrence for personal injuries
or deaths of persons occurring in or about the Premises. Said policies shall:
(i) name Landlord, its agents and mortgagees as additional insureds and insure
Landlord's contingent liability under this Lease (except for the workers'
compensation policy, which shall instead include waiver of subrogation
endorsement in favor of Landlord); (ii) be issued by an insurance company which
is acceptable to Landlord and licensed to do business in the State of Georgia
and maintains an A.M. Best credit rating of "B+" or better; and (iii) provide
that said insurance shall not be cancelled unless thirty (30) days' prior
written notice shall have been given to Landlord. Said policy or policies, or
certificate thereof, shall be delivered to Landlord by Tenant upon commencement
of the Term of the Lease and upon each renewal and/or modification of said
insurance. If during the Term or any extension thereof additional coverage
and/or higher limits of insurance than those mentioned above shall be deemed
necessary by Landlord, Tenant shall procure such additional coverage provided
such additional coverage is appropriate, customary and generally required for
like premises utilized for similar purpose. If Tenant shall fail at any time to
procure and/or maintain the
13
<PAGE> 14
insurance required herein, Landlord may, at its option, procure such insurance
on Tenant's behalf and the cost thereof shall be payable upon demand, as
additional rent. Payment by Landlord of any insurance premium or the carrying by
Landlord of any such insurance policy shall not be deemed to waive or release
the default of Tenant with respect thereto.
22. WAIVER OF SUBROGATION. Landlord and Tenant each hereby
releases the other from any and all liability or responsibility to the other or
anyone claiming through or under them by way of subrogation or otherwise for any
loss or damage to property caused by fire or any other perils that is insured
against or that are required to be insured against under the terms of the Lease,
even if such loss or damage shall have been caused by the fault or negligence of
the other party, or anyone for whom such party may be responsible, including,
without limitation, any other tenants or occupants of the remainder of the
Building in which the Premises are located; provided, however, that this release
shall be applicable and in force and effect only to the extent that such release
shall be lawful at that time and in any event only with respect to loss or
damage occurring during such time as the releaser's policies shall contain a
clause or endorsement to the effect that any such release shall not adversely
affect or impair said policies or prejudice the right of the releaser to recover
thereunder and then only to the extent of the insurance proceeds payable under
such policies. Landlord and Tenant each agrees that it will request its
insurance carriers to include in its policies such a clause of endorsement. If
extra cost shall be charged therefor, each party shall advise the other thereof
and of the amount of the extra cost, and the other party, at its election, may
pay the same, but shall not be obligated to do so. If such other party fails to
pay such extra costs, the release provisions of this paragraph shall be
inoperative against such other party to the extent necessary to avoid
invalidation of such releaser's insurance.
23. NO ESTATE IN LAND. This contract shall create the relationship
of Landlord and Tenant between the parties hereto; no estate shall pass out of
Landlord. Tenant has only a usufruct, not subject to levy and sale, and not
assignable by Tenant except by Landlord's consent in accordance with the
provisions of this Lease.
24. INDEMNITY. Tenant shall hold Landlord, its agents and
employees harmless from, indemnify and defend Landlord, its agents and employees
against any and all claims for liability for any injury (including death) or
damage to any person or property whatsoever (i) occurring in, on, or about the
leased Premises or any part thereof, or (ii) occurring in, or about the Building
when such injury or damage has been caused in part of or in whole by the act,
neglect, fault or omission of Tenant, its agents, servants, employees, or
invitees, and shall further indemnify and hold Landlord, its agents and
employees harmless from any and all claims arising from any breach or default in
the performance of any obligation on Tenant's part to be performed under the
terms of this Lease, or arising from any act or negligence of Tenant, or of its
agents or employees, and
14
<PAGE> 15
from all costs, attorneys' fees, expenses and liabilities incurred as a result
of any such claim or any action or proceedings brought thereon; and in case any
action or proceeding be brought against Landlord, its agents or employees by
reason of any such claim, Tenant, upon notice from Landlord, shall defend the
same at Tenant's expense by counsel reasonably satisfactory to Landlord. Tenant,
as a material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons (including death), in, upon or about the
Premises from any cause which does not result from the willful or negligent acts
of Landlord, its agents or employees, and Tenant hereby waives all claims in
respect thereof against Landlord.
Landlord or anyone authorized to act for Landlord shall not be liable
for any damage to property entrusted to employees of the Building, nor for loss
of or damage to any property by theft or otherwise, nor for any injury or damage
to persons or property resulting from fire, explosion, failing plaster, steam,
gas, electricity, water or rain which may leak from any part of the Building or
from the pipes, appliances or plumbing works therein, or from the roof, street
or subsurface, or from any other place resulting from dampness or any other
cause whatsoever which does not result from the willful or negligent acts of
Landlord. Landlord or its agents shall not be liable for interference with the
natural light, nor shall Landlord be liable for any latent defect in the
Premises or in the Building.
The provisions of this paragraph shall survive the expiration or
termination of this Lease with respect to any claims or liability occurring
prior to such expiration or termination.
25. LIABILITY OF LANDLORD. Landlord shall not be liable to Tenant
or to any persons, firm, corporation, or other business association claiming by,
through, or under Tenant for failure to furnish or for delay in furnishing any
service provided for in this Lease, and no such failure or delay by Landlord
shall be an actual or constructive eviction of Tenant nor shall any such failure
or delay operate to relieve Tenant from the prompt and punctual performance of
each and all the covenants to be performed herein by Tenant; nor for any latent
defects in the Premises or Building; nor for defects in the cooling, heating,
electric, water, elevator, or other apparatus or systems or for water discharged
from sprinkler systems, if any, or from water pipes and plumbing facilities in
the Building; nor for the theft, mysterious disappearance, or loss of any
property of Tenant whether from the Premises or any part of the Building; and
nor from interference, disturbance, or acts to or omitted against Tenant by
third parties, including, without limitation other occupants of the Building and
any such occurrences shall not constitute an actual or constructive eviction of
Tenant.
26. LIMITATION OF LIABILITY. Landlord's obligations and liability
with respect to this Lease shall be limited solely to Landlord's interest in the
Building, as
15
<PAGE> 16
such interest is constituted from time to time, and neither Landlord nor any
officer, director, shareholder, or partner of Landlord, or of any partner of
Landlord, shall have any personal liability whatsoever with respect to this
Lease. In no event shall Landlord be liable to Tenant nor shall any interest of
Landlord in the Building be subject to execution by Tenant, for any indirect,
special or consequential damages.
27. NO WAIVER OF RIGHTS. No failure or delay of Landlord to
exercise any right or power given it herein or to insist upon strict compliance
by Tenant of any obligation imposed on it herein and no custom or practice of
either party hereto at variance with any term hereof shall constitute a waiver
or a modification of the terms hereof by Landlord or any right it has herein to
demand strict compliance with the terms hereof by Tenant. No person has or shall
have any authority to waive any provision of this Lease unless such waiver is
expressly made in writing and signed by Landlord.
28. ENTIRE AGREEMENT AND EXHIBITS. This Lease constitutes and
contains the sole and entire agreement of Landlord and Tenant and no prior or
contemporaneous oral or written representation or agreement between the parties
and affecting the Premises shall have legal effect. The content of each and
every exhibit which is referenced in this Lease as being attached hereto is
incorporated into this Lease as fully as if set forth in the body of this Lease.
Landlord hereby disclaims any warranties and representations as to the Building
or Premises, whether express or implied.
29. NOTICES. All notices required or desired to be given with
respect to this Lease shall, in order to be effective, be in writing and shall
be effectively given or delivered if hand delivered to the addresses for
Landlord and Tenant specified hereinbelow, or if deposited, postage prepaid, to
the United States mail, certified, return receipt requested, properly addressed
to the addresses specified hereinbelow, or if delivered by Federal Express or
other overnight commercial courier to the addresses for Landlord and Tenant
hereinbelow. Any notice mailed or sent by overnight commercial courier shall be
deemed to have been given upon receipt or refusal thereof Notice affected by
hand delivery shall be deemed to have been given at the time of actual delivery.
In the event of a change of address by either party, such party shall give
written notice thereof to the other party in accordance with the foregoing.
Additionally, Tenant agrees to send copies of all notices required or permitted
to be given to Landlord to each lessor under any ground or land lease covering
all or any part of the Land and each holder of a mortgage or deed to secure debt
encumbering the Building and/or the Land that notifies Tenant in writing of its
interest in the address to which notices are to be sent.
If to Tenant: HEADHUNTER.NET
333 Research Court, Suite 200
Norcross, Georgia 30092
16
<PAGE> 17
If to Landlord: AJ PARTNERS LIMITED PARTNERSHIP
c/o Griffin Management Services, Inc.
800 Mount Vernon Highway, Suite 300
Atlanta, Georgia 30328
The foregoing addresses may be changed by thirty (30) days written
notice from time to time.
Tenant hereby appoints as his agent to receive the service of all
dispossessory or distraint proceedings and notices thereunder, and all notices
required under this Lease, the person in charge of or occupying the Premises at
the time; and if no person is in charge of or occupying same, then such service
or notice may be made by attaching the same on the main entrance to the
Premises. To the extent permitted by law, Tenant hereby submits to the
jurisdiction of any state or federal court located in Fulton County, Georgia, as
well as to the jurisdiction of all courts from which an appeal may be taken from
the aforesaid courts for the purpose of any suit, action or other proceeding
arising out of Tenant's obligations under or with respect to this Lease and
Tenant hereby expressly waives any and all objections that Tenant may have as to
jurisdiction and/or venue in any of such courts.
30. SUCCESSORS AND ASSIGNS. The covenants, conditions and
agreements herein contained shall inure to the benefit of and be binding upon
Landlord, its successors and assigns, and shall be binding upon Tenant, its
heirs, executors, administrators, successors and assigns, and shall inure to the
benefit of Tenant and only such assigns of Tenant to whom the assignment by
Tenant has been consented to by Landlord. Nothing contained in this Lease shall
in any manner restrict Landlord's right to assign or encumber this Lease in its
sole discretion. Should Landlord assign this Lease as provided for above, Tenant
shall be bound to said conditions of this Lease for the balance of the Term
hereof remaining after such succession, and Tenant shall attorn to such
succeeding party as its landlord under this Lease promptly under any such
successions (including a mortgagee or any other party who may come into custody
or possession of the Premises because of a mortgage foreclosure or otherwise).
Tenant agrees that should any party so succeeding to the interest of Landlord
require a separate agreement of attornment regarding the matters covered by this
Lease, then Tenant shall enter into any such "attornment agreement," provided
the same does not modify any of the provisions of this Lease and has no adverse
effect upon Tenant's continued occupancy of the Premises.
31. SUBORDINATION. Tenant agrees that this Lease shall
automatically be and remain subject and subordinate to all present and future
mortgages, deeds to secure debt or other security instruments (the "Security
Deeds") affecting the Premises. Tenant shall promptly execute and deliver to
Landlord such certificate or certificates in writing as Landlord or Landlord's
lender may request, confirming the subordinate nature of the
17
<PAGE> 18
Lease to such Security Deeds, and in default of Tenant so doing, Landlord shall
be and is hereby authorized and empowered to execute such certificate in the
name of and as the act and deed of Tenant, this authority being hereby declared
to be coupled with an interest and to be irrevocable.
32. ESTOPPEL CERTIFICATE. Tenant shall, within five (5) days after
request from Landlord, at any time and from time to time execute, acknowledge
and deliver to Landlord or Landlord's lender a written statement certifying as
follows: (a) that this Lease is unmodified and in full force and effect (or if
there has been modification thereof, that the same is in full force and effect
as modified and stating the nature thereof); (b) that to the best of its
knowledge, there are no uncured defaults on the part of Landlord (or if any such
default exists, the specific nature and extent thereof); and (c) the date to
which any rents and other charges have been paid in advance, if any; and (d)
such other matters as Landlord may reasonably request. Tenant irrevocably
appoints Landlord as its attorney-in-fact, coupled with an interest, to execute
and deliver, for and in the name of Tenant, any document or instrument provided
for in this paragraph.
33. TIME IS OF THE ESSENCE. Time is of the essence with the
respect to the performance of each of the covenants and agreements of this
Lease; provided, however, that failure of Landlord to provide Tenant with any
notification regarding adjustments in Base Monthly Rental, or any other charges
provided for hereunder, within the time periods prescribed in this Lease shall
not relieve Tenant of its obligation to make such payments, which payments shall
be made by Tenant at such time as notice is subsequently given. Unless
specifically provided otherwise, all references to terms of days or months shall
be construed as references to calendar day's or calendar months, respectively.
34. CAPTIONS; GOVERNING LAW. The captions of this Lease are for
convenience of reference only and in no way define, limit or describe the scope
or intent of this Lease. The laws of the State of Georgia shall govern the
validity, performance and enforcement of this Lease.
35. DEFINITIONS. "Landlord" as used in this Lease shall include
his heirs, representatives, assigns and successors in title to Premises.
"Tenant" shall include its heirs and representatives, and if this Lease shall be
validly assigned or sublet, shall include also Tenant's assignees or sublessees,
as to premises covered by such assignment or sublease. "Broker" and "Co-Broker"
shall include its successors, assigns, heirs, and representatives. "Landlord,"
"Tenant," "Broker" and "Co-Broker," shall include male and female, singular and
plural, corporation, partnership or individual, as may fit the particular
parties.
18
<PAGE> 19
36. SEVERABILITY. If any clause or provision of this Lease is or
becomes illegal, invalid, or unenforceable because of present or future laws or
any rule or regulation of any governmental body or entity, effective during its
term, the intention of the parties hereto is that the remaining parts of this
Lease shall not be affected thereby, unless such invalidity is, in the sole
determination of Landlord, essential to the rights of both parties in which
event Landlord has the right to terminate this Lease on written notice to
Tenant.
37. LAWS AND REGULATIONS; BUILDING RULES AND REGULATIONS. Tenant
shall comply with, and Tenant shall cause its agents, contractors, customers,
employees, invitees, licensees, servants and visitors to comply with (i) all
applicable laws, ordinances, orders, directions, requirements, rules and
regulations (state, federal, municipal and other agencies or bodies having any
jurisdiction thereof) now in force or which may hereafter be in force, which
shall impose any duty upon Landlord or Tenant relating to the use, condition or
occupancy of the Premises or the conduct of Tenant's business therein,
including, without limitation, the Americans With Disabilities Act of 1990 (as
now or hereafter amended); and (ii) the Building Rules and Regulations set forth
in Exhibit "E," as such Rules and Regulations are modified and supplemented by
Landlord from time to time, and such other rules and regulations as are
reasonably adopted by Landlord from time to time, for the safety, care or
cleanliness of the Premises and the Building, or for preservation of good order
therein, all of which will be sent by Landlord to Tenant in writing and shall be
thereafter carried out and observed by Tenant, its agents, contractors,
customers, employees, invitees, licensees, servants and visitors. Tenant hereby
expressly waives the benefit of all existing and future rent control laws and
similar governmental rules and regulations, whether in time of war or not, to
the full extent permitted by law.
38. SPECIAL STIPULATIONS. The Special Stipulations, if any,
attached hereto and initialed by Landlord and Tenant are hereby incorporated
herein and made a part hereof. In the event the Special Stipulations conflict
with any of the foregoing provisions of this Lease, the Special Stipulations
shall control.
