<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 10, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
HOTJOBS.COM, LTD.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 7361 13-3931821
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------
24 WEST 40TH STREET, 14(TH) FLOOR
NEW YORK, NEW YORK 10018
(212) 302-0060
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
------------------------------
MR. RICHARD S. JOHNSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HOTJOBS.COM, LTD.
24 WEST 40TH STREET, 14(TH) FLOOR
NEW YORK, NEW YORK 10018
(212) 302-0060
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------------
Copies to:
<TABLE>
<S> <C>
ALEXANDER D. LYNCH, ESQ. ANDREW M. TUCKER, ESQ.
BROBECK, PHLEGER & HARRISON LLP SHAW PITTMAN
1633 BROADWAY, 47TH FLOOR 1676 INTERNATIONAL DRIVE
NEW YORK, NY 10019 MCLEAN, VA 22102
(212) 581-1600 (703) 790-7900
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / _____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _____________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $.01 per share.......................... $69,000,000 $19,182
</TABLE>
(1) Includes shares that the Underwriters have the option to purchase from the
Company solely to cover over-allotments, if any. Estimated pursuant to Rule
457(o) under the Securities Act of 1933, as amended, solely for the purpose
of computing the amount of the registration fee.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION
JUNE 10, 1999
Shares
[HotJobs.com LOGO]
Common Stock
---------------
This is an initial public offering of shares of common stock of
HotJobs.com, Ltd. We anticipate that the initial public offering price will be
between $ and $ per share.
We intend to apply to have our common stock approved for listing on the Nasdaq
National Market under the symbol "HOTJ."
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
------------------------
<TABLE>
<CAPTION>
PER
SHARE TOTAL
---------------- ----------------
<S> <C> <C>
Public offering price......................................................... $ $
Underwriting discounts........................................................ $ $
Proceeds to HotJobs.com....................................................... $ $
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
HotJobs.com has granted the underwriters a 30-day option to purchase up to an
additional shares of common stock at the initial public offering price to
cover over-allotments.
We expect to issue the shares on , 1999.
------------------------
Deutsche Banc Alex. Brown
BancBoston Robertson Stephens
SG Cowen
, 1999
<PAGE>
[DESCRIPTION OF PICTURES TO COME]
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS. THIS SUMMARY IS NOT COMPLETE AND DOES NOT CONTAIN ALL OF THE
INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING IN OUR COMMON STOCK. YOU
SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE RISKS OF PURCHASING
OUR COMMON STOCK DISCUSSED UNDER "RISK FACTORS." REFERENCES IN THIS PROSPECTUS
TO "WE," "OUR" AND "US" REFER TO HOTJOBS.COM, LTD.
HOTJOBS.COM, LTD.
OUR BUSINESS
We are a leading Internet-based recruiting solutions company. Our suite of
services leverages the Internet to provide a direct exchange of information
between job seekers and employers. We developed these services based on our
experience in the recruiting industry and our in-depth understanding of the
needs of job seekers and employers. By solving many of the problems associated
with traditional recruiting methods, we allow employers to more effectively
manage their recruiting processes to save time and money. More than 2,500
recruiters from over 1,500 member employers subscribe to our online employment
exchange, WWW.HOTJOBS.COM. We have added over 175 new memberships per month
since February 1999. Our member employers include: Amazon.com, Inc., America
Online, Inc., eBay Inc., The Home Depot, Inc., International Business Machines
Corporation, Merck & Co., Inc., Microsoft Corporation, Nike, Inc. and The Walt
Disney Company.
The majority of our revenues are recurring and are primarily derived from
employer memberships to our online employment exchange, WWW.HOTJOBS.COM. Our
employment exchange allows member employers to access our database of over
350,000 job seekers and provides member employers with the tools to post, track
and manage job openings in a real-time environment. We allow job seekers to
identify, research, apply to and evaluate job opportunities, while enabling them
to prevent unwanted access to their resumes. Headhunters are prohibited from
using our employment exchange, ensuring direct contact between job seekers and
member employers.
We also provide employers with additional recruiting solutions such as our
proprietary Softshoe recruiting software, our WorkWorld job fairs and online
advertising and consulting services. Softshoe is a private label job board and
applicant tracking system that enables companies to define, manage and analyze
their recruiting practices and share relevant recruiting information across
their organizations. Our Softshoe customers include: Coors Brewing Company,
DoubleClick, Inc., Ford Motor Company, Humana Inc., Lucent Technologies, Inc.
and Tricon Global Restaurants Inc. Our WorkWorld job fairs integrate with
WWW.HOTJOBS.COM, enabling job seekers and employers to interact online in
addition to providing direct physical interaction at the job fair.
Revenues from our services have grown rapidly, primarily driven by increased
employer memberships to our WWW.HOTJOBS.COM employment exchange. Our revenues
increased from approximately $749,000 for the period ended December 31, 1997, to
approximately $4.2 million for the fiscal year ended December 31, 1998. Our
revenues for the three months ended March 31, 1999 were approximately $2.7
million.
OUR MARKET OPPORTUNITY
According to industry sources, businesses in the U.S. spent in excess of $13
billion in 1997 to hire new employees by advertising job openings in newspapers
and by hiring headhunters. We believe that factors such as the increasing labor
shortage and employee turnover are forcing employers to increase spending for
recruiting efforts in order to maintain and grow their workforce. Prior to the
advent of the Internet, companies relied on traditional recruiting methods
including
1
<PAGE>
newspaper advertisements and headhunters. The emergence of the Internet has
created an opportunity to connect job seekers and employers more efficiently and
cost effectively when compared to traditional recruiting methods. We believe
that most of the advantages offered by Internet technology have not been fully
applied to the recruiting market. We believe that an opportunity exists for
HotJobs.com to become the leader in online recruiting solutions.
OUR SOLUTION
We believe that traditional recruiting methods are expensive and relatively
slow, and that our solution is more comprehensive and efficient than other
online recruiting services. Our solution:
- offers job seekers, free of charge, detailed and current information on a
large and growing list of employers and job openings and value-added tools
to help job seekers plan, execute, monitor and control their job searches;
- ensures privacy by allowing job seekers to restrict employers from
reviewing their resumes;
- excludes headhunters to ensure a direct exchange of information between
job seekers and employers;
- combines our WWW.HOTJOBS.COM employment exchange, Softshoe recruiting
software and WorkWorld job fairs to enable employers to reach job seekers
through multiple channels; and
- offers employers workflow management tools to streamline the recruiting
process.
OUR STRATEGY
Our objective is to become the leading provider of online recruiting
services worldwide. Key elements of our strategy include:
- build global brand awareness;
- accelerate new subscriber growth;
- continue to enhance site functionality and features;
- expand our relationship with employers;
- provide additional career channels in specific fields;
- expand international operations; and
- pursue strategic acquisitions.
CORPORATE INFORMATION
We were incorporated in Delaware on February 20, 1997 as Hot Jobs, Inc. We
changed our name to HotJobs.com, Ltd. on September 23, 1998. Our principal
executive offices are located at 24 West 40th Street, 14th Floor, New York, New
York 10018. Our telephone number at that location is (212) 302-0060 and our
website address is WWW.HOTJOBS.COM. INFORMATION CONTAINED ON OUR WEBSITE DOES
NOT CONSTITUTE PART OF THIS PROSPECTUS.
2
<PAGE>
THE OFFERING
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<S> <C>
Common stock offered by us.......... shares
Common stock to be outstanding after
the offering...................... shares
Use of proceeds..................... For general corporate purposes, including increasing
our sales and marketing efforts; developing our
infrastructure, products and services; hiring
additional personnel; and possible acquisitions. See
"Use of Proceeds."
Proposed Nasdaq National Market
symbol............................ HOTJ
</TABLE>
The foregoing information is based on the shares outstanding as of June ,
1999. The total number of shares that we assume will be outstanding after the
offering:
- includes shares of common stock to be issued upon conversion of our
Series A Preferred Stock at a conversion price of $ per share;
- excludes shares reserved for future grants under our stock
option/stock issuance plan;
- excludes shares reserved for future issuances under our employee
stock purchase plan; and
- excludes shares of common stock issuable at a weighted average
exercise price of $ per share upon exercise of stock options
outstanding at June , 1999, of which are exercisable upon
completion of this offering.
See "Capitalization" for information with respect to our capitalization as
of March 31, 1999, our pro forma financial information and our pro forma
financial information as adjusted to reflect our capitalization after this
offering.
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS: (1) REFLECTS
THE COMPLETION OF A 2,000-FOR-ONE STOCK SPLIT ON APRIL 9, 1999; (2) REFLECTS THE
AUTOMATIC CONVERSION OF ALL OUTSTANDING SHARES OF OUR SERIES A PREFERRED STOCK
INTO SHARES OF OUR COMMON STOCK UPON THE CLOSING OF THIS OFFERING;
(3) ASSUMES THE COMPLETION OF A FOR-ONE STOCK SPLIT IN CONNECTION WITH
THIS OFFERING; AND (4) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT
OPTION.
Softshoe-Registered Trademark- is a registered trademark of HotJobs.com,
Ltd. Each trademark, trade name or service mark of any other company appearing
in this prospectus belongs to its holder.
3
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table sets forth certain summary financial data for
HotJobs.com. You should read this information together with the financial
statements and the notes to those statements appearing elsewhere in this
prospectus and the information under "Selected Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 20, THREE MONTHS ENDED
1997 (INCEPTION)
TO YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, --------------------
1997 1998 1998 1999
----------------- -------------- --------- ---------
<S> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Revenues:
Service fees............................................ $ 361 $ 3,038 $ 347 $ 2,018
Software license fees................................... 375 563 125 80
Job fair fees........................................... -- -- -- 216
Other................................................... 13 550 80 337
------- ------- --------- ---------
Total revenues...................................... 749 4,151 552 2,651
Cost of revenues......................................... 12 506 78 589
------- ------- --------- ---------
Gross profit........................................ 737 3,645 474 2,062
Operating expenses:
Product development..................................... 174 474 90 156
Sales and marketing..................................... 431 3,085 524 3,229
General and administrative.............................. 726 1,642 274 823
------- ------- --------- ---------
Total operating expenses............................ 1,331 5,201 888 4,208
------- ------- --------- ---------
Loss from operations.............................. (594) (1,556) (414) (2,146)
Net interest expense..................................... -- 63 7 68
------- ------- --------- ---------
Net loss.......................................... $ (594) $ (1,619) $ (421) $ (2,214)
------- ------- --------- ---------
------- ------- --------- ---------
Basic and diluted net loss per common share.............. $ $ $ $
------- ------- --------- ---------
------- ------- --------- ---------
Weighted average shares outstanding used in basic and
diluted net loss per common share calculation...........
------- ------- --------- ---------
------- ------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1999
------------------------------------
PRO FORMA
PRO AS
ACTUAL FORMA(1) ADJUSTED(2)
--------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 258 $ 16,458
Working capital (deficit)............................. (5,091) 11,109
Total assets.......................................... 4,125 20,325
Obligations under capital leases, excluding current
installments........................................ 317 317
Total stockholders' equity (deficit).................. (4,107) (4,107)
</TABLE>
- ------------------------
(1) Pro forma information gives effect to our issuance of 1,620,000 shares of
Series A Preferred Stock effective May 10, 1999, for cash proceeds of $16.2
million.
(2) Pro forma as adjusted information gives effect to the automatic conversion
of all of the outstanding Series A Preferred Stock into shares of
common stock upon consummation of this offering and our sale of shares
to be sold in this offering assuming an initial public offering price of
$ per share, less the underwriters' discounts and commissions and
estimated expenses of the offering.
4
<PAGE>
RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD
CONSIDER CAREFULLY THE FOLLOWING INFORMATION ABOUT THESE RISKS, TOGETHER WITH
THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, BEFORE YOU DECIDE TO BUY OUR
COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER. IN THIS CASE,
THE MARKET PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART
OF THE MONEY YOU PAID TO BUY OUR COMMON STOCK.
RISKS RELATED TO OUR FINANCIAL CONDITION AND BUSINESS MODEL
OUR LIMITED OPERATING HISTORY MAKES OUR BUSINESS DIFFICULT TO EVALUATE.
We were incorporated and began generating revenues in February 1997.
Accordingly, we have only a limited operating history for you to evaluate our
business. As a new company, we face risks and uncertainties relating to our
ability to successfully implement our business plan. You must consider the
risks, expenses and uncertainties that an early stage company like ours faces.
These risks include our ability to:
- increase awareness of HotJobs.com;
- attract additional job seekers;
- attract and retain additional employers;
- increase the functionality of our products and services;
- maintain our current, and develop new, strategic relationships;
- respond effectively to competitive pressures; and
- continue to develop and upgrade our technology.
If we are unsuccessful in addressing these risks and uncertainties, our
business could be materially adversely affected.
WE HAVE NOT BEEN PROFITABLE, AND WE EXPECT OUR LOSSES TO CONTINUE.
We have never been profitable. For the year ended December 31, 1998, we
incurred net losses from operations of approximately $1.6 million. For the
quarter ended March 31, 1999, we incurred net losses from operations of
approximately $2.2 million. As of March 31, 1999, we had an accumulated deficit
of approximately $4.4 million. We expect to continue to lose money in the
foreseeable future because we anticipate incurring significant expenses in
connection with building awareness of HotJobs.com and improving our products and
services. We forecast our future expense levels based on our operating plans and
our estimates of future revenues. We may find it necessary to accelerate
expenditures relating to our sales and marketing efforts or otherwise increase
our financial commitment to creating and maintaining brand awareness among
potential job seekers and employers. If our revenues grow at a slower rate than
we anticipate, or if our spending levels exceed our expectations or cannot be
adjusted to reflect slower revenue growth, we may not generate sufficient
revenues to achieve or sustain profitability. In this case, the value of your
investment could be reduced.
5
<PAGE>
YOU SHOULD NOT RELY ON OUR QUARTERLY OPERATING RESULTS AS AN INDICATION OF OUR
FUTURE RESULTS BECAUSE THEY ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS.
FLUCTUATIONS IN OUR OPERATING RESULTS MAY NEGATIVELY IMPACT OUR STOCK PRICE.
Our quarterly operating results may fluctuate significantly in the future
due to a variety of factors that could affect our revenues or our expenses in
any particular quarter. You should not rely on quarter-to-quarter comparisons of
our results of operations as an indication of future performance. Factors that
may affect our quarterly results include:
- mismatches between resource allocation and consumer demand due to
difficulties in predicting consumer demand in a new market;
- the demand for and acceptance of our website, products, product
enhancements and services;
- the timing, amount and mix of subscription, license and service payments;
- changes in general economic conditions that could affect recruiting
efforts generally and online recruiting efforts in particular;
- the magnitude and timing of marketing initiatives;
- the maintenance and development of our strategic relationships;
- the introduction, development, timing, competitive pricing and market
acceptance of our products and services and those of our competitors;
- the attraction and retention of key personnel;
- our ability to manage our anticipated growth and expansion;
- our ability to attract qualified job seekers; and
- technical difficulties or system downtime affecting the Internet generally
or the operation of our products and services specifically.
As a result of the factors listed above and because the online recruiting
market is new and it is difficult to predict customer demand, it is possible
that in some future periods our results of operations may be below the
expectations of public market analysts and investors. This could cause our stock
price to decline. In addition, we plan to significantly increase our operating
expenses to expand our sales and marketing, administration, consulting and
training, maintenance and technical support and research and development groups.
If revenues fall below our expectations in any quarter and we are unable to
quickly reduce our spending in response, our operating results would be lower
than expected and our stock price may fall.
OUR BUSINESS MODEL IS UNPROVEN AND MAY NOT BE ADAPTABLE TO A CHANGING MARKET.
Our current revenue model depends on recurring revenue from employers using
our website and leased application software. Our revenue model and profit
potential are unproven. If current employers decide to discontinue our service
and we are unable to replace them with new employers, our business may be
adversely affected. To be successful, we must develop and market online
recruiting services that achieve broad market acceptance by employers and job
seekers. In addition, we must attract sufficient job seekers with attractive
demographic characteristics to employers. It is possible that we will be
required to further adapt our business model in response to additional changes
in the online recruiting market or if our current business model is not
successful. If we are not able to anticipate changes in the online recruiting
market or if our business model is not successful, our business could be
materially adversely affected which could reduce the value of your investment.
6
<PAGE>
WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT FUNDS TO GROW OUR BUSINESS AND ANY
ADDITIONAL FINANCING MAY BE ON TERMS ADVERSE TO YOUR INTERESTS.
We intend to continue to grow our business. We currently anticipate that the
net proceeds from this offering, together with available funds, will be
sufficient to meet our anticipated needs for at least the next 12 months.
Because we expect to generate losses for the foreseeable future, income from our
operations may not be sufficient to meet our needs after that period. We expect
to raise additional funds in the future in order to fund our anticipated growth,
more aggressive marketing programs or the acquisition of complementary
businesses, technologies and services. Obtaining additional financing will be
subject to a number of factors, including:
- market and economic conditions;
- our financial condition and operating performance; and
- investor sentiment.
These factors may make the timing, amount, terms and conditions of
additional financing unattractive for us. If additional financing is not
available when required or is not available on acceptable terms, we may be
unable to fund our expansion, successfully promote our brand name, develop or
enhance our products and services, take advantage of business opportunities or
respond to competitive pressures, any of which could have a material adverse
effect on our business and the value of your investment.
If we are able to raise additional funds and we do so by issuing equity
securities, you may experience significant dilution of your ownership interest
and holders of these securities may have rights senior to those of the holders
of our common stock. If we obtain additional financing by issuing debt
securities, the terms of these securities could restrict or prevent us from
paying dividends and could limit our flexibility in making business decisions.
OUR BUSINESS MAY BE SENSITIVE TO RECESSIONS.
The demand for recruiting and job seeking services may be linked to the
level of economic activity and employment in the U.S. and abroad. A recession
could cause employers to reduce or postpone their recruiting efforts generally,
and their online recruiting efforts in particular. If a significant economic
downturn or recession occurs in the U.S. or abroad, our business and the value
of your investment could be materially adversely affected.
RISKS RELATED TO OUR MARKETS AND STRATEGY
THE INTERNET IS NOT A PROVEN RECRUITING MEDIUM.
The future of our business is dependent on the acceptance by job seekers and
employers of the Internet as an effective job seeking and recruiting tool. The
online recruiting market is new and rapidly evolving, and we do not yet know how
effective online recruiting is compared to traditional recruiting methods. The
adoption of online recruiting and job seeking, particularly among those that
have historically relied upon traditional recruiting methods, requires the
acceptance of a new way of conducting business, exchanging information,
advertising and applying for jobs. Many of our potential employer customers have
little or no experience using the Internet as a recruiting tool, and only select
segments of the job seeking population have experience using the Internet to
look for jobs. As a result, we cannot be sure that we will be able to
effectively compete with traditional recruiting and job seeking methods. If we
are unable to compete with traditional recruiting and job seeking methods, our
business and results of operations and the value of your investment could be
materially adversely affected.
7
<PAGE>
WE WILL ONLY BE ABLE TO EXECUTE OUR BUSINESS MODEL IF USE OF THE INTERNET GROWS.
If Internet usage does not continue to grow, our business could be adversely
affected. Internet usage may be inhibited by any of the following factors:
- the Internet infrastructure may not be able to support the demands placed
on it, or its performance and reliability may decline as usage grows;
- websites may not be able to provide adequate security and authentication
of confidential information contained in transmissions over the Internet;
and
- the Internet industry may not be able to adequately respond to privacy
concerns of potential users.
If Internet usage does not continue to grow, we may not be able to meet our
business objectives, which could decrease the value of your investment.
WE MAY NOT BE ABLE TO DEVELOP AWARENESS OF OUR BRAND NAME.
We believe that continuing to build awareness of our HotJobs.com brand name
is critical to achieving widespread acceptance of our business. Brand
recognition is a key differentiating factor among providers of online recruiting
services, and we believe it could become more important as competition in the
online recruiting market increases. In order to maintain and build brand
awareness, we must succeed in our marketing efforts, provide high quality
services and increase the number of high quality job seekers using
WWW.HOTJOBS.COM. If we fail to successfully promote and maintain our brand,
incur significant expenses in promoting our brand and fail to generate a
corresponding increase in revenue as a result of our branding efforts, or
encounter legal obstacles which prevent our continued use of our brand name, our
business and the value of your investment could be materially adversely
affected.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTRODUCE NEW PRODUCTS AND SERVICES.
We expect to introduce new and enhanced products and services, and in
particular, web-based products and services in order to generate additional
revenues, attract and retain more employers, attract more job seekers to our
website and respond to competition. Any new product or service we introduce that
is not favorably received could damage our reputation and the perception of our
brand name. The failure of our new products and services to achieve market
acceptance and generate revenue could result in a material adverse effect on our
business and the value of your investment.
WE WILL NOT BE ABLE TO ATTRACT JOB SEEKERS OR EMPLOYERS IF WE DO NOT
CONTINUALLY ENHANCE AND DEVELOP THE CONTENT AND FEATURES OF OUR PRODUCTS AND
SERVICES. To remain competitive, we must continually improve the
responsiveness, functionality and features of our products and services and
develop other products and services that are attractive to job seekers and
employers. We may not succeed in developing or introducing features, functions,
products or services that job seekers and employers find attractive. This could
reduce the number of job seekers and employers using WWW.HOTJOBS.COM and
materially adversely affect our business and the value of your investment.
WE MAY LOSE BUSINESS IF WE FAIL TO KEEP PACE WITH RAPIDLY CHANGING
TECHNOLOGIES AND CUSTOMER NEEDS. Our success is dependent on our ability to
develop new and enhanced software, services and related products to meet rapidly
evolving technological requirements for online recruiting software and
solutions. Our current technology may not meet the future technical requirements
of employers. Trends that could have a critical impact on our success include:
- rapidly changing technology in online recruiting;
8
<PAGE>
- evolving industry standards, including both formal and DE FACTO standards
relating to online recruiting;
- developments and changes relating to the Internet;
- competing products and services that offer increased functionality; and
- changes in employer and job seeker requirements.
If we are unable to timely and successfully develop and introduce new
products and enhancements to existing products in response to our industry's
changing technological requirements, our business and the value of your
investment could be materially adversely affected.
OUR BUSINESS AND GROWTH WILL SUFFER IF WE ARE UNABLE TO HIRE AND RETAIN HIGHLY
SKILLED PERSONNEL.
Our future success depends on our ability to attract, train, motivate and
retain highly skilled employees. Competition for highly skilled employees is
intense, particularly in the Internet industry. We may be unable to retain our
skilled employees or attract, assimilate and retain other highly skilled
employees in the future. We have from time to time in the past experienced, and
we expect to continue to experience in the future, difficulty in hiring and
retaining highly skilled employees with appropriate qualifications. If we are
unable to hire and retain skilled personnel, our growth may be restricted, the
quality of our products and services reduced and the value of your investment
reduced.
WE MAY NOT BE ABLE TO EFFECTIVELY MANAGE OUR EXPANDING OPERATIONS.
We have recently experienced a period of rapid growth. In order to execute
our business plan, we must continue to grow significantly. We had 15 employees
in January 1998. As of May 31, 1999, that number had increased to 89. We expect
that the number of our employees will continue to increase for the foreseeable
future. This growth has placed, and our anticipated future growth combined with
the requirements we will face as a public company will continue to place, a
significant strain on our management, systems and resources. We expect that we
will need to continue to improve our financial and managerial controls and
reporting systems and procedures. We will also need to continue to expand and
maintain close coordination among our technical, accounting, finance and sales
and marketing organizations. We may not succeed in these efforts. Our inability
to expand our operations in an efficient manner could cause our expenses to grow
disproportionately to revenues, our revenues to decline or grow more slowly than
expected and otherwise have a material adverse effect on our business and the
value of your investment.
INTENSE COMPETITION MAY RENDER OUR SERVICES AND PRODUCTS UNCOMPETITIVE OR
OBSOLETE.
The market for online recruiting solutions is intensely competitive and
highly fragmented. We compete with companies, including recruiting search firms,
that offer a single database job board solution, such as Monster.com, as well as
newspapers, magazines and other traditional media companies that provide online
job search services, such as CareerPath.com. We also compete with large Internet
information hubs, or portals, such as Excite@Home. We may experience competition
from potential customers to the extent that they develop their own online
recruiting offerings internally. In addition, we compete with traditional
recruiting services, such as headhunters, for a share of employers' total
recruiting budgets. We expect to face additional competition as other
established and emerging companies, including print media companies and
headhunters with established brands, enter the online recruiting market.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources and larger customer bases than we do. In
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addition, current and potential competitors may make strategic acquisitions or
establish cooperative relationships to expand their businesses or to offer more
comprehensive solutions.
We believe that there will be rapid business consolidation in the online
recruiting industry. Accordingly, new competitors may emerge and rapidly acquire
significant market share. In addition, new technologies will likely increase the
competitive pressures that we face. The development of competing technologies by
market participants or the emergence of new industry standards may adversely
affect our competitive position. Competition could result in reduced margins on
our products and services, loss of market share or less use of WWW.HOTJOBS.COM
by job seekers and employers. If we are not able to compete effectively with
current or future competitors as a result of these and other factors, our
business could be materially adversely affected.
LOSS OF ANY OF OUR KEY MANAGEMENT PERSONNEL COULD NEGATIVELY IMPACT OUR
BUSINESS.
Our future success depends to a significant extent on the continued service
and coordination of our management team, particularly Richard S. Johnson, our
President and Chief Executive Officer. The loss or departure of any of our
officers or key employees could materially adversely affect our ability to
implement our business plan. We do not maintain key person insurance for any
member of our management team. In addition, certain members of our management
team have joined us within the last year. These individuals have not previously
worked together and are becoming integrated into our management team. If our key
management personnel are not able to work together effectively or successfully,
our business could be materially adversely affected.
WE MAY NOT BE SUCCESSFUL IN OUR PLAN FOR INTERNATIONAL EXPANSION.
Our strategy includes expansion into international markets through a
combination of internal business expansion, strategic alliances and potential
acquisitions. Our future international operations might not succeed for a number
of reasons including:
- difficulties in staffing and managing foreign operations;
- competition from local recruiting services;
- operational issues such as longer customer payment cycles and greater
difficulties in collecting accounts receivable;
- seasonal reductions in business activity;
- language and cultural differences;
- legal uncertainties inherent in transnational operations such as export
and import regulations, tariffs and other trade barriers;
- taxation issues;
- unexpected changes in trading policies, regulatory requirements and
exchange rates;
- issues relating to uncertainties of laws and enforcement relating to the
protection of intellectual property; and
- general political and economic trends.
Accordingly, we may not be able to successfully execute our business plan in
foreign markets. If revenue from international ventures is not adequate to cover
our investment in those ventures, our business and the value of your investment
could be materially adversely affected.
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WE MAY NOT BE ABLE TO SUCCESSFULLY MAKE ACQUISITIONS OF OR INVESTMENTS IN OTHER
COMPANIES.
Though we have no present understanding or agreement relating to any
acquisition of or investment in another company or its business, our business
strategy includes the pursuit of acquisitions. In executing this strategy, we
may be unable to identify suitable acquisition candidates. If we make an
acquisition of a company, we could have difficulty assimilating the acquired
company's operations and personnel. If we make other types of acquisitions, we
could have difficulty in assimilating any acquired products, services, personnel
and technologies into our operations. These difficulties could disrupt our
ongoing business, distract our management and employees, increase our expenses
and charges and materially adversely affect our business.
RISKS RELATED TO THE INTERNET AND OUR TECHNOLOGY INFRASTRUCTURE
WE MAY EXPERIENCE REDUCED VISITOR TRAFFIC, REDUCED REVENUE AND HARM TO OUR
REPUTATION IN THE EVENT OF UNEXPECTED NETWORK INTERRUPTIONS CAUSED BY SYSTEM
FAILURES.
Our servers and software must be able to accommodate a high volume of
traffic. We have experienced system interruptions in the past, and we believe
that these interruptions will continue to occur from time to time in the future.
Any substantial increase in demands on our servers will require us to expand and
adapt our network infrastructure. If we are unable to add additional software
and hardware to accommodate increased demand, we could experience unanticipated
system disruptions and slower response times. Any catastrophic failure at our
co-location facility could prevent us from serving our web traffic for up to
several days, and any failure of our Internet service provider may adversely
affect our network's performance. Our clients may become dissatisfied by any
system failure that interrupts our ability to provide our products and services
to them or results in slower response times. We do not maintain business
interruption insurance and our other insurance may not adequately compensate us
for any losses that may occur due to any failures in our system or interruptions
in our service. Any system failure, including network, software or hardware
failure, that causes an interruption in the delivery of our products and
services or a decrease in responsiveness of our services could result in reduced
revenue and could materially adversely affect our reputation and brand.
BREACHES OF OUR NETWORK SECURITY COULD BE COSTLY.
A significant barrier to confidential communications over the Internet has
been the need for security. We may incur significant costs to protect against
the threat of security breaches or to alleviate problems caused by these
breaches. If unauthorized persons penetrate our network security, they could
misappropriate proprietary information or cause interruptions in our services.
As a result, we may be required to expend capital and resources to protect
against or to alleviate these problems. In addition, because we host all of the
HotJobs.com and Softshoe-related data for our customers, we may be liable to any
of those customers our employers that experience losses due to our security
failures. As a result, security breaches could have a material adverse effect on
our business and the value of your investment.
COMPUTER VIRUSES MAY CAUSE OUR SYSTEMS TO INCUR DELAYS OR INTERRUPTIONS AND MAY
ADVERSELY AFFECT OUR BUSINESS.
Computer viruses may cause our systems to incur delays or other service
interruptions. 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 highly publicized, our
reputation could be materially damaged and our visitor traffic may decrease. Any
of these events could materially adversely affect our business and the value of
your investment.
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WE MAY NOT BE ABLE TO ACCESS THIRD PARTY TECHNOLOGY UPON WHICH WE DEPEND.
We license technology that is incorporated into our services and related
products from third parties including Oracle Corporation for database technology
and Thunderstone Software-EPI, Inc. for full-text indexing. In light of the
rapidly evolving nature of Internet technology, we may increasingly need to rely
on technology from other vendors. Technology from our current or other vendors
may not continue to be available to us on commercially reasonable terms, or at
all. If we lose the ability to access this technology, are unable to gain access
to additional products or are unable to integrate new technology with our
existing systems, we could experience delays in our development and introduction
of new services and related products or enhancements until equivalent or
replacement technology can be accessed, if available, or developed internally,
if feasible. If we experience these delays, our business and the value of your
investment could be materially adversely affected.
WE COULD LOSE SUBSTANTIAL REVENUES OR INCUR SIGNIFICANT COSTS DUE TO YEAR 2000
ISSUES.
Computer systems and software must accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, many software and
computer systems may need to be upgraded in order to be year 2000 compliant or
risk system failure or miscalculations causing disruptions of normal business
activities. Significant uncertainties exist in the software industry concerning
the potential effects associated with the failure of computer systems and
software to be year 2000 compliant.