39. BROKER COMMISSION. Tenant represents and warrants to Landlord
that, other than Insignia/ESG, Inc. ("Broker"), no broker, agent, commissioned
salesperson or other person has represented Tenant in the negotiations for and
procurement of this Lease, and that no commissions, fees or compensation of any
kind are due in connection herewith to any broker, agent, commissioned
salesperson or other person, other than Broker, which has acted as broker for
Tenant in this transaction. Landlord shall pay Broker a real estate commission
in connection with this transaction pursuant to the terms of a separate written
Commission Agreement between Landlord and Broker. Landlord has disclosed that
The Griffin Company ("Co-Broker") is acting on
19
<PAGE> 20
behalf of Landlord in this transaction and is receiving a commission pursuant to
the term of a separate written Commission Agreement.
40. REMOVAL OF PERSONAL PROPERTY. Tenant may (if not in default
hereunder) prior to the expiration of this Lease, or any extension thereof,
remove all unattached and movable personal property and equipment which Tenant
has placed in the Premises, provided Tenant repairs all damages to Premises
caused by such removal. All personal property of Tenant remaining on the
Premises after the end of the Term shall be deemed conclusively abandoned,
notwithstanding that title to or a security interest in such personal property
may be held by an individual or entity other than Tenant, and Landlord may
dispose of such personal property in any manner it deems proper, in its sole
discretion. Tenant hereby waives and releases any claim against Landlord arising
out of the removal or disposition of such personal property. Tenant shall
reimburse Landlord for the cost of removing such personal property.
41. SIGNS. Tenant shall not place signs nor decals upon or in the
grounds, outside walls, windows, roofs, exterior building doors, interior suite
doors of the Premises, except with the written consent of Landlord, which shall
be granted in its sole discretion. Any and all signs placed on or within the
Premises by Tenant, at Tenant's expense, shall be maintained in compliance with
the rules and regulations of Technology Park Atlanta governing such signs, and
such signs' design shall be subject to Landlord's approval, and the Tenant shall
be responsible to Landlord for any damage caused by installation, use, or
maintenance of said sign, and Tenant agrees, upon removal of said signs, to
repair all damage incident to such removal and to restore the Building to its
original condition.
42. EFFECT OF TERMINATION OF LEASE. No termination of this Lease
prior to the normal ending thereof, by lapse of time or otherwise, shall affect
Landlord's right to collect rent for the period prior to termination thereof.
43. RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon parties hereto shall be cumulative but not restrictive to those
given by law.
44. FORCE MAJEURE. In the event of strike, lockout, labor trouble,
civil commotion, act of God, or any other cause (hereinafter collectively
referred to as "Force Majeure") outside and beyond Landlord's control, resulting
in the impairment of Landlord's ability to perform any obligation or provide any
service hereunder, this Lease shall not terminate except at Landlord's election,
and Tenant's obligation to pay Base Monthly Rental, additional rental and all
other charges and sums due payable by Tenant shall not be altered or excused and
Landlord shall not be considered to be in default under this Lease or liable in
damages to Tenant in any manner.
20
<PAGE> 21
45. TENANT CORPORATION, PARTNERSHIP OR INDIVIDUAL. If Tenant
executes this Lease as a corporation, each of the persons executing this Lease
on behalf of Tenant does hereby covenant, warrant and represent that Tenant is a
duly organized and validly existing corporation, that Tenant has and is
qualified to do business in Georgia, that the corporation has fall right and
authority to enter into this Lease, and that each and all persons signing on
behalf of the corporation were authorized to so do. Upon Landlord's request,
Tenant shall provide Landlord with evidence reasonably satisfactory to Landlord
confirming the foregoing covenants and warranties. If Tenant executes this Lease
as a partnership, Tenant does hereby covenant, warrant and represent that all
the persons who are general or managing partners in said partnership have
executed this Lease on behalf of Tenant, or that this Lease has been executed
and delivered pursuant to and in conformity with a valid and effective
authorization therefor, by all of the general or managing partners of such
partnership, and is and constitutes the valid and binding agreement of the
partnership and each and every partner therein in accordance with its terms.
Also, it is agreed that each and every present and future partner of Tenant
shall be and shall remain at all times jointly and severally liable hereunder,
and that the death, resignation, or withdrawal of any partner shall not release
the liability of such partner under the terms of this Lease unless and until
Landlord consents in writing to such release. If Tenant executes this Lease as
an individual, Tenant does hereby covenant, warrant and represent that his legal
residence address is that set forth below his signature on this Lease. If more
than one individual or entity comprises and constitutes Tenant, then all
individuals and entities comprising Tenant are and shall each be jointly and
severally liable for the due and proper performance of Tenant's covenants,
duties and obligations arising under or in connection with this Lease.
46. SUBMISSION OF LEASE. The submission of this Lease for
examination does not constitute an offer to lease nor a reservation of space
even if said lease is executed by Landlord, and this Lease shall be effective
only upon execution hereof by Landlord and Tenant and delivery of a counterpart
hereof to Landlord and Landlord's acceptance and final approval thereof.
47. NO RECORDATION OF LEASE. This Lease is not in recordable form,
and Tenant agrees not to record or permit the recording of this Lease.
48. HAZARDOUS MATERIAL. Tenant shall not cause or permit the
release, discharge, or disposal nor the presence, use, transportation,
generation, or storage of any Hazardous Material (as hereafter defined) in, on,
under, about, to, or from the Premises by either Tenant, Tenant's employees,
agents, contractors, or invitees (collectively the "Tenant") other than the use
of such materials in de minimus quantities reasonably necessitated by the
Tenant's regular business activities.
21
<PAGE> 22
Tenant further agrees and covenants to Landlord, its agents, employees,
affiliates and shareholders (collectively the "Landlord") the following:
A. To comply with all Environmental Laws in effect, or may come
into effect, applicable to the Tenant or Tenant's use and
occupancy of the Premises;
B. To immediately notify Landlord, in writing, of any existing,
pending or threatened (i) investigation, inquiry, claim or
action by any governmental authority in connection with any
Environmental Laws; (ii) third party claims; (iii) regulatory
actions; and/or (iv) contamination of the Premises;
C. Tenant shall, at Tenant's expense, investigate, monitor,
remediate, and/or clean up any Hazardous Material or other
environmental condition on, about, or under the Premises
required as a result of Tenant's use or occupancy of the
Premises;
D. To keep the Premises free of any lien imposed pursuant to any
Environmental Laws; and
E. To indemnify, defend, and save Landlord harmless from and
against any and all claims (including personal injury, real,
or personal property damage), actions, judgments, damages,
penalties, fines, costs, liabilities, interest, or attorney's
fees that arise, directly or indirectly, from Tenant's
violation of any Environmental Laws or the presence of any
Hazardous Materials on, under or about the Premises, which
presence is caused by, allowed, or permitted by the Tenant..
The Tenant's obligations, responsibilities, and liabilities under this
Section shall survive the expiration of this Lease.
For purposes of this Section the following definitions apply:
"Hazardous Materials" shall mean: (1) any "hazardous waste" and/or
"hazardous substance" defined pursuant to any Environmental Laws; (2) asbestos
or any substance containing asbestos; (3) polychlorinated biphenyls; (4) lead;
(5) radon; (6) pesticides; (7) petroleum or any other substance containing
hydrocarbons; (8) any substance which, when on the Premises, is prohibited by
any Environmental Laws; and (9) any other substance, material, or waste which,
(i) by any Environmental Laws requires special handling or notification of any
governmental authority in its collection, storage, treatment, or disposal or
(ii) is defined or classified as hazardous, dangerous or toxic pursuant to any
legal requirement.
22
<PAGE> 23
"Environmental Laws" shall mean: any and all federal, state and local
laws, statutes, codes ordinances, regulations, rules or other requirements,
relating to human health or safety or to the environment, including, but not
limited to, those applicable to the storage, treatment, disposal, handling and
release of any Hazardous Materials, all as amended or modified from time to
time.
49. EXECUTION. This Lease may be executed in any number of
counterparts, each of which shall be deemed an original and any of which shall
be deemed to be complete in itself and may be introduced into evidence or used
for any purpose without the production of the other counterparts. No
modification or amendment of this Lease shall be binding upon the parties hereto
unless such modification or amendment is in writing and signed by Landlord and
Tenant.
50. ATTORNEY'S FEES AND HOMESTEAD EXEMPTION. If any Base Monthly
Rental, Additional Rent, or any Other item or obligation of Tenant hereunder is
collected by or through an attorney at law. Tenant agrees to pay, in addition to
Base Monthly Rental, Additional Rent and other obligations, all of Landlord's
actual and reasonable attorney's fees, together with actual out-of-pocket
expenses. Tenant hereby waives any and all homestead rights and exemptions which
it may have under any law as against its obligation owing Landlord under this
Lease. Tenant hereby assigns to Landlord its homestead and exemptions.
51. NOVATION IN THE EVENT OF SALE. In the event of the sale of the
Building, Landlord shall be and hereby is relieved of all of the covenants and
obligations created hereby accruing from and after the date of sale, and such
sale shall result automatically in the purchaser assuming and agreeing to carry
out all the covenants and obligations of Landlord herein. Notwithstanding the
foregoing provisions of this Paragraph, Landlord in the event of a sale of the
Building, shall cause to be included in this agreement of sale and purchase a
covenant whereby the purchaser of the Building assumes and agrees to carry out
all of the covenants and obligations of Landlord herein.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
hereunder and have caused this Lease to be executed in their names and their
corporate seals to be affixed by their officers duly authorized thereunto, upon
the day and year set forth above.
23
<PAGE> 24
TENANT:
Signed, sealed and delivered in HEADHUNTER.NET
The presence of:
/s/ Sandy Kirschbaum
- -------------------------------- By: /S/ Mark Partin
Notary Public or Witness -------------------------------
Name: Mark Partin
Sandy Kirschbaum -----------------------------
- -------------------------------- (Please Print)
Name
- --------------------------------
(Please Print)
(CORPORATE SEAL)
[SIGNATURES CONTINUED ON NEXT PAGE]
24
<PAGE> 25
LANDLORD:
AJ PARTNERS LIMITED
PARTNERSHIP, AN ILLINOIS
LIMITED PARTNERSHIP
Signed, sealed and delivered in By: GRIFFIN MANAGEMENT
the presence of: SERVICES, INC., Manager
/s/ Laurie Goin By: /s/ Kyle Jenks
- ---------------------------------- ------------------------------
Notary Public or Witness Kyle Jenks, President,
Marketing Division
/s/ Laurie Goin Date:
- ---------------------------------- ------------------------------
Name
(Please Print)
Signed, sealed and delivered in
the presence of:
/s/ Laurie Goin By: /s/ Robert A. Carithers
- ---------------------------------- ------------------------------
Notary Public or Witness Robert A. Carithers, President
Laurie Goin
- ----------------------------------
Name
(Please Print)
25
<PAGE> 26
RESEARCH COURT
HEADHUNTER.NET
SPECIAL STIPULATIONS
1. Provided Tenant is not in default under the terms of this Lease, and
has faithfully performed all of its obligations hereunder, Tenant, but
not any assignee or subtenant, shall have the option to extend this
Lease for an additional period of five (5) years. Tenant shall evidence
its intention to exercise this option by giving Landlord written notice
on or before March 1, 2004. All other terms and conditions of this
Lease shall remain the same except for the Base Monthly Rental which
shall be equal to the then current market rate for comparable office
space in the Technology Park area of Atlanta, Georgia.
2. Landlord agrees to grant to Tenant, but not any assignee or subtenant,
a Right of First Refusal to lease additional space located on the
Second Floor of the Building, provided that Landlord elects to lease
such space to a third party in any incremental amount containing not
less than 16,000 rentable square feet. Upon Landlord receiving a
bona-fide offer to lease such space that is acceptable to Landlord,
Landlord will give Tenant written notice and Tenant shall have seven
(7) business days from receipt of such notice to exercise or not
exercise its Right of First Refusal by providing written notice to
Landlord. In the event Tenant elects to exercise said right, then the
terms and conditions shall be as outlined in the bona-fide offer. In
the event Tenant elects not to exercise said right, then Landlord shall
be entitled to lease the space without restriction.
3. Landlord hereby acknowledges and agrees that Tenant shall have the
right to install and operate one (1) satellite dish for service to the
Premises at a location on the roof and in a first-class manner
acceptable to Landlord (hereinafter referred to as the "dish space")
during the term of this Lease and any extension thereof.
Tenant hereby agrees to install the satellite dish on the dish space in
a good and workmanlike manner, maintain and repair such satellite dish
and dish space in proper condition and to secure all permits required
for the installation and operation thereof, at no cost to Landlord, and
hereby indemnifies Landlord from and against any claims against
Landlord for personal injury, property damage or other damage,
including reasonable attorney's fees, arising from the installation,
use, operation, maintenance, repair and removal of the dish space, the
satellite dish, or any cables or related equipment thereof. The
provisions of this paragraph shall survive the expiration date or
sooner termination of this Lease. The
<PAGE> 27
insurance required to be carried by Tenant under the Lease shall also
apply to the satellite dish and dish space.
Landlord understands and agrees that the satellite dish and related
equipment is considered the personal property of Tenant, and that
Tenant has the right to remove the same at any time during the Lease
Term, or during any renewals or extensions thereafter. Tenant shall
remove the satellite dish and restore the dish space to substantially
the same condition as existed prior to the installation of the
satellite dish, reasonable wear and tear excepted.
All direct expenses incurred by Tenant in connection with the
installation, operation or removal of the satellite dish shall be paid
promptly by Tenant, and Tenant shall not permit any mechanic's or other
lien to be filed against Landlord in connection with the installation,
operation or removal of the satellite dish. Tenant shall provide
Landlord with an executed contractor's lien waiver within thirty (30)
days of completion of the work. Tenant shall be responsible for any and
all utilities to be used in connection with the operation of the
satellite dish should Landlord determine an additional charge is
necessary for its operation.
Tenant shall properly and promptly repair any damage or potentially
damaging condition existing or caused by the existence or operation and
use of the satellite dish or connecting cables or any part thereof
within ten (10) days after receipt of Landlord's written notice;
provided, however, if such repair cannot reasonably be cured within the
said ten-day period, and Tenant shall, in good faith, commence to
repair and diligently proceed to effect such repair, then the ten-day
period shall be extended for such reasonable period as Tenant shall
require to effect such repair. Should Tenant fail to satisfy the terms
of this provision within said ten-day period, Landlord may repair the
damaged condition at Tenant's cost.
Tenant represents and warrants to Landlord that the specifications,
location and contemplated use of the satellite dish comply with all
laws, ordinances, codes and regulations promulgated by any governmental
authority having jurisdiction over the Premises or the installation and
operation of the satellite dish. The construction and installation
shall be accomplished in a good and workmanlike manner and with no
disruption to .he other occupants of the Building. Tenant shall provide
Landlord, prior to installation of the satellite dish, detailed
drawings and specifications on the mounting method to be used in
affixing the proposed dish to the roof. Tenant shall require all
contractors and subcontractors to provide Landlord with certificates of
insurance with Landlord being named as Additional Loss Payee prior to
installation.
2
<PAGE> 28
RESEARCH COURT
HEADHUNTER.NET
EXHIBIT "A" - FLOOR PLAN
[TO BE ATTACHED]
Exhibit A
<PAGE> 29
RESEARCH COURT
HEADHUNTER.NET
EXHIBIT "B" - TENANT FINISH AGREEMENT ("AGREEMENT")
WHEREAS, the undersigned Landlord and Tenant have executed, sealed and
delivered the Lease, to which this Agreement is attached, and into which this
Agreement is fully incorporated by this reference, as Exhibit "B";
WHEREAS, said Lease provides for the leasing of office space (the
"Premises") within 333 RESEARCH COURT located at 333 Research Court, Norcross,
Gwinnett County, Georgia 30092 (the "Building");
WHEREAS, the terms "Landlord" and "Tenant," "Premises" and "Building,"
as used herein, shall have the same meanings ascribed thereto as set forth in
the Lease; and
WHEREAS, Landlord and Tenant desire to set forth herein their
respective agreements regarding design and construction of the improvements to
the Premises.
NOW THEREFORE, in consideration of the Premises, the execution and
delivery of the Lease by the parties hereto, the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Landlord and Tenant, intending to be legally
bound, hereby agree as follows:
SECTION 1. TENANT IMPROVEMENTS.
Section 1.01. Definition.
The term "Tenant Improvements" shall mean all improvements
constructed or installed in or on the Premises in accordance with the Drawings
and Specifications, as hereinafter defined.
SECTION 2. DRAWINGS AND SPECIFICATIONS.
Section 2.01. Definition.
The term "Drawings and Specifications" shall mean the final drawings,
specifications, and finish schedules for the Tenant Improvements which shall be
prepared by Tenant and approved by Landlord in accordance with the following
procedure:
EXHIBIT B
<PAGE> 30
a) As provided in Section 3.02 (b) hereof, the cost of
preparing the drawings, specifications, finish
schedules and the like shall be paid by Tenant and be
a part of Tenant Costs.
b) The architect selected by Landlord shall be referred
to as "Landlord's Architect."
c) As soon as reasonably possible, but not later than
________________________, Tenant shall deliver to
Landlord Tenant's proposed final working drawings,
specifications, finish schedules, and the like for
the Tenant Improvements. Landlord shall promptly
review and resubmit the same to Tenant, either with
Landlord's approval, which approval shall not be
unreasonably delayed or withheld, or with Landlord's
disapproval. If Landlord fails to respond within two
(2) business days after receiving such proposed final
drawings and the like, Landlord shall be deemed to
have given its full approval thereto. Tenant shall,
as soon as possible (but not more than two (2)
business days after Tenant's receipt of Landlord's
comments), resubmit any such drawings and the like
which are returned by Landlord without complete
approval, and such resubmitted drawings and the like
shall contain the information or changes reasonably
required by Landlord. Once Landlord then satisfies
itself that such drawings, specifications, finish
schedules, and the like are reasonably acceptable,
Landlord shall so notify Tenant and the same shall
constitute the "Drawings and Specifications" for
purposes of this Tenant Improvement Agreement.
d) Landlord's Architect shall acknowledge to Landlord
and Tenant that the proposed final working drawings,
specifications and the like will comply with all
state and local zoning laws, building laws, public
safety, or any other ordinances applicable hereunder.
e) For the purpose of this Agreement, Landlord shall
retain and supervise, as its agent, the general
contractor. Landlord agrees that the general
contractor retained by Landlord, as Landlord's
contractor shall perform the Tenant Improvements.
Accordingly, on or before the four (4) business day
following receipt of the Drawings and Specifications
and final approval by Landlord and Tenant, Landlord
shall obtain from Landlord's Contractor a detailed
price schedule for the Tenant Improvements and shall
submit the same to Tenant for its approval. If Tenant
shall fail to
4
<PAGE> 31
approve any such price schedule within two (2)
business days after Tenant's receipt of same, then
the price schedule shall be deemed approved in all
respects by Tenant and Landlord shall be authorized
to proceed thereon. If Tenant disapproves such price
schedule, Tenant agrees to work promptly to alter the
Drawings and Specifications as necessary to cause the
price quotation based thereon to be acceptable to
Tenant. The aggregate cost for the Tenant
Improvements, once approved by Tenant, shall
hereinafter be referred to as "Tenant Improvement
Costs". Upon determination of the Tenant Improvement
Costs, Tenant shall be deemed to have given final
approval to the Drawings and Specifications and
Landlord shall be deemed to have been authorized to
proceed, through Landlord's Contractor, with the work
of constructing and installing the Tenant
Improvements in accordance with the Drawings and
Specifications.
At its option, Tenant may review the single source proposal submitted
on behalf of Landlord's Contractor (which shall include a breakdown of the bids
of the trades together with all other costs to be included within Tenant's
Construction Costs with each such bid and cost to be set forth on a "line item"
basis) for all or any part of the work and if dissatisfied with the cost of all
or any trade portion(s) or other cost items of such proposal, Tenant may require
Landlord to solicit bids or obtain proposals from others or otherwise object to
such cost items as hereinafter provided. If Tenant disapproves any portion of
the Landlord's Contractor's proposal, or the work being priced is not in any
respect, in Tenant's reasonable judgment, standard construction work, Tenant may
with regard to any trade bid (a) require Landlord to obtain no less then three
(3) subcontractor bids and Tenant shall then have the right to select the chosen
bid; or (b) require the work to be performed on a time and materials basis by
such trades.
SECTION 3. PAYMENT OF COSTS.
Section 3.01. Landlord's Allowance for Tenant Costs.
Landlord shall pay the Tenant Costs up to, but not in excess of, an
amount equal to $12.00 per rentable square foot of the Premises (the "Landlord's
Allowance for Tenant Costs") as and when same are due.
Section 3.02. Tenant Costs.
The aggregate of all costs described in the following subparagraphs (a)
through (e) of this Section 3.02 are hereinafter referred to collectively as
"Tenant Costs."
3
EXHIBIT B
<PAGE> 32
a) The Tenant Improvement Costs;
b) The cost of preparing and finalizing all drawings,
specifications, finish schedules and the like as set
forth in Sections 2.01(a) through (e) above;
c) Fees for architects, engineers, interior designers,
and other professionals and design specialists
reasonably incurred by Landlord or Tenant in
connection with the Tenant Improvements;
d) The cost of making any and all changes in and to the
Drawings and Specifications and any increased or
decreased costs in the Tenant Improvement Costs
resulting therefrom; and
In the event the aggregate of Tenant Costs, as defined above, exceeds
Landlord's Allowance for Tenant Costs, as specified in Section 3.01 above, then
Tenant shall promptly pay the excess to Landlord upon demand; provided however,
Tenant shall have the option to amortize up to $1.50 per square rentable square
foot of such excess as Additional Rent paid monthly over the initial Lease Term
at a 12% annual interest rate.
Section 3.03. Availability of Materials.
Notwithstanding anything to the contrary contained herein, the parties
acknowledge that for purposes of the completion of the Tenant Improvement work
by Landlord, any delay attributable to Landlord's difficulty ordering materials
shall be conditioned upon the Landlord notifying Tenant in writing of the
unavailability of such materials and allowing Tenant the opportunity to
substitute for such materials.
Section 3.04. Changes in Drawings and Specifications,
If at any time after the Tenant Improvement Costs are determined Tenant
desires to make changes in the Drawings and Specifications, Tenant shall submit
to Landlord for approval working drawings, specifications, and finish schedules
for any and all such desired changes. The process of finalizing such drawings
and the like shall be as set forth in Section 2 above. Once any and all changes
and modifications are approved, Landlord shall promptly submit the same to
Landlord's Contractor for pricing. The procedure for determining any approved
cost for such changes shall be as set forth in Section 2 above. Once a cost for
such changes has been approved, all references in this Agreement to Drawings and
Specifications shall be to the Drawings and Specifications adopted pursuant to
the procedures of Section 2 above, as changed and modified pursuant to this
Section 3.04, and all references to "Tenant Improvement Costs" shall be deemed
to include the aggregate approved cost for the changes as determined in this
Section 3.04.
4
EXHIBIT B
<PAGE> 33
Once the changes and the costs therefore have been approved, Tenant shall be
deemed to have given full authorization to Landlord to proceed with the work of
constructing and installing the Tenant Improvements in accordance with the
Drawings and Specifications, as changed and modified.
Landlord, at its option, may require Tenant to pay in lump sum to
Landlord any and all increases in the Tenant Improvement Costs which result from
approved changes to the Drawings and Specifications. Any delays in completing
the Tenant Improvements which result from either changes in the Drawings and
Specifications made by Tenant or from the unavailability of materials specified
by Tenant, shall not operate to delay or extend the Commencement Date under the
Lease nor the payment of the Base Monthly Rental or other charges due under this
Lease.
Section 3.05. Failure to Pay Tenant Costs.
Failure by Tenant to pay Tenant Costs, in accordance with this Section
3, will constitute a failure by Tenant to pay rent when due under the Lease and
for such failure to pay Tenant Costs, Landlord shall have all of the remedies
available to it under this Lease and at law or in equity for nonpayment of rent.
SECTION 4. INSPECTION.
Landlord and Tenant each reserve the right to perform periodic
inspections prior to the Commencement Date of the Tenant Improvements and Tenant
shall notify Landlord at least twenty-four (24) hours in advance of such
inspection procedures by Tenant. Tenant and Tenant's Architect shall be
permitted to visit and walk through the Premises at any time during normal
business hours.
Any defective Tenant Improvement work discovered during either
Landlord's or Tenant's inspection or work failing to conform to the Plans and
Specifications, together with any latent defects in the initial improvements
shall be promptly corrected by Landlord's Contractor at Landlord's sole cost.
SECTION 5. FINISH WORK IN ADDITION TO TENANT IMPROVEMENTS.
All work in or about the Premises which is not within the scope of the
work necessary to construct and install the Tenant Improvements, such as
delivering and installing furniture, telephone equipment, and wiring, and office
equipment, shall be furnished and installed by Tenant entirely at Tenant's
expense. Tenant shall adopt a schedule for performing such additional work
consistent with the schedule of Landlord's Contractor and shall see that such
work is conducted in such a manner as to maintain harmonious labor relations and
as not to interfere unreasonably with or to delay the work
5
<PAGE> 34
of constructing or installing the Tenant Improvements. Landlord shall give
access and entry to the Premises to Tenant and its contract parties performing
such additional work and reasonable opportunity and time to enable Tenant and
such contract parties to perform and complete such work provided such additional
work does not interfere with or otherwise encumber Landlord's work or
construction progress. All of such additional work and Tenant's use (and the use
by its contract parties) of the Premises for such purposes shall be entirely in
accordance with the Lease, including without limitation this Work Letter.
SECTION 6. TIME IS OF THE ESSENCE.
Time is of the essence of this Agreement. Unless specifically provided
otherwise, all reference to days or months shall be construed as references to
calendar days or months, respectively. Notwithstanding anything to the contrary
contained herein, Tenant agrees that in the event Tenant shall fail to perform
any of its duties or obligations hereunder by the time specified and provided
that Landlord has notified Tenant in writing of such failure and Tenant has
failed to promptly correct same, together with any other delay principally
caused by Tenant or its agents, officers, employees, contractors or
subcontractors (a "Tenant Delay"), then the date for completion by Landlord of
Tenant Improvements shall be extended for the period of such delay, but the
Commencement Date of Tenant's payment obligations hereunder, including, without
limitation, Base Monthly Rental, shall not be extended and shall commence as
scheduled under this Lease without regard to non-completion of Tenant
Improvements.
SECTION 7. APPROVAL OF PLANS.
Any approval by Landlord of or consent by Landlord to any plans,
specifications or other items to be submitted to and/or reviewed by Landlord
pursuant to this Lease shall be deemed to be strictly limited to an
acknowledgment of approval or consent by Landlord thereto and, whether or not
the work is performed by Landlord or by Tenant's contractor, such approval or
consent shall not constitute the assumption by landlord of any responsibility
for the accuracy, sufficiency or feasibility of any plans, specifications or
other such items and shall not imply any acknowledgment, representation or
warranty by landlord that the design is safe, feasible, structurally sound or
will comply with any legal or governmental requirements, and Tenant shall be
responsible for all of the same.
6
EXHIBIT B
<PAGE> 35
RESEARCH COURT
HEADHUNTER.NET
EXHIBIT "C" - TENANT ACCEPTANCE AGREEMENT
THIS AGREEMENT is an amendment to the Lease Agreement (the "Lease") for
space in the office building known as RESEARCH COURT, located at 333 Research
Court, Suite 200, Norcross, Gwinnett County, Georgia 30092, dated as of the
_______ day of _______________1999, by and between AJ PARTNERS LIMITED
PARTNERSHIP, AN ILLINOIS LIMITED PARTNERSHIP, as Landlord, and HEADHUNTER.NET,
as Tenant.
Pursuant to the provisions of Paragraph 2 of the Lease, Landlord and
Tenant hereby mutually agree that:
1. Except for those items shown on the attached "Punch List,"
which Landlord will remedy within _________ days hereof, Landlord has fully
completed the construction work required under the terms of the Lease.
2. Tenant is in possession of, and has accepted the Premises. The
Premises are tenantable, the Landlord has no further obligation for construction
(except as specified above), and Tenant acknowledges that both the Building and
the Premises are satisfactory in all respects except for any latent defects for
which Landlord shall be and remain responsible. All conditions of the Lease
required of Landlord as of this date have been fulfilled (except as specified
above), and there are no defenses or setoffs against the enforcement of the
Lease by Landlord.
3. The Commencement Date of the Lease is hereby agreed to be the
______ day of __________________, 1999.
4. The Expiration Date of the Lease is hereby agreed to be the
__________ day of _______________, ________.
5. The Premises are hereby agreed to contain _____________
rentable square feet.
6. The Building is hereby agreed to contain _________________
rentable square feet.
7. Tenant's Percentage Share is hereby agreed to be
________________ percent.
EXHIBIT C
<PAGE> 36
All other terms and conditions of the Lease are hereby ratified and
acknowledged to be unchanged.
Agreed and Executed this _______________ day of ______________, 1999.
TENANT:
Signed, sealed and delivered this HEADHUNTER.NET
___ day of _______________,
1999 in the presence of:
By: (Exhibit Purposes Only-Not for
Signature)
- ------------------------------------
Notary Public or Witness
- ------------------------
Name:
- ------------------------------------- -----------------------------
Name (Please Print)
- ----
(Please Print)
(CORPORATE SEAL)
[SIGNATURES CONTINUED ON NEXT PAGE]
2
EXHIBIT C
<PAGE> 37
LANDLORD:
AJ PARTNERS LIMITED
PARTNERSHIP, AN ILLINOIS
LIMITED PARTNERSHIP
Signed, sealed and delivered this By: (Exhibit Purposes Only-Not for
___ day of _______________, 1999 Signature)
in the presence of:
By:
- ---------------------------------- -------------------------------
Notary Public or Witness Kyle Jenks, President,
Marketing Division
Date:
- ---------------------------------- -----------------------------
Name (Please Print)
- --------------------
Signed, sealed and delivered in the
presence of:
By:
- ----------------------------------- -------------------------------
Notary Public or Witness Joel Griffin, Chairman
- ----------------------------------
Name (Please Print)
- --------------------
3
EXHIBIT C
<PAGE> 38
RESEARCH COURT
HEADHUNTER.NET
EXHIBIT "D" - OPERATING EXPENSES (DEFINITIONS)
Operating Expenses shall be all those expenses of operating, servicing,
managing, maintaining and repairing the Property (defined below), Building, and
the Common Areas (defined below) in a manner deemed by Landlord reasonable and
appropriate and in the best interest of the tenants of the Building and in a
manner consistent with other first-class office buildings in the Technology Park
area. Operating Expenses shall include, without limitation, the following:
a. All real and personal property ad valorem taxes and
assessments, whether general or special, applicable to the Land, the Building,
any furniture, fixtures, machinery, apparatus, systems and appurtenances of
Landlord used in connection therewith or the operation thereof, including
without limitation, sewer rents, rates and charges, transit taxes, and any other
federal, state or local governmental charge, general, special, ordinary or
extraordinary, and any and all reasonable costs and expenses incurred by
Landlord in seeking a reduction or refund of any such taxes and assessments.