OUR PRODUCTS AND SERVICES MAY NOT BE YEAR 2000 COMPLIANT. Year 2000
problems could materially adversely affect our current products and services and
the WWW.HOTJOBS.COM website. We have completed an assessment of the year 2000
readiness of our products and services. We believe that all of the products and
services we currently offer were year 2000 compliant at the time of installation
or launch. We have conducted tests internally to validate the compliance of
these products. We cannot be certain, however, that these tests have detected
all potential year 2000 problems. To address potential disruptions, we maintain
off-site backup data for our databases, and we are developing a redundant,
outsourced data center to protect against the failure of the WWW.HOTJOBS.COM
website and its associated hardware. However, these precautions may not be
sufficient to prevent a failure of our products and systems. Any business
disruption due to a failure of our products or systems to be year 2000 compliant
could have a material adverse effect on our business and the value of your
investment.
OUR INTERNAL COMPUTER SYSTEMS MAY NOT BE YEAR 2000 COMPLIANT. Year 2000
problems could materially adversely affect our internal computer systems. We
have reviewed year 2000 compliance statements made by the vendors of our
software systems, such as accounting and database management systems, and we
have completed an assessment of the year 2000 readiness of our internal systems.
Based on this review and assessment, we currently believe that our internal
software systems are year 2000 compliant. We cannot be certain, however, that we
are aware of all potential year 2000 problems. The failure of our internal
systems could disrupt our business. To address these potential disruptions, we
maintain off-site backup data for our internal systems and databases. However,
these precautions may not be sufficient to prevent a failure of our internal
systems. Any business disruption caused by the failure of our internal systems
to be year 2000 compliant could have a material adverse effect on our business
and results of operations.
OUR CUSTOMERS' AND JOB SEEKERS' SYSTEMS MAY NOT BE YEAR 2000 COMPLIANT. It
is possible that our customers will experience problems with their Internet
sites or internal computer systems due to software that is not year 2000
compliant, which could lead to disruptions in their ability to use the services
of WWW.HOTJOBS.COM. If employers are not able to use our services for a period
of time, they may cease using our services. Also, if a substantial number of
employers are unable to use our services for a long period of time, the quality
and quantity of jobs available at WWW.HOTJOBS.COM
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may decrease, which could discourage qualified job seekers from using our
services. Similarly, if a substantial percentage of job seekers are unable to
access our services due to failures in their computer systems, recruiters may
find our services less valuable and reduce or discontinue their use of our
products. If either employers or job seekers experience sustained difficulty in
accessing our products and services due to year 2000 complications, our business
and results of operations could be materially adversely affected.
YEAR 2000 CONCERNS MAY ADVERSELY AFFECT THE PURCHASING PATTERNS OF
EMPLOYERS. Due to year 2000 concerns, many employers that are customers or
potential customers may choose to devote resources to year 2000 compliance
efforts that might otherwise be used to begin or expand online recruiting
efforts. In addition, employers may elect to spend a greater portion of their
recruiting budgets on traditional recruiting methods rather than risk disruption
in their recruiting in the event of technical difficulties related to year 2000
problems.
YEAR 2000 PROBLEMS COULD DECREASE USE OF THE INTERNET. Increasing usage of
the Internet is necessary for us to achieve our business objectives. Any
disruptions caused by year 2000 problems could decrease Internet usage
generally, which could cause our business, results of operations and financial
condition to be materially adversely affected.
WE COULD BE SUBJECT TO YEAR 2000-RELATED LITIGATION. The failure of our
currently supported products and services to be fully year 2000 compliant could
result in claims by or liability to employers or, possibly, job seekers. We host
all of the HotJobs.com-related data for all of our customers. As a result, any
year 2000-related failure of our systems could destroy a large amount of
proprietary data that our customers rely on for their recruiting efforts. If we
are the subject of any claims related to or are liable for losses resulting from
year 2000-related systems failures, our business, results of operations and the
value of your investment could be materially adversely affected.
RISKS RELATED TO LEGAL UNCERTAINTY
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATIONS AND LEGAL
UNCERTAINTIES AFFECTING THE INTERNET WHICH COULD ADVERSELY AFFECT OUR BUSINESS.
To date, governmental regulations have not materially restricted use of the
Internet in our markets. However, the legal and regulatory environment that
pertains to the Internet is uncertain and may change. Uncertainty and new
regulations could increase our costs of doing business, prevent us from
delivering our products and services over the Internet or slow the growth of the
Internet. In addition to new laws and regulations being adopted, existing laws
may be applied to the Internet. New and existing laws may cover issues which
include:
- user privacy;
- civil rights and employment claims;
- consumer protection;
- libel and defamation;
- copyright, trademark and patent infringement;
- pricing controls;
- characteristics and quality of products and services;
- sales and other taxes; and
- other claims based on the nature and content of Internet materials.
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WE MAY BE UNABLE TO OBTAIN A U.S. TRADEMARK REGISTRATION FOR OUR BRAND OR TO
PROTECT OUR OTHER PROPRIETARY INTELLECTUAL PROPERTY RIGHTS.
Our success depends to a significant degree upon the protection of our
proprietary technology, including our Softshoe software and our "HotJobs.com"
brand name. We are aware of other trademarks or pending trademarks that may be
deemed similar to our HotJobs.com brand. We filed with the U.S. Patent and
Trademark Office to register the trademark "www.hotjobs.com" for "providing a
Web site in the field of employment opportunities and career placement which
offers the exchange of information." The PTO initially refused registration,
citing a prior existing U.S. trademark registration. On May 25, 1999, we filed a
Petition for Cancellation with the PTO to cancel the registration for that
existing U.S. trademark on grounds that the mark is not in use. Until the
Petition for Cancellation is resolved, our trademark application for
"www.hotjobs.com" is suspended. Additionally, the PTO also informed us that, if
we overcome its objection relating to the existing trademark and our application
proceeds, it may refuse to register our mark because of a likelihood of
confusion with two other prior pending trademark applications. We cannot assure
you that we will be successful in cancelling the registration for the existing
trademark or, if we are successful, that we can overcome the PTO's potential
refusal to register our mark because of the two prior pending applications, and
thus we may be prevented from securing a federal registration for
"www.hotjobs.com." In addition, in May 1998, one of the other pending trademark
applicants made claims regarding prior use and ownership of "hotjobs" as a
trademark. We investigated these claims and have not found any verifiable basis
for these claims. We responded to that effect and have not received any further
correspondence. Adverse outcomes to these claims or any related litigation,
should it occur, could result in us being limited or prohibited from further
using the "www.hotjobs.com" mark and related derivative marks in the future. We
are not able at this time to evaluate the likelihood of any subsequent actions
related to those claims or an unfavorable outcome in the event such claims are
reasserted, or to estimate the amount or range of any related potential loss. If
we are unable to secure the rights to use the www.hotjobs.com mark and related
derivative marks, a key element of our strategy of promoting HotJobs.com as a
global brand could be disrupted and our business could be adversely affected.
See "Business--Intellectual Property."
We rely on a combination of copyright, trade secret and trademark laws and
non-disclosure and other contractual arrangements to protect our intellectual
property rights. The steps we have taken to protect our proprietary rights,
however, may not be adequate to deter misappropriation of proprietary
information. We may not be able to detect unauthorized use of our proprietary
information or take appropriate steps to enforce our intellectual property
rights. In addition, the validity, enforceability and scope of protection of
intellectual property in Internet-related industries is uncertain and still
evolving. The laws of other countries in which we may market our services in the
future are uncertain and may afford little or no effective protection of our
intellectual property. The unauthorized reproduction or other misappropriation
of our proprietary technology could enable third parties to benefit from our
technology and brand name without paying us for them. If this were to occur, our
business could be materially adversely affected.
If we resort to legal proceedings to enforce our intellectual property
rights, the proceedings could be burdensome and expensive. The proceedings also
could involve a high degree of risk. If we fail to adequately protect our
proprietary rights, third parties may infringe or misappropriate our ownership
of our intellectual property and this could erode our market position and our
operating results.
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DEFENDING AGAINST INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS COULD BE TIME
CONSUMING AND EXPENSIVE, AND WE MAY BE LIABLE FOR INFRINGING ON THE INTELLECTUAL
PROPERTY RIGHTS OF OTHERS. IF WE ARE NOT SUCCESSFUL IN DEFENDING AGAINST THESE
CLAIMS, WE COULD BE SUBJECT TO SIGNIFICANT DAMAGES AND THE DISRUPTION OF OUR
BUSINESS.
We cannot be certain that our products, content and brand names do not or
will not infringe valid patents, copyrights or other intellectual property
rights held by third parties. We expect that infringement claims in our markets
will increase in number as more participants enter the markets. We may be
subject to legal proceedings and claims from time to time relating to the
intellectual property of others in the ordinary course of our business. We may
incur substantial expenses in defending against these third party infringement
claims, regardless of their merit. Successful infringement claims against us may
result in monetary liability or a material disruption in the conduct of our
business.
WE MAY BE LIABLE AS A RESULT OF INFORMATION RETRIEVED FROM OR TRANSMITTED OVER
THE INTERNET.
We may be sued for defamation, civil rights infringement, negligence,
copyright or trademark infringement, personal injury, product liability or other
legal claims relating to information that is published or made available on
WWW.HOTJOBS.COM and the other sites linked to it. These types of claims have
been brought, sometimes successfully, against online services in the past. We
could also be sued for the content that is accessible from WWW.HOTJOBS.COM and
through links to other Internet sites or through content and materials that may
be posted by members in chat rooms or on bulletin boards. We also offer email
services, which may subject us to potential risks, such as liabilities or claims
resulting from unsolicited email or spamming, lost or misdirected messages,
security breaches, illegal or fraudulent use of email or interruptions or delays
in email service. Our insurance does not specifically provide for coverage of
these types of claims and therefore may not adequately protect us against these
types of claims. In addition, we could incur significant costs in investigating
and defending such claims, even if we ultimately are not liable. If any of these
events occur, our business and the value of your investment could be materially
adversely affected.
RISKS RELATED TO THIS OFFERING, OUR STOCK PRICE AND CORPORATE CONTROL
WE MAY USE THE PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT AGREE.
Our management will have broad discretion with respect to the expenditure of
the net proceeds of this offering, including discretion to use the proceeds in
ways with which stockholders may disagree. Investors will be relying on the
judgment of our management regarding the application of the proceeds of this
offering.
OUR STOCK PRICE MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS, AND
INVESTORS IN OUR STOCK MAY NOT BE ABLE TO RESELL THEIR SHARES AT OR ABOVE THE
OFFERING PRICE.
We cannot predict the extent to which investors' interest in us will lead to
the development of a trading market in our common stock or how liquid the market
might become. If you purchase shares of our common stock in this offering, you
will pay a price that was not established in a competitive market, but was
negotiated between us and the underwriters. The price of the common stock that
will prevail in the market after the offering may be higher or lower than the
price you paid. The stock market in general and the market prices of shares in
newly public technology companies, particularly those such as ours that offer
Internet-based products and services, have been extremely volatile and have
experienced fluctuations that have often been unrelated or disproportionate to
the operating performance of such companies. The market price of our common
stock could be highly volatile and subject to wide fluctuations in response to
many factors, some of which are largely beyond our control. These factors
include:
- quarterly variations in our results of operations;
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- adverse business developments;
- changes in financial estimates by securities analysts;
- investor perception of us and online recruiting services in general;
- announcements by our competitors of new products and services; and
- general economic conditions both in the U.S. and in foreign countries.
In the event of fluctuations in the market price of our common stock, you
may be unable to resell your shares at or above the offering price.
IF OUR STOCK PRICE IS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES LITIGATION
WHICH IS EXPENSIVE AND COULD RESULT IN A DIVERSION OF RESOURCES.
Securities class action litigation has often been brought against companies
that experience volatility in the market price of their securities. Litigation
brought against us could result in substantial costs to us in defending against
the lawsuit and a diversion of management's attention that could cause our
business and the value of your investment to be materially adversely affected.
FUTURE SALES OF OUR COMMON STOCK AFTER THIS OFFERING MAY NEGATIVELY AFFECT OUR
STOCK PRICE.
Following the offering, we will have a large number of shares of common
stock outstanding and available for resale beginning at various points in time
in the future. The market price of our common stock could decline as a result of
sales of a large number of shares of our common stock in the market following
this offering, or the perception that such sales could occur. These sales also
might make it more difficult for us to sell equity securities in the future at a
time and at a price that we deem appropriate. The shares of our common stock
currently outstanding will become eligible for sale without registration
pursuant to Rule 144 under the Securities Act, subject to certain conditions of
Rule 144. Certain holders of our common stock also have certain demand and
piggyback registration rights enabling them to register their shares under the
Securities Act for sale. In connection with this offering, our officers and
directors and certain of our stockholders, who will hold a total of shares
of common stock after the offering, have agreed, subject to certain exceptions,
not to sell their shares for 180 days after the date of this prospectus without
the consent of Deutsche Bank Securities Inc.
IT MAY BE DIFFICULT FOR A THIRD PARTY TO ACQUIRE OUR COMPANY WHICH COULD DEPRESS
OUR STOCK PRICE.
Delaware corporate law and our amended and restated certificate of
incorporation and bylaws, which will become effective upon the closing of this
offering, will contain provisions that could have the effect of delaying,
deferring or preventing a change in control of HotJobs.com or our management
that stockholders may consider favorable or beneficial. These provisions could
discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. These
provisions could also limit the price that investors might be willing to pay in
the future for shares of our common stock. These provisions include:
- authorization to issue "blank check" preferred stock, which is preferred
stock that can be created and issued by the board of directors without
prior stockholder approval, with rights senior to those of common stock;
- a staggered board of directors, so that it would take three successive
annual meetings to replace all directors;
- prohibition of stockholder action by written consent; and
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- advance notice requirements for the submission by stockholders of
nominations for election to the board of directors and for proposing
matters that can be acted upon by stockholders at a meeting.
See "Description of Capital Stock--Anti-Takeover Effects of Delaware Law and
our Amended and Restated Certificate of Incorporation and Bylaws" for a more
complete description of these provisions.
OUR EXECUTIVE OFFICERS, DIRECTORS AND EXISTING STOCKHOLDERS, WHOSE INTERESTS MAY
DIFFER FROM OTHER STOCKHOLDERS, WILL HAVE THE ABILITY TO EXERCISE SIGNIFICANT
CONTROL OVER US.
Our executive officers and directors and entities affiliated with them will,
in the aggregate, beneficially own approximately % of our common stock
following this offering. These stockholders will be able to exercise significant
influence over all matters requiring approval by our stockholders, including the
election of directors and the approval of significant corporate transactions,
including a change of control of HotJobs.com. The interests of these
stockholders may differ from the interests of our other stockholders.
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION OF THE VALUE OF YOUR
INVESTMENT.
The initial public offering price per share will exceed our net tangible
book value per share. Accordingly, investors purchasing shares in this offering
will incur immediate and substantial dilution in their investments. See
"Dilution" for a calculation of the extent to which your investment will be
diluted. To the extent outstanding options to purchase common stock are
exercised, your investment will be further diluted.
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FORWARD-LOOKING STATEMENTS
Many statements made in this prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere are
forward-looking statements that are not based on historical facts. Because these
forward-looking statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from those
expressed or implied by these forward-looking statements, including those
discussed under "Risk Factors."
The forward-looking statements made in this prospectus are based on events
through the date on which the statements are made.
MARKET DATA
This prospectus contains market data related to our business and the
Internet. This market data includes projections that are based on a number of
assumptions. The assumptions include the following:
- no catastrophic failure of the Internet will occur;
- the number of people online and the total number of hours spent online
will increase significantly over the next five years; and
- Internet security and privacy concerns will be adequately addressed.
If any one or more of these assumptions turns out to be incorrect, actual
results may differ from the projections based on these assumptions. The
Internet-related markets may not grow over the next three to four years at the
rates projected by these market data, or at all. The failure of these markets to
grow at these projected rates may have a material adverse effect on our business
and the market price of our common stock.
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USE OF PROCEEDS
The net proceeds from the sale of the shares of common stock, assuming
an initial public offering price of $ per share, less underwriting
discounts and estimated offering expenses, are estimated to be approximately
$ million, or $ million if the underwriters'
overallotment option is exercised in full.
We intend to use the net proceeds of this offering for general corporate
purposes, including increasing our sales and marketing efforts; developing our
infrastructure, products and services; and hiring additional personnel. In
addition, we may use a portion of the net proceeds to acquire or invest in
complementary businesses, technologies, services or products; however, we have
no commitments or agreements, and we are not involved in any negotiations with
respect to any such transaction. As of the date of this prospectus, we cannot
specify the particular uses for the net proceeds to be received upon completion
of the offering. Accordingly, management will have significant flexibility in
applying the net proceeds of this offering.
Pending any use, we will invest the net proceeds of this offering in
short-term, investment grade, interest-bearing securities.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our common stock or
preferred stock since inception and do not expect to pay any cash dividends for
the foreseeable future. We currently intend to retain future earnings, if any,
to finance the expansion of our business. The payment of dividends will be at
the discretion of our board of directors and will depend upon factors such as
future earnings, capital requirements, our financial condition and general
business conditions.
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CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999:
(1) on an actual basis;
(2) on a pro forma basis to reflect:
- the filing of an amendment to our certificate of incorporation to
provide for authorized capital stock of 50,000,000 shares of common
stock and 10,000,000 shares of preferred stock;
- the issuance of 1,620,000 shares of Series A Preferred Stock in
consideration for cash proceeds of $16.2 million; and
(3) on a pro forma as adjusted basis to reflect:
- the automatic conversion of all outstanding shares of Series A
Preferred Stock into shares of common stock upon the closing of
this offering;
- our sale of shares to be sold in this offering at an assumed
initial public offering price of $ per share, less the
underwriters' discounts and commissions; and
- the estimated expenses of this offering.
The table excludes:
- shares reserved for future issuance under our employee stock
purchase plan;
- shares reserved for future grants under our stock option/stock
issuance plan; and
- shares of common stock issuable at a weighted average exercise price
of $ per share upon exercise of stock options outstanding at June ,
1999, of which are exercisable upon completion of this offering.
<TABLE>
<CAPTION>
MARCH 31, 1999
(IN THOUSANDS)
---------------------------------
PRO FORMA
AS
ACTUAL PRO FORMA ADJUSTED
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Obligations under capital leases, excluding current
installments........................................... $ 317 $ 317 $ 317
Series A redeemable convertible preferred stock, par
value $0.01 per share; 1,620,000 shares authorized; no
shares issued and outstanding actual; 1,620,000 shares
issued and outstanding pro forma and no shares issued
and outstanding pro forma as adjusted.................. -- 16,200 --
Stockholders' equity (deficit):
Preferred stock, $0.01 par value per share; 2,000,000
shares authorized actual and 10,000,000 shares
authorized pro forma and pro forma as adjusted; no
shares issued and outstanding actual, pro forma and
pro forma as adjusted................................ -- -- --
Common Stock, $0.01 par value, 2,000,000 shares
authorized actual and 50,000,000 shares authorized
pro forma and pro forma as adjusted; shares
issued and outstanding actual; shares issued
and outstanding pro forma; shares issued and
outstanding pro forma as adjusted.................... 9 9
Additional paid-in capital............................... 311 311
Accumulated deficit...................................... (4,427) (4,427)
--------- --------- -----------
Total stockholders' equity (deficit)................... (4,107) (4,107)
--------- --------- -----------
Total capitalization................................. $ (3,790) $ 12,410 $
--------- --------- -----------
--------- --------- -----------
</TABLE>
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<PAGE>
DILUTION
Our pro forma net tangible book value at March 31, 1999 was $ , or
$ per share, as adjusted to give effect to our pro forma capitalization and
the automatic conversion of all of the outstanding Series A Preferred Stock into
our common stock upon consummation of this offering. Pro forma net tangible book
value per share represents the amount of our total pro forma tangible assets
reduced by the amount of our pro forma total liabilities and divided by the pro
forma number of shares of common stock outstanding. Assuming the sale by us of
the shares offered hereby at an assumed initial public offering price of
$ per share and after deducting the underwriting discounts and
commissions and estimated offering expenses, our pro forma net tangible book
value at March 31, 1999 would have been $ , or $ per share.
This represents an immediate increase in pro forma net tangible book value of
$ per share to existing stockholders and an immediate dilution in pro
forma net tangible book value of $ per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................ $
Pro forma net tangible book value per share at March 31, 1999........ $
Increase in pro forma net tangible book value attributable to new
investors.......................................................... $
---------
Adjusted pro forma net tangible book value per share after this
offering............................................................. $
---------
Dilution per share to new investors.................................... $
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis at March 31, 1999,
after giving effect to this offering, the differences between existing
stockholders and investors in this offering with respect to the number of shares
of common stock purchased from us, the total consideration paid with respect to
us and the average price paid per share:
<TABLE>
<CAPTION>
TOTAL CONSIDERATION
SHARES PURCHASED
------------------------ ------------------------ AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................................... % % $
New investors............................................
----- ----- ----- ----- -------------
Total.................................................. 100% 100% $
----- ----- ----- ----- -------------
----- ----- ----- ----- -------------
</TABLE>
The foregoing tables and calculations assume no exercise of outstanding
options. At March 31, 1999, there were shares of common stock issuable
upon exercise of outstanding options at a weighted average exercise price of
$ per share. To the extent that these options are exercised, there will be
further dilution to new investors.
21
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following selected financial data should be read in conjunction with the
financial statements and the notes to those statements appearing elsewhere in
this prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The statement of operations data for the period from
February 20, 1997 (inception) through December 31, 1997 and for the year ended
December 31, 1998, are derived from our audited financial statements included
elsewhere in this prospectus. The statement of operations data for each of the
three-month periods ended March 31, 1998 and 1999, and the balance sheet data at
March 31, 1999, are derived from unaudited interim financial statements of
HotJobs.com included elsewhere in this prospectus. The unaudited financial
statements have been prepared on substantially the same basis as the audited
financial statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for such periods. Historical results
are not necessarily indicative of the results to be expected in the future, and
results of interim periods are not necessarily indicative of results for the
entire year.
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 20, THREE MONTHS ENDED
1997 (INCEPTION)
TO YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, --------------------
1997 1998 1998 1999
----------------- -------------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Service fees............................................ $ 361 $ 3,038 $ 347 $ 2,018
Software license fees................................... 375 563 125 80
Job fair fees........................................... -- -- -- 216
Other................................................... 13 550 80 337
------- ------- --------- ---------
Total revenues........................................ 749 4,151 552 2,651
Cost of revenues......................................... 12 506 78 589
------- ------- --------- ---------
Gross profit............................................ 737 3,645 474 2,062
Operating expenses:
Product development..................................... 174 474 90 156
Sales and marketing..................................... 431 3,085 524 3,229
General and administrative.............................. 726 1,642 274 823
------- ------- --------- ---------
Total operating expenses............................ 1,331 5,201 888 4,208
------- ------- --------- ---------
Loss from operations................................ (594) (1,556) (414) (2,146)
Net interest expense..................................... -- 63 7 68
------- ------- --------- ---------
Net loss............................................ $ (594) $ (1,619) $ (421) $ (2,214)
------- ------- --------- ---------
------- ------- --------- ---------
Basic and diluted net loss per common share.............. $ $ $ $
------- ------- --------- ---------
------- ------- --------- ---------
Weighted average shares outstanding used in basic and
diluted net loss per common share calculation...........
------- ------- --------- ---------
------- ------- --------- ---------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
MARCH 31, 1999
(IN THOUSANDS)
------------------------------------
PRO FORMA
PRO AS
ACTUAL FORMA(1) ADJUSTED(2)
--------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 258 $ 16,458
Working capital (deficit)............................. (5,091) 11,109
Total assets.......................................... 4,125 20,325
Obligations under capital leases, excluding current
installments........................................ 317 317
Total stockholders' equity (deficit).................. (4,107) (4,107)
</TABLE>
- ------------------------
(1) Pro forma information gives effect to our issuance of 1,620,000 shares of
Series A Preferred Stock effective May 10, 1999, for cash proceeds of $16.2
million.
(2) Pro forma as adjusted information gives effect to the automatic conversion
of all of the outstanding Series A Preferred Stock into shares of
common stock upon consummation of this offering and our sale of shares
to be sold in this offering assuming an initial public offering price of
$ per share, less the underwriters' discounts and commissions and
estimated expenses of the offering.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO, THE FINANCIAL STATEMENTS AND THE NOTES TO THOSE
STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION AND ANALYSIS
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF FACTORS INCLUDING, BUT NOT LIMITED TO,
THOSE DISCUSSED IN "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. WE UNDERTAKE
NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON,
EVEN IF NEW INFORMATION BECOMES AVAILABLE OR OTHER EVENTS OCCUR IN THE FUTURE.
OVERVIEW
We are a leading provider of comprehensive recruiting solutions that
leverage the Internet to exchange information more efficiently between job
seekers and employers. The majority of our revenues are recurring and are
derived primarily from employer memberships to our WWW.HOTJOBS.COM employment
exchange. We also provide additional recruiting solutions to employers such as
our proprietary Softshoe recruiting software, our WorkWorld job fairs, online
advertising and consulting services.
Founded in February 1997, we began operations with seven employees and we
had grown to 89 employees as of May 31, 1999. Our early operating activities
related primarily to the development of the necessary technological
infrastructure for the operation of WWW.HOTJOBS.COM. In February 1997, we
commercially launched our WWW.HOTJOBS.COM employment exchange. In September
1997, we began selling our Softshoe software. During 1998, we experienced
significant increases in our revenue from sales of memberships to our employment
exchange and license and hosting fees for our Softshoe software. In early 1999,
we introduced our WorkWorld job fairs and expanded our marketing programs to
increase awareness of the HotJobs.com brand. In May 1999, we raised $16.2
million in a private placement of our convertible preferred stock.
We classify our revenues as follows:
- Service fee revenue, consisting of subscription fees paid by employers for
memberships to our WWW.HOTJOBS.COM employment exchange and software
hosting fees paid by customers of our Softshoe software. We sell
memberships to each employer on a per recruiter basis and bill the
employer monthly, quarterly, semi-annually or annually. Membership
entitles each recruiter to post a specific number of jobs on
WWW.HOTJOBS.COM simultaneously. Software hosting fees consist of recurring
monthly fees to maintain an employer's Softshoe database and a
miscellaneous proprietary software product.
- Software license revenue, consisting of one-time license fees paid by our
Softshoe customers.
- Job fair revenue, consisting of fees from employers that rent booths at
our WorkWorld job fairs.
- Other revenue, consisting of fees derived from 30-day single ad job
postings on WWW.HOTJOBS.COM, banner advertising, which we sell on a
monthly and extended-term basis, and other Softshoe-related services,
including system customization and resume scanning services, which we bill
on a monthly and extended-term basis, and the license of a miscellaneous
proprietary software product.
24
<PAGE>
We recognize revenue as follows:
- SERVICE FEE REVENUE. We recognize subscription and software hosting fees
over the period of the delivery of service.
- SOFTWARE LICENSE REVENUE. We recognize software license revenue in
accordance with Statements of Position 97-2 and 98-9 issued by the
American Institute of Certified Public Accountants. Under these
pronouncements, revenue is recognized upon the substantial completion and
delivery of the related software, assuming that the fee is fixed and
determinable, and that collectibility is probable.
- JOB FAIR REVENUE. We recognize job fair revenue in the month in which the
job fair takes place.
- OTHER REVENUE. We recognize revenue related to these services over the
period of delivery of service. Other revenue also includes fees from the
license of a miscellaneous proprietary software product in 1998, which we
recognized in accordance with Statements of Position 97-2 and 97-9. Other
revenue also includes barter revenue, which consists of fees generated
from exchanges of services with other vendors. We recognize barter revenue
over the period that we receive the benefit.
We classify our cost of revenue and operating expenses as follows:
- COST OF REVENUE. Cost of revenue consists of compensation associated with
network operations staff, technology support contract fees, Internet
access, job fair expenses, resume scanning services, barter expenses and
depreciation expense.
- PRODUCT DEVELOPMENT EXPENSE. Product development expense consists
primarily of costs associated with the compensation of product development
personnel.
- SALES AND MARKETING EXPENSE. Sales and marketing expense consists
primarily of advertising and promotional expenses, public relations
expenses, conference expenses, printing fees, sales and marketing
compensation, including base salary and sales commissions, and
telemarketing communications expenses. Sales commissions have remained
relatively constant as a percentage of revenues, and we expect this to
continue. However, the timing and magnitude of marketing initiatives have
caused, and will continue to cause, fluctuations in sales and marketing
expense as a percentage of revenues.
- GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
consists primarily of compensation for administrative and executive staff,
fees for professional services, bad debt expense and general office
expense.
25
<PAGE>
The following table sets forth, as a percentage of total revenues, the
results of our operations for the period ended December 31, 1997, the year ended
December 31, 1998 and the three months ended March 31, 1998 and 1999.
<TABLE>
<CAPTION>
PERIOD FROM THREE MONTHS ENDED
FEBRUARY 20, MARCH 31,
1997 (INCEPTION) YEAR ENDED ----------------------------
TO DECEMBER 31, DECEMBER 31, 1998
1997 1998 --------------- 1999
------------------- ----------------- (UNAUDITED) -----
<S> <C> <C> <C> <C>
Revenues:
Service fees........................................... 48% 73% 63% 76%
Software license fees.................................. 50 14 23 3
Job fair fees.......................................... -- -- -- 8
Other.................................................. 2 13 14 13
--- --- --- ---
Total revenues....................................... 100 100 100 100
Cost of revenues......................................... 2 12 14 22
--- --- --- ---
Gross profit......................................... 98 88 86 78
Operating expenses:
Product development.................................... 23 11 16 6
Sales and marketing.................................... 57 74 95 122
General and administrative............................. 97 40 50 31
--- --- --- ---
Total operating expenses............................. 177 125 161 159
--- --- --- ---
Loss from operations............................... (79) (37) (75) (81)
Net interest expense..................................... -- 2 1 3
--- --- --- ---
Net loss........................................... (79)% (39 )% (76 )% (84 )%
--- --- --- ---
--- --- --- ---
</TABLE>
We have incurred substantial losses in every fiscal period since our
inception. For the year ended December 31, 1998, we incurred net losses of
approximately $1.6 million. For the quarter ended March 31, 1999, we incurred
net losses of approximately $2.2 million. As of December 31, 1998, and March 31,
1999, we had accumulated deficits of approximately $2.2 million and $4.4
million, respectively. Our net losses and resulting accumulated deficit are
primarily due to the costs we incurred to develop our online employment exchange
and software products in advance of substantial revenue and to expand our sales
and marketing programs.
We intend to devote significant resources to advertising and brand marketing
programs designed to attract new employers to subscribe to WWW.HOTJOBS.COM. We
expect growth in the number of member employers of WWW.HOTJOBS.COM to result in
substantial growth in subscription fees, both in terms of dollar amount and as a
percentage of total revenue. Our strategy contemplates that revenue from
employer memberships will likely be the single largest source of revenue for us
in the immediate future.