However, Tenant shall not be obligated for income or franchise taxes or any
other taxes imposed on or measured by Landlord's net income or profits from the
operation of the Building or otherwise, unless there is imposed in the future
such a tax in lieu of the real property ad valorem taxes, in which event such
tax shall be deemed an Operating Expense of the Building.
b. Insurance premiums and deductible amounts, including, without
limitation, for commercial general liability, "all risks" property, rent loss
and other coverages carried by Landlord on the Building, the Property and any
easement areas benefiting the Property.
c. All utility costs and expenses, including without limitation,
water, power, heating, lighting, ventilation, sanitary sewer and air
conditioning, but not including those utility charges actually paid by Tenant or
other tenants of the Building.
d. Janitorial and maintenance expenses, including:
(i.) General janitorial services and janitorial supplies
as outlined in Paragraph 17-A and other materials
used in the operation and maintenance of the Building
but excluding special cleaning or extra janitorial
service required by Tenant;
EXHIBIT D
<PAGE> 39
(ii.) The costs of maintenance and service agreements on
mechanical systems and equipment, window cleaning,
grounds maintenance, pest control, security, trash
and snow removal, and other similar services or
agreements relating to the operation, maintenance and
repair of the Building, the Property and the Common
Areas; and
(iii.) Costs and expenses paid or incurred by Landlord for
the maintenance and repair of the Property, the
Building, the Common Areas and the mechanical systems
and equipment and personal property used in
connection therewith, including without limitation
the maintenance, repair or replacement of the
heating, ventilating and air conditioning equipment,
elevators, plumbing and electrical systems and
equipment, light bulbs and broken glass, and the
repair, resurfacing or repaying of the driveways and
parking lots of the Property.
e. The costs, including interest, amortized over its useful life,
or at Landlord's option, the time period within which the operating efficiency
realized from the installation of such capital improvement shall result in an
operating expense savings equal the cost of acquiring and installing such
capital improvement, of any capital improvement made to the Building by or on
behalf of Landlord after the date of this Lease which is required under any
governmental law or regulation that was not applicable to the Building at the
time of its construction, and of the acquisition and installation of any device
or equipment designed to improve the operating efficiency of any system within
the Building.
f. All services, supplies, repairs, replacements or other
expenses directly and reasonably associated with servicing, maintaining,
managing and operating the Property, the Building and the Common Areas.
g. Management Fees and Landlord's employees (not above the level
of Building Manager) to the extent engaged in the maintenance, operation,
repair, security and services of the Building.
h. Legal and accounting costs and expenses.
i. Landscaping and grounds maintenance costs and expenses and
security service costs and expenses unless Landlord hires a third party to
provide such services pursuant to a service contract and the cost of that
service contract is already included in Operating Expenses as described. above,
2
EXHIBIT D
<PAGE> 40
j. Costs and expenses of redecorating, painting and carpeting the
Common Areas within the Building.
k. Preventive Maintenance and repair of the roof and roof
surfaces including flashings, drains and the like.
l. Expenses incurred in the purchase or acquisition of materials
and supplies in connection with all of the foregoing.
m. Such other expenses paid by Landlord, from time to time, in
connection with the operation and maintenance of the Building, the Property and
the Common Areas as would be expected to be paid by a reasonable and prudent
operator and manager of a building and site comparable to the Land, the Building
and the Common Areas.
Definitions:
For the purposes of this Lease Agreement and this Exhibit "D", the following
terms shall be defined as:
A. "Common Areas". The term "Common Areas" means the entire areas to be
used for the non-exclusive use by Tenant and other tenants in the
Building, including but not limited to shared entries as designated by
Landlord from time to time, patios, parking lots and landscaped areas.
Subject to reasonable rules and regulations promulgated by Landlord,
the Common Areas are hereby made available to Tenant and its employees,
agents, customers and invitees for reasonable use in common with other
tenants, their employees, agents, customers and invitees.
B. "Property". That certain real property located in Gwinnett County,
Georgia, commonly known as 333 Research Court including all buildings
and site improvements located thereon.
3
EXHIBIT D
<PAGE> 41
RESEARCH COURT
HEADHUNTER.NET
EXHIBIT "E" - RULES AND REGULATIONS
Tenant shall observe the following Rules and Regulations (as amended, modified
or supplemented from time to time by Landlord as provided in this Lease).
1. Tenant, its agents, servants, contractors, invitees or
employees, shall not bring in or take out, position, construct, install or move
any safe, business machine or other heavy office equipment without first
obtaining the consent of the Landlord. In giving such consent, Landlord shall
have the right, in its sole discretion, to prescribe the weight permitted and
the position thereof, and the use and design of planks, skids or platforms to
distribute the weight thereof. All damage done to the Building by moving or
using any such heavy equipment or other office equipment or furniture shall be
repaired at the expense of Tenant. The moving of all heavy equipment or other
office equipment or furniture shall occur at reasonable hours and the persons
employed to move the same in and out of the Building must be acceptable to
Landlord. Safes and other heavy office equipment will be moved through the halls
and corridors only upon steel bearing plates.
2. Tenant shall not rekey existing locks, place, nor cause to be
placed, any additional locks upon any doors of the Premises without the approval
of Landlord and subject to any conditions imposed by Landlord. Additional keys
may be obtained from Landlord at the cost of Tenant.
3. The water closets and other water apparatus shall not be used
for any purpose other than those for which they were constructed and no
sweepings, rubbish, rags, ashes or other substances shall be thrown therein. Any
damage resulting from misuse of such facilities by Tenant, or Tenant's servants
or employees, shall be borne by Tenant. Tenant shall not let the water run
unless it is in actual use.
4. Tenant shall not deface or mark any part of the Premises or
the Building or drive nails, spikes, hooks or screws into the walls or woodwork
of the Premises or the Building.
5. Any hand trucks, carryalls, or similar appliances used in the
Building shall be equipped with rubber tires, side guards and such other
safeguards as Landlord shall require.
6. No animals or birds shall be brought into the Premises.
EXHIBIT E
<PAGE> 42
7. Tenant agrees that it will not install any equipment which
will exceed or overload the capacity of any utility facilities, whether or not
provided by Tenant or Landlord, and that if any equipment installed by Tenant
shall require additional utility facilities, the same shall be furnished and
installed at Tenant's expense in accordance with plans and specifications to be
approved in writing by Landlord.
8. Tenant shall have all curtains and window treatments approved
by Landlord before installing on the Premises.
2
EXHIBIT E
<PAGE> 43
RESEARCH COURT
HEADHUNTER.NET
TENANT ACCEPTANCE AGREEMENT
This AGREEMENT is an amendment to the Lease Agreement (the "Lease") for
space in the office building known as RESEARCH COURT, located at 333 Research
Court, Suite 100, Norcross, Gwinnett County, Georgia 30092, dated as of the 22nd
day of September, 1999 by and between AJ PARTNERS LIMITED PARTNERSHIP, as
Illinois limited partnership, as Landlord, and HEADHUNTER.NET as Tenant.
Pursuant to the provisions of Paragraph 2 of the Lease, Landlord and
Tenant hereby mutually agree that:
1. The Commencement Date of the Lease is hereby agreed to be
January 1, 2000.
2. The Expiration Date of the Lease is hereby agreed to be
December 31, 2004.
3. The Premises are hereby agreed to contain 17,229 rentable
square feet.
4. The Building is hereby agreed to contain 65,463 rentable
square feet.
5. Tenant's Percentage Share is hereby agreed to be twenty six
(26%) percent.
All other terms and conditions of the Lease are hereby satisfied and
acknowledged to be unchanged.
Agreed and executed this 23rd day of February, 2000.
TENANT:
Signed, sealed and delivered in the presence of: HEADHUNTER.NET
/s/ M.L. Turner
- -----------------------------------
Notary Public or Witness By: /s/ Mark Partin,
------------------------
Mark Partin,
M. L. Turner Chief Financial Officer
- ----------------------------------------
Name (Please Print)
Notary Public, DeKalb County, Georgia
My Commission Expires September 14, 2003
<PAGE> 44
LANDLORD:
AJ PARTNERS LIMITED
PARTNERSHIP
an Illinois limited partnership
Signed, sealed and delivered in the BY: GRIFFIN MANAGEMENT
presence of: SERVICES, INC.
/s/ Laurie Goin
- -----------------------------------
Notary Public or Witness By: /s/ Kyle Jenks
-----------------------------
Kyle Jenks,
Laurie Goin President, Marketing Division
- -----------------------------------
Name (Please Print)
Signed, sealed and delivered in the
presence of:
- -----------------------------------
Notary Public or Witness
By:
----------------------------
Joel Griffin, Chairman
- -----------------------------------
Name (Please Print)
<PAGE> 1
EXHIBIT 10.11*
NBCI PROMOTION AGREEMENT
HEADHUNTER.NET
This Promotion Agreement (the "Agreement") is made and entered into as of
December 9, 1999 (the "Effective Date") between NBC Internet, Inc., a Delaware
corporation, with its principal place of business at 225 Bush Street, San
Francisco, California 94104 ("NBCi") and Headhunter.net, a Georgia corporation,
with its principal place of business at 6410 Atlantic Boulevard, Suite 160,
Norcross, Georgia 30071 (the "Company"). Pursuant to this Agreement, NBCi will
provide various services, including promotions, to the Company to assist the
Company in promoting its Internet site and the products and services offered
through its Internet site. The Company acknowledges that NBCi will fulfill its
obligations under this Agreement itself and through various of its subsidiaries
and/or affiliates, including Snap! L.L.C. ("Snap"), a Delaware limited
liability company. Accordingly, the parties hereby agree as follows:
1. Background.
1.1. The Company operates an Internet site located at
http://www.headhunter.net., which is designed to provide
Internet-based job searching products, listings and services
to online consumers.
1.2. NBCi operates a search and aggregation "portal" site on the
Web.
2. Certain Definitions. As used in this Agreement, the terms set forth
below shall have the following meanings:
2.1. "Above the Fold" means that a particular item on a Web page
is viewable on a computer screen at an 800 x 600 pixels
resolution when the User first accesses such Web page,
without scrolling vertically or horizontally to view more of
the Web page.
2.2. "Anchor Tenant" means a preferred Web content provider whose
position is greater in size and prominence than that of any
non-affiliated third party within the relevant NBCi Sites'
page or area of a page.
2.3. "Best of Breed" means (i) those job searching products and
services available on the Internet with the most advanced and
commercially successful, functionality, performance, content,
and features, whether utilitarian or aesthetic, and (ii) the
ability of the Company Sites and the Co-Branded Site to scale
easily with only additional hardware and to accommodate, at a
minimum, [***].
2.4. "Below the Fold" means that a particular item on a Web page
is not viewable on a computer screen at an 800 x 600 pixels
resolution when the User first accesses such Web page, but
requires scrolling down to view more of the Web page
2.5. "Business and Money Channel" means the Business and Money
Channel on the Snap Sites.
* In the upper right corner of a page indicates that portions of text
have been omitted from such page pursuant to a confidential treatment
request.
[***] Indicates omitted text
1
<PAGE> 2
2.6. "Career Center" means a collection of related Web sites, Web
pages, links, portals and other resources on the Business and
Money Channel that will feature job searching products,
listings and services for Users.
2.7. "City" means a particular city or geographic region of the
United States that constitutes an employment market for job
searching and listing purposes.
2.8. "Click Thrus" means any type of link (but not a Promotion
paid for by the Company as an Impression) from the Company
Content Portals or Jump Pages that a User (as tagged by NBCi
pursuant to 13.2) depresses or "clicks-on" and that delivers
the User, to the Co-Branded Site or the Company Site.
2.9. "Co-Branded Page" means a Web page that is part of the
Co-Branded Site that contains a specific subset of
information and content from the Company Site based on
criteria provided to the Company by NBCi.
2.10. "Co-Branded Site" means the co-branded version of the Company
Site (but excluding co-branded sites), and successors to the
foregoing, that is created pursuant to Section 5.
2.11. "Company Competitor" means the following: Monster.com, Hot
Jobs, Careerpath, Career Mosaic, Careerbuilder, Jobs.com,
K-Force, JobOptions and America's Job Bank.
2.12. "Company Content" means (i) the Company's and its licensors'
text links, graphic links, and other materials, tools,
editorial content, or text that are delivered by the Company
to NBCi hereunder and (ii) Company Marks.
2.13. "Company Marks" means the Company's and its licensors'
trademarks, trade names, service marks and logos that may be
delivered by the Company to NBCi hereunder.
2.14. "Company Products" means all job and resume posting and
searching services and related services offered through the
Company Sites or the Co-Branded Site.
2.15. "Company Sites" means the Internet site operated by the
Company at http://www.headhunter.net, (not including the
Co-Branded Site), and successors to the foregoing.
2.16. "Competitor" means an entity providing products or services
in connection with the Web that compete with products or
services provided by NBCi on Exhibit C, as NBCi shall update
from time to time.
2.17. "Content Portal(s)" means the specific aggregations of linked
content within the Career Center and Employment Classifieds,
which are organized around the Company Content, and relate to
job searching products, listings and services.
2
<PAGE> 3
2.18. "Employment Classifieds" means the Web page within the
Shopping Channel providing services for national employment
classifieds that will feature the Company's job searching
tool to be accessed by Users. It does not include Local
Channel Users seeking job searching products, listings and
services.
2.19. "Front Door Window" means the promotional box on the front
door of the NBCi Site, including any one of the three front
doors of the Snap Site: Home, Local, and My Snap, and any
other front door created by NBCi in the future for the Snap
Site. NBCi, in its sole discretion, may cease use of the
Front Door Window at any time for any reason. In such an
event, the parties shall mutually agree on a specific
Promotion of substantially equivalent value to replace the
Front Door Window and such specific Promotion shall for all
purposes of this Agreement be deemed a Front Door Window.
2.20. "Impression" means the display of any Promotion on any NBCi
Site.
2.21. "Integrated Media Opportunity" means an advertising
opportunity that includes an on-air component on television
and its other components will be at the sole discretion of
NBC and NBCi.
2.22. "Jump Pages" means any Web pages within the NBCi Site that
contain Company Content with NBCi's Look and Feel and that
are created pursuant to Section 7 below.
2.23. "Keyword Promotions" means any Promotion tied to one of the
keywords listed in Exhibit A attached hereto, including the
advertising banners to be displayed on search results pages
corresponding with the keywords.
2.24. "Launch Date" means the date on which the Co-Branded Site
functions properly and is made accessible to Users.
2.25. "Local Channel" means the Local Channel on the Snap Sites.
2.26. "Look and Feel" means the look and feel, User interface and
flow of User experience of an Internet site.
2.27. "My Snap" means the My Snap channel on the Snap Sites.
2.28. "Net Advertising Revenue" means all fees, charges or value
that the Company or its agents receive for advertising on the
Co-Branded Site less any actual cash fees paid to third
parties related to such advertising.
2.29. "NBCi Marks" means any trademarks, trade names, service marks
and logos that may be delivered by NBCi to the Company
hereunder.
2.30. "NBCi Member" means a User who has registered to become a
member of one of NBCi's registration based services,
including without limitation, the NBCi Sites and the free
email service available at http://www.email.com.
3
<PAGE> 4
*
2.31. "NBCi Product Manager" means a NBCi employee or independent
contractor holding editorial authority and responsibility for
a portal, site, collection, area, center or page on the NBCi
Sites.
2.32. "NBCi Sites" means: (i) subject to the "Distributor" (as
defined in Section 9.1) exclusion in Section 9.1, any and all
search and aggregation "portal," direct marketing, and
commerce Web sites, whether operated by NBCi or a third party
under the "NBCi" "Snap" or "Xoom" brand, including, without
limitation, the Web site located at http://www.snap.com,
http://www.xoom.com, http://www.nbc.com, and
http://www.videoseeker.com, together with any mirror sites,
any co-branded editions of such site that have been or may be
developed for Distributors, and successors to the foregoing;
(ii) if NBCi so elects within its sole discretion, the
Enhanced Site and/or the International Editions, subject to
Section 9.2; and (iii) if NBCi so elects within its sole
discretion, the Web site located at http://www.nbcin.com and
successors thereto, and NBC's network of affiliate Web
stations' Web sites, as updated from time to time by NBCi in
its sole discretion.
2.33. "Promotions" means (i) banners, buttons, windows, portals,
Keyword Promotions, Front Door Windows, text links, and other
promotions that are offered by NBCi now or in the future and
link directly to the Company Sites and/or Co-Branded Site
from the NBCi Sites; and/or (ii) text links within email
newsletters distributed by NBCi (including, without
limitation, Snap Wires) and other promotions that are offered
by NBCi now or in the future and link directly to the Company
Sites and/or Co-Branded Site.
2.34. "Shopping Channel" means the Shopping Channel on the Snap
Sites.
2.35. "Snap Wire" means Snap email newsletter sent by NBCi to Snap
Members.
2.36. "Sufficient Job Listings" means a the number of job listings
for a particular City[***].
2.37. "User" means any end-user of the Web.
2.38. "User Profile Data" means data regarding a User provided by
the User on the NBCi Sites or the Co-Branded Site or
otherwise to NBCi or the Company, including without
limitation the User's name, e-mail address, street address,
telephone number and other information about the User.
2.39. "Web" means the World Wide Web part of the Internet.
2.40. "Year One" means the period beginning on the Effective Date
and ending upon the day before the twelfth month anniversary
of the Effective Date.
2.41. "Year Two" means the period beginning on the twelfth month
anniversary of the Effective Date and ending upon the day
before the twenty-fourth month anniversary of the Effective
Date.
4
<PAGE> 5
*
3. Promotions; Performance; and Account Management.
3.1. Promotion Design. The Company will design and create all
Company Content required for the Promotions in accordance
with NBCi's standard technical and editorial guidelines which
apply to a majority of NBCi partners providing harvested
content, as updated in NBCi's sole discretion from time to
time, including those set forth at http://www.snap.com/media/
or any successor URL designated by NBCi. The Company shall
deliver via email such Company Content for the Promotions to
NBCi within five days after the Effective Date. If the
Company delivers such materials to NBCi more than five
business days after the Effective Date, then for each day
thereafter, (i) a pro-rata number of the Impressions to be
delivered pursuant to this Agreement will be deemed to have
been delivered by NBCi; and (ii) a pro-rata number of Click
Thrus, calculated as a daily average of the actual number of
Click Thrus over the first 30 days after such materials are
delivered to NBCi, will be deemed to have been delivered by
NBCi.
3.2. Impression Delivery.
3.2.1. Impressions. Beginning on the Effective Date, NBCi
will use commercially reasonable efforts to deliver
a total number of Impressions as set forth in
Exhibit A attached hereto.
3.2.2. Underdelivery. If NBCi fails to deliver the required
number of Impressions during the Term, the Company
agrees that NBCi shall have an additional three
months to deliver such Impressions on any Web site
operated by NBCi, Snap or Xoom, at NBCi's sole
discretion. If NBCi underdelivers on the required
number of Impressions during such additional three
months, NBCi will refund to the Company the pro-rata
amount of the media fees set forth in Section 11.4
for such undelivered Impressions.
3.2.3. Overdelivery. In the event that NBCi deliver in
excess of the number of Impressions required to be
delivered pursuant to this Section 3.2 during Year
One, then such over-delivery of Impressions shall be
credited towards satisfaction of the next year's
obligations for NBCi to deliver Impressions until all
obligations through the end of the Term have been
fulfilled, after which the Company will pay for any
additional Keyword Promotions delivered, with payment
to be at the lesser of (a) Snap's current standard
rate card charges for Keyword Promotions less a
[***]% discount or (b) Snap's rate card charges for
Keyword Promotions in effect at beginning of
overdelivery, less a [***]% discount. In the event
that NBCi delivers more than [***]% of Year Two's
obligation in Year One, the Company may choose to
either discontinue delivery of Keyword Promotions for
the remainder of Year One or pay for any additional
Keyword Promotions delivered during Year One at (a)
Snap's current standard rate card charges for Keyword
Promotions less a [***]% discount or
5
<PAGE> 6
*
(b) Snap's rate card charges for Keyword Promotions
in effect at beginning of overdelivery, less a
[***]% discount.
3.3. Click Thru Delivery. During the Term, NBCi will use
reasonable efforts to deliver Click Thrus to the Co-Branded
Site or the Company's Site.
3.4. Links; Performance Standards. The Company will be responsible
for ensuring that each link embedded within a Promotion takes
the User to the appropriate area within the Company Sites or
the Co-Branded Site (other than links to the Career Center and
the Employment Classifieds for which NBCi will be
responsible), and that such sites function with reasonable
reliability and in a commercially reasonable manner throughout
the Term. The Company agrees that the Company Sites and the
Co-Branded Site will comply with the performance standards set
forth in Exhibit B attached hereto throughout the Term. Any
failure by the Company to comply with this Section will be
deemed to be a material breach of this Agreement. In the event
of such breach, then for each day thereafter, (i) [***]
Impressions to be delivered pursuant to this Agreement will be
deemed to have been delivered by NBCi; and (ii) [***] Click
Thrus, calculated as [***] will be deemed to have been
delivered by NBCi for the duration of such breach. During the
Term, NBCi will maintain NBCi as a top twenty general purpose
portal site as measured by Media Metrix page views, unique
users, or other reasonable metric.
3.5. Best of Breed. During the Term, in the event the Company has
failed to maintain the Company Sites, Company Content, or the
Co-Branded Site as Best of Breed, NBCi shall have the right
to (a) remove any deficient Company Content from the NBCi
Sites and the Co-Branded Site until the Company has corrected
such failure and/or (b) terminate this Agreement in
accordance with Section 12.3.
3.6. Account Management.
3.6.1. Account and Contact Managers. For the purposes of
this Agreement, Candace Brown shall be NBCi's
account manager for the Company and Judy Hackett
shall be the Company's contact manager for NBCi
(collectively, the "Managers"). Subject to Section
19.16, the Managers shall be the primary points of
contact for inquiries and requests, and each Manager
shall provide the other with such information and
assistance as may be reasonably requested by the
other from time to time. Either party to this
Agreement may change its designated Manager by
giving the other party written notice of such
change.
3.6.2. Quarterly Meetings. At least once each quarter, the
Managers shall discuss the Company's Promotions for
the next quarter, the effectiveness of the last
quarter's Promotions, the reports provided under
Section 13, and any other items under this Agreement
either Manager wishes to bring to the attention of
the other Manager.
6
<PAGE> 7
4. Anchor Tenancy.
4.1. Anchor Tenant of Career Center and Employment Classifieds.
After the Launch Date and during the Term, NBCi will feature
the Company as the Anchor Tenant within the Career Center and
Employment Classifieds. In the Career Center, the Company
will have the right to program a Content Portal that begins
Above the Fold that measures approximately 67% of the screen
width and 250 pixels tall with relevant content and links to
the Co-Branded Site. In addition, the Company shall have the
right to program a Content Portal that measures approximately
67% of the screen width and 400 pixels tall in the Employment
Classifieds with links to the Co-Branded Site. Company will
provide the appropriate Company Content, subject to the
reasonable discretion of a NBCi Product Manager, for the
Content Portals as further defined in Sections 4.2 and 4.3.
The NBCi Product Manager may provide the Company with
reasonable assistance to enable the Company to effectively
design the Content Portals. Subject to this Section 4.1, the
NBCi Product Manager will determine the size and location of
the Content Portals. NBCi may, in the exercise of its
reasonable discretion, make changes to the design and
functionality of the Career Center and Employment
Classifieds. Notwithstanding anything in this Agreement to
the contrary, any third party content or links may exist on
any area of the Career Center and Employment Classifieds that
provide (i) products or services that the Company does not
offer or (ii) products or services for which the Company
Products or Company Content are not Best of Breed; provided
that (a) NBCi shall place any links to Company Competitors
with attribution primarily Below the Fold and (b) NBCi will
not have paid content aggregation with a Company Competitor.
Moreover, other than as expressly set forth herein, NBCi
shall have the right to display any third party links, media,
banner advertisements, other promotions, and/or paid or
unpaid editorial content anywhere on the NBCi Sites. Other
than as expressly set forth in this Agreement, Company shall
have the right to display any third party links, media,
banner advertisements, other promotions, and/or paid or
unpaid editorial content anywhere on the Company Sites.
4.2. Career Center. The Career Center will contain multiple links
to various areas of the NBCi Sites. During the Term, the
Career Center shall contain Company Marks in the form of the
Company logo, however it will otherwise retain the NBCi Look
and Feel, subject to the reasonable discretion of a NBCi
Product Manager, and will promote Company Content and the
Company's Products. Subject to the reasonable discretion of a
NBCi Product Manager, the Career Center may contain Jump
Pages from the Career Center to the Co-Branded Site.
4.3. Employment Classifieds. The Employment Classifieds will
contain multiple links to various areas of the NBCi Sites.
During the Term, the front door of the Employment Classifieds
shall contain Company Marks in the form of the Company logo,
the Company search tool and the language "Provided by
Headhunter". Company will not be required to change its
search methodology unless such change becomes necessary to
maintain Best of Breed status. No later than January 1, 2000,
the Company search tool on the NBCi Sites must be able to
7
<PAGE> 8
provide region-specific job searching information to Users
based on a zip code provided by Users.
4.3.1. Alternate Job Listings Providers. Notwithstanding
anything in this Agreement to the contrary, if
Company is not providing Sufficient Job Listings for
a City, NBCi may provide Users with listings from
alternate job listing providers ("Alternate
Listings"). Before NBCi may use Alternate Listings,
(a) NBCi must give the Company written notice that
the Company is not providing Sufficient Job
Listings; (b) then the Company will have 60 days to
provide Sufficient Job Listings after such written
notice; and (c) after such 60 days, NBCi may then
supplement its listings with Alternate Listings,
including listings from Company Competitors. Within
fifteen days after receiving written notice from the
Company that it has achieved Sufficient Job
Listings, and subject to NBCi's reasonable
verification, NBCi shall reinstate the Company's
listings and remove all Alternate Listings for such
City.
4.4. Harvesting. Except as set forth in Section 3.1, the Company
shall, beginning on the Effective Date, provide all Company
Content as required herein pursuant to NBCi's standard
harvesting technical specifications which are applicable to a
majority of NBCi partners, as updated in NBCi's sole
discretion from time to time, including those set forth at
http://partnermarketing.snap.com/guide/htmlharvest.html
(Standard HTML Harvest Specifications),
http://partnermarketing.snap.com/guide/htmlsample.html
(Sample of HTML harvested content) and
http://partnermarketing.snap.com/guide/metaharvest.html (Meta
HTML Harvest Specifications),
http://partnermarketing.snap.com/guide/metasample.html
(Sample of Meta HTML harvested content), or any other
successor URLs designated by NBCi. For Company Content
appearing on My Snap or the Career Center, NBCi shall have
the right, in its sole discretion, to harvest such Company
Content in a manner requiring a User of the NBCi Sites to
"click through" as many as two Web pages within the NBCi
Sites before the User is transferred to the Company Sites or
the Co-Branded Site. For Company Content appearing on the
Employment Classifieds, NBCi shall harvest such Company
Content in a manner such that a User of the NBCi Sites
"clicks directly" to the Co-Branded Site. Harvested Company
Content will maintain the NBCi Sites' Look and Feel and will
include branding for the Company using Company Marks, in such
form and placement as the parties shall mutually agree. The
Company shall ensure that all Company Content remains at all
times current by continually providing NBCi with timely
updates to the Company Content. Furthermore, under no
circumstances shall Company Content include any content of a
Competitor or reference a Competitor.
4.5. Internal Promotions for the Career Center and Employment
Classifieds. During the Term, a NBCi Product Manager will use
reasonable efforts to promote the Career Center and/or the
Employment Classifieds by (i) placing a promotional link to
the Career Center and/or the Employment Classifieds on a NBCi
Front
8
<PAGE> 9
Door at least 24 days and (ii) subject to the discontinuance
of the Snap Wire, placing promotional links to the Career
Center and/or the Employment Classifieds in a minimum of six
Snap Wires. Such six Snap Wires referred to in this Section
are in addition of the requirements of Section 3.2. NBCi, in
its sole discretion may promote the Career Center and/or the
Employment Classifieds by linking to the Career Center and/or
the Employment Classifieds from relevant channels of the NBCi
Sites such as Local, Education, Entertainment, and Business
and Money.
4.6. Hosting. NBCi will host the Career Center, the Employment
Classifieds and the Content Portals on its servers, servers
within its control, or servers of a third party under
contract with NBCi, and will provide all computer hardware,
software and personnel necessary to operate and maintain the
Career Center and Employment Classifieds, and the Content
Portal as functional pages accessible to Users.
4.7. Advertising. NBCi shall own and have the right to use or sell
all of the advertising inventory on the Career Center and
Employment Classifieds. The Company acknowledges that any
advertising for and/or links to other sites similar to or in
competition with the Company may exist in Career Center and
Employment Classifieds; provided, however, that any links are
subject to the restrictions contained in Section 4.1 of this
Agreement.
5. Co-Branded Site.
5.1. Co-Branded Site Described. The Company will develop the
Co-Branded Site in accordance with this Section 5 and NBCi
will provide reasonable assistance in connection therewith.
Subject to the reasonable discretion of a NBCi Product
Manager, the Co-Branded Site will provide all of the features
and functionality provided by, and will perform in a manner
substantially identical to, the Company Sites, as the Company
Sites may be updated and enhanced from time to time by
Company in its sole discretion.
5.2. Changes. NBCi acknowledges that the Company may change the
design and functionality of the Company Sites from time to
time, in which case the design and functionality of the
Co-Branded Site will be changed in a similar fashion.
Notwithstanding the foregoing, the Company will ensure that
the Co-Branded Site at all times maintains the NBCi Sites'
Look and Feel and will make all changes reasonably suggested
by a NBCi Product Manager regarding the Look and Feel for
editorial consistency.
5.3. Co-Branding Features. Each page on the Co-Branded Site will
include branding for NBCi and the Company so that the NBCi
Marks and Company Marks are both Above the Fold and are of
substantially equivalent value and prominence to each other.
Each page of the Co-Branded Site will also comply with NBCi's
co-branding technical specifications, as updated in NBCi's
sole discretion from time to time, including those set forth
at
http://partnermarketing.snap.com/cobrand/cobranded_specs.html
or any other
9
<PAGE> 10
*
successor URL designated by NBCi, and will include
appropriate navigation features, such as an embedded link on
each NBCi logo to the front door of the NBCi Sites,
breadcrumb trails linking the User to the page of the NBCi
Sites from which the User originated, navigation bars, and a
NBCi search box, that will include links to the NBCi Sites.
5.4. Launch Date. The Company will use its best efforts to achieve
a Launch Date for the Co-Branded Site within 60 days after
the Effective Date; provided, however, that if the Launch
Date occurs after such 60 days or does not occur due to the
fault of the Company, then such failure will be deemed a
material breach of this Agreement by Company. NBCi shall
provide the Company with reasonable assistance to launch the
Co-Branded Site. Notwithstanding the Launch Date, NBCi shall
have the right to begin displaying Impressions immediately
upon the Effective Date. If the Launch Date of the Co-Branded
Site does not occur within 60 days after the Effective Date,
due to the fault of the Company, then for each day
thereafter, (i) a pro-rata number of the Impressions to be
delivered pursuant to this Agreement will be deemed to have
been delivered by NBCi; and (ii) a pro-rata number of Click
Thrus, calculated as a daily average of the actual number of
Click Thrus over the first 30 days after the Launch Date,
will be deemed to have been delivered by NBCi.