As a result of our expansion plans and our expectation that operating
expenses will increase significantly in the next several years, especially in
the areas of sales and marketing and brand promotion, we expect to incur
additional losses from operations for the foreseeable future. To the extent that
(1) increases in our operating expenses precede and are not subsequently
followed by commensurate increases in revenue, or (2) we are unable to adjust
operating expense levels accordingly, our operating losses may exceed our
expectations for those periods. We cannot be sure that we will ever achieve or
sustain profitability.
26
<PAGE>
QUARTER ENDED MARCH 31, 1999 COMPARED TO QUARTER ENDED MARCH 31, 1998
REVENUES
Our total revenues increased to $2.7 million for the quarter ended March 31,
1999, from $552,000 for the quarter ended March 31, 1998. The increase in our
total revenues was primarily due to an increase in service fees.
SERVICE FEES. Service fee revenue increased to $2.0 million for the quarter
ended March 31, 1999, from $347,000 for the quarter ended March 31, 1998.
This increase resulted primarily from an increase in the number of employers
subscribing to WWW.HOTJOBS.COM and, to a lesser extent, an increase in the
hosting fees generated by a larger number of licensees of our Softshoe
software.
SOFTWARE LICENSE FEES. Software license revenue decreased 36%, to $80,000
for the quarter ended March 31, 1999, from $125,000 for the quarter ended
March 31, 1998. This decrease was due primarily to the fact that the
Softshoe software we licensed in the first quarter of 1999 required less
customization than the Softshoe software we licensed in the first quarter of
1998.
JOB FAIR FEES. Job fair revenue increased to $216,000 for the quarter ended
March 31, 1999, from $0 for the quarter ended March 31, 1998. We held our
first job fair in February 1999.
OTHER FEES. Other revenue increased to $337,000 for the quarter ended March
31, 1999, from $80,000 for the quarter ended March 31, 1998. This increase
primarily relates to a barter transaction for advertising.
COST OF REVENUES
Our cost of revenues increased to $589,000 for the quarter ended March 31,
1999, from $78,000 for the quarter ended March 31, 1998. As a percentage of
revenue, cost of revenues increased to 22% for the quarter ended March 31, 1999,
from 14% for the quarter ended March 31, 1998. This increase resulted primarily
from costs associated with the launch of our WorkWorld job fairs as well as an
increase in our network operations staff.
OPERATING EXPENSES
PRODUCT DEVELOPMENT EXPENSE. Product development expense increased 73%, to
$156,000 for the quarter ended March 31, 1999, from $90,000 for the quarter
ended March 31, 1998. This increase resulted primarily from increased
salaries and related expenses associated with hiring additional technology
personnel required to enhance the content and features of our products and
services.
SALES AND MARKETING EXPENSE. Sales and marketing expense increased to $3.2
million for the quarter ended March 31, 1999, from $524,000 for the quarter
ended March 31, 1998. The increase in sales and marketing expense was
primarily due to the expansion of the HotJobs.com marketing campaign,
including approximately $2.0 million for a television advertisement during
the Super Bowl in January 1999. In addition, sales and marketing expense
increased due to the hiring of additional sales and marketing personnel.
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased to $823,000 for the quarter ended March 31, 1999, from $274,000
for the quarter ended March 31, 1998. General and administrative expense
increased primarily due to increased salaries and related expenses
associated with hiring additional administrative personnel.
27
<PAGE>
NET INTEREST EXPENSE
Net interest expense increased to $68,000 for the quarter ended March 31,
1999, from $7,000 for the quarter ended March 31, 1998. This increase resulted
from increased borrowings, as well as increased capital expenditures under
capital leases.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO PERIOD ENDED DECEMBER 31, 1997
REVENUES
Our total revenues increased to $4.2 million for the year ended December 31,
1998, from $749,000 for the period ended December 31, 1997. The increase in our
total revenues was primarily due to an increase in service fees and other fees
associated with the sale of miscellaneous proprietary software.
SERVICE FEES. Service fee revenue increased to $3.0 million for the year
ended December 31, 1998, from $361,000 for the period ended December 31,
1997. This increase resulted primarily from an increase in the number of
employers subscribing to WWW.HOTJOBS.COM and, to a lesser extent, an
increase in the hosting fees generated from a larger number of licensees of
our Softshoe software.
SOFTWARE LICENSE FEES. Software license revenue increased 50%, to $563,000
for the year ended December 31, 1998, from $375,000 for the period ended
December 31, 1997. This increase was due to an increase in the number of
customers who purchased licenses for our Softshoe software.
JOB FAIR FEES. We held our first WorkWorld job fair in 1999. Therefore, we
did not generate any job fair revenue in either 1998 or 1997.
OTHER FEES. Other revenue increased to $550,000 for the year ended December
31, 1998, from $13,000 for the period ended December 31, 1997. The increase
is primarily due to the sale of a miscellaneous proprietary software product
and an increase in fees related to customizing Softshoe applications.
COST OF REVENUES
Our cost of revenues increased to $506,000 for the year ended December 31,
1998, from $12,000 for the period ended December 31, 1997. As a percentage of
revenue, cost of revenues increased to 12% for the year ended December 31, 1998,
from 2% for the period ended December 31, 1997. This increase resulted primarily
from an increase in our network operations staff as well as an increase in
depreciation expense.
OPERATING EXPENSES
PRODUCT DEVELOPMENT EXPENSE. Product development expense increased to
$474,000 for the year ended December 31, 1998, from $174,000 for the period
ended December 31, 1997. This increase resulted primarily from increased
salaries and related expenses associated with hiring additional technology
personnel required to enhance the content and features of our products and
services.
SALES AND MARKETING EXPENSE. Sales and marketing expense increased to $3.1
million for the year ended December 31, 1998, from $431,000 for the period
ended December 31, 1997, and increased as a percentage of revenue to 74% for
the year ended December 31, 1998 from 58% for the period ended December 31,
1997. The increase in sales and marketing expense was primarily due to costs
associated with advertising and increases in sales compensation and
commissions related to an increase in the number of our sales and marketing
personnel.
28
<PAGE>
GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased to $1.6 million for the year ended December 31, 1998, from
$726,000 for the period ended December 31, 1997. General and administrative
expense increased primarily due to increased salaries and related expenses
associated with hiring additional personnel.
NET INTEREST EXPENSE
Net interest expense increased to $63,000 for the year ended December 31,
1998, from $0 for the period ended December 31, 1997. This increase resulted
from increased borrowings, as well as increased capital expenditures under
capital leases.
TAXES
At December 31, 1998, we had a net operating loss carryforward of $3.1
million. This carryforward is available to offset future taxable income and
expires at various dates through 2018. We have recorded a valuation allowance of
an equal amount to fully offset the deferred tax benefit. The valuation
allowance increased approximately $431,000 for the year ended December 31, 1998.
UNAUDITED QUARTERLY RESULTS OF OPERATIONS
The following table sets forth a summary of our quarterly results for 1998
and the first quarter of 1999. This information was derived from unaudited
interim financial statements that, in the opinion of management, have been
prepared on a basis consistent with the financial statements contained elsewhere
in this prospectus and include all adjustments, consisting of only normal
recurring adjustments, necessary for a fair statement of such information when
read in conjunction with the financial statements and notes thereto. The results
of operations for any quarter are not necessarily indicative of the results of
operations for any future period.
Our revenue has increased in each consecutive quarter since inception as a
result of increased market acceptance of our employment exchange service and
Softshoe software product. Product development expense has steadily decreased as
a percentage of revenue due to a faster increase in revenue relative to product
development expense. Sales and marketing expense increased between the fourth
quarter of 1998 and the first quarter of 1999, primarily as a result of
increased advertising expenditures. Sales commissions have remained relatively
constant as a percentage of revenues, and we expect this to continue. However,
the timing and magnitude of marketing initiatives have caused, and will continue
to cause, fluctuations in sales and marketing expense as a percentage of
revenues. General and administrative expense has increased in every quarter
since inception due to an increase in personnel, facilities and increased
spending on internal operational and financial infrastructure.
In light of the evolving nature of our business and limited operating
history, we believe that period to period comparisons of our historical
operating results may not be meaningful and should not be relied upon as
indications of future performance. Although we have experienced sequential
29
<PAGE>
quarterly revenue growth since inception, our historical revenue growth rates
are not necessarily indicative of future revenue growth rates.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MARCH 31, JUNE 30, SEPT 30, DEC 31, MARCH 31,
1998 1998 1998 1998 1999
----------- ----------- ----------- --------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenues:
Service fees........................................... $ 347 $ 627 $ 914 $ 1,150 $ 2,018
Software license fees.................................. 125 125 70 243 80
Job fair fees.......................................... -- -- -- -- 216
Other.................................................. 80 90 245 135 337
----------- ----------- ----- --------- -----------
Total revenues..................................... 552 842 1,229 1,528 2,651
Cost of revenues......................................... 78 89 139 200 589
----------- ----------- ----- --------- -----------
Gross profit....................................... 474 753 1,090 1,328 2,062
Operating expenses:
Product development.................................... 90 112 140 132 156
Sales and marketing.................................... 524 629 754 1,178 3,229
General and administrative............................. 274 280 375 713 823
----------- ----------- ----- --------- -----------
Total operating expenses........................... 888 1,021 1,269 2,023 4,208
----------- ----------- ----- --------- -----------
Loss from operations............................. (414) (268) (179) (695) (2,146)
Net interest expense..................................... 7 5 15 36 68
----------- ----------- ----- --------- -----------
Net loss......................................... $ (421) $ (273) $ (194) $ (731) $ (2,214)
----------- ----------- ----- --------- -----------
----------- ----------- ----- --------- -----------
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
MARCH 31, JUNE 30, SEPT 30, DEC 31, MARCH 31,
1998 1998 1998 1998 1999
----------- ----------- ----------- --------- -----------
AS A PERCENTAGE OF TOTAL REVENUES:
Revenues:
Service fees........................................... 63% 74% 74% 75% 76%
Software license fees.................................. 23 15 6 16 3
Job fair fees.......................................... -- -- -- -- 8
Other.................................................. 14 11 20 9 13
----------- ----------- ----- --------- -----------
Total revenues..................................... 100 100 100 100 100
Cost of revenues......................................... 14 11 11 13 22
----------- ----------- ----- --------- -----------
Gross profit....................................... 86 89 89 87 78
Operating expenses:
Product development.................................. 16 13 12 9 6
Sales and marketing.................................. 95 75 61 77 122
General and administrative........................... 50 33 31 46 31
----------- ----------- ----- --------- -----------
Total operating expenses........................... 161 121 104 132 159
----------- ----------- ----- --------- -----------
Loss from operations............................. (75) (32) (15) (45) (81)
Net interest expense..................................... 1 1 1 3 3
----------- ----------- ----- --------- -----------
Net loss......................................... (76)% (33 )% (16 )% (48)% (84 )%
----------- ----------- ----- --------- -----------
----------- ----------- ----- --------- -----------
</TABLE>
30
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our activities primarily through funding
from OTEC, Inc., proceeds as well as from our line of credit and cash from
operations. As of December 31, 1998, OTEC owned approximately 23% of the voting
stock of HotJobs.com. Richard S. Johnson, our Chief Executive Officer and
President, formerly served as President of OTEC and currently is a director and
one of its two stockholders. See "Related Party Transactions--Transactions
Involving OTEC." During 1998, OTEC provided us with approximately $3.7 million
to fund our operations. In addition, effective May 10, 1999, we raised $16.2
million from the sale of our Series A Preferred Stock in a private placement. In
June 1999, we used a portion of these proceeds to repay OTEC in full.
Net cash used in operating activities was $2.1 million during 1998 and
$431,000 for the quarter ended March 31, 1999. We have had significant negative
cash flows from operating activities in each fiscal and quarterly period to
date. Net cash used in operating activities resulted primarily from our net
operating losses, adjusted for certain non-cash items, and a higher level of
accounts receivable due to increased sales which were partially offset by
increases in accounts payable, accrued expenses and deferred revenues.
Net cash used in investing activities was $497,000 during 1998 and $128,000
for the quarter ended March 31, 1999. We used net cash in investing activities
primarily for equipment purchases and leasehold improvements. During 1998 and
the quarter ended March 31, 1999, we acquired additional equipment under capital
leases with a value of $201,000 and $378,000, respectively.
Net Cash provided by financing activities was $2.8 million during 1998 and
$651,000 for the quarter ended March 31, 1999. Net cash was provided by
financing activities primarily from borrowings under our line of credit and
OTEC's line of credit. In May 1999, we received $16.2 million in cash proceeds
from a private placement of our convertible preferred stock.
As of March 31, 1999, we had a cash balance of $258,000 and our principal
obligations consisted of borrowings of $180,000 under our $500,000 line of
credit and advances from OTEC of approximately $4.4 million, the latter of which
was repaid in full in June 1999 from the proceeds of our May 1999 private
placement. In addition, we had approximately $502,000 of obligations under
capital leases. As of May 31, 1999, we had $180,000 outstanding under our line
of credit.
We believe that the net proceeds of this offering, together with our
existing cash and cash equivalents, will be sufficient to meet our anticipated
cash requirements for working capital and capital expenditures for the next 12
months. Our capital requirements will depend on a number of factors, including
market acceptance of our products and services, the amount of our resources we
devote to WWW.HOTJOBS.COM and expansion of our operations and the amount of our
resources we devote to promoting awareness of the HotJobs.com brand. Consistent
with our growth, we have experienced a substantial increase in our sales and
marketing expenses, capital expenditures and operating lease arrangements since
inception, and we anticipate that these increases will continue for the
foreseeable future. In addition, we will continue to evaluate possible
investments in businesses, products and technologies, the consummation of any of
which would increase our capital expenditures.
Although we currently believe that we have sufficient capital resources to
meet our anticipated working capital and capital expenditure requirements beyond
the next 12 months, unanticipated events and opportunities may require us to
sell additional equity or debt securities, increase our current line of credit
or establish new credit facilities to raise capital in order to meet our capital
requirements. If we sell additional equity or convertible debt securities, the
sale could dilute the ownership of our existing stockholders. If we issue debt
securities, increase our credit facility or establish a new credit facility, our
fixed obligations could increase and result in operating covenants
31
<PAGE>
that would restrict our operations. We cannot be sure that any such financing
will be available in amounts or on terms acceptable to us.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept or recognize only two-digit entries in the date code field. These systems
and software products will need to accept four-digit entries to distinguish 21st
century dates from 20th century dates. As a result, computer systems and
software used by many companies and governmental agencies may need to be
upgraded to comply with such year 2000 requirements or risk system failure or
miscalculations causing disruptions of normal business activities.
STATE OF READINESS. We have made a preliminary assessment of the year 2000
readiness of our information technology ("IT") systems, including the hardware
and software that enable us to provide and deliver our products and services.
Our year 2000 readiness plan consists of:
- quality assurance testing of our internally developed proprietary
software;
- contacting third-party vendors and licensors of material software and
services that are both directly and indirectly related to the delivery of
our products and services;
- assessing our repair and replacement requirements; and
- creating contingency plans in the event of year 2000 failures.
We performed a year 2000 simulation on our software during the second
quarter of 1999 to test system readiness, and found no anomalous behavior in our
systems. We have been informed by all of our material software component vendors
that the products we use are currently year 2000 compliant. We purchased all of
our software and hardware within the past two years, and therefore we do not
have legacy systems that have been historically identified to have year 2000
issues. We have applied all known vendor patches for relevant software to come
to compliance with vendor defined year 2000 standards. We are currently
assessing our non-IT systems and will seek assurance of year 2000 compliance
from providers of material non-IT systems. Until testing is complete and we
contact these vendors and providers, we will not be able to completely evaluate
whether our IT systems or non-IT systems will need to be revised or replaced.
COSTS. To date we have not incurred any material costs in identifying or
evaluating year 2000 compliance issues. Based on our assessment to date, we do
not anticipate that costs associated with remediating our non-compliant IT
systems or non-IT systems will be material. We expect that our existing
employees or consultants will perform any significant work pertaining to year
2000 compliance.
RISKS. We are not currently aware of any year 2000 compliance problems
relating to our technology or our IT or non-IT systems that would have a
material adverse effect on our business, results of operations or financial
condition. However, we may discover year 2000 compliance problems in our
technology that will require substantial revisions. In addition, we may need to
revise or replace third party software, hardware or services incorporated into
our material IT and non-IT systems, all of which could be time consuming and
expensive. If we fail to fix our technology or to fix or replace third party
software, hardware or services on a timely basis, the result could be lost
revenues, increased operating costs, the loss of customers and other business
interruptions, any of which could have a material adverse effect on our
business, results of operations and financial condition. Moreover, the failure
to adequately address year 2000 compliance issues in our technology and our IT
and non-IT systems could result in claims of mismanagement, misrepresentation or
breach of contract and related litigation, which could be costly and
time-consuming to defend. In addition, we cannot assure you that governmental
agencies, utility
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companies, Internet access companies, third party service providers and others
outside our control will be year 2000 compliant. The failure by such entities to
be year 2000 compliant could result in a systemic failure beyond our control,
such as a prolonged Internet, telecommunications or electrical failure, which
could also prevent us from delivering our products and services to our
customers, decrease the use of the Internet or prevent users from accessing the
websites of companies with whom we have entered into business alliances, which
could have a material adverse effect on our business, results of operations and
financial condition.
CONTINGENCY PLAN. As discussed above, we are engaged in an ongoing year
2000 assessment and are developing contingency plans in case of year 2000
disruptions. We will take into account the results of our year 2000 simulation
testing and the responses received from third party vendors and service
providers in determining the nature and extent of any contingency plans.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about
Segments of an Enterprise and Related Information, which supersedes SFAS No. 14,
Financial Reporting for Segments of a Business Enterprise. This statement
changes the way that public business enterprises report segment information,
including financial and descriptive information about their selected segment
information. Under SFAS No. 131, operating segments are defined as
revenue-producing components of the enterprise which are generally used
internally for evaluating segment performance. SFAS No. 131 became effective for
HotJobs.com fiscal year ending December 31, 1997, and we have determined that
under the guidelines of SFAS No. 131 we did not have any separately reportable
business segments as of December 31, 1998.
In February 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. SOP 98-1 establishes the accounting for
costs of software products developed or purchased for internal use, including
when such costs should be capitalized. We do not expect SOP 98-1, which is
effective January 1, 1999, to have a material effect on our financial condition
or results of operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments, including derivative instruments embedded
in other contracts, and for hedging activities. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning June 15, 2000. This statement is
not expected to affect us because we currently do not engage or plan to engage
in derivative instruments or hedging activities.
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BUSINESS
GENERAL
We are a leading Internet-based recruiting solutions company. Our suite of
services leverages the Internet to provide a direct exchange of information
between job seekers and employers. We developed these services based on our
experience in the recruiting industry and our in-depth understanding of the
needs of job seekers and employers. By solving many of the problems associated
with traditional recruiting methods, we allow employers to more effectively
manage their recruiting processes to save time and money.
The majority of our revenues are recurring and are primarily derived from
employer memberships to our online employment exchange, WWW.HOTJOBS.COM.
Headhunters are prohibited from using our employment exchange, ensuring direct
contact between job seekers and member employers. We also provide employers with
additional recruiting solutions such as our proprietary Softshoe recruiting
software, our WorkWorld job fairs and online advertising and consulting
services.
Revenues from our services have grown rapidly, primarily driven by increased
employer memberships to our WWW.HOTJOBS.COM employment exchange. Our revenues
increased from approximately $749,000 for the period ended December 31, 1997, to
approximately $4.2 million for the fiscal year ended December 31, 1998. Our
revenues for the three months ended March 31, 1999 were approximately $2.7
million.
INDUSTRY BACKGROUND
RECRUITING MARKET
We believe that companies cannot be competitive without implementing
successful recruiting practices. According to industry sources, businesses in
the U.S. spent in excess of $13 billion in 1997 to hire new employees by
advertising job openings in newspapers and by hiring headhunters.
We believe that several factors are causing an increase in spending on
recruiting efforts:
INCREASED LABOR SHORTAGE. We believe that demographic trends such as the
aging of the Baby Boomers and decreasing birth rates, together with the
continued growth in the U.S. economy, are combining to cause a tight labor
market. For example, according to a 1998 recruiting survey prepared by
Interbiznet.com, over 60% of the recruiters surveyed experienced labor
shortages. As a result, the recruiting process now focuses less on selecting
qualified employees from a ready pool of candidates and more on managing a
scarce resource.
INCREASED EMPLOYEE TURNOVER. We believe that employees currently change
jobs more often than they have in the past and that even satisfied employees are
increasingly investigating job opportunities. According to the U.S. Bureau of
Labor Statistics, the average person entering the workforce today will work for
between eight and ten different employers. This makes it more difficult for
employers to retain qualified, experienced individuals and increases the number
of hirings that must occur each year in order to maintain or grow an employer's
workforce.
INCREASED URGENCY TO REDUCE TIME TO HIRE. Forrester Research, Inc.
estimates that unemployment among "knowledge workers" is less than 1% relative
to overall unemployment of 4.3%. Because of the shortage in highly skilled job
seekers, qualified candidates must be hired quickly or they may be lost to
competitors. The ability to quickly hire qualified employees may have a
significant influence on the future success of a company.
Prior to the advent of the Internet, companies traditionally relied on a
combination of five recruiting methods. These five methods include newspaper
classifieds and other print
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advertisements, traditional job fairs, on-campus recruiting, internal referral
programs and headhunters. The key limitations of each of these methods include:
NEWSPAPER CLASSIFIEDS AND OTHER PRINT ADVERTISEMENTS
- multiple intermediaries including media buyers and media placement agents
are typically involved before an advertisement is placed;
- several weeks to several months may pass from the time a job is advertised
to the time the recruiter can respond to resumes in which he or she is
interested; and
- it is typically cost prohibitive to provide a full description of either
the employer or the job opportunity and to advertise jobs nationally.
TRADITIONAL JOB FAIRS
- employers have limited time to meet with job seekers whom they have not
pre-screened; and
- job seekers often must visit each company's booth prior to determining the
specific jobs that are available.
ON-CAMPUS RECRUITING
- the number of candidates requesting interviews typically exceeds the
employers' available time slots; and
- employers must visit multiple campuses and have limited time to meet with
all qualified candidates.
INTERNAL REFERRAL PROGRAMS
- incentive programs may divert an employee's attention away from performing
his or her job, thereby reducing productivity; and
- referring employees may be more concerned about the quantity than the
quality of referrals.
HEADHUNTERS
- placement fees are costly and employers only have access to limited
applicant pools; and
- job seekers generally receive limited information about the specific
companies and positions for which they apply and do not have direct
contact with the employer.
ONLINE RECRUITING MARKET
The emergence of the Internet has created an opportunity to connect job
seekers with employers more efficiently and cost effectively when compared to
traditional recruiting methods. Online recruiting can automate the recruiting
process, providing more informative and responsive real-time interaction between
job seekers and employers, and has the potential to lower the cost and time to
hire. Job seekers are empowered with access to an aggregation of information
about employment opportunities worldwide not previously available to them in one
place. We believe that a significant online recruiting marketplace will emerge
as more job seekers and employers embrace the advantages the Internet brings to
the recruiting process. In addition, Internet-based solutions may replace more
expensive client/server recruiting software and change the way companies manage
and distribute information about job seekers throughout their organizations.
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International Data Corporation estimates that the total number of individual
Internet users worldwide will grow from approximately 69 million in 1997 to 320
million in 2002. As Internet usage becomes more widespread, companies from a
broad range of industries are expected to conduct an increasing percentage of
their recruiting over the Internet. Of the 6 million businesses in the U.S.,
Forrester estimates that only 15,000 businesses currently recruit online, but
this figure is estimated to increase to 124,000 by 2003. Forrester forecasts
that by 2003, most large companies, 60% of medium-sized companies and 20% of
small companies will use the Internet for recruiting purposes.
MARKET OPPORTUNITY
We believe that most of the advantages offered by Internet technology have
not been fully applied to the recruiting market. While online job boards have
improved the aggregation of job postings and job seekers, they have not
fundamentally improved workflow throughout the recruiting process. Additionally,
few web-based commercial software applications are available to help employers
manage their internal recruiting processes. We also believe that most employers
are in the early stages of understanding how to use the Internet to increase
their competitiveness in recruiting.
We believe that many of the current online recruiting offerings suffer from
the following limitations:
- LACK OF PRIVACY. Most online recruiting solutions do not allow job seekers
to restrict access to their resumes. We believe that many experienced
professionals will not post their resumes on a job board if there is a
chance that they may be detected by their current employers.
- HEADHUNTER POSTINGS. Many of the current online recruiting offerings give
headhunters complete access to their sites, resulting in a high cost
intermediary between employers and job seekers. In addition, employers
have to compete with headhunters for the job seekers they are looking to
hire. Job seekers do not know whether the jobs to which they are applying
are from actual employers or are merely ads placed by headhunters looking
for applicants for whom they can charge a fee.
- LACK OF SCREENING PROCESS. Many of the current online job boards offer no
or only limited testing and screening capabilities. Many sites stress the
size of their resume database and the number of people who visit the site
each month. This focus on quantity rather than quality results in the
recruiter receiving an excessive amount of unwanted resumes.
- LACK OF FUNCTIONALITY. Many online job boards serve only to attract
candidates without providing employers with the tools they need to manage
the recruiting process within their organizations. Additionally, these job
boards generally lack the ability to help employers compile and analyze
job seeker data.
- UNFAVORABLE PRICING MODEL. Most recruiting websites charge companies to
list openings for a fixed period of time on a price-per-ad basis. We
believe that this is inefficient for companies with ongoing recruiting
needs. Jobs that have been filled remain posted, attracting unwanted
applicants, while unfilled jobs need to be posted again and again until a
person is hired.
Because our recruiting solution does not suffer from these limitations, we
believe that an opportunity exists for HotJobs.com to become the leader in
online recruiting solutions.
THE HOTJOBS.COM SOLUTION
We provide comprehensive online recruiting solutions for employers and job
seekers. Our solutions include our online employment exchange, WWW.HOTJOBS.COM,
our browser-based
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proprietary recruiting software, Softshoe, and our WorkWorld job fairs.
Additionally, we provide strategic consulting and development services focused
on improving the efficiency and effectiveness of the recruiting process for
employers. As companies increasingly utilize the Internet to improve their
recruiting processes, we believe that our solution enables our customers to
leverage the lower cost and real-time communication enabled by the Internet
while retaining many of the positive attributes of traditional recruiting
methods.
BENEFITS TO JOB SEEKERS
Our WWW.HOTJOBS.COM employment exchange empowers job seekers to find
employment opportunities posted directly by employers at no cost to the job
seeker. Key features of our solution for job seekers include:
- DIRECT ACCESS TO A LARGE AND GROWING LIST OF EMPLOYERS. Our
WWW.HOTJOBS.COM site offers job seekers direct access to job postings from
over 1,500 member employers. Unlike most online recruiting services, we
exclude headhunters from our site to ensure direct contact between our job
seekers and member employers. Job seekers can search for and apply to
specific job openings or submit their resumes to our HotShots resume
database, providing our member employers with access to their resumes
unless blocked by the job seeker.
- PRIVACY. Through the use of the HotBlock feature, job seekers can prevent
the viewing of their resumes. With this feature, job seekers can eliminate
unwanted solicitations and avoid detection by their current employers.
- PERSONALIZATION. We enable job seekers to set up their own career home
page, My HotJobs, free of charge and provide them with tools to manage
their job searches. We also provide job seekers with the ability to set up
personal job search agents, enabling them to create customized and
automated searches based on their specifications, such as job type or
geographic preference. This service also provides job seekers with email
notification during a specified period of time of any new jobs added to
the system which match the job seeker's specifications.
- DETAILED, CURRENT INFORMATION. We provide in-depth company and job
descriptions, enabling job seekers to apply for those jobs for which they
are most qualified and minimizing the need for additional research.
Additionally, each job posting includes a date stamp, giving the job
seeker information about the age of a particular job posting.
- JOB SEARCH TOOLS. We provide job seekers with the ability to store job
search information, including a "shopping cart" to store multiple job
search results as well as cover letter storage related to specific job
inquiries. Additionally, job seekers can keep track of currently active
jobs for which they have applied and can analyze the effectiveness of
their job searches by tracking the number of times their resumes appear in
an employer's search and are subsequently viewed.
- CAREER RESOURCES. We provide job seekers with career resources, including
a bookstore, original editorial content and job seeker message boards.
BENEFITS TO EMPLOYERS
We provide employers with a comprehensive Internet-based recruiting solution
focused on reducing the cost and time to hire a new employee. This comprehensive
solution includes WWW.HOTJOBS.COM, our online employment exchange, our Softshoe
recruiting software, our WorkWorld job fairs and related advertising and
consulting services. We developed our solution to provide employers with access
to a high quality pool of job seekers and the tools necessary to
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manage the workflow involved in the recruiting process. Key features of our
solution for employers include:
- FLEXIBLE PRICING MODEL. We offer employers a fully automated,
cost-efficient means to recruit job seekers online. Our pricing model
allows employers to choose between different levels of service to meet
their needs. Depending upon the employer's requirements, employers may
choose to pay periodic per-seat subscription fees to become a member of
our online employment exchange, to utilize our online software on a
subscription fee basis or to purchase customized consulting services.
- DIRECT ACCESS TO A LARGE NUMBER OF JOB SEEKERS. Through our employment
exchange, we offer member employers access to our growing job seeker
database which currently contains more than 350,000 resumes. We do not
allow headhunters to search our resume database or to place job
advertisements on our job board. By limiting access only to member
employers, we provide direct access to our pool of job seekers and
eliminate competition for candidates from headhunters.
- REAL-TIME JOB POSTING, TRACKING AND MANAGEMENT TOOLS. We provide member
employers the ability to post, track and manage job openings in a
real-time environment. Our solution enables a member employer to remove a
posting once a position has been filled and replace it with a new posting.
We believe that this reduces unnecessary expenditures of time and money
experienced in traditional recruiting methods.
- REDUCE UNWANTED RESUMES. Because we do not charge on a per-word basis, our
solution allows employers to provide in-depth job descriptions, allowing
candidates to self-select jobs for which they are qualified. Additionally,
employers can pre-screen applicants using online testing and remove a job
posting as soon as it is filled. We believe these functions minimize the
receipt by employers of unqualified or untimely resumes.
- VALUE ADDED RECRUITING MANAGEMENT SOFTWARE. In addition to our online
employment exchange, we provide our proprietary browser-based recruiting
software to help employers better manage the entire recruiting process.
Softshoe provides private label job board and applicant tracking
capabilities, enabling employers to coordinate online and traditional
recruiting methods and to share information throughout their entire
organization. This enables improved coordination and communication among
recruiters, hiring managers and executive management.