5.5. Implementation. Notwithstanding anything in this Agreement to
the contrary, the Company shall have thirty days to implement
any significant changes required by a NBCi Product Manager.
5.6. Hosting. Except as otherwise expressly provided in this
Agreement, the Company will host the Co-Branded Site and the
Company Products on its servers (or on servers within its
control), and will provide all computer hardware, software
and personnel necessary to operate and maintain the
Co-Branded Site as a functional site accessible to Users.
5.7. Advertisements. The Company shall own and have the right to
use or sell (but not barter) all of banner advertising
inventory on the Co-Branded Site; provided, however, the
Company shall pay to NBCi [***] of the Net Advertising
Revenue, Company receives from such advertising on the
Co-Branded Site. The Company will display advertising
on the Co-Branded Site consistent with the number, type, and
placement of advertising displayed on the Company Sites;
provided, however, that all advertisements on the Co-Branded
Site must also comply with NBCi's reasonable editorial
guidelines in effect from time to time. At the Company's
request, NBCi will sell and deliver advertising to the
Co-Branded Site via third party advertising. The Company will
not display advertisements of Competitors on the Co-Branded
Site. Further, if any advertisement on the Co-Branded Site is
reasonably deemed inappropriate by NBCi, the Company shall
upon notice from NBCi immediately remove the advertisement
from the Co-Branded Site.
10
<PAGE> 11
5.8. Customized Co-Branded Pages. Subject to the mutual discretion
of a NBCi Product Manager and Company, NBCi may create links
within specific areas of the NBCi Sites to the Co-Branded
Site for targeted job searching products, listings and
services in a specified category (e.g. sports, entertainment,
health, computers). The Company shall create customized
Co-Branded Pages that contain jobs in the specified category.
5.9. DNS Redirection. Using Domain Name System redirection, the
URL for the Co-Branded Site will begin with
http://headhunter/snap. NBCi agrees that the Company will be
entitled to count all page views of the Co-Branded Site
towards the Company's traffic as measured by Media Metrix and
other Internet traffic-auditing firms.
5.10. Most Favored Customer Pricing. The Company shall offer on the
Co-Branded Site and the Company Sites to Users from the NBCi
Sites the Company's most favored customer pricing, which
means pricing and terms substantially similar to the lowest
pricing and most favorable terms offered by the Company to
any other Users. The Company shall maintain competitive
pricing for the products and services it offers.
6. My Snap Job Search Option.
6.1. My Snap Job Search Described. No later than February 1, 2000,
the Company will provide job searching and listing services
to Users of My Snap ("My Snap Job Search"). My Snap Job
Search (or a substantial equivalent), will be linked to a
Jump Page. At the Jump Page, Users will be permitted to
create an individual job search that is refreshed each time
such User clicks on My Snap Job Search. Snap will promote the
My Snap Job Search to Users, however, My Snap Job Search will
not be a default link on My Snap. Snap has 60 days after
written notice from the Company to implement the Jump Pages
for the My Snap Job Search.
6.2. Availability. If the Company can not provide My Snap Job
Search by March 31, 2000, due to the fault of the Company,
NBCi, in its sole discretion shall have the right to obtain
the My Snap job searching and listing services as described
in this Section 6 from another job searching and listings
services provider and shall have no further obligation to the
Company under this Section 6. NBCi shall provide the Company
with reasonable assistance to launch My Snap Job Search.
7. Jump Pages.
7.1. Jump Pages Described. NBCi will develop, implement, and
maintain all Jump Pages in accordance with this Section 7 and
the Company will provide reasonable assistance in connection
therewith. NBCi has the sole discretion on the Look and Feel
of the Jump Pages. Jump Pages will feature Company Content
and attribution. Company Marks shall be included on all Jump
Pages.
11
<PAGE> 12
*
7.2. Changes. Subject to the other provisions of this Agreement,
NBCi may, in the exercise of its reasonable discretion, make
changes to the number, design and functionality of the Jump
Pages.
7.3. Company Content. The Company will provide all appropriate and
mutually agreeable Company Content for the Jump Pages to NBCi
as harvested Company Content pursuant to Section 4.4.
7.4. Hosting. NBCi will host the Jump Pages on its servers,
servers within its control, or servers of a third party under
contract with NBCi, and will provide all computer hardware,
software and personnel necessary to operate and maintain the
Jump Pages as functional pages accessible to Users.
7.5. Advertisements. NBCi shall own and have the right to use or
sell all of the advertising inventory on the Jump Pages.
8. NBC On-Air Promotion. Within six months of the Effective Date, NBCi
will present at least one Integrated Media Opportunity to air on NBC
(the "NBCi Spots"). The Company shall have seven (7) days to accept the
terms of such Integrated Media Opportunity from NBCi after which the
Company will be deemed to have forfeited such Integrated Media
Opportunity. If Company rejects the first Integrated Media Opportunity
presented by NBCi, NBCi will only be obligated to make one additional
presentation for an Integrated Media Opportunity to the Company during
the Term. NBCi shall have sole discretion regarding the final form and
content of all aspects of such advertisements but will consult with the
Company regarding how Company Products and/or Company Marks will be
featured in the NBCi Spots. Up to $[***] of the media fee paid by
Company under Section 11.4 of this Agreement may be applied to the fee
for the first Integrated Media Opportunity purchased by the Company
from NBCi. Company acknowledges that all placement of Company Products
and/or Company Marks within the NBCi Spots, as well as the NBCi Spots
themselves, will be subject to the NBC Advertising Standard Terms and
Conditions as well as the Advertising Standards set by NBC Broadcast
Standards and Practices, and NBCi will have no right or power to cause
NBC to make any exception thereto for Company or the NBCi Spots. All
other terms and conditions of the Integrated Media Opportunity shall be
contained in an advertising agreement for the Integrated Media
Opportunity between NBCi and the Company.
9. Co-Branded, Enhanced, and International Editions.
9.1. Co-Branded Editions. Company acknowledges that NBCi produces
co-branded editions of the NBCi Sites for various resellers,
distributors, other licensees and/or joint venture partners
(collectively the "Distributors"). In some cases, such
Distributors are entitled to replace NBCi's default content
with other content within their own co-branded editions of
any NBCi Site. Notwithstanding any other provisions of this
Agreement, if any such Distributor has exercised its right to
replace Company Content with other content, then NBCi will
not be required to display the Promotions or Company Content
within such Distributor's co-branded edition of the NBCi
Sites. If NBCi does display the Promotions or Company
12
<PAGE> 13
*
Content within a co-branded edition of any NBCi Site, such
display will be governed by this Agreement.
9.2. Enhanced and International Editions. NBCi has created an
enhanced, high-speed version of the NBCi Sites focused on
rich media content (together with any successor service(s) or
site(s) thereof and any co-branded editions of such service
that have been or may be developed for NBCi's third party
distribution partners and licensees, the "Enhanced Sites")
and may desire to include appropriate rich media Company
Content within the Enhanced Sites. NBCi is currently
considering creating one or more international editions of
the NBCi Sites to reflect appropriate localized and local
partner content ("International Editions") and may desire to
include localized Company Content within the International
Site. At NBCi's sole discretion, all terms and conditions
contained in the Agreement related to the "NBCi Sites" may
also apply to the Enhanced Site and International Editions,
and any Impressions and Click Thrus required under the
Agreement may be delivered on the Enhanced Sites,
International Editions, and/or the existing NBCi Sites. The
Company hereby acknowledges that NBCi, in its sole
discretion, may use appropriate content, promotions and other
material provided by Company within the Enhanced Sites and
the International Editions, and all licenses set forth in
this Agreement are hereby expanded to include the Enhanced
Sites and International Editions. The Company acknowledges
that the Look and Feel of the Enhanced Site will be designed
for a high-bandwidth audience and therefore may substantially
differ from the Look and Feel of the primary NBCi Sites. The
Company further acknowledges that the Look and Feel of the
International Editions will be localized for the relevant
target audience (e.g., in terms of language, culture, and
ethnicity) and therefore may substantially differ from the
Look and Feel of the primary NBCi Sites.
10. User Profile Data, Commerce Opportunities, and Direct Marketing.
10.1. Data Ownership. The Company will be the sole owner of any
information that the Company collects from Users through the
Company Sites and the Co-Branded Site, and NBCi will be the
sole owner of any information that NBCi collects from Users
through the NBCi Sites and the Co-Branded Site.
10.2. Use of Information and Confidentiality. Each party will have
the right to use any information provided by the other party
pursuant to Section 13 subject to the confidentiality
restrictions set forth in Section 19.8. Unless otherwise
clearly disclosed to Users on the respective site, all data
collected from Users through the Company Sites and Co-Branded
Site will be kept confidential and not disclosed to third
parties in accordance with the published privacy policy of
NBCi.
11. Payments and Credits.
11.1. Production Fee. On the Effective Date, the Company will pay
to NBCi a [***] production and content integration fee.
13
<PAGE> 14
*
11.2. Anchor Tenancy Fee. The Company will pay NBCi a [***] fee for
the Anchor Tenant position in the Career Center and the
Employment Classifieds. Year One of such fee, in the amount of
[***], shall be paid in three equal quarterly installments of
[***] due beginning three months after the Effective Date.
Year Two of such fee, in the amount of [***] shall be paid in
four equal quarterly installments of [***] due beginning on
the first day of Year Two.
11.3. Performance Fee. The Company will pay NBCi [***] for each
Click Thru delivered pursuant to Section 3.3 ("Performance
Fee"). Payments under this Section 11.3 will be due monthly,
on receipt of an invoice from NBCi. No Performance Fee shall
be due until NBCi has delivered [***] Click Thrus.
11.4. Media Fee. Beginning one month after the Effective Date, the
Company shall pay NBCi a media fee monthly for all Impressions
NBCi delivers pursuant to Section 3.2. During Year One, the
Company will pay NBCi [***] in twelve equal monthly payments
of [***] for such Impressions. During Year Two and beginning
one month after the first day of Year Two, the Company will
pay NBCi [***] in twelve equal monthly payments of [***] for
such Impressions. Media Fees are payable within 30 days of
receipt of invoice.
11.5. Payment. Payments under this Agreement will be made by check
or wire transfer of immediately available funds. If Company
should fail to make any payment due under this Agreement by
the date such payment is due, the overdue payment will bear
interest at the rate of one and one-half percent simple
interest per month or the maximum interest permitted by law,
whichever is less.
11.6. Invoice Procedure. NBCi shall send the Company all invoices
hereunder to the attention of Judy Hackett, whose title is
Senior Vice President of Marketing. The Company agrees to use
the following procedures for processing and payment of
invoices from NBCi: Company will send payment to NBCi
immediately upon receipt of invoice from NBCi unless
(i)expressly stated otherwise in this Agreement or (ii)
expressly stated otherwise by NBCi at time of invoice, which
shall not supercede provisions in this Agreement.
12. Term; Termination.
12.1. Term. The term of this Agreement will begin on the Effective
Date and end on the last day of the twenty-fourth month after
the Effective Date, unless otherwise terminated or extended
as set forth in this Agreement (the "Term").
12.2. Extension Negotiations. Eighteen months after the Effective
Date, the parties hereto shall work diligently and in good
faith, on an exclusive basis for 60 days, to prepare and
negotiate the written terms of an extension of the Term. If
an agreement is not reached after such exclusive time period,
the parties shall use their best efforts to conclude such
negotiations on a non-exclusive basis within three months of
the end of the Term.
14
<PAGE> 15
12.3. Termination for Cause. Either NBCi or the Company may
terminate this Agreement at any time by giving written notice
of termination to the other parties if any other party
commits a material breach of its obligations hereunder that
is not cured within 30 days after notice thereof from a
non-breaching party; provided, however, that if the Company
fails to make a payment as required hereunder, NBCi may
terminate this Agreement 15 days following the date of notice
of such non-payment if any such payment is not made within 15
days after the Company's receipt of such notice. Company or
NBCi (either, the "Terminating Party") may terminate this
Agreement immediately, and shall have no further obligation
under this Agreement, if the Company or NBCi (either, the
"Non-Terminating Party") becomes insolvent; makes an
assignment for the benefit of creditors; makes or sends
notice of a bulk transfer; calls a meeting of its creditors
with respect to its inability to pay its obligations owed to
such creditors on customary terms; defaults under any
agreement, document or instrument relating to the
Non-Terminating Party's indebtedness for borrowed money;
ceases to do business as a going concern; a petition is filed
by or against the Non-Terminating Party under any bankruptcy
or insolvency laws; or the Non-Terminating Party experiences
a change in its ownership, such that a Competitor holds an
equity interest in the Non-Terminating Party, without the
Terminating Party's prior, written consent to such ownership.
12.4. Termination Regarding Company Content. NBCi may terminate
this Agreement at any time by giving written notice of
termination to the Company if the Company fails to timely
deliver, pursuant to Section 4.4, any material part of the
Company Content, including updates, and such failure is not
cured within 10 days after Company's receipt of notice
thereof from NBCi.
12.5. Consequences of Termination. Upon the termination or
expiration of this Agreement, all licenses granted hereunder
shall immediately terminate and each party shall return or
destroy all Confidential Information of the other party in
its possession. In addition, in the event this Agreement is
terminated pursuant to Sections 12.3, then all monies paid by
the Company to NBCi hereunder prior to the termination,
including without limitation all performance fees set forth
in Section 11.3, shall be deemed non-refundable except (i) as
expressly stated otherwise in this Agreement, or (ii) in the
case of a material breach by NBCi. Finally, in the event this
Agreement is terminated pursuant to Sections 12.3 and 12.4,
then the Company shall pay to NBCi 100% of all fees that
would be incurred by the Company under the Agreement during
the subsequent 90 days of the Term as liquidated damages, and
such payment shall be made within 30 days of termination.
Such payments shall be due and payable on the dates they
would have been due and payable if the termination had not
occurred. The parties acknowledge and agree that it would be
impractical to estimate the amount of any damages that could
arise out of any material breach of this Agreement or
termination pursuant to Section 12.3 and/or Section 12.4, and
agree that the amount of liquidated damages described above
is a reasonable estimate of the actual damages that NBCi
would suffer and incur as a result of such breach or
termination of this Agreement. No party shall be liable to
the others for damages
15
<PAGE> 16
of any sort resulting solely from terminating this Agreement
in accordance with its terms.
13. Reports, Records, and Accounts.
13.1. NBCi Reports. Within 15 days after the end of each month
during the Term, NBCi will provide to the Company its
standard advertising report for User traffic generated from
the Promotions for such month.
13.2. Company Reports. Within 15 days after the end of each month
during the Term, the Company will provide to NBCi a complete
and detailed report that includes, at a minimum, for such
month: (i) the total page views on the Co-Branded Site, (ii)
the number of unique Users to the Co-Branded Site from the
Career Center and/or the Employment Classifieds, (iii) the
number of Click Thrus and the conversion rate resulting from
such Click Thrus, (iv) the number of Users and User Profile
Data for Users who click through from the NBCi Sites to the
Company Sites and/or the Co-Branded Site, (v) the number of
Users and User Profile Data for Users who click through from
the NBCi Sites to the Company Sites and/or the Co-Branded
Site and order Company Products, and (vi) the aggregate
statistical and demographic characteristics of Users in (ii),
(iii), (iv), and (v). To the extent that the Company does not
collect any of the reporting data specified in this Section
13.2, the Company shall not be required to report such data
to NBCi. NBCi will tag each Co-Branded User originating from
the NBCi Sites using a cookie or other similar technology to
assist the Company in obtaining the foregoing data.