- DISTRIBUTION OF JOB POSTINGS. Through our relationships with third-party
websites, we are able to offer our member employers the ability to place
their HotJobs.com job postings onto high-traffic third party web sites
including Yahoo!, Alta Vista, Usenet and America's Job Bank at no
additional cost. We have also entered into arrangements with theglobe.com,
Inc. and E*Trade Group Inc., providing direct access to WWW.HOTJOBS.COM
from their sites.
THE HOTJOBS.COM STRATEGY
Our objective is to become the leading global provider of online recruiting
services. Key elements of our strategy include:
- BUILD GLOBAL BRAND AWARENESS. We believe that it is essential to establish
a strong global brand. We utilize an aggressive marketing program
involving print, radio, outdoor, online and television marketing to
promote HotJobs.com. For example, in January 1999, we aired a television
commercial during the Super Bowl which resulted in a 117% increase in
traffic to our site in the following month. We intend to expand our use of
public relations, strategic alliances and other marketing programs
designed to promote our global brand and build loyalty among our member
employers and job seekers.
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- ACCELERATE NEW SUBSCRIBER GROWTH. We intend to accelerate the growth of
our subscriber base by rapidly expanding the size of our sales force and
locating it in select markets throughout the U.S. Generally, we have found
that we are more successful in obtaining member employers in markets in
which we have a local presence, providing us with a better understanding
of a market's particular recruiting needs.
- CONTINUE TO ENHANCE SITE FUNCTIONALITY AND FEATURES. We intend to provide
the best available tools to empower job seekers and employers to more
effectively manage their job seeking and recruiting processes. We are
developing product and service enhancements aimed at both member employers
and job seekers to continue to improve our user interface, searching
capabilities, workflow and collaboration, data visualization,
navigability, reporting and forecasting. In addition, we intend to enhance
content for job seekers. We believe that these enhancements will increase
interest in and traffic to our website.
- EXPAND OUR RELATIONSHIP WITH MEMBER EMPLOYERS. We focus significant sales
efforts on expanding our relationship with member employers by offering
additional products and services. These efforts include the sale of
additional subscriptions to WWW.HOTJOBS.COM, Softshoe recruiting software,
participation in our WorkWorld job fairs and online advertising and
consulting services.
- PROVIDE ADDITIONAL CAREER CHANNELS IN SPECIFIC FIELDS. We intend to
increase the appeal and ease of use of WWW.HOTJOBS.COM for job seekers by
offering career channels in specific fields such as healthcare, legal
services and biotechnology.
- EXPAND INTERNATIONAL OPERATIONS. We intend to expand our international
operations to attract new job seekers and member employers in new markets
and to allow us to better serve our global member employers. We plan to
accomplish this by opening facilities, making acquisitions and effecting
strategic alliances, investments or licensing arrangements that enhance
our appeal to unique communities of job seekers. By opening international
offices, we believe we will be better positioned to acquire new job
seekers and member employers in those countries.
- PURSUE STRATEGIC ACQUISITIONS. From time to time, we evaluate acquisition
and investment opportunities in complementary businesses, products and
technologies. We explore opportunities that may accelerate our growth; add
new content, advertisers, member employers and job seekers; develop new
technologies; and penetrate new markets. Presently, we do not have any
commitments or understandings for acquisitions or investments and we are
not presently engaged in negotiations.
PRODUCTS AND SERVICES
WWW.HOTJOBS.COM
Our WWW.HOTJOBS.COM employment exchange creates a direct link between member
employers and job seekers. We empower both job seekers and member employers by
providing them with the tools and functionality they need to plan, execute,
monitor and control their employment searches.
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Key features for job seekers and member employers are outlined below:
<TABLE>
<CAPTION>
JOB SEEKER FEATURES MEMBER EMPLOYER FEATURES
---------------------------------------------- ----------------------------------------------
<S> <C> <C>
PRICING - Free of charge - Recurring per-seat subscription fee
REACH - Searchable database with access to more than - Ability to search over 350,000 resumes
1,500 member employers
- Recorded over 1.9 million visits in April
1999
- Ability to post job listings to third party
sites, including Yahoo!, AltaVista, Usenet
and America's Job Bank, at no additional
cost
DIRECT EXCHANGE - Direct access to member employers; no - No headhunters may post jobs or search our
headhunter listings permitted resume database
CUSTOMIZATION - Personal Job Search Agent - Allows for a detailed job description and a
- Personal career home page full company profile
- Test module feature allows pre-screening of
candidates
REAL-TIME - Up-to-date job postings - Ability to remove job postings at any time
- Date stamping of all job postings - Date stamping of resumes
- Immediate receipt of resume submissions
PRIVACY - Ability to restrict access to their resume - Search and review job seeker resumes
anonymously
TRACKING AND - Automatic email notification confirming - Ability to respond directly to job seekers
MONITORING application receipt - Storage and management of job listings and
- Online "shopping cart" to store jobs resumes
- Ability to store resumes and cover letters - Ability to coordinate job postings for
- Archive job applications member employers with multiple accounts
- Multiple recruiters within an enterprise can
share notes on an applicant
STATISTICS - Number of times resume has come up in a - Number of times a job posting comes up in a
search and subsequently been viewed and how search, is viewed and applied to by job
many jobs to which the job seeker has seekers
applied
COMMUNITY - Career resources, bookstore, original
editorial content and job seeker message
boards
</TABLE>
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SOFTSHOE
Introduced in September 1997, our Softshoe recruiting software permits
employers to manage their enterprise-wide recruiting process by leveraging the
cost-efficiencies associated with the Internet. Softshoe provides employers with
the ability to create a private label, publicly-viewed job board and an internal
employee-only job board, to schedule and track the results of interviews and
other recruiting events and to prepare detailed analyses of the company's
recruiting efforts. Softshoe provides a browser-based interface that allows
multiple participants within an employer's organization to coordinate their
efforts in the recruiting process. These participants include recruiters,
administrators, executives and hiring managers, each of whom is able to access
different levels of information relevant to their involvement in the recruiting
process.
Softshoe provides extensive online reports that allow users to analyze
processes and statistical data to establish and refine strategic recruiting
initiatives. Examples of these reports include time to hire, number of hires,
source of applicants and equal opportunity employment data.
WORKWORLD AND OTHER SERVICES
We conduct a series of job fairs known as WorkWorld. Like WWW.HOTJOBS.COM,
these job fairs do not allow headhunters to participate. Unlike the traditional
job fair model which leaves recruiters with thousands of paper resumes to sort
through, our fairs are fully integrated into the WWW.HOTJOBS.COM system, placing
all job seekers' information online. Job seekers can log onto WorkWorld.com to
view a schedule of upcoming events and a list of participating employers and to
apply directly to available jobs. Recruiters can then schedule appointments with
candidates prior to the actual event. WorkWorld job fairs also serve to provide
a physical forum for our account executives to meet directly with employers.
We also offer consulting services to assist employers with automating the
recruiting and job advertising processes in areas including recruiting process
re-engineering and web page design, online advertising and customization.
CUSTOMERS
As of May 31, 1999, our customer base included over 1,500 employers in
industries such as technology, financial services, health care, professional
services, retail and telecommunications. Some of our member employers include:
Amazon.com, Inc.
CNN
The Walt Disney Company
Merck & Co. Inc.
Nike, Inc.
The Home Depot, Inc.
America Online, Inc.
Cisco Systems
International Business
Machines Corporation
City of Palo Alto
E*Trade Group Inc.
Yankee Group
Central Intelligence Agency
eBay Inc.
Microsoft Corporation
Procter & Gamble
Union Carbide Corporation
Young & Rubicam
As of May 31, 1999, the following clients used Softshoe to manage their
recruiting systems:
Coors Brewing Company
DoubleClick, Inc.
Ford Motor Company
Humana Inc.
Lucent Technologies
Tricon Global
Restaurants, Inc.
Wang Government Services
Division
For the period from February 20, 1997 to December 31, 1997, OTEC and Lucent
Technologies together accounted for approximately 60% of our revenues. For the
year ended December 31, 1998, OTEC accounted for 11% of our revenues.
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SALES AND MARKETING
As of May 31, 1999, our direct sales force consisted of 34 account
executives located in New York, San Francisco, Boston and Chicago. We obtain new
corporate members primarily through telemarketing directly to employers as well
as leads generated from online inquiries and referrals. In addition, we solicit
employers through participation in human resource industry trade shows and
similar events. To encourage our account executives to maintain and build our
relationship with our member employers, we pay them a monthly commission that is
a fixed percentage of all periodic fees paid by the accounts with whom they have
established a relationship. This also creates an opportunity for account
executives to sell other components of our online recruiting solution such as
our Softshoe recruiting software, participation in our WorkWorld job fairs and
related advertising and promotional opportunities.
We utilize an aggressive marketing program involving print, radio, outdoor,
online and television advertising to promote WWW.HOTJOBS.COM as a leading
employment exchange. We also support a consistent direct marketing and
educational campaign to our member companies regarding online recruiting
developments and practices. We plan to continue to use key marketing events,
coupled with public relations efforts, to promote awareness of the HotJobs.com
brand.
In addition, we have developed co-promotional events and marketing campaigns
for both WWW.HOTJOBS.COM and WorkWorld. Some examples of these include: Jane
Magazine Fall College Tour and Experienceonline.com college career center tour.
Our July '99 WorkWorld job fair will be produced in conjunction with the
Internet World Summer '99 trade show conference.
BUSINESS ALLIANCES
We have entered into the following alliances to expand our distribution
network, providing added value to our member employers, and increasing
recognition of the HotJobs.com brand:
THEGLOBE.COM, INC. We have entered into a co-branding agreement with
theglobe.com, Inc., an online network that fuses together lifestyle and
entertainment content and commerce with personal interaction. This alliance will
fully integrate HotJobs.com's employment opportunities within Careers,
theglobe.com's new sub-theme area. Users of theglobe.com will be able to create
resumes through theglobe.com's home page builder and post them at HotJobs.com's
co-branded service.
E*TRADE GROUP INC. We have entered into a co-branding agreement with
E*Trade Group Inc., a leading provider of online investing services. Under this
agreement, visitors to the "Community" page on www.etrade.com will have access
to "Hot Jobs of the Week," a feature of HotJobs.com that highlights certain job
opportunities. The agreement also calls for online and offline marketing
components, including banners and direct mail.
HotJobs.com enters into relationships that allow us to acquire editorial
content and/or web services that are relevant to our job seeker audience. These
include salary calculators, relocation services, company biographies and other
pertinent information.
Parties with whom we have entered into alliances may not perform their
obligations as agreed. Our business alliances generally do not establish minimum
performance requirements but instead rely on voluntary efforts. In addition,
most of our alliance agreements may be terminated by either party with little
notice.
TECHNOLOGY
We developed our technology to serve a large volume of web traffic in an
efficient, scalable and fault-tolerant manner. The system updates its data
files, providing useful search and statistical results
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to the user. We designed the system to scale easily to support geometric growth
without the need to re-architect, or acquire hardware/software systems at a
geometric rate.
We currently support our production servers in-house, but have signed
contracts to co-locate at Level(3), an Internet service provider. Level(3)'s
facility includes features such as power redundancy, multiple egress and peering
to other ISPs, fire suppression and physical space and allows us to grow without
being limited by "environmental" factors while simultaneously providing
sufficient bandwidth capacities. As we expand our leased application hosting, we
intend to use and increase our reliance on Level(3).
Our software is written using open standards, such as ANSI C, C++, ECMA-262
Script, and HTML, and interfaces with products from Oracle, Netscape
Communications, Inc. and Thunderstone. Our template-based page generation using
our proprietary tagging language allows for rapid deployment of user interface
changes without the necessity to recompile code. This also allows us to develop
co-branded sites rapidly without re-engineering.
We have standardized our hardware platform on Sun Microsystems servers,
Cisco routers, Foundry Networks switches and Boxhill disk arrays. Our network
topology is designed to sustain multiple failures by various components without
down-time.
COMPETITION
The market for online recruiting solutions is intensely competitive and
highly fragmented. We compete with companies, including recruiting search firms,
that offer a single database "job board" solution, such as Monster.com, as well
as newspapers, magazines and other traditional media companies that provide
online job search services, such as CareerPath.com. We also compete with large
Internet information hubs, or portals, such as Excite@Home. We may experience
competition from potential customers to the extent that they develop their own
online recruiting offerings internally. In addition, we compete with traditional
recruiting services, such as headhunters, for a share of employers' total
recruiting budgets. We expect to face additional competition as other
established and emerging companies, including print media companies and
headhunters with established brands, enter the online recruiting market.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources and larger client bases than we do. In addition, current and potential
competitors may make strategic acquisitions or establish cooperative
relationships to expand their businesses or to offer more comprehensive
solutions.
We believe that there will be rapid business consolidation in the online
recruiting industry. Accordingly, new competitors may emerge and rapidly acquire
significant market share. In addition, new technologies will likely increase the
competitive pressures that we face. The development of competing technologies by
market participants or the emergence of new industry standards may adversely
affect our competitive position. Competition could result in reduced margins on
our products and services, loss of market share or less use of WWW.HOTJOBS.COM
by job seekers and employers. If we are not able to compete effectively with
current or future competitors as a result of these and other factors, our
business could be materially adversely affected.
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
There is 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
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and infringement, copyright, patent, trademark, trade secret, obscenity, libel,
employment and personal privacy is uncertain and developing.
PRIVACY CONCERNS. Government agencies are considering adopting regulations
regarding the collection and use of personal identifying information obtained
from individuals when accessing web sites. 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 the 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 (the "EU") 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 entities such as HotJobs.com that plan to
engage in data collection from users in EU 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 "HotJobs.com" as a trademark, third parties have and may
continue to bring claims for infringement against us for the use of this
trademark. In the event those claims are successful, we would lose the ability
to use the HotJobs.com domain name. 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 New
York City, 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.
INTELLECTUAL PROPERTY
Our success depends to a significant degree upon the protection of our
proprietary technology, including Softshoe recruiting software and the
HotJobs.com brand name. The unauthorized reproduction or other misappropriation
of our proprietary technology could enable third parties to benefit from our
technology without paying us for it. If this were to occur, our business could
be materially adversely affected. We rely upon a combination of patents,
copyright, trade secret and trademark laws and non-disclosure and other
contractual arrangements to protect our intellectual property rights. The steps
we have taken to protect our proprietary rights, however, may not be adequate to
deter misappropriation of proprietary information.
We may not be able to detect unauthorized use of our proprietary information
or take appropriate steps to enforce our intellectual property rights. In
addition, the validity, enforceability and scope of protection of intellectual
property in Internet-related industries is uncertain and still evolving. The
laws of other countries in which we may market our services in the future are
uncertain and may afford little or no effective protection of our intellectual
property.
We filed with the U.S. Patent and Trademark Office to register the trademark
"www.hotjobs.com" for "providing a Web site in the field of employment
opportunities and career placement which offers the exchange of information."
The PTO initially refused registration, citing a prior existing U.S. trademark
registration. On May 25, 1999, we filed a Petition for Cancellation with
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the PTO to cancel the registration for that existing U.S. trademark on grounds
that the mark is not in use. Until the Petition for Cancellation is resolved,
our trademark application for "www.hotjobs.com" is suspended. Additionally, the
PTO also informed us that, if we overcome its objection relating to the existing
trademark and our application proceeds, it may refuse to register our mark
because of a likelihood of confusion with two other prior pending trademark
applications. We cannot assure you that we will be successful in cancelling the
registration for the existing trademark or, if we are successful, that we can
overcome the PTO's potential refusal to register our mark because of the two
prior pending applications, and thus we may be prevented from securing a federal
registration for "www.hotjobs.com." In addition, in May 1998, one of the other
pending trademark applicants made claims regarding prior use and ownership of
"hotjobs" as a trademark. We investigated these claims and have not found any
verifiable basis for these claims. We responded to that effect and have not
received any further correspondence. Adverse outcomes to these claims or any
related litigation, should it occur, could result in us being limited or
prohibited from further using the "www.hotjobs.com" mark and related derivative
marks in the future. We are not able at this time to evaluate the likelihood of
any subsequent actions related to those claims or an unfavorable outcome in the
event such claims are reasserted, or to estimate the amount or range of any
related potential loss.
We currently hold a trademark registration in the United States for
Softshoe. Effective trademark protection may not be available in all countries
in which we intend to conduct business. Policing unauthorized use of our marks
is also difficult and expensive. In addition, it is possible that our
competitors will adopt product or service names similar to ours, impeding our
ability to build brand identity and possibly leading to customer confusion.
EMPLOYEES
As of May 31, 1999, we had 89 employees, of whom 58 worked in sales,
marketing, client services, and business development, 10 in product development
and 21 were involved in finance, administration, and corporate operations. From
time to time, we employ independent contractors and consultants to support
research and development, marketing and sales, and business development. None of
our employees are represented under collective bargaining agreements. We
consider our relations with our employees to be good.
FACILITIES
Our principal executive offices are currently located in approximately 9,900
square feet of office space in New York, New York under a lease that expires in
March 2004, but can be terminated by either party with 90 days notice after July
31, 1999. In March 1999, we leased approximately 1,280 square feet of office
space in San Francisco, CA under a five-year lease expiring in 2004. We intend
to expand our sales, marketing and technology operations and therefore may
require additional facilities in the future.
LEGAL PROCEEDINGS
There are no material legal proceedings pending or, to our knowledge,
threatened against us.
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MANAGEMENT
The following table sets forth, as of March 31, 1999, the name, age and
position within HotJobs.com of each of our directors and executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ------------------------------------------------------------------
<S> <C> <C>
Richard S. Johnson..................... 38 President, Chief Executive Officer and Chairman of the Board of
Directors
Stephen W. Ellis....................... 48 Chief Financial Officer and Director
Dimitri J. Boylan...................... 38 Chief Operating Officer, Secretary and Director
John A. Hawkins........................ 38 Director
John G. Murray......................... 36 Director
</TABLE>
RICHARD S. JOHNSON founded HotJobs.com in February 1997 and has served as
our President, Chief Executive Officer and Chairman of the board of directors
since inception. From 1988 to 1997, Mr. Johnson served as President of OTEC,
Inc., a New York-based recruiting firm focusing on IT professionals. Mr. Johnson
co-founded OTEC in 1988 and remains one of its directors and principal
stockholders. Mr. Johnson received his bachelor's degree from Bucknell
University. Mr. Johnson is a member of the Society of Human Resource Management
and of New York's New Media Association.
STEPHEN W. ELLIS has served as our Chief Financial Officer since April 1999,
and as a director since May 1999. From March 1998 through December 1998, Mr.
Ellis served as the Chief Financial Officer for Biztravel.com, an Internet-based
travel services company. Prior to that, from March 1997 through February 1998,
Mr. Ellis was the Chief Financial Officer for Metromedia Fiber Network (NASDAQ:
MFNX), a facilities-based fiber optic/telecom services company. Mr. Ellis also
served as an executive officer of Data Broadcasting Corporation (NASDAQ: DBCC),
a financial market-data company, first as Chief Financial Officer from 1992 to
1995 and then as Executive Vice President, Finance through March 1997. Mr. Ellis
holds a bachelor's degree from the Massachusetts Institute of Technology and a
Master of Business Administration from the Stanford University Graduate School
of Business. Mr. Ellis is a Certified Public Accountant. He also is on the board
of directors of the following private companies: FSA Capital, Inc., TreeSource,
Inc. and US Medical Network, Inc.
DIMITRI J. BOYLAN has served as our Chief Operating Officer since March
1998, and as our Vice President of Sales and Marketing from February 1997 until
March 1998. Mr. Boylan has also served as a director since May 1999. From
October 1990 until October 1997, Mr. Boylan served as the managing director of
recruiting for OTEC. Mr. Boylan earned a master's degree from the University of
Illinois and a bachelor's degree from the University of Pennsylvania.
JOHN A. HAWKINS has served as a director since May 1999. In 1995, Mr.
Hawkins co-founded Generation Partners L.P., a private equity fund. From 1987
until 1995, Mr. Hawkins was a General Partner of Burr, Egan, Deleage & Co., a
$700 million venture capital firm. Mr. Hawkins specializes in information
technology investments including data communications and telecommunications,
software and the Internet. Mr. Hawkins graduated with a bachelor's degree from
Harvard College and received his Master of Business Administration from the
Harvard Graduate School of Business. Mr. Hawkins currently serves on the boards
of P-COM, Inc. (NASDAQ: PCMS), PixTech (NASDAQ: PIXT), Enso Audio Imaging
Corporation, Dover Pacific Computing, Inc., High End Systems, Inc. and
Linguateq, Inc.
JOHN G. MURRAY has served as a director since May 1999. Since June 1998, Mr.
Murray has been a Managing Director of Deutsche Bank Securities Inc., formerly
BT Alex. Brown Incorporated, specializing in the venture capital service sector.
From January 1994 to June 1998, Mr. Murray served as a principal of BancBoston
Robertson Stephens, specializing in the venture capital service sector. Mr.
Murray received his bachelor's degree from St. Lawrence University and his
Master of Business Administration from The Wharton School of Finance.
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CLASSES OF DIRECTORS
In accordance with the terms of our amended and restated certificate of
incorporation, our board of directors has been divided into three classes,
denominated as Class I, Class II and Class III. Members of each class hold
office for staggered three-year terms. At each annual meeting of our
stockholders commencing in 2000, the successors to the directors whose terms
expire at that meeting will be elected to serve until the third annual meeting
after their election or until their successors have been elected and qualified.
Prior to consummation of this offering, we will appoint two independent
directors to serve as the Class I directors whose terms expire at the 2000
annual meeting of stockholders. Messrs. Murray and Hawkins are Class II
directors whose terms expire at the 2001 annual meeting of stockholders. Messrs.
Johnson, Boylan and Ellis are Class III directors whose terms expire at the 2002
annual meeting of stockholders. With respect to each class, a director's term
will be subject to the election and qualification of their successors, or their
earlier death, resignation or removal. These provisions, when taken in
conjunction with other provisions of our amended and restated certificate of
incorporation authorizing the board of directors to fill vacant directorships,
may delay a stockholder from removing incumbent directors and simultaneously
gaining control of the board of directors by filling the vacancies with its own
nominees.
BOARD COMMITTEES
Our Compensation Committee is responsible for reviewing and recommending to
the Board the compensation arrangements provided to the management of
HotJobs.com and administers the stock option plan. Following the consummation of
this offering, the members of the Compensation Committee will be two of our
independent directors.
Our Audit Committee reviews our annual audit and meets with our independent
auditors to review our internal controls and financial management practices.
Following the consummation of this offering, the board of directors intends to
establish an Audit Committee. A majority of the members of the Audit Committee
will be independent directors.
DIRECTOR COMPENSATION
We do not currently compensate our directors for attending board of director
or committee meetings, but we reimburse directors for their reasonable travel
expenses incurred in connection with attending these meetings. Directors are
eligible for option grants under our 1999 Stock Option/Stock Issuance Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1998, the Compensation Committee
of the board of directors consisted of Richard S. Johnson. No interlocking
relationship exists between Mr. Johnson or any other member of our board of
directors and any members of the board of directors or compensation committee of
any other company, and no such interlocking relationship has existed in the
past.
EMPLOYMENT AGREEMENTS
Richard S. Johnson, Stephen W. Ellis and Dimitri J. Boylan each has an
employment agreement with us. Each agreement became effective on May 6, 1999,
expires on May 5, 2002, and will automatically renew for additional one-year
terms after that date unless HotJobs.com gives the executive written notice of
its desire not to renew the agreement at least six months prior to the
expiration of the initial or any additional term. The annual salary for each of
these executives is as follows: Mr. Johnson, $200,000; Mr. Ellis, $175,000; and
Mr. Boylan, $175,000. The annual salary of
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each executive will increase by a minimum of 10% each year. In addition, Mr.
Ellis received stock options to purchase shares of our common stock, of
which vest monthly beginning on June 5, 1999 and ending on May 6, 2000 and an
additional of which vest on each of May 6, 2001 and May 6, 2002. On the
closing of this offering, however, of these shares will vest automatically
and the remaining shares will vest on May 6, 2001 and 2002 as stated above.
Also, each of these executives is entitled to an annual bonus determined by the
compensation committee of the board of directors. We can terminate these
employment agreements with or without cause by delivering written notice to the
executive. Each executive may terminate his employment agreement with or without
good reason by delivering written notice to us. Upon termination of the
agreement by us without cause or by the executive for good reason, the executive
is entitled to the greater of his annual salary for the remainder of the term of
the agreement or one year of salary and all options become immediately
exercisable.
Each of the executives with an employment agreement has agreed not to
compete with us, solicit our suppliers or employees or reveal our confidential
information during the term of his employment agreement and for two years
thereafter. In addition, each executive is bound by a proprietary inventions
agreement which prohibits the executive from, among other things, disseminating
or using confidential information about our business or clients in any way that
would be adverse to us.
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning all
compensation we paid our Chief Executive Officer during the year ended December
31, 1998. We did not pay any other executive officer over $100,000 in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------------
------------------------ SHARES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION
- -------------------------------------------------- ----------- ----------- ------------------ --------------
<S> <C> <C> <C> <C>
Richard S. Johnson
President and Chief Executive Officer........... $ 182,000 -- -- --
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR/OPTION EXERCISES AND HOLDINGS
Mr. Johnson did not own any options or stock appreciation rights in 1997 or
1998. In 1999, we granted Mr. Johnson options to purchase shares of our
common stock at an exercise price of $ .
1999 STOCK OPTION/STOCK ISSUANCE PLAN
The 1999 Stock Option/Stock Issuance Plan has three separate programs: (1)
the discretionary option grant program under which eligible individuals in our
employ or service (including officers, non-employee board members and
consultants) may be granted options to purchase shares of our common stock, (2)
the stock issuance program under which such individuals may be issued shares of
common stock directly, through the purchase of such shares or as a bonus tied to
the performance of services and (3) the automatic option grant program under
which option grants will automatically be made at periodic intervals to eligible
non-employee board members.
shares of common stock have been authorized for issuance under
the 1999 Stock Option/Stock Issuance Plan. We have granted options to purchase
shares at a weighted average exercise price of $ , of which
are immediately exercisable
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and the remainder vest over a period of four years. In no event may any one
participant in the 1999 Stock Option/Stock Issuance Plan receive option grants
or direct stock issuances for more than shares in the aggregate per
calendar year.
The discretionary option grant and stock issuance programs will be
administered by our compensation committee. This committee will determine which
eligible individuals are to receive option grants or stock issuances, the time
or times when such option grants or stock issuances are to be made, the number
of shares subject to each such grant or issuance, the exercise or purchase price
for each such grant or issuance, the status of any granted option as either an
incentive stock option or a non-statutory stock option under the federal tax
laws, the vesting schedule to be in effect for the option grant or stock
issuance and the maximum term for which any granted option is to remain
outstanding. Neither the compensation committee nor the board will exercise any
administrative discretion with respect to option grants made under the automatic
option grant program for the non-employee board members.
The exercise price for the options may be paid in cash or in shares of our
common stock valued at fair market value on the exercise date. The option may
also be exercised through a same-day sale program without any cash outlay by the
optionee. In addition, the compensation committee may allow a participant to pay
the option exercise price or direct issue price (and any associated withholding
taxes incurred in connection with the acquisition of shares) with a
full-recourse, interest-bearing promissory note.
In the event that we are acquired, whether by merger or asset sale or
board-approved sale by the stockholders of more than 50% of our voting stock,
each outstanding option under the discretionary option grant program which is
not to be assumed by the successor corporation or otherwise continued will
automatically accelerate in full, and all unvested shares under the
discretionary option grant and stock issuance programs will immediately vest,
except to the extent the repurchase rights with respect to those shares are to
be assigned to the successor corporation or otherwise continued in effect. The
compensation committee may grant options under the discretionary option grant
program which will accelerate in the acquisition even if the options are assumed
or which will accelerate if the optionee's service is subsequently terminated.
The compensation committee may also grant options and issue shares which
accelerate in connection with a hostile change in control effected through a
successful tender offer for more than 50% of our outstanding voting stock or by
proxy contest for the election of board members or the options and shares may
accelerate upon a subsequent termination of the individual's service.
Stock appreciation rights may be issued under the discretionary option grant
program which will provide the holders with the election to surrender their
outstanding options for an appreciation distribution from us equal to the fair
market value of the vested shares subject to the surrendered option less the
aggregate exercise price payable for such shares. Such appreciation distribution
may be made in cash or in shares of our common stock.
The compensation committee has the authority to cancel outstanding options
under the discretionary option grant in return for the grant of new options for
the same or different number of option shares with an exercise price per share
based upon the fair market value of the common stock on the new grant date.
Limited stock appreciation rights will automatically be included as part of
each grant made under the automatic option grant program and may be granted to
one or more officers as part of their option grants under the discretionary
option grant program. Options with such a limited stock appreciation right may
be surrendered to us upon the successful completion of a hostile tender offer
for more than 50% of our outstanding voting stock. In return for the surrendered
option, the optionee will be entitled to a cash distribution from us in an
amount per surrendered option share
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equal to the highest price per share of common stock paid in connection with the
tender offer less the exercise price payable for such share.
The board may amend of modify the 1999 Stock Option/Stock Issuance Plan at
any time, subject to any required stockholder approval. The 1999 Stock
Option/Stock Issuance Plan will terminate no later than , 2009.
EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan will become effective immediately upon the
execution of the underwriting agreement for this offering. The plan is designed
to allow our eligible employees to purchase shares of our common stock, at
semi-annual intervals, through periodic payroll deductions. A total of
shares of common stock will be issued under the plan.
The plan will have a series of successive offering periods, each with a
maximum duration of 24 months. However, the initial offering period will begin
on the day the underwriting agreement is executed in connection with this
offering and will end on the last business day in July 2001. The next offering
period will begin on the first business day in August 2001, and subsequent
offering periods will be set by our compensation committee.
Individuals who are eligible employees on the start date of any offering
period may enter the plan on that start date or on any subsequent semi-annual
entry date (generally February 1 or August 1 each year). Individuals who become
eligible employees after the start date of the offering period may join the plan
on any subsequent semi-annual entry date within that period.
A participant may contribute up to % of his or her cash earnings through
payroll deductions and the accumulated payroll deductions will be applied to the
purchase of shares on the participant's behalf on each semi-annual purchase date
(the last business day in January and July each year). The purchase price per
share will be 85% of the lower of the fair market value of our common stock on
the participant's entry date into the offering period or the fair market value
on the semi-annual purchase date. The first purchase date will occur on the last
business day in January 2000. In no event, however, may any participant purchase
more than shares, nor may all participants in the aggregate
purchase more than shares on any one semi-annual purchase date.
Should the fair market value of the common stock on any semi-annual purchase
date be less than the fair market value on the first day of the offering period,
then the current offering period will automatically end and a new offering
period will begin, based on the lower fair market value.
The board may at any time amend or modify the plan. The plan will terminate
no later than the last business day in July 2009.