13.3. Records and Accounts. The Company agrees to keep, on a
continuing basis, full and accurate records and accounts,
including, without limitation all logs and reports,
sufficient to permit NBCi to verify the accuracy of all
reports submitted by the Company as hereinabove required.
NBCi shall have the right, at its sole expense, to examine
such books and records, whether in electronic format or
otherwise, to the extent that such examination is necessary
and pertinent to the foregoing verification, during
reasonable business hours, using its employees or principals,
or through outside, authorized representatives. In the event
such an examination reveals that any of the Click Thru
reports submitted or payments made by the Company to NBCi, as
hereinabove required, understated the monies owed by five
percent (5%) or more, then the Company shall, in addition to
the payment of the additional monies owed fees determined by
such examination, promptly pay to NBCi the reasonable cost of
such examination.
14. Licenses.
14.1. Company Content. The Company hereby grants to NBCi a
non-exclusive, non-transferable, royalty-free license,
effective throughout the Term, to use, display and publish
the Company Content solely as permitted hereunder. In the
event the Enhanced Sites and/or the International Editions
are deemed included within this Agreement pursuant to Section
9.2, the Company hereby further grants to NBCi a
16
<PAGE> 17
non-exclusive, non-transferable, royalty-free license,
effective throughout the Term, to modify and create
derivative works of the Company Content solely as permitted
hereunder. In the event the International Editions are deemed
included within this Agreement pursuant to Section 9.2, the
Company shall in good faith modify the Company Marks to
incorporate changes reasonably suggested by NBCi for the
relevant target audience (e.g., complying with local laws or
avoiding the use of offensive terms in the local language).
Nothing contained in this Agreement will give NBCi any right,
title or interest in or to the Company Content or the
goodwill associated therewith, except for the limited usage
rights expressly provided above. NBCi acknowledges and agrees
that, as between the Company and NBCi, the Company is the
sole owner of all rights in and to the Company Content. All
use of the Company Marks by NBCi shall inure to the benefit
of the Company and shall be subject to any reasonable usage
guidelines communicated by the Company to NBCi regarding the
Company Marks.
14.2. NBCi Marks. NBCi hereby grants to the Company a
non-exclusive, non-transferable, royalty free license,
effective throughout the Term, to use, display and publish
the NBCi Marks solely within the Co-Branded Site as permitted
hereunder. Any use of the NBCi Marks by the Company must
comply with any reasonable usage guidelines communicated to
the Company by NBCi from time to time. Nothing contained in
this Agreement will give the Company any right, title or
interest in or to the NBCi Marks or the goodwill associated
therewith, except for the limited usage rights expressly
provided above. The Company acknowledges and agrees that, as
between the Company and NBCi, NBCi is the sole owner of all
rights in and to the NBCi Marks.
15. Responsibility for the Sites and Products. The Company acknowledges
and agrees that, as between the Company and NBCi, the Company will be
solely responsible for any claims or other losses associated with or
resulting from the marketing or operation of the Company Sites or the
Co-Branded Site or the offer or sale of any Company Products by the
Company or through the Company Sites or the Co-Branded Sites. NBCi is
not authorized to make, and agrees not to make, any representations or
warranties concerning the Company Products, except to the extent (if
any) contained within Promotions delivered to NBCi by the Company.
16. LIMITATION OF DAMAGES. NO PARTY WILL BE LIABLE FOR ANY SPECIAL,
INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING OUT OF OR
RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND ON ANY THEORY OF
LIABILITY (INCLUDING NEGLIGENCE), AND EVEN IF SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT IN THE EVENT OF A
CLAIM UNDER SECTION 18 OR SECTION 19.8, IN NO EVENT SHALL EITHER PARTY
BE LIABLE TO THE OTHER PARTY IN AN AMOUNT GREATER THAN THE AMOUNTS
ACTUALLY PAID TO NBCI BY THE COMPANY HEREUNDER.
17. NO WARRANTIES. THE IMPRESSIONS, CAREER CENTER AND EMPLOYMENT
CLASSIFIEDS, USER PROFILE DATA AND COMPANY PRODUCTS ARE
17
<PAGE> 18
PROVIDED "AS IS" AND THE INFORMATION CONTAINED THEREIN IS NOT
WARRANTED TO BE FREE FROM ERROR. BOTH PARTIES DISCLAIM ALL WARRANTIES,
EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT TO THE CAREER CENTER, EMPLOYMENT CLASSIFIEDS, IMPRESSIONS
USER PROFILE DATA, COMPANY PRODUCTS AND CONTENT PORTALS.
18. Mutual Indemnification.
18.1. Indemnification by NBCi. NBCi shall indemnify, defend and
hold the Company harmless from and against any costs, losses,
liabilities and expenses, including all court costs,
reasonable expenses and reasonable attorney's fees
(collectively, "Losses") that the Company may suffer, incur
or be subjected to by reason of any legal action, proceeding,
arbitration or other claim by a third party, whether
commenced or threatened, arising out of or as a result of the
operation of the NBCi Sites (except in cases where the
Company is required to indemnify NBCi under Section 18.2).
18.2. Indemnification by Company. The Company shall indemnify,
defend and hold NBCi harmless from and against any Losses
that NBCi may suffer, incur or be subjected to by reason of
any legal action, proceeding, arbitration or other claim by a
third party, whether commenced or threatened, arising out of
or as a result of (i) the use of Company Content by NBCi in
accordance with this Agreement; (ii) the operation of the
Company Sites or the Co-Branded Site; (iii) the use of any
word as a keyword to trigger a Keyword Promotion; (iv) the
offer or sale of Company Products by the Company on or
through the Company Sites or the Co-Branded Site, or (v) the
authorized and legal use of the User Profile Data under the
terms of this Agreement.
18.3. Indemnification Procedures. If any party entitled to
indemnification under this Section (an "Indemnified Party")
makes an indemnification request to the other, the
Indemnified Party shall permit the other party (the
"Indemnifying Party") to control the defense, disposition or
settlement of the matter at its own expense; provided that
the Indemnifying Party shall not, without the consent of the
Indemnified Party enter into any settlement or agree to any
disposition that imposes an obligation on the Indemnified
Party that is not wholly discharged or dischargeable by the
Indemnifying Party, or imposes any conditions or obligations
on the Indemnified Party other than the payment of monies
that are readily measurable for purposes of determining the
monetary indemnification or reimbursement obligations of
Indemnifying Party. The Indemnified Party shall notify the
Indemnifying Party promptly of any claim for which
Indemnifying Party is responsible and shall cooperate with
the Indemnifying Party in every commercially reasonable way
to facilitate defense of any such claim; provided that the
Indemnified Party's failure to notify Indemnifying Party
shall not diminish Indemnifying Party's obligations under
this Section except to the extent that Indemnifying Party is
materially prejudiced as a result of such failure. An
18
<PAGE> 19
Indemnified Party shall at all times have the option to
participate in any matter or litigation through counsel of
its own selection and at its own expense.
19. Miscellaneous.
19.1. Local Employment Classifieds. During the Term, NBCi grants to
the Company a first right of refusal on any future
negotiations for the NBCi Local Channel Employment Classified
job searching products, listings and services.
19.2. Update of Company Competitor List. At the end of Year One,
the Company may provide the NBCi Product Manager with a
written list selecting nine (9) new competitors to qualify as
Company Competitors under this Agreement.
19.3. Promotion of NBCi Sites. The Company shall display the NBCi
Marks on the Company Sites at least as prominently as any
other portal or search engine entity that Company promotes on
the Company Sites. The Company shall ensure that the NBCi
Marks on the Company Sites link to the Co-Branded Site, the
Career Center or Employment Classifieds.
19.4. Assignment. Subject to Section 12.3, either party shall have
the right to assign all of its rights and liabilities
hereunder to an affiliate or to any person or entity that (i)
acquires all or substantially all of such party's operating
assets (whether by asset sale, stock sale, merger or
otherwise) or (ii) results from a merger or reorganization of
such party pursuant to any plan of merger or reorganization;
provided that the new entity accepts in writing all of such
party's rights, obligations and liabilities hereunder and
such entity is not a Competitor.
19.5. Relationship of Parties. This Agreement will not be construed
to create a joint venture, partnership or the relationship of
principal and agent between any of the parties hereto, nor to
impose upon any party any obligations for any losses, debts
or other obligations incurred by another party except as
expressly set forth herein.
19.6. Conflicts. Notwithstanding any other provision of this
Agreement, no obligation of NBCi pursuant to this Agreement
shall be interpreted or operate to cause NBCi to breach any
contract or agreement between NBCi and any other party, or
impair the rights of any such contract party pursuant to a
contract or agreement with NBCi.
19.7. Applicable Law; Forum. This Agreement will be construed in
accordance with and governed by the laws of the State of New
York, without regard to principles of conflicts of law.
Litigation of disputes under this Agreement shall be
conducted in the appropriate state or federal courts located
in the City of New York, New York. The parties hereto consent
to the jurisdiction of any local, state or federal court in
which an action is commenced and located in accordance with
the terms of this Section and that is located in New York,
New York. The parties further agree not to disturb such
choice of forum, and if not resident in such state, waive the
personal service of any and all process upon them, and
consent that
19
<PAGE> 20
such service of process may be made by certified or
registered mail, return receipt requested, addressed to the
parties as set forth herein.
19.8. Confidentiality. In connection with the activities
contemplated by this Agreement, each party may have access to
confidential or proprietary technical or business information
of another party, including without limitation (i) proposals,
ideas or research related to possible new products or
services; (ii) financial statements and other financial
information; (iii) any reporting information in Section 13;
and (iv) the terms of this Agreement and the relationship
among the parties (collectively, "Confidential Information").
Each party will take reasonable precautions to protect the
confidentiality of each of the other party's Confidential
Information, which precautions will be at least equivalent to
those taken by such party to protect its own Confidential
Information. Except as required by law or as necessary to
perform under this Agreement, no party will knowingly
disclose the Confidential Information of any other party or
use such Confidential Information for its own benefit or for
the benefit of any third party. Each party's obligations in
this Section with respect to any portion of another party's
Confidential Information shall terminate when the party
seeking to avoid its obligation under such Section can
document that: (i) it was in the public domain at or
subsequent to the time it was communicated to the receiving
party ("Recipient") by the disclosing party ("Discloser")
through no fault of Recipient; (ii) it was rightfully in
Recipient's possession free of any obligation of confidence
at or subsequent to the time it was communicated to Recipient
by Discloser; (iii) it was developed by employees or agents
of Recipient independently of and without reference to any
information communicated to Recipient by Discloser; (iv) it
was communicated by the Discloser to an unaffiliated third
party free of any obligation of confidence; or (v) the
communication was in response to a valid order by a court or
other governmental body, was otherwise required by law or was
necessary to establish the rights of either party under this
Agreement.
19.9. Press Release. No party will make any public statement or
other announcement (including without limitation, issuing a
press release) or pre-briefing any member of the press or
other third party) relating to the terms or existence of this
Agreement without the prior written approval of the other
parties. Notwithstanding the foregoing and Section 19.8, the
parties may issue an initial joint press release, the timing
and wording of which will be subject to each party's
reasonable approval, regarding the relationship between the
parties.
19.10. Injunctive Relief. Each party agrees that in the event of a
breach or alleged breach of Sections 19.8 or 19.9 that the
other parties shall not have an adequate remedy at law,
including monetary damages, and that the other parties shall
consequently be entitled to seek a temporary restraining
order, injunction, or other form of equitable relief against
the continuance of such breach, in addition to any and all
remedies to which any other party shall be entitled.
19.11. Captions and Section Headings. Captions and section headings
used in this Agreement are for convenience only and are not a
part of this Agreement and
20
<PAGE> 21
shall not be used in construing it. Except as otherwise
specifically provided, any reference in this Agreement to a
section or exhibit shall be deemed to be a reference to such
section or exhibit of this Agreement.
19.12. Survival. Termination or expiration of this Agreement for any
reason shall not release any party from any liabilities or
obligations set forth in this Agreement which (i) the parties
have expressly agreed shall survive any such termination or
expiration, or (ii) remain to be performed or by their nature
would be intended to be applicable following any such
termination or expiration.
19.13. Taxes. For all fees or charges payable hereunder by the
Company to NBCi, the Company will pay or reimburse NBCi for
any taxes or fees (including all federal, state, or local
taxes), if any, associated with NBCi's provision of the
services hereunder to the Company, except that the Company
will have no liability for any taxes based on NBCi's net
assets or net income, or for which Company has an appropriate
resale or other exemption.
19.14. Force Majeure. If any party shall be delayed in its
performance of any obligation hereunder or be prevented
entirely from performing any such obligation due to causes or
events beyond its reasonable control, including without
limitation any act of God, fire, strike or other labor
problem, such delay or non-performance shall be excused and
the time for performance shall be extended to include the
period of such delay or non-performance.
19.15. Dispute Resolution. In the event that any dispute arises
hereunder, the parties agree that prior to commencing
litigation, arbitration, or any other legal proceeding, each
party shall send an officer of such party to negotiate a
resolution of the dispute in good faith at a time and place
as may be mutually agreed. Each officer shall have the power
to bind its respective party in all material respects related
to the dispute. If the parties cannot agree on a time or
place, upon written notice from either party to the other,
the negotiations shall be held at the principal executive
offices of NBCi twenty one days following such notice (or on
the next succeeding business day, if the twenty first day is
a weekend or holiday).
19.16. Notices. All notices or other communications that shall or
may be given pursuant to this Agreement, shall be in writing,
in English, shall be sent by certified or registered air mail
with postage prepaid, return receipt requested, by facsimile,
overnight express mail, or by hand delivery. Such
communications shall be deemed given and received upon
confirmation of receipt, if sent by facsimile; the day after
delivery if by overnight express mail; or upon delivery if
hand delivered; or upon receipt of mailing, if sent by
certified or registered mail; and shall be addressed to the
parties as set forth above on the first page of this
Agreement and to the attention of Judy Hackett, if to the
Company; and to the attention of Mark Markunas, Contracts
Administrator, if to NBCi; or to such other addresses or
persons as the parties may designate in writing from time to
time.
21
<PAGE> 22
19.17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed a duplicate
original and all of which, when taken together, shall
constitute one and the same document.
19.18. Entire Agreement. This Agreement constitutes and contains the
entire agreement between the parties with respect to the
subject matter hereof and supersedes any prior oral or
written agreements. This Agreement may not be amended except
in writing signed by all parties. Each party acknowledges and
agrees that the other has not made any representations,
warranties or agreements of any kind, except as expressly set
forth herein. All exhibits attached to this Agreement are
incorporated hereby and shall be treated as if set forth
herein.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives on the dates indicated below.
NBC INTERNET INC. HEADHUNTER.NET
By: Edward Sanctis By: /s/ Mark Partin
-------------------------------- ---------------------------------
(Signature) (Signature)
Name: /s/ Edward Sanctis Name: Mark Partin
------------------------------- -------------------------------
(Please print) (Please print)
Title: Pres. and C.O.O. Title: CFO
------------------------------ ------------------------------
Date: 12/10/99 Date: 12/10/99
------------------------------- -------------------------------
22
<PAGE> 23
*
EXHIBIT A
KEYWORD PROMOTIONS
1. Keywords. Subject to availability in NBCi's inventory, the Company
shall provide NBCi with no more than 10 keywords. For any keywords
protected by trademark or servicemark rights, NBCi shall have the
right to accept or reject such term regardless of availability. In the
event NBCi accepts such a keyword protected by trademark or service
mark rights, (i) the Company shall indemnify, hold harmless, and
defend NBCi as set forth in Section 18 of the Agreement to which this
Exhibit is attached and (ii) NBCi shall have the right, in its sole
discretion, to terminate immediately its acceptance in the event NBCi
becomes aware of third party claims regarding such keyword (e.g.,
demand letter, complaint, etc.).