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RELATED PARTY TRANSACTIONS
SERIES A PRIVATE PLACEMENT
Effective May 10, 1999, we sold 1,620,000 shares of our Series A Preferred
Stock at a price of $10.00 per share. Upon consummation of this offering, all of
the Series A Preferred Stock will automatically convert into an aggregate of
shares of common stock. The purchasers of Series A Preferred Stock
included the following directors, executive officers and holders of 5% or more
of our common stock on a fully-converted basis:
- FSA Capital, Inc. purchased 40,000 shares of Series A Preferred Stock for
$400,000. Stephen W. Ellis, our Chief Financial Officer and a director, is
a director of FSA Capital, Inc.
- Generation Capital Partners L.P. and affiliated investment entities
("Generation Partners") purchased in the aggregate 1,000,000 shares of
Series A Preferred Stock for $10,000,000. Generation Partners owns more
than 5% of our stock. John A. Hawkins, one of our directors, is a Managing
Partner of an affiliate of Generation Partners.
- John G. Murray, one of our directors, purchased 25,000 shares of Series A
Preferred Stock for $250,000. In connection with the Series A Preferred
Stock financing, GreenAcre Ventures LLC, of which Mr. Murray is a managing
member, purchased shares of our common stock from two of our
employees.
In connection with our private placement, we entered into a stockholders'
agreement with the investors in our Series A Preferred Stock and our current
stockholders. In accordance with this agreement, John A. Hawkins, a designee of
Generation Partners, and John G. Murray, a designee of the holders of our Series
A Preferred Stock, have been elected to our Board. In addition, the investors in
our Series A Preferred Stock have registration rights applicable to the common
stock issuable upon conversion of the Series A Preferred Stock. See "Description
of Capital Stock-- Registration Rights." Other than the registration rights, all
other rights under this agreement terminate upon the closing of this offering.
REDEMPTION OF SECURITIES
On April 2, 1999, we redeemed shares of our common stock for an aggregate
price of $61,000, equal to $ per share, from the following executive officer
and employees in the following amounts:
<TABLE>
<CAPTION>
NAME POSITION AMOUNT
- --------------------------------------- -------------------------------------------------------------- -------------
<S> <C> <C>
Richard S. Johnson..................... Chairman, Chief Executive Officer and President
Allen Murabayashi...................... Director of Technology
Thomas Chin............................ Senior Programmer
</TABLE>
TRANSACTIONS INVOLVING OTEC
Richard S. Johnson is the former President and is currently a director and
one of two shareholders of OTEC. As of December 31, 1998, OTEC owned
approximately 23% of our outstanding voting stock.
OTEC has served as our principal source of financing. During 1997 and 1998,
OTEC paid various expenses on our behalf. These expenses primarily consisted of
rents, salaries, computer expenses and other administrative expenses. These
expenses totaled approximately $741,600 and approximately $1.2 million for 1997
and 1998, respectively. These amounts were repaid with the proceeds of the
Series A Preferred Stock financing.
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<PAGE>
OTEC paid compensation expenses for Richard S. Johnson of $137,500 and
$182,000 for the period ended December 31, 1997 and for the year ended December
31, 1998, respectively. These amounts do not need to be repaid.
OTEC also provided cash advances of approximately $2.6 million to us in 1998
of which approximately $2.2 million bore interest at rates ranging from 8.75% to
9.5% per annum. We repaid these cash advances in May and June 1999.
OTEC and two of its affiliates maintain a line of credit with The Dime
Savings Bank of New York ("Dime") in the principal amount of $3.5 million which
bears interest at a fluctuating rate of 1% above Dime's established commercial
lending rate. All of our assets are pledged to secure this loan. OTEC used this
line of credit to provide the cash advanced to us in 1998. We also maintain a
line of credit with Dime in the principal amount of $500,000 which bears
interest at a fluctuating rate of 1% above Dime's established commercial lending
rate. OTEC and two of its affiliates pledged all of their assets to secure this
loan. As at May 31, 1999, $180,000 remained outstanding under our facility with
Dime. In addition, Mr. Johnson and Bennett Carroccio, one of our principal
stockholders and the other stockholder of OTEC, personally guaranteed repayment
of all outstanding amounts under both lines of credit. In June 1999, Dime
released Messrs. Johnson and Carroccio from their guarantees and released its
security interest in our and OTEC's assets.
OTEC paid us $300,000 in 1997 for the license of miscellaneous proprietary
software and $444,000 in 1998 for hosting that software and for purchasing
additional software. We believe that this transaction was entered into on an
arms length basis.
We have several joint insurance policies with OTEC and its affiliates. Our
commercial property insurance issued by Federal Insurance Company for a one-year
term beginning October 15, 1998, covers both our California and New York offices
as well as OTEC's California office. Our commercial umbrella policy, also issued
by Federal Insurance Company for a one-year term beginning October 15, 1998,
also covers OTEC and its affiliates, as does our workers compensation insurance,
issued by Lumbermans Mutual Casualty Company on December 1, 1998 for a term
ending October 15, 1999. Our employee benefit and life insurance plans are
covered by a policy issued by Travelers Insurance for a one-year term beginning
October 22, 1998, which also covers the benefit plans of OTEC and its
affiliates. Effective June 1, 1999, we have stand-alone insurance policies in
place.
Our employees participate in the 401(k) Profit Sharing Plan established by
RBL Agency, Ltd., one of OTEC's affiliates, in January 1996. The Plan Trustees
are Richard Johnson and Bennett Carroccio. The Plan allows our employees to
defer between 1% and 15% of their compensation. Under the Plan, we make matching
contributions of $.50 for every $1.00 contributed by an employee on the first 6%
of the employee's salary deferrals, which contribution is subject to vesting.
Effective July 1, 1999, our employees will participate in our own 401(k) Plan
and all amounts attributed to our employees in the RBL Plan will be transferred
to our 401(k) Plan.
On March 2, 1999, Mr. Johnson granted Mr. Carroccio an option, which expires
on March 2, 2002, to purchase 34 shares of OTEC common stock at a purchase price
of $4,880 per share and an additional option to purchase 50 shares of each of
OTEC's affiliated companies at a purchase price of $1 per share. In addition,
Mr. Johnson granted to Mr. Carroccio an irrevocable proxy expiring March 2, 2002
to vote all of Mr. Johnson's shares subject to the option. Similarly, on March
2, 1999, Mr. Carroccio granted Mr. Johnson an option, which expires on March 2,
2002, to purchase shares of our common stock at a purchase price of $ per
share. Mr. Carroccio granted Mr. Johnson an irrevocable proxy expiring March 2,
2002 to vote all of his shares of our stock.
52
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of June , 1999, and as adjusted to
reflect the sale of the shares of common stock offered by us in this offering
for:
- each person, or group of affiliated persons, who HotJobs.com knows
beneficially owns 2% or more of our common stock;
- each of our directors;
- each executive officer named in the Summary Compensation Table; and
- all directors and executive officers of HotJobs.com as a group.
Except as otherwise noted, the address of each person listed in the table is
c/o HotJobs.com, Ltd., 24 West 40th Street, 14th Floor, New York, NY 10018.
The table includes all shares of common stock beneficially owned by the
indicated stockholder as of June , 1999. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and includes
voting or investment power with respect to securities. In computing the number
of shares beneficially owned by a person and the percentage of ownership of that
person, shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of June , 1999 are deemed
outstanding. These shares, however, are not deemed outstanding for the purposes
of computing the percentage of ownership of any other person. To our knowledge,
except as otherwise noted, the persons named in the table have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them, subject to community property laws where applicable.
The percent of beneficial ownership for each stockholder is based on
shares of common stock outstanding as of June , 1999 and shares of
common stock outstanding after this offering. An "*" indicates ownership of less
than 1%.
<TABLE>
<CAPTION>
PERCENT OF TOTAL SHARES OF
SHARES COMMON STOCK
BENEFICIALLY -------------------------------
NAME OWNED BEFORE OFFERING AFTER OFFERING
- ------------------------------------------------------------------ ------------ --------------- --------------
<S> <C> <C> <C>
Richard S. Johnson(1).............................................
Bennett Carroccio(2)..............................................
OTEC, Inc.(3).....................................................
Generation Partners(4)............................................
John A. Hawkins(5)................................................
Thomas Chin.......................................................
Allen Murabayashi.................................................
Dimitri J. Boylan(6)..............................................
Stephen W. Ellis(7)...............................................
Boston Millennia(8)...............................................
Bessemer Venture Partners(9)......................................
John G. Murray(10)................................................
All directors and executive officers as a group (5 persons).......
</TABLE>
(1) Includes shares issuable upon the exercise of outstanding options;
shares held by the Richard and Carole Johnson 1999 Trust of which Mr.
Johnson disclaims beneficial ownership; shares owned by Mr. Carroccio
which Mr. Johnson has a right to purchase pursuant to an option granted to
him by Mr. Carroccio and a right to vote pursuant to an irrevocable proxy
granted by Mr. Carroccio; and shares owned by OTEC of which Mr.
Johnson disclaims beneficial ownership.
53
<PAGE>
(2) Includes shares issuable upon the exercise of outstanding options;
shares held by the Bennett and Brenda Carroccio 1999 Trust of which
Mr. Carroccio disclaims beneficial ownership; shares subject to
purchase by Mr. Johnson pursuant to an option of which Mr.Carroccio
disclaims beneficial ownership; and shares owned by OTEC of which Mr.
Carroccio disclaims beneficial ownership.
(3) OTEC's address is 24 West 40(th) Street, 12(th) Floor, New York, NY 10018.
(4) Includes shares held by Generation Capital Company LLC as general partner of
Generation Parallel Management Partners L.P. and as general partner of the
general partner of Generation Capital Partners L.P. In addition, includes
shares held in a separate account of State Board of Administration of
Florida with respect to which an affiliate of Generation Capital Company LLC
has management authority.
(5) Includes shares beneficially owned by Generation Capital Company LLC.
Mr. Hawkins is a Managing Partner of Generation Capital Company LLC and, as
such, may be deemed to have voting and investment power over the shares
beneficially owned by Generation Capital Company LLC. Mr. Hawkins disclaims
any beneficial ownership of these shares.
(6) Includes shares issuable upon the exercise of outstanding options.
(7) Includes shares owned by FSA Capital, Inc., of which Mr. Ellis is a
director, and shares issuable upon the exercise of outstanding
options.
(8) Includes shares owned by Boston Millennia Partners Limited Partnership
and shares owned by Boston Millennia Associates I Partnership. The
general partner of Boston Millennia Partners Limited Partnership is Glen
Partners Limited Partnership. The managing general partners of Boston
Millennia Associates I Partnership are A. Dana Callow, Jr., Robert S.
Sherman and Martin J. Hernon. The address for Boston Millennia is 30 Rowes
Wharf, Boston, MA 02110.
(9) Bessemer Venture Partners is the name used to refer to a group of affiliated
investment partnerships. Shares reflected include holdings of two investment
partnerships--Bessemer Venture Partners IV L.P. with respect to shares
and Bessec Ventures IV L.P. with respect to shares. The general
partner of these partnerships is Deer IV & Co. LLC. The members of Deer IV &
Co. LLC are William T. Burgin, Robert H. Buescher, Christopher Gabrieli,
David J. Cowan, G. Felda Hardymon and Rob L. Soni. The general partner and
each of the members of Deer IV & Co. LLC disclaim beneficial ownership of
the shares held by the investment partnerships, except to the extent of
their proportionate partnership interests therein. The address for Bessemer
Venture Partners is 1400 Old Country Road, Suite 407, Westbury, NY 11590.
(10) Includes shares of our common stock owned by GreenAcre Ventures LLC
of which Mr. Murray is a Managing Member. Mr. Murray disclaims beneficial
ownership of these shares.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our amended and restated certificate of incorporation, which will become
effective upon the closing of this offering, authorizes the issuance of up to
50,000,000 shares of common stock, par value $.01 per share, and 10,000,000
shares of preferred stock, par value $.01 per share, the rights and preferences
of which may be established from time to time by our board of directors. As of
June , 1999, shares of common stock were outstanding and 1,620,000
shares of convertible preferred stock convertible into shares of common
stock were issued and outstanding. As of June , 1999, HotJobs.com had 52
stockholders.
COMMON STOCK
Under our amended and restated certificate of incorporation, holders of our
common stock are entitled to one vote for each share held on all matters
submitted to a vote of stockholders, including the election of directors. They
do not have cumulative voting rights. Accordingly, holders of a majority of the
shares of common stock entitled to vote in any election of directors may elect
all of the directors standing for election. Holders of common stock are entitled
to receive ratably dividends, if any, as may be declared by the board of
directors out of legally available funds, subject to any preferential dividend
rights of any outstanding preferred stock. In case of a liquidation, dissolution
or winding up of HotJobs.com, the holders of common stock are entitled to
receive ratably our net assets available after the payment of all debts and
other liabilities and subject to the prior rights of any outstanding preferred
stock. Holders of the common stock have no preemptive, subscription or
conversion rights. There are no redemption or sinking fund provisions applicable
to the common stock. The outstanding shares of common stock are, and the shares
offered by us in this offering will be, when issued in consideration for payment
thereof, fully paid and nonassessable. The rights, preferences and privileges of
holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock which we may
designate and issue in the future. After the closing of this offering, there
will be no shares of preferred stock outstanding.
PREFERRED STOCK
Under our amended and restated certificate of incorporation, our board of
directors will be authorized, without further stockholder approval, to issue
from time to time up to an aggregate of 10,000,000 shares of preferred stock in
one or more series. Our board of directors may fix or alter the number of
shares, designations, preferences, powers and other special rights of the
preferred stock. The preferences, powers, rights and restrictions of different
series of preferred stock may differ. The issuance of preferred stock could
decrease the amount of earnings and assets available for distribution to holders
of common stock or affect adversely the rights and powers, including voting
rights, of the holders of common stock. The issuance may also have the effect of
delaying, deferring or preventing a change in control of HotJobs.com. All
outstanding shares of preferred stock will be automatically converted into
common stock upon the closing of this offering. We have no present plans to
issue any additional shares of preferred stock.
REGISTRATION RIGHTS
Under the terms of our amended and restated stockholders' agreement, at any
time on or after May 11, 1999, the holders of a majority of the outstanding
shares of common stock issuable upon the conversion of the shares of our
preferred stock may on three occasions require us to register for sale all or
any portion of the shares of common stock issuable upon conversion of the
preferred shares held by them. This type of registration right is known as a
"demand" registration right.
55
<PAGE>
In addition, under the terms of our amended and restated stockholders'
agreement, if required by the stockholder, we are also obligated to register any
currently outstanding shares of common stock and any of the shares of common
stock issuable upon conversion of the preferred shares when we register stock
for our own account or the account of other stockholders. This type of
registration right is known as a "piggyback" registration right.
The foregoing registration rights are subject to certain conditions and
limitations, including:
- the right of the underwriters in any underwritten offering to limit the
number of shares of common stock held by stockholders with registration
rights to be included in any registration;
- our right to delay for up to 120 days after the effectiveness of a
registration statement in connection with a firm commitment underwritten
public offering; and
- our right to delay for up to 120 days the filing of a registration
statement pursuant to a demand registration if our board of directors
determines that the registration would not be in our best interest at that
time.
We are generally required to bear all of the expenses of all registrations,
except underwriting discounts and commissions. Registration of any of the shares
of common stock held by stockholders with registration rights would result in
those shares becoming freely tradable without restriction under the Securities
Act immediately after consummation of this offering. We have agreed to indemnify
the holders of registration rights in connection with the demand and piggyback
registration rights under the terms of our amended and restated stockholders'
agreement.
The holders of our currently outstanding shares of common stock and the
shares of our common stock issuable upon conversion of the Series A Preferred
Stock have piggyback registration rights in connection with this offering. These
holders have agreed to waive their piggyback registration rights with respect to
this offering. In addition, certain holders of our currently outstanding shares
of common stock and the holders of shares of our common stock issuable upon
conversion of the Series A Preferred Stock have entered into a 180-day lock-up
agreement with the underwriters. After expiration of this lock-up period, these
stockholders will have the ability to exercise the registration rights set forth
above.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND OUR AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION AND BYLAWS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law (as amended from time to time, the "DGCL"). Subject to certain
exceptions, Section 203 of the DGCL prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the interested
stockholder attained such status with the approval of the board of directors or
unless the business combination is approved in a prescribed manner. A "business
combination" includes mergers, asset sales and other transactions resulting in a
financial benefit to the interested stockholder. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, fifteen percent (15%) or more
of the corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to HotJobs.com and, accordingly, may discourage attempts to acquire
HotJobs.com.
In addition, provisions of our amended and restated certificate of
incorporation and bylaws, which provisions will be in effect upon the closing of
this offering and are summarized in the following paragraphs, may be deemed to
have an anti-takeover effect and may delay, defer or prevent a tender offer or
takeover attempt that a stockholder might consider in its best interest,
56
<PAGE>
including those attempts that might result in a premium over the market price
for the shares held by stockholders.
CLASSES OF DIRECTORS. In accordance with the terms of our amended and
restated certificate of incorporation, our board of directors has been divided
into three classes, denominated as Class I, Class II and Class III. Members of
each class hold office for staggered three-year terms. At each annual meeting of
our stockholders commencing in 2000, the successors to the directors whose terms
expire at that meeting will be elected to serve until the third annual meeting
after their election or until their successors have been elected and qualified.
Prior to consummation of this offering, we will appoint two independent
directors to serve as the Class I directors whose terms expire at the 2000
annual meeting of stockholders. Messrs. Murray and Hawkins are Class II
directors whose terms expire at the 2001 annual meeting of stockholders. Messrs.
Johnson, Boylan and Ellis are Class III directors whose terms expire at the 2002
annual meeting of stockholders. With respect to each class, a director's term
will be subject to the election and qualification of their successors, or their
earlier death, resignation or removal. These provisions, when taken in
conjunction with other provisions of our amended and restated certificate of
incorporation authorizing the board of directors to fill vacant directorships,
may delay a stockholder from removing incumbent directors and simultaneously
gaining control of the board of directors by filling the vacancies with its own
nominees.
BOARD OF DIRECTORS VACANCIES. Our amended and restated certificate of
incorporation authorizes the board of directors to fill vacant directorships or
increase the size of the board of directors. This may deter a stockholder from
removing incumbent directors and simultaneously gaining control of the board of
directors by filling the vacancies created by the removal with its own nominees.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS. Our amended and
restated certificate of incorporation eliminates the ability of stockholders to
act by written consent. Our amended and restated bylaws provide that special
meetings of stockholders of HotJobs.com may be called only by the chairman of
the board of directors or the president at the request of two-thirds of the
board of directors.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS. Our amended and restated bylaws provide that stockholders seeking
to bring business before an annual meeting of stockholders, or to nominate
candidates for election as directors at an annual meeting of stockholders, must
provide timely notice thereof in writing. To be timely, a stockholder's notice
must be received at our principal executive offices not less than 90 days nor
more than 120 days prior to the anniversary date of the immediately preceding
annual meeting of stockholders. In the event that the annual meeting is called
for a date that is not within 30 days before or 70 days after the anniversary
date, in order to be timely, notice from the stockholder must be received:
- not earlier than 120 days prior to the annual meeting of stockholders; and
- not later than 90 days prior to the annual meeting of stockholders or the
tenth day following the date on which notice of the annual meeting was
made public.
In the case of a special meeting of stockholders called for the purpose of
electing directors, notice by the stockholder, in order to be timely, must be
received:
- not earlier than 120 days prior to the special meeting; and
- not later than 90 days prior to the special meeting or the close of
business on the tenth day following the day on which public disclosure of
the date of the special meeting was made.
57
<PAGE>
Our amended and restated bylaws also specify certain requirements as to the
form and content of a stockholder's notice. These provisions may preclude
stockholders form bringing matters before an annual meeting of stockholders or
form making nominations for directors at an annual meeting of stockholders.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of
common stock and preferred stock are available for future issuance without
stockholder approval, subject to certain limitations imposed by the Nasdaq
National Market. These additional shares may be utilized for a variety of
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued and unreserved common stock and preferred stock could
render more difficult or discourage an attempt to obtain control of HotJobs.com
by means of a proxy contest, tender offer, merger or otherwise.
AMENDMENTS; SUPERMAJORITY VOTE REQUIREMENTS. The Delaware General
Corporation Law provides generally that the affirmative vote of a majority of
the shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or bylaws, unless a corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage. Our
amended and restated certificate of incorporation imposes supermajority vote
requirements in connection with various business combination transactions and
the amendment of various provisions of our amended and restated certificate of
incorporation and bylaws, including those provisions relating to the classified
board of directors and the ability of stockholders to call special meetings.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The amended and restated certificate of incorporation provides that, except
to the extent prohibited by the Delaware General Corporation Law, our directors
shall not be personally liable to HotJobs.com or its stockholders for monetary
damages for any breach of fiduciary duty as directors of HotJobs.com. Under the
Delaware General Corporation Law, the directors have a fiduciary duty to
HotJobs.com which is not eliminated by this provision of the amended and
restated certificate of incorporation and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of nonmonetary relief will
remain available. In addition, each director will continue to be subject to
liability under the Delaware General Corporation Law for breach of the
director's duty of loyalty to HotJobs.com for acts or omissions which are found
by a court of competent jurisdiction to be not in good faith or which involves
intentional misconduct, or knowing violations of law, for actions leading to
improper personal benefit to the director, and for payment of dividends or
approval of stock repurchases or redemptions that are prohibited by the Delaware
General Corporation Law. This provision also does not affect the directors'
responsibilities under any other laws, such as the Federal securities laws.
Section 145 of the Delaware General Corporation Law empowers a corporation
to indemnify its directors and officers and to purchase insurance with respect
to liability arising out of their capacity or status as directors and officers,
provided that this provision shall not eliminate or limit the liability of a
director: (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
arising under Section 174 of the Delaware General Corporation Law; or (iv) for
any transaction from which the director derived an improper personal benefit.
The Delaware General Corporation Law provides further that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's bylaws, any
agreement, a vote of stockholders or otherwise. The Certificate eliminates the
personal liability of directors to the fullest extent permitted by Section
102(b)(7) of the Delaware General Corporation Law and provides that we may fully
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed
58
<PAGE>
action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that such person is or was a director or
officer of HotJobs.com or is or was serving at the request of HotJobs.com as a
director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding.
We have entered into agreements to indemnify its directors and executive
officers, in addition to the indemnification provided for in our amended and
restated bylaws. We believe that these provisions and agreements are necessary
to attract and retain qualified directors and executive officers. Our amended
and restated bylaws also permit us to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions, regardless of whether the Delaware General Corporation Law would permit
indemnification. We have applied for liability insurance for our officers and
directors.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under our amended and restated certificate of
incorporation. We are not aware of any threatened litigation or proceeding that
may result in a claim for such indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is .
59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our common
stock, and no prediction can be made as to the effect, if any, that market sales
of shares of common stock or the availability of shares of common stock for sale
will have on the market price of the common stock prevailing from time to time.
Nevertheless, sales of substantial amounts of common stock in the public market,
or the perception that such sales could occur, could adversely affect the market
price of the common stock and could impair our future ability to raise capital
through the sale of our equity securities.
Upon the closing of this offering, we will have a total of shares of
common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options. Upon the closing
of this offering, shares of common stock will be issuable upon exercise
of outstanding options. Of the outstanding shares, the shares sold in
this offering will be freely tradable, except that any shares held by our
"affiliates" (as that term is defined in Rule 144 promulgated under the
Securities Act) may only be sold in compliance with the limitations described
below. The remaining shares of common stock will be deemed "restricted
securities" as defined under Rule 144. Restricted securities may be sold in the
public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k) or 701 promulgated under the Securities
Act, which rules are summarized below. Subject to the lock-up agreements
described below and the provisions of Rules 144, 144(k) and 701, additional
shares will be available for sale in the public market as follows:
- shares will be available for immediate sale in the public market
on the date of this prospectus;
- shares will be eligible for sale 90 days after the date of this
prospectus;
- shares will be eligible for sale 180 days after the date of this
prospectus; and
- shares will be eligible for sale following 180 days after the date
of this prospectus.
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated), including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of (i) 1% of the then
outstanding shares of common stock (approximately shares immediately after
this offering) or (ii) the average weekly trading volume in the common stock
during the four calendar weeks preceding the date on which notice of such sale
is filed, subject to certain restrictions. In addition, a person who is not
deemed to have been an affiliate of HotJobs.com at any time during the 90 days
preceding a sale and who has beneficially owned the shares proposed to be sold
for at least two years would be entitled to sell such shares under Rule 144(k)
without regard to the requirements described above. To the extent that shares
were acquired from an affiliate of HotJobs.com, such person's holding period for
the purpose of effecting a sale under Rule 144 commences on the date of transfer
from the affiliate.
Rule 701 promulgated under the Securities Act provides that shares of common
stock acquired pursuant to written plans such as the Stock Option/Stock Issuance
Plan may be resold by persons other than affiliates, beginning 90 days after the
date of this prospectus, subject only to the manner of sale provisions of Rule
144, and by affiliates, beginning 90 days after the date of this prospectus,
subject to all provisions of Rule 144 except its one-year minimum holding
period.
All of our directors and officers and certain stockholders and optionholders
(holding an aggregate of shares of common stock) have agreed that
they will not, without the prior written consent of the representatives of the
underwriters, offer, sell, sell short, transfer,
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<PAGE>
hypothecate, pledge or otherwise dispose of any shares of our common stock or
the securities convertible into or exchangeable or exercisable for shares of our
common stock (or to enter into any agreement or transaction which is designed to
effect, or could be expected to result in, any such transaction) for a period of
180 days following the date of this prospectus without the consent of Deutsche
Bank Securities Inc.
We intend to file a Form S-8 registration statement under the Securities Act
on or immediately after the date of this prospectus to register all shares of
common stock issuable under the Stock Option/Stock Issuance Plan. Such
registration statement will automatically become effective upon filing.
Accordingly, shares covered by that registration statement will thereupon be
eligible for sale in the public markets, unless such options are subject to
vesting restrictions or the contractual restrictions described above.
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of the prospectus, except
that we may issue, and grant options to purchase, shares of common stock under
the Stock Option/Stock Issuance Plan. In addition, we may issue shares of common
stock in connection with any acquisition of another company if the terms of such
issuance provide that such common stock shall not be resold prior to the
expiration of the 180-day period referenced in the preceding sentence.
Following this offering, under certain circumstances and subject to certain
conditions, holders of shares of our outstanding common stock will
have certain demand registration rights with respect to their shares of common
stock (subject to the 180-day lock-up arrangement described above) to require us
to register their shares of common stock under the Securities Act, and they will
have certain rights to participate in any future registration of securities by
us. We are not required to effect more than demand registrations on behalf
of such holders. These holders are subject to lock-up periods of not more than
180 days following the date of this prospectus or any subsequent prospectus.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the
underwriters named below, through their representatives Deutsche Bank Securities
Inc., BancBoston Robertson Stephens and SG Cowen Securities Corporation, have
severally agreed to purchase from us the following respective numbers of shares
of common stock at the initial public offering price less the underwriting
discounts and commissions set forth on the cover page of this prospectus:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ---------------------------------------------------------------------------------------------- ------------------
<S> <C>
Deutsche Bank Securities Inc. ................................................................
BancBoston Robertson Stephens.................................................................
SG Cowen Securities Corporation...............................................................
------------------
Total.....................................................................................
------------------
------------------
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
are subject to specified conditions and that the underwriters will purchase all
of the shares of common stock offered in the offering if any of the shares are
purchased.
We have been advised by the underwriters' representatives that the
underwriters propose to offer the shares of common stock to the public at the
initial public offering price set forth on the cover page of this prospectus and
to dealers at that price less a concession not in excess of $ per
share. The underwriters may allow, and the dealers may reallow, a concession not
in excess of $ per share to other dealers. After the initial
public offering, the offering price and other selling terms may be changed by
the underwriters' representatives. The expenses of the offering are estimated to
be $ . The following table sets forth the public offering price and all
discounts and commissions to be allowed to the underwriters:
<TABLE>
<CAPTION>
PUBLIC OFFERING UNDERWRITING DISCOUNTS PROCEEDS TO
PRICE AND COMMISSIONS HOTJOBS
--------------- ----------------------- -------------
<S> <C> <C> <C>
Per share............................................... $ $ $
Total................................................... $ $ $
</TABLE>
We have granted to the underwriters an option, exercisable not later than 30
days after the date of this prospectus, to purchase up to
additional shares of common stock at the initial public offering
price less the underwriting discounts and commissions set forth on the cover
page of this prospectus. If the underwriters exercise the option, each of the
underwriters will have a firm commitment to purchase approximately the same
percentage of the option shares that the number of shares of common stock to be
purchased by it in the above table bears to , and we will be obligated to
sell these shares to the underwriters. The underwriters may exercise the option
only to cover over-allotments made in connection with the sale of the common
stock offered in the offering. If purchased, the underwriters will offer the
additional shares on the same terms as those on which the shares are being
offered.
At our request, the underwriters have reserved up to shares of common
stock for sale, at the initial public offering price, to employees and friends
of ours through a directed share program. The number of shares of common stock
available for sale to the general public in the
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public offering will be reduced to the extent that employees and friends
purchase the reserved shares.
We have agreed to indemnify the underwriters against specified liabilities,
including liabilities under the Securities Act of 1933.
We have agreed not to offer, sell, sell short, transfer, hypothecate, pledge
or otherwise dispose of any shares of our common stock or other securities
convertible into or exchangeable or exercisable for shares of our common stock
or derivatives of our common stock (or to enter into any agreement or
transaction which is designed to effect, or could be expected to result in, any
such transaction) for a period of 180 days after the date of this prospectus,
directly or indirectly, by us or otherwise, except as consideration for business
acquisitions, on exercise of currently outstanding stock options or on the
issuance of options to key employees and directors under our stock option plans
and the exercise of such options, without the prior written consent of Deutsche
Bank Securities Inc.
All of our officers and directors and certain of our stockholders and option
holders (holding an aggregate of shares of common stock) have entered into
lock-up agreements. Under these agreements, they have agreed not to offer, sell,
sell short, transfer, hypothecate, pledge or otherwise dispose of any shares of
our common stock or other securities convertible into or exchangeable or
exercisable for shares of our common stock or derivatives of our common stock
(or to enter into any agreement or transaction which is designed to effect, or
could be expected to result in, any such transaction) for a period of 180 days
after the date of this prospectus, directly or indirectly, any shares of our
common stock or any securities convertible into or exchangeable or exercisable
for shares of our common stock for a period of 180 days following the date of
this prospectus without the consent of Deutsche Bank Securities Inc. Transfers
or dispositions can be made during the lock-up period in case of gifts for
estate planning purposes where the donee signs a lock-up agreement.
The underwriters' representatives have advised us that the underwriters do
not intend to confirm sales to any account over which they exercise
discretionary authority.