Keywords:
1.Job
2.Jobs
3.Career
4.Careers
5.Job Search
6.headhunters
7.resume
8.resumes
9. employment
10.job sites
2. [***] Exclusivity. At least [***] of all keyword search results for
only such keywords will result in a Company Keyword Promotion. This
Section 2 of this Exhibit A may not apply to keyword searches
containing the keywords indicated and also containing additional words.
[For example, if "job" is a selected keyword, a search on "job search"
means this Section 2 of this Exhibit A may not apply to this search.]
3. Underdelivery of Keyword Promotions. If for any reason NBCi
underdelivers on the stated number of Keyword Promotions, NBCi will
make good on the amount of the underdelivery with a number of targeted
Impressions of equal value.
4. Overdelivery. In the event that NBCi delivers in excess of the stated
number of Keyword Promotions, NBCi shall notify the Company in writing
as soon as reasonably practical. Upon receipt of such notice, the
Company shall, in writing, but within its sole discretion, either
accept or decline the overdelivery. In the event the Company either
confirms the over delivery of Impressions of Keyword Promotions or
does not respond in writing within 5 days of NBCi's written notice of
over delivery, the Company will pay for all excess ordered Impressions
of Keyword Promotions at NBCi's then standard net rate card charges
for Keyword Promotions less a 25% discount. In the event the Company
declines in writing to accept the over delivery within 5 days of
NBCi's written notice, NBCi shall cease delivering any additional
Keyword Promotions.
23
<PAGE> 24
*
5. Impressions. NBCi will make commercially reasonable efforts to deliver
the Impressions in the quantity and according to the allocation
schedule below. In the event that NBCi is unable to deliver the
Impressions as defined in the schedule below, NBCi may substitute
Impressions of comparable value.
6. Integrated Media Opportunity. If the Company elects the Integrated
Media Opportunity in Section 8 of this Agreement, the Impressions
defined below in the schedule will be reduced pro-rata across Year One
and Year Two up to $[***] of media fees that may be deferred under
such section.
<TABLE>
<CAPTION>
IMPRESSIONS YEAR 1 YEAR 2 TOTAL
----------- ------ ------ -----
<S> <C> <C> <C>
TARGETED:
Local [***] [***] [***]
Computing and Internet [***] [***] [***]
Entertainment [***] [***] [***]
Sports [***] [***] [***]
Education [***] [***] [***]
Shopping [***] [***] [***]
People and Society [***] [***] [***]
Health [***] [***] [***]
Business and Money [***] [***] [***]
Keywords [***] [***] [***]
TOTAL NBCI TARGETED IMPRESSIONS [***] [***] [***]
NBCI UNTARGETED:
Front Door Windows [***] [***] [***]
Run of Site Banners, Buttons, Windows [***] [***] [***]
Snap Wire [***] [***] [***]
TOTAL NBCI UNTARGETED IMPRESSIONS [***] [***] [***]
Direct Marketing Email [***] [***] [***]
TOTAL IMPRESSIONS [***] [***] [***]
MEDIA FEES [***] [***] [***]
</TABLE>
24
<PAGE> 25
EXHIBIT B
GENERAL PERFORMANCE STANDARDS
The Company Sites, the Co-Branded Site and the Company's related operations
must comply with the following performance standards throughout the Term:
1. The Company Sites and Co-Branded Site will be operational and fully
functional in all material respects (i.e. capable of displaying
information and conducting transactions as contemplated in the
ordinary course of business) at least 99.5% of the time during any 30
day period.
2. The average time required to start displaying the HTML on a page of
the Company Sites or Co-Branded Site after a link from the NBCi Sites
shall not exceed a daily average of eight seconds, and the average
time required to deliver an entire page of the Company Sites or
Co-Branded Site over the open Internet shall not exceed a daily
average of eight seconds. For measurements required in this Section,
the Company may assume standard T1 connectivity to the Internet.
3. Without limiting the effect of Sections 1 and 2 above, the Company
shall provide to Users coming to the Company Sites or the Co-Branded
Site from the Promotions at least the same level of service as is
offered to Users coming directly to the Company Sites.
4. The Company Sites and Co-Branded Site will offer job searching
products, listings and services as well as links to various resources
and shall not: (i) contain defamatory or libelous material or material
which discloses private or personal matters concerning any person,
without such person's consent; (ii) permit to appear or be uploaded
any messages, data, images or programs which are illegal, contain
nudity or sexually explicit content or are, by law, obscene, profane
or pornographic; or (iii) permit to appear or be uploaded any
messages, data, images or programs that would knowingly or
intentionally (which includes imputed intent) violate the property
rights of others, including unauthorized copyrighted text, images or
programs, trade secrets or other confidential proprietary information,
or trademarks or service marks used in an infringing fashion.
5. If any of the performance standards set forth above are not met by the
Company, NBCi may immediately remove any or all links to the Company
Sites or Co-Branded Site, as applicable, at NBCi's sole discretion. If
the Company Sites or the Co-Branded Site fail to operate fully and
functionally in any material respect for any period of four or more
consecutive hours, even if otherwise in compliance with the
performance standards, NBCi may immediately remove any or all links to
the Company Sites or Co-Branded Site, as applicable, at NBCi's sole
discretion until such time as the Company notifies NBCi that such
Company Sites or Co-Branded Site has resumed acceptable operation.
These remedies are for NBCi's editorial purposes and in no way limit
NBCi's ability to terminate this contract or pursue any other remedies
hereunder in the event the performance standards set forth herein are
not met.
25
<PAGE> 26
Exhibit C
List of NBCi Competitors
1. @Home/Excite
2. 4anything.com
3. ABC
4. About.com
5. Altavista/Compaq
6. Amazon.com
7. AOL.com/AOL/Mirabilis-ICQ/
8. AskJeeves
9. Broadcast.com
10. CBS
11. CMGI/AltaVista
12. CMGI/Lycos
13. Compuserve
14. Direct Hit
15. Disney/Infoseek/GoNetwork
16. Euroseek
17. Fox
18. GeoCities
19. Go2net Inc.
20. GOD (Global Online Directory)
21. Google, Inc.
22. GoTo.com
23. HotBot
24. Hotmail
25. InfoSpace.com
26. Looksmart
27. Magellan
28. MSN/Microsoft
29. Mining Company
30. Netscape
31. Northern Lights
32. RoadRunner/MediaOne
33. Search.com
34. TalkCity
35. TheGlobe.com
36. Time Warner/Pathfinder
37. Tripod
38. USA Networks/Ticketmaster Online/CitySearch
39. WebCrawler
40. Yahoo
26
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion of our
reports dated January 26, 2000 included in HeadHunter.NET, Inc.'s Annual Report
on Form 10-K for the year ending December 31, 1999 as well as the incorporation
by reference of such reports into the Company's previously filed Registration
Statements File No. 333-86485, and 333-94027.
/s/ Arthur Andersen LLP
Atlanta, Georgia
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HEADHUNTER.NET FOR THE TWELVE MONTHS ENDED DECEMBER 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 16,938,708
<SECURITIES> 4,125,084
<RECEIVABLES> 2,056,288
<ALLOWANCES> 209,475
<INVENTORY> 0
<CURRENT-ASSETS> 23,472,023
<PP&E> 2,156,561
<DEPRECIATION> 406,850
<TOTAL-ASSETS> 26,979,744
<CURRENT-LIABILITIES> 2,235,820
<BONDS> 0
0
0
<COMMON> 108,028
<OTHER-SE> 24,635,896
<TOTAL-LIABILITY-AND-EQUITY> 26,979,744
<SALES> 9,253,954
<TOTAL-REVENUES> 9,253,954
<CGS> 147,275
<TOTAL-COSTS> 19,741,913
<OTHER-EXPENSES> 379,198
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,256,036
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,256,036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,256,036
<EPS-BASIC> (1.90)
<EPS-DILUTED> (1.90)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
Risk Factors
WE ARE AN EARLY-STAGE COMPANY, AND 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
you can base an evaluation of our business and prospects. You 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 industry-focused 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, WE ANTICIPATE FUTURE LOSSES AND WE MAY NEVER
ACHIEVE PROFITABILITY.
We have a history of losses and may never be profitable. We incurred net
losses of $35,000, $176,000, $4.3 million and $10.3 million for the ten months
ended October 31, 1997, two months ended December 31, 1997, year ended December
31, 1998 and year ended December 31, 1999, respectively. As of December 31,
1999, we had an accumulated deficit of approximately $36.5 million. We expect
operating losses and negative cash flow to 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:
- increased marketing and advertising to strengthen brand awareness;
- rapid expansion of our sales and other personnel;
- continued development of our web site and service offerings; and
- development of strategic relationships with industry-focused Internet
sites.
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; and
- the number of job opportunities 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
<PAGE> 2
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 HAS
DECREASED AND MAY FURTHER 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 job opportunities on
our web site free of charge. Since June 1, 1999, they must pay a fee for each
job opportunity they post on our web site. In the event the number of job
opportunities in our database 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 upgrade fees that they
are willing to pay. These decreases 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 our 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;
- 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 THE HEADHUNTER.NET BRAND, AND
IF WE FAIL TO FURTHER DEVELOP OUR 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 the HeadHunter.NET 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
<PAGE> 3
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 substantially increase our marketing budget. If we fail to
successfully promote 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 market for online recruiting 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, 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 SERVICES 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 we are
not the beneficiaries 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 REVENUE TO FLUCTUATE.
We derive a substantial majority of our revenues from employers and
recruiters that pay to post job opportunities on our web site and purchase
upgrades to their listings or other service offerings. Generally, these
employers and recruiters post their job opportunities on a monthly basis. They
have no obligation to purchase any upgrades or other service offerings, or to
post any job opportunities for more than a month at a time. As a result, an
employer or recruiter that generates substantial revenue for us in one 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
<PAGE> 4
management, financial, technical and other resources. These demands are likely
to continue and 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 our 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.
WE DEPEND ON THIRD PARTIES TO FACILITATE ACCESS TO OUR WEB SITE, AND 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 and upgrade their job opportunities. The amounts
they are willing to pay to post and upgrade their job opportunities 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 buying fewer upgrades and other
enhanced 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 the acquired company into ours;
- diversion of our management's attention from other business concerns;
- inability to retain and motivate key personnel of the acquired
business;
- entry into markets in which we have little or no direct prior
experience; and
- inability to retain clients or goodwill of the acquired business.
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.
<PAGE> 5
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, patent 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, it 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 also be time-consuming and expensive to
defend, even if we ultimately are not found liable. In addition, these claims
could divert our management's time and attention.
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.
WE FACE RISKS RELATED TO YEAR 2000 FAILURES, WHICH COULD INCREASE OUR
LIABILITIES OR EXPENSES.
The risks posed by year 2000 issues could adversely affect our business in
a number of significant ways. Our internally developed proprietary software and
our critical information technology systems, which are substantially comprised
of third party software and hardware, could fail due to year 2000 issues. In
addition, we rely on the systems of third party vendors to host our servers and
provide us with connections to the Internet, which systems may be subject to
year 2000 failures. As a result of the failure of any of our critical internal
systems or the systems of our third party vendors, we could lose users, incur
significant disruption in our business or our ability to generate revenues, or
incur substantial liabilities or expenses. In addition, the Internet could face
serious disruptions arising from year 2000 issues, which generally may have an
adverse impact on traffic and commerce on the Internet.
We cannot assure you that:
- our critical information technology and non-information technology
systems, or the systems of third party vendors on which we rely, will
not experience year 2000 problems;
- users will be able to access our web site without serious disruptions
arising from year 2000 issues;
- disruptions with other Internet sites and our strategic partners will
not adversely affect our business;
<PAGE> 6
- our costs and liabilities related to year 2000 issues will be
insignificant; or
- we will not become a party to litigation related to the year 2000
issue.
OUR RELATIONSHIP WITH ITC MAY PRESENT POTENTIAL CONFLICTS OF INTEREST, WHICH
MAY RESULT IN DECISIONS WHICH FAVOR ITC OVER OUR OTHER SHAREHOLDERS.
Our controlling shareholder, ITC Holding Company, Inc., is the parent of,
or a significant investor in, a group of companies involved in a wide range of
activities, including broadband cable services, telecommunications services,
conference calling and videoconferencing, and Internet access and content
services. Our Chairman and most of our other directors (Messrs. Scott,
Montgomery, Cox, Misikoff and Weber and Ms. Thompson) are directors, officers
or stockholders of ITC. In addition, Robert Montgomery, our Chief Executive
Officer and President, previously served as Chief Executive Officer of another
subsidiary of ITC. When the interests of ITC and its affiliates diverge from
our interests, ITC and its affiliates may exercise their influence in their own
best interests. Some decisions concerning our operations or finances may
present conflicts of interest between us and ITC or its affiliates. There is no
mechanism in place to resolve these conflicts of interest, except that it is
our policy that transactions with affiliated parties be approved by a majority,
but not fewer than two, of our disinterested directors. Nevertheless, due to
the extensive relationships between ITC and us, we may make decisions that
potentially favor ITC or its affiliates at our expense. Furthermore, Georgia
law may prohibit you from successfully challenging these decisions, if the
decision received the affirmative vote of a majority, but not less than two, of
our "qualified directors," or disinterested directors, who received full
disclosure of the existence and nature of the conflict.
OUR ARTICLES OF INCORPORATION AND BYLAWS AND GEORGIA LAW CONTAIN PROVISIONS
THAT COULD DISCOURAGE A TAKEOVER OF OUR COMPANY.
Our articles of incorporation and bylaws 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 HeadHunter.NET. See "Description of Capital Stock."
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.
<PAGE> 7
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
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. For example, we believe that more than 200 pieces of
legislation relating to privacy issues and the Internet have been, or will be,
introduced during 1999 by various legislative bodies. Moreover, the
applicability to the Internet of existing laws governing 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 our 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.
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 add
sufficient security features to our web site, our services may not gain market
acceptance or there may be additional legal exposure to us. 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.
<PAGE> 8
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.
A RECESSION COULD ADVERSELY IMPACT OUR BUSINESS.
Online recruiting is a relatively new industry and we do not know how
sensitive it is 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 the net proceeds of
the initial public offering, together with 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 currently do not have any commitments for additional financing. 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. If
adequate funds are not available on acceptable terms, we may not be able to
fund our expansion, increase brand development and market awareness, develop or
enhance our service offerings, respond to competitive pressures or establish
strategic relationships.
<PAGE> 9
OUR COMMON STOCK PRICE MAY BE VOLATILE, WHICH COULD RESULT IN SUBSTANTIAL
LOSSES FOR INDIVIDUAL SHAREHOLDERS.
Prior to this offering, you could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after the offering. We negotiated and determined the initial public
offering price with the underwriters based on several factors. This price may
vary from the market price of the common stock after this offering. The market
price of the common stock may fluctuate significantly in response to the
following factors, some of which are beyond our control:
- variations in quarterly operating results;
- changes in financial estimates by securities analysts;
- our announcements of significant contracts, milestones, acquisitions,
strategic relationships or capital commitments;
- additions or departures of key personnel;
- sales of common stock or termination of stock transfer restrictions;
and
- fluctuations in stock market price and volume, which are particularly
common among securities of Internet companies.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation often has been
instituted against that company. Such litigation is expensive and diverts
management's attention and resources.