In order to facilitate this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the market price of
our common stock. Specifically, the underwriters may over-allot shares of our
common stock in connection with this offering, thereby creating a short position
in the underwriters' syndicate account. Additionally, to cover over-allotments
or to stabilize the market price of our common stock, the underwriters may bid
for, and purchase, shares of our common stock in the open market. Any of these
activities may maintain the market price of our common stock at a level above
that which might otherwise prevail in the open market. The underwriters are not
required to engage in these activities, and, if commenced, the activities may be
discontinued at any time. The underwriters' representatives, on behalf of the
underwriters, also may reclaim selling concessions allowed to an underwriter or
dealer, if the syndicate repurchases shares distributed by that underwriter or
dealer.
The underwriters and their respective affiliates may be lenders to, engage
in transactions with, and perform services for us in the ordinary course of
business.
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock will
be determined by negotiations among us and the underwriters' representatives.
Among the factors to be considered in negotiations are prevailing market
conditions, our results of operations in recent periods, the market
capitalizations and stages of development of other companies that we and the
underwriters' representatives believe to be comparable to us, estimates of our
business potential, the present stage of our development and other factors
deemed relevant.
63
<PAGE>
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for HotJobs.com by Brobeck, Phleger & Harrison LLP, Washington, DC. Certain
legal matters in connection with this offering will be passed upon for the
underwriters by Shaw Pittman, a law partnership including professional
corporations, McLean, Virgina.
EXPERTS
The financial statements for HotJobs.com, Ltd. as of December 31, 1997 and
December 31, 1998 and for the period from February 20, 1997 (inception) to
December 31, 1997 and the year ended December 31, 1998 included in this
prospectus have been so included in reliance on the report of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, upon the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 (including the exhibits, schedules and amendments thereto)
under the Securities Act with respect to the shares of common stock to be sold
in this offering. This prospectus does not contain all the information set forth
in the Registration Statement. For further information with respect to
HotJobs.com and the shares of common stock to be sold in this offering,
reference is made to the Registration Statement. Statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete, and in each instance reference is made
to the copy of such contract, agreement or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.
You may read and copy all or any portion of the Registration Statement or
any other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating fee, by writing
to the Securities and Exchange Commission. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information on the operation
of the public reference rooms. Our Securities and Exchange Commission filings,
including the Registration Statement, are also available to you on the
Commission's web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended, and,
in accordance therewith, will file periodic reports, proxy statements and other
information with the Securities and Exchange Commission. Upon approval of the
common stock for the quotation on the Nasdaq National Market, such reports,
proxy and information statements and other information may also be inspected at
the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
We intend to furnish our stockholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each year containing unaudited interim consolidated financial information.
64
<PAGE>
HOTJOBS.COM, LTD.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Independent Auditors' Report.............................................................................. F-2
Balance Sheets as of December 31, 1997 and 1998, and March 31, 1999 (unaudited)........................... F-3
Statements of Operations for the period from February 20, 1997 (inception) to December 31, 1997, the year
ended December 31, 1998, and for the three months ended March 31, 1998 (unaudited) and 1999
(unaudited)............................................................................................. F-4
Statements of Stockholders' Deficit for the period from February 20, 1997 (inception) to December 31,
1997, the year ended December 31, 1998, and for the three months ended March 31, 1999 (unaudited)....... F-5
Statements of Cash Flows for the period from February 20, 1997 (inception) to December 31, 1997, the year
ended December 31, 1998, and for the three months ended March 31, 1998 (unaudited) and 1999
(unaudited)............................................................................................. F-6
Notes to Financial Statements............................................................................. F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
HotJobs.com, Ltd.:
We have audited the accompanying balance sheets of HotJobs.com, Ltd. as of
December 31, 1997 and 1998, and the related statements of operations,
stockholders' deficit, and cash flows for the period from February 20, 1997
(inception) to December 31, 1997 and for the year ended December 31, 1998. 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 HotJobs.com, Ltd. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the period from February 20, 1997 (inception) to December 31, 1997 and for
the year ended December 31, 1998 in conformity with generally accepted
accounting principles.
March 15, 1999, except as to notes 2(a), 6 and 13(c)
which are as of June 10, 1999
F-2
<PAGE>
HOTJOBS.COM, LTD.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1999
-------------------------- ----------------------------------------------
1997 1998 ACTUAL
----------- ------------- -------------
(UNAUDITED) PRO FORMA (A) PRO FORMA
-------------- AS ADJUSTED (B)
(UNAUDITED) ---------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash...................................... $ -- $ 167,004 $ 257,834 $ 16,457,834 $ 16,457,834
Accounts receivable, less allowance for
doubtful accounts of $0 in 1997, $85,000
in 1998 and $169,000 in 1999............ 319,137 1,553,297 2,203,639 2,203,639 2,203,639
Prepaid expenses.......................... 20,848 1,042,675 362,473 362,473 362,473
----------- ------------- ------------- -------------- ---------------
Total current assets.................. 339,985 2,762,976 2,823,946 19,023,946 19,023,946
Property and equipment, net................. -- 589,693 1,023,284 1,023,284 1,023,284
Other assets................................ -- 301,285 277,369 277,369 277,369
----------- ------------- ------------- -------------- ---------------
Total assets.......................... $ 339,985 $ 3,653,954 $ 4,124,599 $ 20,324,599 $ 20,324,599
----------- ------------- ------------- -------------- ---------------
----------- ------------- ------------- -------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit............................ $ -- $ 180,000 $ 180,000 180,000 180,000
Accounts payable and accrued expenses..... 77,264 617,879 1,885,639 1,885,639 1,885,639
Due to affiliate.......................... 294,449 3,631,640 4,406,803 4,406,803 4,406,803
Deferred revenue.......................... 424,491 964,711 1,257,277 1,257,277 1,257,277
Current installments of obligations under
capital leases.......................... -- 72,950 184,915 184,915 184,915
----------- ------------- ------------- -------------- ---------------
Total current liabilities............. 796,204 5,467,180 7,914,634 7,914,634 7,914,634
Obligations under capital leases, excluding
current installments...................... -- 79,999 317,107 317,107 317,107
----------- ------------- ------------- -------------- ---------------
Total liabilities..................... 796,204 5,547,179 8,231,741 8,231,741 8,231,741
Redeemable convertible preferred stock...... -- -- -- 16,200,000 --
Stockholders' (deficit) equity:
Common stock, $0.01 par value; 2,000,000
shares authorized, 887,500 and 867,500,
867,500 and 867,500 shares issued and
outstanding at December 31, 1997, and
December 31, 1998 and March 31, 1999
actual and pro forma, respectively, and
1,031,418 shares pro forma as
adjusted................................ 8,875 8,675 8,675 8,675 10,314
Additional paid-in capital................ 128,629 310,829 310,829 310,829 16,509,190
Accumulated deficit....................... (593,723) (2,212,729) (4,426,646) (4,426,646) (4,426,646)
----------- ------------- ------------- -------------- ---------------
Total stockholders' (deficit)
equity.............................. (456,219) (1,893,225) (4,107,142) (4,107,142) 12,092,858
----------- ------------- ------------- -------------- ---------------
Commitments and contingencies...............
Total liabilities and stockholders
(deficit) equity.................... $ 339,985 $ 3,653,954 $ 4,124,599 $ 20,324,599 $ 20,324,599
----------- ------------- ------------- -------------- ---------------
----------- ------------- ------------- -------------- ---------------
</TABLE>
- --------------------------
(a) Pro forma information gives effect to the issuance of 1,620,000 shares of
Series A Preferred Stock for cash proceeds of $16.2 million on May 10, 1999.
(b) Assumes conversion of all outstanding shares of Series A Preferred Stock
upon consummation of the offering.
See accompanying notes to financial statements.
F-3
<PAGE>
HOTJOBS.COM, LTD.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM THREE MONTHS ENDED
FEBRUARY 20, 1997 MARCH 31,
(INCEPTION) TO YEAR ENDED ------------------------------
DECEMBER 31, DECEMBER 31, 1998 1999
1997 1998 -------------- --------------
------------------ -------------- (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Service fees............................... $ 360,942 $ 3,038,317 $ 346,606 $ 2,018,374
Software license fees...................... 375,000 563,200 125,000 80,000
Job fair fees.............................. -- -- -- 215,727
Other...................................... 13,117 549,269 80,000 336,787
------------------ -------------- -------------- --------------
Total revenues........................... 749,059 4,150,786 551,606 2,650,888
Cost of revenues............................. 12,000 505,527 77,483 588,419
------------------ -------------- -------------- --------------
Gross profit........................... 737,059 3,645,259 474,123 2,062,469
Operating expenses:
Product development........................ 173,846 474,406 89,852 156,411
Sales and marketing........................ 431,165 3,084,712 524,589 3,228,509
General and administrative................. 725,771 1,642,089 273,719 823,379
------------------ -------------- -------------- --------------
Total operating expenses................. 1,330,782 5,201,207 888,160 4,208,299
------------------ -------------- -------------- --------------
Loss from operations................... (593,723) (1,555,948) (414,037) (2,145,830)
Net interest expense......................... -- 63,058 6,584 68,087
------------------ -------------- -------------- --------------
Net loss............................... $ (593,723) $ (1,619,006) $ (420,621) $ (2,213,917)
------------------ -------------- -------------- --------------
------------------ -------------- -------------- --------------
Basic and diluted net loss per common
share...................................... $ (0.67) $ (1.85) $ (0.47) $ (2.55)
------------------ -------------- -------------- --------------
------------------ -------------- -------------- --------------
Weighted average shares outstanding used in
basic and diluted net loss per common share
calculation................................ 887,500 876,841 887,500 867,500
------------------ -------------- -------------- --------------
------------------ -------------- -------------- --------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
HOTJOBS.COM, LTD.
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------ PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
----------- ----------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Issuance of common stock..................... 887,500 $ 8,875 $ (8,871) $ -- $ 4
Allocation of compensation from affiliate.... -- -- 137,500 -- 137,500
Net loss for the period from February 20,
1997 (inception) to December 31, 1997...... -- -- -- (593,723) (593,723)
----------- ----------- ----------- -------------- --------------
Balance as of December 31, 1997.............. 887,500 8,875 128,629 (593,723) (456,219)
Allocation of compensation from affiliate.... -- -- 182,000 -- 182,000
Repurchase of common stock................... (20,000) (200) 200 -- --
Net loss for the year ended December 31,
1998....................................... -- -- -- (1,619,006) (1,619,006)
----------- ----------- ----------- -------------- --------------
Balance as of December 31, 1998.............. 867,500 8,675 310,829 (2,212,729) (1,893,225)
Net loss for the three months ended March 31,
1999 (unaudited)........................... -- -- -- (2,213,917) (2,213,917)
----------- ----------- ----------- -------------- --------------
Balance as of March 31, 1999 (unaudited)..... 867,500 $ 8,675 $ 310,829 $ (4,426,646) $ (4,107,142)
----------- ----------- ----------- -------------- --------------
----------- ----------- ----------- -------------- --------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
HOTJOBS.COM, LTD.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 20, 1997 THREE MONTHS ENDED
(INCEPTION) TO YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, ------------------------------
1997 1998 1998 1999
------------------ -------------- ------------- ---------------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
Cash flows from operating activities:
Net loss................................... $ (593,723) $ (1,619,006) $ (420,621) $ (2,213,917)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization of
property and equipment............... -- 107,904 3,164 73,378
Provision for doubtful accounts
contributed by affiliate............. -- 85,000 16,200 84,000
Allocation of compensation cost from
affiliate............................ 137,500 182,000 45,501 --
(Increase)/decrease In:
Accounts receivable.................. (319,137) (1,319,160) (245,807) (734,342)
Due to affiliate..................... 294,449 697,396 168,500 95,163
Prepaid expenses..................... (20,848) (1,021,827) -- 680,202
Other assets......................... -- (301,285) -- 23,916
Increase in:
Accounts payable and accrued
expenses........................... 77,264 540,615 348,375 1,267,760
Deferred revenue..................... 424,491 540,220 119,741 292,566
------------------ -------------- ------------- ---------------
Net cash provided by (used in)
operating activities............. (4) (2,108,143) 35,053 (431,274)
------------------ -------------- ------------- ---------------
Cash flows from investing activities:
Capital expenditures....................... -- (497,054) (13,170) (128,482)
------------------ -------------- ------------- ---------------
Net cash used in investing
activities....................... -- (497,054) (13,170) (128,482)
------------------ -------------- ------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of common stock..... 4 -- -- --
Advances from affiliate.................... -- 2,639,795 -- 680,000
Proceeds from bank loan.................... -- 180,000 -- --
Principal payments under capital lease
obligations.............................. -- (47,594) (5,954) (29,414)
------------------ -------------- ------------- ---------------
Net cash provided by (used in)
financing activities............. 4 2,772,201 (5,954) 650,586
------------------ -------------- ------------- ---------------
Net increase in cash and cash
equivalents...................... -- 167,004 15,929 90,830
------------------ -------------- ------------- ---------------
Cash and cash equivalents at beginning of
period...................................... -- -- -- 167,004
Cash and cash equivalents at end of period... $ -- $ 167,004 $ 15,929 $ 257,834
------------------ -------------- ------------- ---------------
------------------ -------------- ------------- ---------------
</TABLE>
F-6
<PAGE>
HOTJOBS.COM, LTD.
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 20, 1997 THREE MONTHS ENDED
(INCEPTION) TO YEAR ENDED MARCH 31,
DECEMBER 31, DECEMBER 31, ------------------------------
1997 1998 1998 1999
------------------ -------------- ------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Supplemental disclosures of cash flow
information:
Interest paid.............................. $ -- $ 13,128 $ 6,584 $ 8,495
------------------ -------------- ------------- ---------------
------------------ -------------- ------------- ---------------
Noncash transactions:
Equipment acquired under capital leases.... $ -- $ 200,543 $ 39,533 $ 378,487
Barter transaction......................... $ -- $ -- $ -- $ 168,334
</TABLE>
See accompanying notes to financial statements.
F-7
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(1) DESCRIPTION OF BUSINESS
HotJobs.com, Ltd. ("HotJobs") was incorporated in the State of Delaware on
February 20, 1997 (inception) as Hot Jobs, Inc. On September 23, 1998, Hot Jobs,
Inc. changed its name to HotJobs.com, Ltd.
HotJobs is an Internet-based recruiting solutions company. HotJobs leverages
the Internet to provide a direct exchange of information between job seekers and
employers. Hot Jobs' employment exchange, WWW.HOTJOBS.COM, allows member
employers access to a database of job seekers and provides the tools to post,
track and manage job openings in a real-time environment. HotJobs also provides
employers with additional recruiting solutions including Softshoe, its
proprietary recruiting software, WorkWorld job fairs, and online advertising and
consulting services.
HotJobs operates in a highly competitive environment and inherent in the
HotJobs' business are various risks and uncertainties including its limited
operating history and unproven business model. HotJobs' success may depend in
part upon the emergence of the Internet as a recruiting medium, prospective
product and service development efforts, and the acceptance of HotJobs' products
and services by the marketplace.
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
(A) PRIVATE PLACEMENT, INITIAL PUBLIC OFFERING AND UNAUDITED PRO FORMA BALANCE
SHEET
Effective May 10, 1999, HotJobs entered into a Series A convertible
preferred stock purchase agreement with a number of investors whereby HotJobs
issued 1,620,000 shares of Series A Preferred Stock for aggregate proceeds of
$16,200,000.
In June 1999, the Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission ("SEC") that would permit
HotJobs to sell shares of HotJobs' common stock in connection with a proposed
initial public offering ("IPO").
Upon the closing of the proposed IPO, each of the then outstanding shares of
HotJobs' convertible preferred stock will automatically convert into 163,918
shares of common stock based on the current conversion price of the Series A
Preferred Stock.
(B) UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited interim financial information for the three months ended March
31, 1998 and 1999, has been prepared in accordance with generally accepted
accounting principles for interim financial information and with instructions to
Article 10 of Regulation S-X. In the opinion of management, such information
contains all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation of such periods. The operating
results for any quarter are not necessarily indicative of results for any future
periods.
(C) USE OF ESTIMATES
The preparation of the 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 the
disclosure of contingent assets and liabilities at the date of
F-8
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
(D) CASH AND CASH EQUIVALENTS
HotJobs considers all highly liquid securities with original maturities of
three months or less to be cash equivalents.
(E) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over three to five
years, which is the estimated useful life of the related assets. Equipment under
capital leases is stated at the present value of minimum lease payments and is
amortized using the straight-line method over the shorter of the lease term or
the estimated useful life of the assets.
(F) IMPAIRMENT OF LONG-LIVED ASSETS
HotJobs reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
(G) INCOME TAXES
HotJobs accounts for income taxes using the asset and liability method.
Under this method, 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 bases and operating loss and tax credit carryforwards. 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. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in results of operations in
the period that includes the enactment date.
(H) REVENUE RECOGNITION
Service fee revenues consist of subscription fees paid by employers for
memberships to the WWW.HOTJOBS.COM employment exchange and software hosting fees
paid by customers of Softshoe software. HotJobs recognizes service fee revenues
over the period of the delivery of service.
HotJobs also licenses its Softshoe proprietary recruiting software. Software
license fee revenue consists of one-time license fees paid by Softshoe
customers. Revenue is recognized in accordance with the guidance provided in
AICPA Statements of Position 97-2 and 98-9 "Software Revenue Recognition." Under
this guidance, revenue is recognized upon the substantial completion and
F-9
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
delivery of the related software, assuming that the fee is fixed and
determinable, and that collectibility is probable.
Job fair revenue consists of fees from employers that rent booths at
WorkWorld jobs fairs. Revenue is recognized in the month in which the job fair
takes place.
Other revenues primarily consist of fees derived from 30-day single ad job
postings on WWW.HOTJOBS.COM, banner advertising, and other Softshoe-related
services, including system customization and resume scanning services. HotJobs
recognizes revenue related to these services over the period of delivery of
service. Other revenue also includes fees from a one-time sale of a
miscellaneous proprietary software license in 1998, which HotJobs recognized in
accordance with Statements of Position 97-2 and 98-9.
Other revenues also include barter revenues. Barter advertising revenues and
expenses are recorded at the fair market value of services provided or received,
whichever is more determinable in the circumstances. Revenue from barter
advertising transactions is recognized as income when advertisements are
delivered on HOTJOBS.COM. Barter expense is recognized when HotJobs'
advertisements are run on third-party web sites, which is typically in the same
period when barter revenue is recognized. Barter expense is included as a
component of cost of revenues.
Deferred revenue represents amounts billed or payments received in advance
of the subscription period and maintenance services to be rendered over a
certain period of time and is recognized as revenue ratably over the term of the
related contracts.
(I) PRODUCT DEVELOPMENT EXPENSES
Product development costs include expenses incurred by HotJobs for research,
design and development of HotJobs' proprietary technology. Product development
costs are expensed as incurred. Software development costs are required to be
capitalized when a product's technological feasibility has been established by
completion of a working model of the product and ending when a product is
available for general release to customers. To date, completion of a working
model of the HotJobs product and general release have substantially coincided.
As a result, HotJobs has not capitalized any software developments costs because
such costs have not been significant.
(J) ADVERTISING EXPENSES
Advertising costs totaling $287,067 and $1,305,607, respectively, for the
period from February 20, 1997 (inception) through December 31, 1997 and the year
ended December 31, 1998 and $175,728 and $2,494,280 for the three months ended
March 31, 1998 and 1999, respectively, are included in sales and marketing
expenses in HotJobs' statements of operations.
(K) STOCK-BASED COMPENSATION
HotJobs adopted Statement of Financial Accounting Standards (SFAS) No. 123,
"Accounting for Stock-Based Compensation," which permits entities to recognize
the fair value of all stock-based awards on the date of grant as expense over
the vesting period. Alternatively, SFAS No. 123 also allows entities to continue
to apply the provisions of APB Opinion No. 25, "Accounting for Stock
F-10
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Issued to Employees," and provide pro forma net loss disclosure for employee
stock option grants made as if the fair value-based method defined in SFAS No.
123 has been applied. Under APB Opinion No. 25, compensation expense would be
recorded on the date of grant only if the market price of the underlying stock
options exceeded the exercise price. HotJobs has elected to apply the provisions
of APB Opinion No. 25 and provide the pro forma disclosure provisions of SFAS
No. 123.
(L) BASIC AND DILUTED NET LOSS PER SHARE
HotJobs computes net income (loss) available per share in accordance with
SFAS No. 128, "Computation of Earnings Per Share," and the SEC Staff Accounting
Bulletin No. 98 ("SAB 98"). Under the provisions of SFAS No. 128 and SAB 98,
basic net income (loss) available per share is computed by dividing the net
income (loss) available to common stockholders for the period by the weighted
average number of common shares outstanding during the period. Diluted net
income (loss) available per share is computed by dividing the net income (loss)
for the period by the weighted average number of common and dilutive net income
(loss) available per share in accordance with common equivalent shares
outstanding during the period. HotJobs has presented historical basic and
dilutive net income (loss) available per share in accordance with SFAS No. 128.
As HotJobs had a net loss in each of the periods presented, basic and diluted
net income (loss) available per share is the same.
Diluted net loss per share for the period from February 20, 1997 (inception)
through December 31, 1997, the year ended December 31, 1998, and the three
months ended March 31, 1999, does not include the effects of options to purchase
- -0-, 51,500, and 267,500 shares of common stock, respectively as the effect of
their inclusion is anti-dilutive during each period. Dilutive common stock
equivalents include an option granted by the president of an affiliated company
to purchase shares personally owned by him.
(M) STOCK SPLIT
On April 9, 1999, HotJobs authorized and implemented a 2,000-for-1 stock
split. Accordingly, all share and per share information in the accompanying
financial statements has been retroactively restated to reflect the effect of
this stock split.
In connection with the IPO, the Board of Directors approved a -for-one
stock split of HotJobs' common stock to be effected at or prior to the
effectiveness of the IPO. All common share and per share amounts in the
accompanying financial statements will be adjusted retroactively.
(N) RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 1998, HotJobs adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income" which establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. The adoption of this standard has had no impact on
HotJobs' financial statements. Accordingly, HotJobs' comprehensive net loss is
equal to its net loss for all periods presented.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal
F-11
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(2) SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use" ("SOP 98-1") which provides guidance for determining whether computer
software is internal-use software and on accounting for the proceeds of computer
software originally developed or obtained for internal use and then subsequently
sold to the public. It also provides guidance on capitalization of the costs
incurred for computer software developed or obtained for internal use. HotJobs
has not yet determined the impact, if any, of adopting SOP 98-1, which will be
effective for HotJobs' year ending December 31, 1999.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information" which establishes standards for the way
that a public enterprise reports information about operating segments in annual
financial statements, and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997. In the initial
year of application, comparative information for earlier years must be restated.
HotJobs has determined that it does not have any separately reportable business
segments.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which establishes accounting and reporting
standards for derivative instruments, including derivative instruments embedded
in other contracts, and for hedging activities. SFAS No. 133 is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. This
statement is not expected to affect HotJobs as HotJobs currently does not engage
or plan to engage in derivative instruments or hedging activities.
(3) PREPAID EXPENSES
Prepaid expenses as of December 31, 1997 and 1998 consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
-------------- --------------
<S> <C> <C>
Prepaid advertising..................................................... $ 20,848 $ 791,700
Prepaid software license................................................ -- 155,292
Other................................................................... -- 95,683
-------------- --------------
Total................................................................... $ 20,848 $ 1,042,675
-------------- --------------
-------------- --------------
</TABLE>
F-12
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
<S> <C> <C>
1997 1998
----------- -----------
Computer equipment, including assets under capital leases of $0 and $200,543
respectively................................................................ $ -- $ 686,117
Furniture and fixtures........................................................ -- 11,480
----------- -----------
-- 697,597
Less accumulated depreciation, including assets under capital leases of $0 and
$41,895, respectively....................................................... -- (107,904)
----------- -----------
Total................................................................... $ -- $ 589,693
----------- -----------
----------- -----------
</TABLE>
(5) INCOME TAXES
There has been no provision for U.S. federal or state income taxes for any
period as HotJobs has incurred operating losses since inception.
HotJobs has adopted the cash method of accounting for income tax purposes.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the HotJobs' deferred tax assets and liabilities for federal and state income
taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................... $ 249,000 $ 693,000
Excess depreciation for tax................................ -- (13,000)
--------- ---------
249,000 680,000
--------- ---------
--------- ---------
Less valuation allowance..................................... (249,000) (680,000)
--------- ---------
Deferred tax assets.......................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>
Realization of deferred tax assets is dependent upon future earnings, if
any, the timing and amount of which are uncertain. Accordingly, the net deferred
tax assets have been fully offset by a valuation allowance as it is more likely
than not that the deferred tax assets will not be realized.
The net change in valuation allowance for the year ended December 31, 1998
was an increase of approximately $431,000.
As of December 31, 1998, HotJobs had net operating loss carryforwards for
federal income tax purposes of approximately $3.1 million. There can be no
assurance that HotJobs will realize the benefit of the net operating loss
carryforwards. The federal net operating loss carryforwards are available to
offset future taxable income and expire at various dates through 2018 if not
utilized.
F-13
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(5) INCOME TAXES (CONTINUED)
The Tax Reform Act of 1986 contains provisions which may limit the net operating
loss carryforwards available to be used in any given year if certain events
occur, including significant changes in ownership interest.
(6) RELATED PARTY TRANSACTIONS
For the period from February 20, 1997 (inception) to December 31, 1997, the
year ended December 31, 1998 and the three months ended March 31, 1999, OTEC,
Inc. ("OTEC"), an affiliated company, paid various expenses on behalf of
HotJobs. HotJobs recorded its allocated share of the expenses on its financial
statements. The effect of all operating expenses paid on behalf of HotJobs by
OTEC was approximately $741,600, $1,153,000 and $131,200 for the period ended
December 31, 1997, the year ended December 31, 1998 and the three months ended
March 31, 1999, respectively. These expenses primarily consist of rents,
salaries, computer expense and other administrative expenses. OTEC also provided
cash advances of $2,639,795 to HotJobs in 1998, of which $2,259,795 bore
interest at rates ranging from 8.75% to 9.5% per annum. The interest expense
relating to such cash advances was approximately $49,000 during 1998 and was
included in the due to affiliate balance as of December 31, 1998. In June 1999,
HotJobs repaid all amounts due to affiliates. HotJobs believes that these
transactions were entered into on an arms-length basis.
At December 31, 1997 and 1998, OTEC owned approximately 22.5% and 23.0%,
respectively of HotJobs.
The chief executive officer of HotJobs is a director, executive officer and
shareholder of OTEC. Compensation expense for the chief executive officer of
$137,500 and $182,000 for the period ending December 31, 1997 and for the year
ended December 31, 1998, respectively, was paid by OTEC. These amounts paid by
OTEC are included as capital contributions in the statements of stockholders'
deficit, as they are not required to be repaid.
HotJobs has recorded in the statement of operations $300,000 in 1997 for the
license of miscellaneous propriety software and $444,000 in 1998 for hosting
that software and for purchasing additional software.
On March 2, 1999, the chief executive officer of HotJobs granted the
president of OTEC an option, which expires on March 2, 2002, to purchase 34
shares of OTEC common stock owned personally by him at a purchase price of
$4,880 per share aggregating to $165,920, and an additional option to purchase
50 shares of each of OTEC's affiliated companies at a purchase price of $1 per
share. Similarly, on March 2, 1999, the president of OTEC granted HotJobs' chief
executive officer an option, which expires on March 2, 2002, to purchase 136,000
shares of HotJobs' common stock owned personally by the president at a purchase
price of $1.22 per share aggregating to $165,920. In addition, the chief
executive officer of HotJobs granted to the President of OTEC an irrevocable
proxy expiring March 2, 2002 to vote all of the chief executive officer of
HotJobs' shares of stock subject to the option. In turn, the president of OTEC
granted the chief executive officer of HotJobs an irrevocable proxy expiring
March 2, 2002 to vote all of his shares of stock in HotJobs.
HotJobs has several joint insurance polices with OTEC and its affiliates.
HotJobs' commercial property insurance issued by Federal Insurance Company for a
one year term begining October 15, 1998, covers both its California and New York
offices as well as OTEC's California office. HotJobs'
F-14
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(6) RELATED PARTY TRANSACTIONS (CONTINUED)
commercial umbrella policy, also issued by Federal Insurance Company for a one
year term begining October 15, 1998, also covers OTEC and its affiliates, as
does HotJobs' workers compensation insurance, issued by Lumbermans Mutual
Casualty Company on December 1, 1998 for a term ending October 15, 1999.
HotJobs' employee benefit and life insurance plans are covered by a policy
issued by Travelers Insurance for a one year term begining October 22, 1998,
which covers the benefit plans of OTEC and its affiliates.
On April 2, 1999, HotJobs repurchased 50,000 shares of common stock from the
chief executive officer and two employees for $1.22 per share.
On May 11, 1999, as part of the Series A Preferred Stock purchase agreement
(see note 8), FSA Capital, Inc. purchased 40,000 shares of Series A Preferred
Stock for $400,000. The chief financial officer and a director of HotJobs, is a
director of FSA Capital, Inc.
Generation Capital Partners, L.P. and affiliated investment entities
("Generation Partners") purchased in the aggregate 1,000,000 shares of Series A
Preferred Stock for $10,000,000. Generation Partners owns more than 5% of
HotJobs' stock. One of HotJobs' directors is a Managing Partner of an affiliate
of Generation Partners.
One of HotJobs' directors purchased 25,000 shares of Series A Preferred
Stock for $250,000. In connection with the Series A Preferred Stock financing,
GreenAcre Ventures LLC, of which one of HotJobs' directors is a managing member,
purchased 11,000 shares of HotJobs' common stock from two employees.
(7) LINE OF CREDIT
On October 13, 1998, HotJobs entered into a $500,000 line of credit with The
Dime Savings Bank of New York (the "Bank"). Any outstanding balance is payable
on demand and bears interest at a fluctuating rate of 1% above the Bank's
reference lending rate for domestic commercial loans. All of HotJobs' assets
were pledged as collateral in the event of default. The amount borrowed on the
line of credit was $180,000 as of December 31, 1998.
On October 13, 1998, an affiliated company refinanced an obligation under a
line of credit. As part of the refinancing agreement, the assets of HotJobs were
pledged as collateral in the event of default by the affiliated company. On June
2, 1999, the bank removed all cross guarantees with both the HotJobs and the
affiliated company lines of credit.
(8) CAPITALIZATION
AUTHORIZED SHARES
In 1998, HotJobs amended and restated its certificate of incorporation to
change its name to HotJobs.com, Ltd. On April 9 and May 10, 1999, HotJobs
amended its certificate of incorporation. As a result, as of May 10, 1999, the
total number of shares which HotJobs is authorized to issue is 4,000,000:
2,000,000 of these shares are common stock, each having a par value of $0.01;
and 2,000,000 of these shares are preferred stock, each having a par value of
$0.01.
F-15
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(8) CAPITALIZATION (CONTINUED)
Effective upon the closing of the IPO, HotJobs will be authorized to issue
up to 50,000,000 shares of common stock par value $0.01 per share, and
10,000,000 shares of preferred stock, par value $0.01 per share.
REDEEMABLE CONVERTIBLE PREFERRED STOCK
Effective May 10, 1999, HotJobs issued an aggregate of 1,620,000 shares of
Series A Preferred, at a purchase price of $10 per share, in consideration for
cash proceeds of $16.2 million. Holders of Series A Preferred Stock are not
entitled to any dividend. However, in the event of any liquidation, dissolution
or winding up of HotJobs, the holders of the Series A Preferred stock then
outstanding are entitled to be paid a preferential amount of $10 per share.
Each holder of Series A Preferred Stock shall be entitled to the number of
votes equal to the number of whole shares of common stock into which the shares
of preferred stock are convertible on the date of the vote.
At the option of the stockholders, Series A Preferred Stock may be
converted, at any time prior to the date of redemption, into shares of common
stock. The conversion will result from dividing the Preferential Amount (as
defined) for the Series A Preferred stock as of the date of conversion by the
conversion price of $98.83 per share. Such shares automatically convert into
common shares in the event of a qualified IPO resulting in proceeds to HotJobs
of not less than $30 million and at a price per share of at least twice the
conversion price, adjusted for the stock split to be effected in connection with
the IPO. The conversion to common stock will be based on the same conversion
features as disclosed above.
Upon request of the majority Series A Preferred stockholders on or after May
1, 2003, HotJobs may be required to redeem Series A Preferred Shares at an
amount equal to the greater of (a) the amount per share payable to the holders
of the Series A Preferred Stock in the event of liquidation, dissolution or
winding up of HotJobs and (b) $10 per share plus an additional amount equal to
10% per annum.
COMMON STOCK
During 1997, HotJobs issued 887,500 shares of common stock to its founders
and original employees at $0.01 per share.
Restricted shares vest, incrementally and equally, over a five-year period
provided that all restricted shares shall become fully vested upon the earlier
of (a) any person or entity purchasing more than 50% of HotJobs' common stock,
(b) HotJobs merging or consolidating one or more corporations where HotJobs'
common stock is exchanged for less than 50% of the voting stock of the surviving
corporation, (c) the sale, assignment, transfer, or other disposition of assets
of the HotJobs having a value in excess of 50% of the total assets of HotJobs
or, (d) the closing of an initial public offering of HotJobs' capital stock.
Upon the termination of the employment contract voluntarily or for any
cause, HotJobs is entitled, at its option, to repurchase from the holder at the
original purchase price the number of restricted shares which have not vested.
F-16
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(9) CONCENTRATION OF CREDIT RISK
For the period from February 20, 1997 (inception) to December 31, 1997, two
customers, one of which was an affiliate company accounted for approximately 60%
of total revenues generated by HotJobs.
For the year ended December 31, 1998, one customer who is an affiliate
accounted for over 10% of total revenues generated by HotJobs. Two customers had
balances of 18% and 17% of gross accounts receivable at December 31, 1998.
(10) PROFIT SHARING RETIREMENT PLAN
HotJobs' employees participate in a qualified profit sharing retirement plan
with a 401(k) deferred compensation provision through an affiliated company.
HotJobs contributes 50% of the amounts contributed by employees up to a maximum
of 6% of gross wages. Additionally, a discretionary profit sharing contribution
is determined annually by the Board of Directors. The contributions charged to
operations for the 401(k) plan amounted to $23,237 and $21,835 for 1998 and
1997, respectively. There were no discretionary profit sharing contributions
made by HotJobs during either 1997 or 1998.
(11) EMPLOYMENT AGREEMENTS
Richard Johnson, Stephen Ellis, and Dimitri Boylan each has an employment
agreement with HotJobs. Each agreement became effective on May 6, 1999 and
expires on May 5, 2002, and will automatically renew for additional one year
terms after that date unless HotJobs gives the executive written notice of its
desire not to renew the agreement at least six months prior to the expiration of
the initial or any additional term. The annual salary for each of these
executives is as follows: Richard Johnson, $200,000; Stephen Ellis, $175,000;
and Dimitri Boylan, $175,000. The annual salary of each executive will increase
by a minimum of 10% each year. In addition, Stephen Ellis received a
non-qualified stock option to purchase 15,000 shares of HotJobs' common stock,
625 of which vest on each of May 6, 2001 and May 6, 2002. On the closing of this
offering, however, 7,500 of these shares will vest automatically and the
remaining shares will vest on May 6, 2001 and 2002 as stated above. Also, each
of these executives is entitled to an annual bonus determined by the
compensation committee of the Board of Directors. HotJobs can terminate these
employment agreements with or without cause by delivering written notice to the
executive. Each executive may terminate his employment agreement with or without
good reason by delivering written notice to HotJobs. Upon termination of the
agreement by HotJobs without cause or by the executive for good reason, the
executive is entitled to the greater of his annual salary for the remainder of
the term of the agreement or one year of salary and all options become
immediately exercisable.
(12) STOCK OPTION PLAN
HotJobs' Board of Directors has authorized 600,000 shares of its common
stock for issuance pursuant to its Stock Award Plan. Such options have ten-year
terms and have been issued at the fair market value of the HotJobs' common stock
on the date of the applicable grant and will vest through 2008. Such options
vest over five years. If there is a Change of Control, (as defined) or the
closing of an IPO, the options become immediately exercisable.
F-17
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(12) STOCK OPTION PLAN (CONTINUED)
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS GRANTED EXERCISE PRICE
----------------- -------------------
<S> <C> <C>
Options outstanding at December 31, 1997
Granted at $0.60.................................................. 92,000 $ 0.60
Granted at $0.89.................................................. 5,500 $ 0.89
Exercised......................................................... -- $ --
Forfeited......................................................... (46,000) $ 0.60
--------
Outstanding as of December 31, 1998............................... 51,500 $ 0.63
--------
Granted at $1.30 (unaudited)...................................... 80,250 $ 1.30
Exercised (unaudited)............................................. -- $ --
Forfeited (unaudited)............................................. (500) $ 1.30
--------
Outstanding as of March 31, 1999 (unaudited)...................... 131,250 $ 1.04
--------
--------
Vested at December 31, 1998....................................... 0
--------
--------
Total options available as of December 31, 1998................... 548,500
--------
--------
</TABLE>
The weighted-average remaining life of the 51,500 options outstanding at
December 31, 1998 is approximately 9.7 years.
HotJobs granted 2,000 options under the plan on April 1, 1998 at an exercise
price of $0.60 to a consultant, an employee of a related party who is providing
services to HotJobs. The value of this option using a Black-Scholes pricing
model was deemed insignificant.
HotJobs has adopted the disclosure provisions of SFAS No. 123. Had
compensation costs on the HotJobs' Stock Award Plan been determined based on the
fair market value on the grant date consistent with the provisions of SFAS No.
123, HotJobs' net loss would have been increased as per the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1998
--------------
<S> <C>
Net loss--actual........................................................................ $ (1,619,006)
--------------
--------------
Net loss--pro forma..................................................................... $ (1,623,947)
--------------
--------------
Basic and diluted net loss per share--actual and pro forma.............................. $ (1.85)
--------------
--------------
</TABLE>
Pro forma information regarding net loss has been determined using a
Black-Scholes option pricing model with the following assumptions for 1998:
<TABLE>
<S> <C>
Risk-free interest rate.................................................... 6.0%
Dividend yield............................................................. 0.0%
Volatility factor.......................................................... 0.0%
Average expected life...................................................... 9 years
</TABLE>
F-18
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(13) COMMITMENTS AND CONTINGENCIES
(A) OFFICE LEASES
HotJobs leases office space in New York and California. The minimum lease
payments under these leases are payable as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 AMOUNT
- ------------------------------------------------------------------------------------------- -----------
<S> <C>
1999....................................................................................... $ 95,526
2000....................................................................................... 91,971
2001....................................................................................... 105,204
2002....................................................................................... 109,176
2003....................................................................................... 109,176
Thereafter................................................................................. 63,686
-----------
$ 574,739
-----------
-----------
</TABLE>
Rent expense for the period from February 20, 1997 (inception) to December
31, 1997 and the year ended December 31, 1998 was $41,667 and $103,398,
respectively.
In March 1999, HotJobs entered into a five-year lease agreement for office
space in California. The lease is due to expire during May 2004 and has been
included above as part of the minimum lease payment schedule.
In April 1999, HotJobs entered into two five-year lease agreements for
office space in New York. These leases are due to expire on March 31, 2004. The
minimum lease payments under these leases amount to approximately $918,000.
Under the terms of these agreements, landlord and tenant have the right to
terminate these leases at any time after July 31, 1999 upon giving ninety days'
written notice. Due to the existence of this termination clause, these amounts
have not been included as part of minimum lease payable commitments.
An affiliated company unconditionally guaranteed payment and performance of
all obligations, liabilities, terms and conditions of HotJobs' office leases.
(B) EQUIPMENT LEASES
HotJobs is obligated under various capital leases that begin in 1998 and
expire at various dates through November 2001.
F-19
<PAGE>
HOTJOBS.COM, LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(ALL INFORMATION SUBSEQUENT TO DECEMBER 31, 1998 IS UNAUDITED)
(13) COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum capital lease payments are payable as follows:
<TABLE>
<CAPTION>
CAPITAL
YEAR LEASES
- ------------------------------------------------------------------------------------------- -----------
<S> <C>
1999....................................................................................... $ 88,470
2000....................................................................................... 64,060
2001....................................................................................... 23,370
-----------
Total minimum lease payments............................................................... 175,900
Less amount representing interest (at rates ranging from 9.7% to 18.7%).................... 22,951
-----------
Present value of net minimum lease payments................................................ 152,949
Less current installment of obligations under capital leases............................... 72,950
-----------
Obligations under capital leases, excluding current installments........................... $ 79,999
-----------
-----------
</TABLE>
From March through April 1999, HotJobs entered into three capital lease
agreements for an aggregate amount of approximately $457,000 to finance computer
equipment. These capital lease commitments are not included in the above lease
schedule.
(C) COMMITMENT TO PURCHASE COMMERCIAL AIRTIME
HotJobs entered into a commitment to purchase 30 seconds of commercial
airtime and a "banner" advertisement from Fox Broadcasting Company during the
National Football League's Super Bowl on January 31, 1999. The cost of the
airtime is $1,360,000. $680,000 was paid in November 1998 and was recorded
within prepaid expenses. The remainder was paid in January 1999.
The Company has also committed approximately $590,000 to advertising firms
and production companies for development of the commercial. This amount was paid
in various installments through January 1999.
Between April 1, 1999 and June 10, 1999, HotJobs incurred approximately
$512,000 in advertising expenses. Also, as of June 1, 1999, HotJobs has
commitments of approximately $10.9 million for various advertising campaigns
over the next three years.
F-20
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
YOU MAY RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NEITHER
HOTJOBS.COM, LTD. NOR ANY UNDERWRITER HAS AUTHORIZED ANYONE TO PROVIDE
PROSPECTIVE INVESTORS WITH DIFFERENT OR ADDITIONAL INFORMATION. THIS PROSPECTUS
IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY THESE SECURITIES IN
ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS,
REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF THESE
SECURITIES.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 1
Risk Factors.................................... 5
Forward-Looking Statements...................... 18
Market Data..................................... 18
Use of Proceeds................................. 19
Dividend Policy................................. 19
Capitalization.................................. 20
Dilution........................................ 21
Selected Financial Data......................... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 24
Business........................................ 34
Management...................................... 46
Related Party Transactions...................... 51
Principal Stockholders.......................... 53
Description of Capital Stock.................... 55
Shares Eligible for Future Sale................. 60
Underwriting.................................... 62
Legal Matters................................... 64
Experts......................................... 64
Where You Can Find More Information............. 64
Index to Financial Statements................... F-1
</TABLE>
UNTIL (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
HOTJOBS.COM, LTD.
SHARES
COMMON STOCK
---------------------
PROSPECTUS
---------------------
DEUTSCHE BANC ALEX. BROWN
BANCBOSTON
ROBERTSON STEPHENS
SG COWEN
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth an estimate of the costs and expenses, other
than the underwriting discounts and commissions, payable by the Registrant in
connection with the sale of the Common Stock being registered.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
-----------
<S> <C>
SEC registration fee............................................................. $
NASD filing fee..................................................................
Nasdaq National Market listing fee...............................................
Legal fees and expenses..........................................................
Accounting fees and expenses.....................................................
Printing and engraving...........................................................
Blue sky fees and expenses (including legal fees)................................
Transfer agent fees..............................................................
Premiums for director and officer insurance......................................
Miscellaneous....................................................................
-----------
Total...................................................................... $
-----------
-----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the DGCL makes provision for the indemnification of officers
and directors in terms sufficiently broad to indemnify officers and directors
under certain circumstances from liabilities (including reimbursement for
expenses incurred) arising under the Securities Act. Section 145 of the DGCL
empowers a corporation to indemnify its directors and officers and to purchase
insurance with respect to liability arising out of their capacity or status as
directors and officers, provided that this provision shall not eliminate or
limit the liability of a director: (1) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) arising under Section 174 of the DGCL or (4) for any transaction from
which the director derived an improper personal benefit. The DGCL provides
further that the indemnification permitted thereunder shall not be deemed
exclusive of any other rights to which the directors and officers may be
entitled under the corporation's bylaws, any agreement, a vote of stockholders
or otherwise.
Effective upon the consummation of this offering, our certificate of
incorporation will provide for indemnification of our directors against, and
absolution of, liability to HotJobs.com and its stockholders to the fullest
extent permitted by the DGCL. HotJobs.com intends to purchase directors' and
officers' liability insurance covering liabilities that may be incurred by our
directors and officers in connection with the performance of their duties.
The employment agreements we have entered into with Richard S. Johnson,
Stephen W. Ellis and Dimitri J. Boylan provide that such executives will be
indemnified by us for all liabilities relating to their status as officers or
directors of HotJobs.com, and any actions committed or omitted by the
executives, to the maximum extent permitted by law of the State of Delaware.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Registrant has sold and issued the following securities since February
20, 1997 (inception):
COMMON STOCK AND PREFERRED STOCK.
1. In February 1997, the Registrant issued and sold shares of common
stock to purchasers, including officers and directors, for $.01 per share.
2. Effective May 10, 1999, the Registrant issued and sold 1,620,000 shares
of Series A Convertible Preferred Stock to 30 accredited investors for an
aggregate purchase price of $16,200,000.
OPTIONS. The Registrant from time to time has granted stock options to
employees and consultants in reliance upon exemption from registration pursuant
to either (i) Section 4(2) of the Securities Act of 1933, as amended, or (ii)
Rule 701 promulgated under the Securities Act of 1933, as amended. The following
table sets forth certain information regarding such grants:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICES
----------- -----------
<S> <C> <C>
February 20, 1997 (inception) to December 31, 1997....................
January 1, 1998 to December 31, 1998..................................
January 1, 1999 to May , 1999...................................
</TABLE>
The above securities were offered and sold by the Registrant in reliance
upon exemptions from registration pursuant to either (1) Section 4(2) of the
Securities Act of 1933, as amended, as transactions not involving any public
offering or (2) Rule 701 promulgated under the Securities Act of 1933, as
amended. No underwriters were involved in connection with the sales of
securities referred to in this Item 15.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation, as amended.
3.2* Form of Amended and Restated Certificate of Incorporation to be in effect upon the closing of this
offering.
3.3 Bylaws.
3.4* Form of Amended and Restated Bylaws to be in effect upon the closing of this offering.
4.1* Specimen Common Stock certificate.
4.2 Please see Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of the certificate of incorporation and bylaws
defining the rights of holders of common stock.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1* Series A Convertible Preferred Stock Purchase Agreement, dated as of May 10, 1999, between HotJobs.com
and the several purchasers names in Schedule I thereto.
10.2 Amended and Restated Stockholders' Agreement, dated as of May 11, 1999.
10.3 Employment Agreement, dated as of May 6, 1999, between HotJobs.com and Richard S. Johnson
10.4 Employment Agreement, dated as of May 6, 1999, between HotJobs.com and Dimitri J. Boylan
10.5 Employment Agreement, dated as of May 6, 1999, between HotJobs.com and Stephen W. Ellis.
10.6* HotJobs.com Stock Award Plan
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.7* 1999 Stock Option/Stock Issuance Plan
10.8* Employee Stock Purchase Plan
23.1 Consent of KPMG LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (See Signature Page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be supplied by amendment.
(b) Financial Statement Schedules.
Schedule II--Valuation and Qualifying Accounts
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424 (b)(1) or
(4), or 497(h) under the Securities Act of 1933, shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and this offering of such securities at that
time shall be deemed to be the initial BONA FIDE offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in The City of New York,
State of New York, on this 10th day of June, 1999.
HOTJOBS.COM, LTD.
By: /s/ RICHARD S. JOHNSON
-----------------------------------------
Name: Richard S. Johnson
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
We, the undersigned directors and/or officers of HotJobs.com, Ltd. (the
"Company"), hereby severally constitute and appoint Richard S. Johnson,
President and Chief Executive Officer, and Stephen Ellis, Chief Financial
Officer, and each of them individually, with full powers of substitution and
resubstitution, our true and lawful attorneys, with full powers to them and each
of them to sign for us, in our names and in the capacities indicated below, the
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission, and any and all amendments to said Registration Statement (including
post-effective amendments), and any registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended, of equity securities
of the Company, and to file or cause to be filed the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys, 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 connection therewith, as fully to all intents and
purposes as each of them might or could do in person, and hereby ratifying and
confirming all that said attorneys, and each of them, or their substitute or
substitutes, shall do or cause to be done by virtue of this Power of Attorney.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on June 10, 1999:
SIGNATURE TITLE(S)
- ------------------------------ ---------------------------
President, Chief Executive
/s/ RICHARD S. JOHNSON Officer and Chairman of
- ------------------------------ the Board of Directors
Richard S. Johnson (principal executive
officer)
Chief Financial Officer
/s/ STEPHEN W. ELLIS (principal financial and
- ------------------------------ accounting officer) and
Stephen W. Ellis Director
/s/ DIMITRI J. BOYLAN Chief Operating Officer,
- ------------------------------ Secretary and Director
Dimitri J. Boylan
/s/ JOHN A. HAWKINS Director
- ------------------------------
John A. Hawkins
/s/ JOHN G. MURRAY Director
- ------------------------------
John G. Murray
II-4
<PAGE>
SCHEDULE II
HOTJOBS.COM, LTD.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT PROVISION BALANCE AT
BEGINNING FOR DOUBTFUL END OF
OF PERIOD ACCOUNTS DEDUCTIONS PERIOD
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
For the period from February 20, 1997 (inception) to
December 31, 1997
Allowance for doubtful accounts........................... $ 0 $ 0 $ 0 $ 0
----------- ------------- ----------- -----------
----------- ------------- ----------- -----------
For the year ended December 31, 1998
Allowance for doubtful accounts........................... $ 0 $ 85,000 $ 0 $ 85,000
----------- ------------- ----------- -----------
----------- ------------- ----------- -----------
</TABLE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation, as amended.
3.2* Form of Amended and Restated Certificate of Incorporation to be in effect upon the closing of this
offering.
3.3 Bylaws.
3.4* Form of Amended and Restated Bylaws to be in effect upon the closing of this offering.
4.1* Specimen Common Stock certificate.
4.2 Please see Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of the certificate of incorporation and bylaws
defining the rights of holders of common stock.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1* Series A Convertible Preferred Stock Purchase Agreement, dated as of May 10, 1999, between HotJobs.com
and the several purchasers names in Schedule I thereto.
10.2 Amended and Restated Stockholders' Agreement, dated as of May 11, 1999.
10.3 Employment Agreement, dated as of May 6, 1999, between HotJobs.com and Richard S. Johnson.
10.4 Employment Agreement, dated as of May 6, 1999, between HotJobs.com and Dimitri J. Boylan.
10.5 Employment Agreement, dated as of May 6, 1999, between HotJobs.com and Stephen W. Ellis.
10.6* HotJobs.com Stock Award Plan.
10.7* 1999 Stock Option/Stock Issuance Plan.
10.8* Employee Stock Purchase Plan.
23.1 Consent of KPMG LLP.
23.2* Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1).
24.1 Powers of Attorney (See Signature Page).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* To be supplied by amendment.
<PAGE>
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
HOTJOBS.COM, LTD.,
A DELAWARE CORPORATION
Pursuant to the provisions of Section 242 of the General
Corporation Law of the State of Delaware, the undersigned Secretary of
HotJobs.com, Ltd. (the "Corporation") does hereby certify:
1. Article Fourth of the Certificate of Incorporation is
hereby amended and restated in its entirety to read as follows:
"The authorized capital of the Corporation is divided into two
classes, as follows:
(i) 2,000,000 shares of common stock, $0.01 par value
per share (the "COMMON STOCK"); and
(ii) 2,000,000 shares of preferred stock, $0.01 par
value per share (the "PREFERRED STOCK"), all of which shares shall
be designated as Series A Preferred Stock (the "SERIES A PREFERRED
STOCK").
The rights, privileges, conditions and restrictions granted to and
imposed upon the Common Stock and the Preferred Stock are set forth below.
Section 1. DIVIDEND RIGHTS.
(a) COMMON STOCK. No dividends will be paid on the Common Stock.
(b) SERIES A PREFERRED STOCK. No dividends will be paid on the
Series A Preferred Stock.
Section 2. LIQUIDATION RIGHTS.
(a) SERIES A PREFERRED STOCK LIQUIDATION PREFERENCE. In the event of
any liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, the holders of the Series A Preferred Stock then outstanding
shall be entitled to be paid an amount equal to the Preferential Amount (as
defined below) out of the assets of the Corporation available for distribution
to its stockholders, whether such assets are capital, surplus or earnings,
before any payment or declaration and setting apart for payment of any amount
shall be made in respect of any Junior Stock (as defined below). If upon any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed to the holders of the Series A
<PAGE>
Preferred Stock shall be insufficient to permit the payment to such stockholders
of the full Preferential Amount to which they are entitled, then all of the
assets of the Corporation shall be distributed ratably to the holders of the
Series A Preferred Stock, in proportion to the amounts that each would have been
entitled to receive if the Corporation's assets were sufficient to permit
distribution of the full Preferential Amount. For purposes hereof, "PREFERENTIAL
AMOUNT" means, for each share of Series A Preferred Stock, $10.00. For purposes
hereof, "JUNIOR STOCK" means the Common Stock and any other shares of capital
stock of the Corporation ranking junior to the Series A Preferred Stock with
respect to the payment of dividends or distributions upon liquidation.
(b) REMAINING ASSETS. If the assets of the Corporation available for
distribution to the Corporation's stockholders exceed the aggregate amount
payable to the holders of the Series A Preferred Stock pursuant to Section 2(a)
hereof, then after the payments required by Section 2(a) shall have been made or
irrevocably set apart, such excess assets shall be distributed ratably among the
holders of the Common Stock in proportion to the number of shares of Common
Stock held by each such holder; PROVIDED, HOWEVER, that in the event that after
giving effect to such distribution to the holders of Common Stock any holder of
Series A Preferred Stock would receive upon any liquidation, dissolution or
winding up of the Corporation less than the amount such holder would have
received had such Series A Preferred Stock been converted into Common Stock
pursuant to Section 4 below immediately prior to the payments and distributions
provided in this Section 2, then such payments and distributions instead shall
be made as if such shares of Series A Preferred Stock had been so converted.
(c) CHANGE OF CONTROL. A Change of Control (as defined below) of the
Corporation shall be deemed a liquidation, dissolution or winding up of the
Corporation as those terms are used in this Section 2, except for any such
transaction with a wholly-owned subsidiary of the Corporation. For purposes
hereof, "CHANGE OF CONTROL" means (i) assets constituting all or substantially
all of the assets of the Corporation or its subsidiaries are sold, in one or
more related transactions, to any "person" or "group" (as such terms are defined
in the Securities Exchange Act of 1934, as amended) or (ii) an event or series
of events (whether a share purchase, merger, consolidation or other business
combination or otherwise) by which any person or group is or becomes the
"beneficial owner" (as defined in the Securities Exchange Act of 1934, as
amended) directly or indirectly of more than fifty (50%) percent of the combined
voting power of the then outstanding securities of the Corporation or the
successor or surviving entity, if the Corporation is not the surviving entity,
excluding in the case of each of clauses (i) and (ii) above any reincorporation,
reorganization or recapitalization transaction in which the stockholders of the
Corporation continue to possess at least fifty (50%) percent of the outstanding
voting securities of the successor or surviving entity in the same relative
proportions.
Section 3. VOTING RIGHTS.
(a) COMMON STOCK. Each holder of shares of Common Stock shall be
entitled to one (1) vote for each share of Common Stock held on all matters
submitted to a vote of
2
<PAGE>
the holders of Common Stock under the applicable provisions of the Delaware
General Corporation Law, PROVIDED, that except as otherwise expressly provided
herein or as required by Delaware General Corporation Law, the holders of shares
of Series A Preferred Stock and the holders of Common Stock shall vote together
as one class and not as separate classes on all matters submitted to a vote to
holders of Common Stock.
(b) SERIES A PREFERRED STOCK. In addition and without limitation to
the general voting rights of holders of the Series A Preferred Stock, pursuant
to the Delaware General Corporation Law, each holder of Series A Preferred Stock
shall be entitled to vote, together with the holders of the Common Stock as one
class, on all matters submitted to a vote of the holders of Common Stock under
the applicable provisions of the Delaware General Corporation Law, and shall be
entitled to the number of votes equal to the number of shares of Common Stock
that would be issuable to such holder if all the shares of Series A Preferred
Stock held by such holder were converted into the number of shares of Common
Stock issuable pursuant to Section 4 below at the record date for the
determination of the stockholders entitled to vote on such matters or, if no
such record date is established, at the date such vote is taken or any written
consent of stockholders is first executed. This provision for determination of
the number of votes to which each holder of Series A Preferred Stock is entitled
shall also apply in all cases in which the holders of Series A Preferred Stock
have the right to vote separately as a class. In all cases in which the holders
of shares of the Series A Preferred Stock have the right to vote separately as a
series, each holder of shares of Series A Preferred Stock shall be entitled to
the number of votes equal to the largest number of full shares of Common Stock
into which all shares of Series A Preferred Stock held by such holder could be
converted pursuant to the provisions of Section 4 below at the record date for
the determination of the stockholders entitled to vote on such matters or, if no
such record date is established, at the date such vote is taken or any written
consent of stockholders is first executed.
Section 4. CONVERSION OF SERIES A PREFERRED STOCK.
(a) OPTIONAL CONVERSION. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time or from
time to time and prior to the date of redemption thereof, into the number of
fully paid and nonassessable shares of Common Stock which, in the case of Series
A Preferred Stock, results from dividing (x) the Preferential Amount for the
Series A Preferred Stock as of the date of conversion by (y) the Conversion
Price (as defined in Section 4(d) below) per share in effect at the time of
conversion, subject to adjustment from time to time as provided in Sections 4(e)
and 4(f) below.
(b) MECHANICS OF OPTIONAL CONVERSION. Each holder of Series A
Preferred Stock that desires to convert the same into Common Stock pursuant to
Section 4(a) shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series A Preferred Stock, and shall give notice to the Corporation at such
office that such holder elects to convert the same and shall state therein the
number of shares of Series A Preferred Stock being converted.
3
<PAGE>
Thereupon the Corporation shall promptly issue and deliver at such office to
such holder a certificate or certificates for the number of shares of Common
Stock to which such holder is entitled upon conversion. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the certificate representing the Series A Preferred Stock
to be converted, and the person entitled to receive the Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder of
such Common Stock on such date. In the event less than all of the shares of
Series A Preferred Stock represented by a certificate are converted, a new
certificate shall be issued representing the unconverted shares.
(c) AUTOMATIC CONVERSION. Each share of Series A Preferred Stock
shall be automatically converted, prior to the date of redemption thereof, into
the number of fully paid and nonassessable shares of Common Stock which, in the
case of Series A Preferred Stock, results from dividing (x) the Preferential
Amount by (y) the applicable Conversion Price per share then in effect, subject
to adjustment from time to time as provided in Sections 4(e) and 4(f) below,
immediately upon the closing of a bona fide, firm commitment underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, concerning the offering and sale of shares of Common
Stock for the account of the Corporation (i) in which the aggregate gross
proceeds to the Corporation at the public offering price equals or exceeds $30.0
million and (B) the public offering price per share equals or is not less than
an amount equal to two times the Conversion Price for the Series A Preferred
Stock (such underwritten public offering, a "QUALIFIED PUBLIC OFFERING"), in
each case as appropriately adjusted for subdivisions and combinations of Common
Stock pursuant to this Section 4. The Corporation shall not be obligated to
issue certificates evidencing the Common Stock issuable upon such automatic
conversion unless the certificates evidencing the Series A Preferred Stock are
either delivered to the Corporation or its transfer agent as provided below, or
the holder notifies the Corporation or its transfer agent that such certificates
have been lost, stolen or destroyed and executes an agreement satisfactory to
the Corporation and its counsel to indemnify the Corporation from any loss
incurred by it in connection with such certificates. Upon the occurrence of such
automatic conversion of the Series A Preferred Stock, the holders thereof shall
surrender the certificates representing such shares at the office of the
Corporation or any transfer agent for the Series A Preferred Stock or Common
Stock. Thereupon, there shall be issued and delivered to such holder promptly at
such office and in its name as shown on such surrendered certificate or
certificates, a certificate or certificates for the number of shares of Common
Stock into which the Series A Preferred Stock surrendered were convertible on
the date on which such automatic conversion occurred.
(d) CONVERSION PRICE. The "CONVERSION PRICE" per share with respect
to the Series A Preferred Stock shall be $98.83 per share, subject to adjustment
from time to time as provided in Section 4(e) and Section 4(f) below.
(e) ADJUSTMENTS. The Conversion Price and the number of shares of
Common Stock issuable upon conversion of Series A Preferred Stock pursuant to
Section 4(a) or Section 4(c) shall be subject to adjustment as follows:
4
<PAGE>
(i) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation effects a split or subdivision of the outstanding shares
of Common Stock, the Conversion Price then in effect immediately
before the subdivision shall be proportionately decreased, and
conversely, if the Corporation combines the outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price
then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this subsection (i)
shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(ii) ADJUSTMENTS FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. In the event the Common Stock issuable upon the
conversion or redemption of the Series A Preferred Stock is changed
into the same or a different number of shares of any class or
classes of capital stock, whether by recapitalization,
reclassification or otherwise (other than a subdivision or
combination of shares or a reorganization, merger, consolidation or
sale of assets provided for elsewhere in this Section 4), then and
in any such event each holder of Series A Preferred Stock shall have
the right thereafter to receive, upon the conversion or the
redemption in exchange for shares of Common Stock of such Series A
Preferred Stock, the kind and amount of capital stock and other
securities and property receivable upon such recapitalization,
reclassification or other change by holders of the number of shares
of Common Stock into which such Series A Preferred Stock shall be
convertible or redeemable, all subject to further adjustment as
provided herein.
(iii) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES
OF ASSETS. Subject to the provisions hereof applicable to any Change
of Control, if there is a capital reorganization of the Common Stock
(other than a recapitalization, subdivision, combination,
reclassification or exchange of shares provided for elsewhere in
this Section 4) or a merger or consolidation of the Corporation with
or into another corporation, or the sale of all or substantially all
of the Corporation's properties and assets to any other Person,
then, as a part of such reorganization, merger, consolidation or
sale, provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive, upon the
conversion or the redemption in exchange for shares of Common Stock
of such Series A Preferred Stock, the number of shares of capital
stock or other securities or property to which a holder of the
number of shares of Common Stock issuable upon such conversion or
redemption would have been entitled to receive on such capital
reorganization, merger, consolidation or sale. In any such case,
appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the
holders of such Series A Preferred Stock after the reorganization,
merger, consolidation or sale to the end that the provisions
5
<PAGE>
of this Section 4 (including adjustment of the Conversion Price then
in effect and the number of shares issuable upon conversion or
redemption of such Series A Preferred Stock) shall be applicable
after that event and be as nearly equivalent as may be practicable.
(f) SALE OF STOCK BELOW CONVERSION PRICE. The Conversion Price and
the number of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock pursuant to Section 4(a) or 4(c) shall be subject to adjustment,
in addition to any adjustments pursuant to Section 4(e) above, as follows:
(i) ADJUSTMENT TO CONVERSION PRICE. If the Corporation
issues or sells, or is deemed by the express provisions of this
Section 4(f) to have issued or sold, Additional Common Stock (as
hereinafter defined), other than as a dividend on or other
distribution in respect of any class of shares in the form of cash
or other property and other than upon a subdivision or combination
of the Common Stock as provided in Section 4(e)(i) above, for an
Effective Price (as hereinafter defined) which is less than the then
existing Conversion Price for the Series A Preferred Stock or the
Fair Market Value (as defined below) of the Additional Common Stock,
then and in each such case such Conversion Price then in effect
shall be reduced, as of the opening of business on the date of each
such issue or sale, to the price (calculated to the nearest cent)
determined by multiplying the Conversion Price in effect immediately
prior to the dilutive issuance by a fraction, the numerator of which
is (A) an amount equal to the sum of (I) the total number of shares
of Common Stock issued and outstanding, on a fully-diluted, fully
converted basis, immediately prior to the time of such issuance or
sale of Additional Common Stock, multiplied by the greater of the
then existing Conversion Price for the Series A Preferred Stock or
the Fair Market Value of the Additional Common Stock in effect, PLUS
---- (II) the amount of consideration, if any, received by the
Corporation upon such issuance or sale of Additional Common Stock
and the denominator of which is (B) the product of (I) the greater
of the then existing Conversion Price for the Series A Preferred
Stock or the Fair Market Value of the Additional Common Stock,
multiplied by (II) an amount equal to the sum of the total number of
shares of Common Stock issued and outstanding, on a fully-diluted,
fully converted basis, immediately prior to the time of such
dilutive issuance plus the number of shares of Additional Common
Stock issued, on a fully-diluted, full-converted basis in connection
with such dilutive issuance. For purposes hereof, "FAIR MARKET
VALUE" means the fair market value of the Common Stock or
Convertible Securities as (x) jointly determined by the Board of
Directors of the Corporation and the Majority Series A Holders, or
(y) in the event the Board of Directors of the Corporation and the
Majority Series A Holders are unable to agree on the fair market
value, determined by a nationally-recognized investment bank
mutually agreed
6
<PAGE>
upon by the Board of Directors of the Corporation and the Majority
Series A Holders.
(ii) CONSIDERATION RECEIVED BY THE CORPORATION. For the
purpose of making any adjustment required under this Section 4(f),
the consideration received by the Corporation for any issue or sale
of securities shall (A) to the extent it consists of cash, be
computed at the gross amount of cash received by the Corporation in
consideration for such issuance or sale, (B) to the extent it
consists of property other than cash, be computed at the fair value
of that property as reasonably determined in good faith by the Board
of Directors of the Corporation, and (C) if Additional Common Stock,
Convertible Securities (as hereinafter defined) or rights or options
to purchase either Additional Common Stock or Convertible Securities
are issued or sold together with other shares or securities or other
assets of the Corporation for a consideration which covers both, be
computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors of the
Corporation to be allocable to such Additional Common Stock,
Convertible Securities or rights or options.
(iii) CONVERTIBLE SECURITIES. For the purpose of the
adjustment required under this Section 4(f), if the Corporation
issues or sells any rights or options for the purchase of, or shares
or other securities convertible or exchangeable, with or without
consideration, into or for, Additional Common Stock (such
convertible or exchangeable shares or securities being hereinafter
referred to as "CONVERTIBLE SECURITIES") and if the Effective Price
of such Additional Common Stock is less than the Conversion Price
for the Series A Preferred Stock then in effect or the Fair Market
Value of the Additional Common Stock, then in each case the
Corporation shall be deemed (A) to have issued at the time of the
issuance of such rights or options or Convertible Securities the
maximum number of shares of Additional Common Stock issuable upon
exercise, conversion or exchange thereof and (B) to have received,
as consideration for the issuance of such Additional Common Stock,
an amount equal to the total amount of the consideration, if any,
received by the Corporation for the issuance of such rights or
options or Convertible Securities, plus (I) in the case of such
rights or options, the minimum amounts of consideration, if any,
payable to the Corporation upon the exercise of such rights or
options, and (II) plus, in the case of Convertible Securities, the
minimum amounts of consideration, if any, payable to the Corporation
upon the conversion or exchange thereof. In the event the Effective
Price for any Additional Common Stock issuable upon conversion or
exercise of any such rights, options or Convertible Securities shall
be modified or adjusted subsequent to the issuance of such
securities, then the Conversion Price for the Series A Preferred
Stock shall be further adjusted to the
7
<PAGE>
Conversion Price that would have been in effect had such Effective
Price been in effect upon the initial issuance of such rights,
options or Convertible Securities. In the event such rights, options
or Convertible Securities shall expire unexercised prior to any
conversion of the Series A Preferred Stock pursuant to this Section
4, then the Conversion Price shall be readjusted to the price that
would have been in effect had such securities not been issued. No
further adjustment of the Conversion Price for the Series A
Preferred Stock, adjusted upon the issuance of such rights, options
or Convertible Securities, shall be made as a result of the actual
issuance of Additional Common Stock on the exercise of any such
rights or options or the conversion or exchange of any such
Convertible Securities.
(iv) DEFINITION OF ADDITIONAL COMMON STOCK. "ADDITIONAL
COMMON STOCK" shall mean all Common Stock or Convertible Securities
issued by the Corporation after the Series A Issuance Date (as
defined below), whether or not subsequently reacquired or retired by
the Corporation, other than:
(A) Common Stock issued or issuable on
conversion of Series A Preferred Stock or options to
purchase Common Stock outstanding on the date hereof;
(B) Common Stock issued pursuant to any
Convertible Securities, provided that the rights
established by this Section 4(f) applied with respect to
the initial issuance by the Corporation of such
Convertible Securities;
(C) Common Stock issued as a dividend or
distribution in respect of the Series A Preferred Stock;
and
(D) Common Stock or Convertible Securities
issued to employees, officers or directors of the
Corporation, provided that any such issuance is or has
been duly approved by the Board of Directors of the
Corporation in accordance with the terms of the
Stockholders' Agreement entered into among the
Corporation and its stockholders (the "STOCKHOLDERS'
AGREEMENT").
For purposes of the definition of "Additional Common Stock", the
sale or other disposition of any shares of Common Stock of the
Corporation theretofore held in its treasury shall be deemed to be
an issuance thereof. For purposes hereof, "PERSON" means any
individual, corporation, partnership, firm, joint venture,
association, joint stock company, limited liability company, trust,
unincorporated organization or governmental
8
<PAGE>
authority. For purposes hereof, "SERIES A ISSUANCE DATE" means the
date of original issuance of the shares of Series A Preferred Stock.
(v) DEFINITION OF EFFECTIVE PRICE. The "EFFECTIVE PRICE"
of Additional Common Stock shall mean the quotient determined by
dividing (A) the aggregate consideration received, or deemed to have
been received by the Corporation for such issue under this Section
4(f), for such Additional Common Stock, by (B) the total number of
shares of Additional Common Stock, issued or sold, or deemed to have
been issued or sold by the Corporation under this Section 4(f).
(g) ACCOUNTANTS' CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of any Conversion Price or the number of shares of
Common Stock or other securities issuable upon conversion of the Series A
Preferred Stock, the Corporation, at its expense and upon the request of any
holder of Series A Preferred Stock, shall cause independent public accountants
of recognized standing selected by the Corporation (who may be the independent
public accountants then auditing the financial statements of the Corporation) to
compute such adjustment or readjustment in accordance with the provisions hereof
and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to each registered
holder of the Series A Preferred Stock at the holder's address as shown in the
Corporation's books. The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based, including a statement (as applicable) of (i) the
consideration received or deemed to be received by the Corporation for any
Additional Common Stock issued or sold or deemed to have been issued or sold,
(ii) the Conversion Price at the time in effect, (iii) the number of shares of
Common Stock issued and outstanding immediately prior to the issuance or sale,
or deemed issuance or sale, of such Additional Common Stock and the number of
Additional Common Stock, and (iv) the type and amount, if any, of other property
which at the time would be received upon conversion of the Series A Preferred
Stock.
(h) NOTICES OF RECORD DATE. In the event of (i) any taking by the
Corporation of record of the holders of any class of securities for the purpose
of determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any merger or consolidation of the Corporation with or into any other Person, or
any transfer of all or substantially all of the assets of the Corporation to any
other Person or any voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, the Corporation shall mail to each holder of Series A
Preferred Stock, at least twenty (20) days prior to the record date specified
therein (or such shorter period as may be agreed to by the Majority Series A
Holders (as defined below)), a notice specifying (A) the date on which any such
record is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (B) the date on which any such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up is expected to become effective, and (C) the date, if
any, that is to be fixed, as of when the holders of record of Common Stock and
Series A
9
<PAGE>
Preferred Stock (or other securities) shall be entitled to exchange their
securities for securities or other property deliverable upon such
reorganization, reclassification, transfer, consolidation, merger, dissolution,
liquidation or winding up. For purposes hereof, "MAJORITY SERIES A HOLDERS"
means, as of any date, the holders of a majority of the outstanding shares of
Series A Preferred Stock or Common Stock issued upon conversion of the Series A
Preferred Stock (or any combination thereof) as of such date.
(i) FRACTIONAL STOCK. No fractional shares shall be issued upon
conversion or redemption of Series A Preferred Stock. If more than one share of
Series A Preferred Stock shall be surrendered for conversion or redemption at
any one time by the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the aggregate
number of shares of Series A Preferred Stock so surrendered. In lieu of any
fractional share to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to the fair market value of such fractional
share as reasonably determined in good faith by the Board of Directors of the
Corporation.
(j) RESERVATION OF COMMON STOCK ISSUABLE. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of Series A Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding Series A Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Series A Preferred Stock, the
Corporation will use its best efforts to take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
(k) PAYMENT OF TAXES. The Corporation will pay all taxes (other than
taxes based upon gross receipts or income) and other governmental charges that
may be imposed with respect to the issue or delivery of Common Stock upon
conversion or redemption of Series A Preferred Stock, except any tax or other
charge imposed in connection with any transfer involved in the issue and
delivery of Common Stock in a name other than that in which the Series A
Preferred Stock so converted or redeemed were registered.
(l) NO DILUTION OR IMPAIRMENT. The Corporation shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion and redemption rights of the holders of the
Series A Preferred Stock against dilution or other impairment.
10
<PAGE>
(m) ROUNDING OF CALCULATIONS; MINIMUM ADJUSTMENT. Any provision of
this Section 4 to the contrary notwithstanding, no adjustment in the Conversion
Price shall be made if the amount of such adjustment would be less than $0.01,
but any such amount shall be carried forward and an adjustment with respect
thereto shall be made at the time of and together with any such subsequent
adjustment which, together with such amount and any other amount or amounts so
carried forward, shall aggregate $0.01 or more.
Section 5. REDEMPTION OF SERIES A PREFERRED STOCK.
(a) REDEMPTION REQUEST. At any time after May 1, 2003, with respect
to the holders of the Series A Preferred Stock, and upon the request (a
"REDEMPTION REQUEST") of the Majority Series A Holders, the Corporation shall
redeem out of funds legally available therefore, in whole or in part, at the
option of the Majority Series A Holders, the outstanding shares of Series A
Preferred Stock within thirty (30) days following the date of the applicable
Redemption Request (the date of such required redemption being the "REDEMPTION
DATE") for the applicable Redemption Price (as defined in Section 5(b) below) by
notice to each holder of record of the Series A Preferred Stock (which notice
shall contain the information specified in clauses (i) through (v) of Section
5(c) below). On the Redemption Date, the Redemption Price for the Series A
Preferred Stock shall be payable in the manner provided below to the order of
the Person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be cancelled and retired.
Notwithstanding anything to the contrary contained in this Section 5, the
Majority Series A Holders shall have no right to make a Redemption Request if
prior to the Redemption Date: (A) the Corporation has consummated a Qualified
Public Offering; or (B) there has occurred a Change of Control.
(b) CALCULATION OF REDEMPTION PRICE. The "REDEMPTION PRICE" for each
share of Series A Preferred Stock being redeemed shall equal the greater of (i)
the amount per share payable to the holders of the Series A Preferred Stock in
the event of the liquidation, dissolution or winding up of the Corporation in
accordance with Section 2 hereof, and (ii) the Accreted Value (as defined below)
thereof. As used herein, "ACCRETED VALUE" means an amount for each share of
Series A Preferred Stock equal to the Preferential Amount, plus an additional
amount equal to ten percent (10%) per annum, computed on the Preferential
Amount, from the Series A Issuance Date to the date of payment thereof to the
holders of the Series A Preferred Stock, compounded annually.
(c) REDEMPTION NOTICE. The Corporation shall, not less than thirty
(30) days nor more than sixty (60) days prior to the applicable Redemption Date,
provide notice (the "REDEMPTION NOTICE") to each holder of record of the Series
A Preferred Stock. The Redemption Notice shall state:
(i) the total number of outstanding shares of Series A
Preferred Stock;
(ii) the number of shares of Series A Preferred Stock
held by the holder;
11
<PAGE>
(iii) the applicable Redemption Date, Preferential
Amount and Redemption Price;
(iv) that the holder's right to convert the Series A
Preferred Stock to be redeemed will terminate on the Redemption
Date; and
(v) the time, place and manner in which the holder is to
surrender to the Corporation the certificate or certificates
representing the Series A Preferred Stock to be redeemed.
On or before the Redemption Date, each holder of Series A Preferred Stock to be
redeemed, unless the holder has exercised its right to convert the shares as
provided in Section 4 above, shall surrender the certificate or certificates
representing such shares to the Corporation, in the manner and at the place
designated in the Redemption Notice, and thereupon the Redemption Price for such
shares shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered
certificate shall be cancelled and retired.
Section 6. SPECIAL VOTING REQUIREMENTS.
Prior to a Qualified Public Offering and for so long as any
shares of Series A Preferred Stock remain outstanding, the Corporation shall
not, and shall not permit any subsidiary to, without approval by vote or written
consent of the Majority Series A Holders voting as a single separate class:
(a) declare or pay any dividends on the Common Stock or any other
distribution in respect of any securities of the Corporation other than the
Series A Preferred Stock or any redemption, purchase or acquisition for value of
any outstanding shares of Common Stock or Convertible Securities;
(b) authorize or issue, or obligate itself to issue, any other
capital stock or security or right convertible or exchangeable for capital stock
of the Company that is senior to or on a parity with the Series A Preferred
Stock as to dividend or redemption rights, liquidation preferences, conversion
rights, voting rights or otherwise or increase the authorized amount of any such
capital stock;
(c) increase the authorized number of shares of Series A Preferred
Stock;
(d) enter any agreement, contract or understanding or otherwise
incur any obligation which by its terms would violate, or be in conflict with
the rights of the holders of Series A Preferred Stock hereunder or the
Corporation's performance of the terms of its Certificate of Incorporation;
(e) incur any indebtedness of the Corporation and its subsidiaries
in excess of $2.0 million (for purposes hereof, "indebtedness" shall include
only liabilities (i) for borrowed money, (ii) evidenced by a bond, note,
debenture or other evidence of
12
<PAGE>
indebtedness, or (iii) any liability of others (which does not include
subsidiaries of the Corporation) for any obligation described in clauses (i) and
(ii) that the Corporation or any of its subsidiaries has guaranteed or is
otherwise legally liable (excluding endorsements of negotiable instruments in
the ordinary course) or which is secured by any property or assets of the
Corporation or any of its subsidiaries);
(f) amend (i) the Certificate of Incorporation or Bylaws of the
Corporation or (ii) any shareholder or other similar agreement to which the
Corporation is a party, in a manner adverse to the Series A Preferred Stock;
(g) authorize or effect any adverse change in the rights,
preferences and privileges of the Series A Preferred Stock;
(h) authorize or issue Common Stock or Convertible Securities to any
management employee (other than Common Stock issued upon the exercise or
conversion of options or warrants outstanding as of the Series A Issuance Date);
(i) materially amend or modify any compensation agreement or other
arrangement with any management employee of the Corporation in excess of
$200,000 in the aggregate;
(j) issue any shares of Common Stock or Convertible Securities below
Fair Market Value;
(k) enter into any transaction or agreement with any stockholder or
affiliate of the Corporation;
(l) effect any acquisition or disposition of any business or
material assets by, or any merger, consolidation, Change of Control or
reorganization involving the Corporation or any of its material subsidiaries
(excluding merger transactions involving the Corporation and any of its
wholly-owned subsidiaries or reincorporation mergers not involving any change in
beneficial ownership of the capital stock of the Corporation);
(m) enter into a line of business other than the business of the
Corporation, or any business activity directly related to the business of the
Corporation, conducted on the Series A Issuance Date; or
(n) approve annual operating budgets.
Section 7. CERTAIN SPECIAL EVENTS.
The holders of the Series A Preferred Stock upon request of
the Majority Series A Holders shall be entitled to the rights set forth in this
Section 7 whenever the Corporation shall fail to pay the Redemption Price for
the Series A Preferred Stock for more than one year from the date when required
hereunder,(such event, a "SPECIAL EVENT"). The rights set forth in this Section
7 shall be in addition to any and all rights granted to the holders of the
Series A Preferred Stock.
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<PAGE>
(a) The Corporation acknowledges its obligation to redeem the
outstanding shares of Series A Preferred Stock at any time and from time to time
after May 1, 2003, upon the request of the Majority Series A Holders, at the
Redemption Price per share in accordance with the terms of this Certificate of
Incorporation. If the Corporation (1) does not have available a source of funds
from which it can legally (including, without limitation, pursuant to the
General Corporation Law of the State of Delaware) meet its redemption
obligations or (2) if the Corporation has insufficient capital resources to meet
its redemption obligations, in each case upon a request for redemption in
accordance with the terms of this Certificate of Incorporation, the Corporation
covenants to use all legally permissible efforts to obtain the funds necessary
to effect such redemption in full as soon as practicable, including revaluing
its assets to establish adequate statutory surplus and/or engaging a
nationally-known investment banking or financial advisory firm mutually agreed
to by the Corporation and a majority in interest of the holders of the
outstanding shares of Series A Preferred Stock to assist the Board of Directors
and management to effect either (i) a recapitalization of the Corporation or
(ii) the sale of all or a portion of the Corporation's assets in order to
generate sufficient funds to fully redeem the shares of Series A Preferred
Stock. The Company will bear all the costs of any appraisals or other expenses
incurred in connection with the foregoing and all costs and expenses incurred by
the holders of the Series A Preferred Stock, including reasonable attorneys'
fees and disbursements, in connection with any action to enforce the provisions
hereof. The Corporation agrees that the holders of the Series A Preferred Stock
would be irreparably damaged and money damages would not be an adequate remedy
in the event of a breach of this Section. Therefore, obligations of the
Corporation hereunder shall be enforceable by specific performance and the
Corporation expressly waives any requirement of a bond in connection with any
application for such relief.
(b) Upon the occurrence of any Special Event, the Corporation shall
not redeem, purchase or otherwise acquire for value or declare or pay any
dividend or other distribution on or in respect of any outstanding Common Stock
or other Junior Stock until satisfaction in full of its obligations in respect
of the Series A Preferred Stock.
Section 8. WAIVERS.
With the written consent of the Majority Series A Holders, the
obligations of the Corporation and the rights of the holders of the Series A
Preferred Stock under any provision of this Article IV may be waived (either
generally or in a particular instance, either retroactively or prospectively and
either for a specified period of time or indefinitely). Upon the effectuation of
each such waiver, the Corporation shall promptly give written notice thereof to
the holders of Series A Preferred Stock who have not previously consented
thereto in writing.
Section 9. NOTICES.
All notices and other communications required by the
provisions of this Article IV shall be in writing and shall be deemed to have
been duly given if delivered in person or sent by registered or certified mail
(return receipt requested) or recognized
14
<PAGE>
overnight delivery service, postage prepaid, to the Corporation at its principal
executive offices or to each holder of record at the address of such holder
appearing on the books of the Corporation. Notice so given shall, in the case of
notice so given by mail, be deemed to be given and received on the fourth (4th)
calendar day after posting, in the case of overnight delivery service, on the
date of actual delivery and, in the case of notice so given by personal
delivery, on the date of personal delivery."
2. This amendment to the Certificate of Incorporation has been
duly adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, I hereby sign my name and affirm that the
statements made herein are true under penalty of perjury, this ____ day of May,
1999.
By:________________________________
Name:
Title:
ACKNOWLEDGED:
By:_______________________________
Name:
Title:
15
<PAGE>
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
HOTJOBS.COM, LTD.
It is hereby certified that:
1. The name of the corporation (hereinafter called the
"Corporation") is Hotjobs.com, Ltd.
2. The Certificate of Incorporation of the Corporation is hereby
amended by striking out Article Fourth thereof and by substituting in lieu of
said Article the following new Article:
FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is 3,000,000 shares, consisting of
1,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred
Stock"), and 2,000,000 shares of common stock, par value $0.01 per share (the
"Common Stock"). Each one share of authorized Common Stock issued and
outstanding or standing in the name of the corporation at the close of business
on the date of filing and recording (the "Effective Time") of this Amendment to
the Certificate of Incorporation with the Secretary of State of the State of
Delaware shall, upon the filing and recording of this Amendment to the
Certificate of Incorporation with the Secretary of State of the State of
Delaware, thereupon automatically be reclassified and changed into 2,000 validly
issued, fully paid and nonassessable shares of Common Stock (the "Stock Split").
Each holder of record of shares of Common Stock to be so reclassified and
changed shall at the Effective Time become the record owner of the number of
shares of Common Stock as shall result from such reclassification and change.
Each such record holder shall be entitled to receive, upon the surrender of the
certificate or certificates representing the shares of Common Stock to be so
reclassified and changed at the office of the corporation in such form and
accompanied by such documents, if any, as may be prescribed by the officers of
the corporation, a new certificate or certificates representing the number of
shares of Common Stock of which he or she is the record owner after giving
effect to the provisions of this Article Fourth.
<PAGE>
2
The designations of the authorized classes of stock, and the powers,
preferences and relative, participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof (in each such case, as
in effect immediately prior to the Stock Split, and in each such case, to
thereafter be adjusted as set forth herein by the Stock Split), are as follows:
A. COMMON STOCK
1. GENERAL. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders
of the Preferred Stock of any series as may be designated by the Board of
Directors upon any issuance of the Preferred Stock of any series.
2. VOTING. The holders of the Common Stock are entitled to one vote for
each share held at all meetings of stockholders (and written actions in
lieu of meetings). There shall be no cumulative voting.
3. DIVIDENDS. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. LIQUIDATION. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled
to receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential dividend rights or liquidation
rights of any then outstanding Preferred Stock.
B. PREFERRED STOCK
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and
in the resolution or resolutions providing for the issue of such series
adopted by the Board of Directors of the Corporation as hereinafter
provided. Any shares of Preferred Stock which may be redeemed, purchased
or acquired by the Corporation may be reissued except as otherwise
provided by law. Different series of Preferred Stock shall not be
construed to constitute different classes of shares for the purposes of
voting by classes unless expressly provided. Authority is hereby expressly
granted to the Board of Directors from time to time to issue the Preferred
Stock in one or more series, and in connection with the creation of any
such series, by resolution or resolutions providing for the issue of the
shares thereof, to determine and fix such voting powers, full or limited,
or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, including without limitation thereof,
dividend rights, special voting rights, conversion rights, redemption
privileges and
<PAGE>
3
liquidation preferences and the number of shares (which number from time
to time may be decreased by the board of directors, but not below the
number of such shares of such series then outstanding, or may be increased
by the board of directors unless otherwise provided in creating such
series) constituting such series, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by the
General Corporation Law of Delaware. Without limiting the generality of
the foregoing, the resolutions providing for issuance of any series of
Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the
extent permitted by law. Except as otherwise specifically provided in the
Corporation's Certificate of Incorporation, as amended, no vote of the
holders of the Preferred Stock or Common Stock shall be a prerequisite to
the issuance of any shares of any series of the Preferred Stock authorized
by and complying with the conditions of the Corporation's Certificate of
Incorporation, as amended, the right to have such vote being expressly
waived by all present and future holders of the capital stock of the
Corporation.
The number of authorized shares of Common Stock and/or Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the voting
stock of the Corporation entitled to vote, irrespective of the provisions of
Section 242(b)(2) of the General Corporation Law of Delaware.
3. The amendment of the Certificate of Incorporation of the
Corporation hereby certified has been duly adopted and written consent has been
given in accordance with the provisions of Sections 228 and 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Hotjobs.com, Ltd. has caused this
Certificate to be signed by Richard S. Johnson, its CEO & President, this 1st of
April, 1999.
By:___________________________________
Richard S. Johnson, CEO & President
<PAGE>
State of Delaware
Secretary of State
Division of Corporations
Files 3:30 PM 09/23/1998
981369697 - 2720404
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
HOT JOBS, INC.
Hot jobs, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the
Corporation, resolutions were duly adopted setting forth a certain proposed
amendment to the Certificate of Incorporation of the Corporation, declaring said
amendment to be advisable and directing that said amendment be approved by the
written consent of stockholders of the Corporation in accordance with Section
228 of the Delaware General Corporation Law. The resolutions setting forth the
proposed amendment is as follows:
BE IT RESOLVED, that in the judgment of the Board of Directors of
the Corporation, it is deemed advisable to amend Article First of the
Certificate of Incorporation of the Corporation, subject to the approval
of the holders of the issued and outstanding shares of the common stock of
the Corporation, par value $.01 per share, to read in its entirety as
follows:
"FIRST: The name of the corporation is Hotjobs.com.Ltd."
SECOND: That, pursuant to resolutions of the Board of Directors, the
holders of the necessary number of shares as required by statute and the
Corporation's Certificate of Incorporation and By-laws consented in writing to
said amendment pursuant to and in accordance with Section 228 of the Delaware
General Corporation Law.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, said Hot Jobs, Inc. has caused this Certificate
to be signed by Christopher J. March, Esq., its V.P., General Counsel &
Secretary, this 23rd day of September, 1998.
By: /s/ Christopher J. March, Esq.
-----------------------------------
Christopher J. March, Esq.
<PAGE>
CERTIFICATE OF INCORPORATION
OF
HOT JOBS, INC.
FIRST: The name of the corporation is Hot Jobs, Inc.
SECOND: The address of the registered office of the corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of the registered agent of
the corporation at such address is the The Corporation Trust Company.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of capital stock which the
corporation shall have authority to issue is One Thousand (1,000) shares, all of
which shall be Common Stock of the par value of one cent ($0.01) per share.
FIFTH: The business and affairs of the corporation shall be managed
by the board of directors, and the directors need not be elected by ballot
unless required by the by-laws of the corporation.
SIXTH: The original by-laws of the Corporation shall be adopted by
the incorporator. In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the board of directors is expressly
authorized to adopt, amend or repeal the by-laws.
SEVENTH: The Corporation is to have perpetual existence.
EIGHTH: The Corporation reserves the right to alter, amend or repeal
any provision contained in this certificate of Incorporation in the manner now
or hereafter prescribed by the laws of the State of Delaware. All rights herein
conferred upon stockholders are granted subject to this reservation.
NINTH: The incorporator is Christopher J. March, Esq., whose mailing
address is c/o Donovan Leisure Newton & Irvine, 30 Rockefeller Plaza, New York,
New York 10112.
TENTH: Directors of the corporation shall not be personally liable
to the corporation or the stockholders for monetary damages for any breach of
any fiduciary duty as a director, provided that this provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or the
<PAGE>
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law, with respect to unlawful payment of
dividends or unlawful approval of stock purchases or redemptions, or (iv) for
any transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is amended to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware, as so amended. No amendment to or repeal of this
Article Tenth shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment.
I, THE UNDERSIGNED, being the incorporator, for the purpose of
forming a corporation under the laws of the State of Delaware do make, file and
record this Certificate of Incorporation, do certify that the facts herein
stated are true, and, accordingly, have hereto set my hand this 20th day of
February, 1997.
/s/ Christopher J. March, Esq.
-----------------------------------
Christopher J. March, Esq.
Incorporator
-2-
<PAGE>
Exhibit 3.3
BYLAWS
OF
HOT JOBS, INC.
(A DELAWARE CORPORATION)
*****
ARTICLE I
OFFICES
SECTION 1. OFFICE. The registered office of the corporation shall be in
the City of Wilmington, State of Delaware.
SECTION 2. ADDITIONAL OFFICES. The corporation may also have offices at
such other places within or without the State of Delaware as the board of
directors may from time to time designate or the business of the corporation may
require.
ARTICLE II
STOCKHOLDERS
SECTION 1. PLACE OF MEETING. Meetings of stockholders shall be held at
such place, within or without the State of Delaware, as the board of directors
may order in the Notice of Meeting.
SECTION 2. ANNUAL MEETINGS. A meeting of stockholders shall be held
annually for the election of directors and the transaction of other business.
The first such meeting shall be held within twelve months from the date of
incorporation of the corporation on such day as the board of directors may order
in the Notice of Meeting.
SECTION 3. AGENDA. The order of business at the annual meeting of
stockholders shall be as follows:
(a) Calling the meeting to order.
(b) Proof of notice of meeting or waiver thereof.
(c) Reading of minutes of last annual meeting.
(d) Reports of officers.
(e) Reports of committees.
(f) Election of directors.
(g) Transaction of other business.
<PAGE>
SECTION 4. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the president or secretary at the
request in writing of a majority of the board of directors, or at the request in
writing by stockholders owning a majority in amount of the capital stock of the
corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
SECTION 5. NOTICE OF MEETINGS. Written notice of the annual meeting
stating the place, date and hour shall be given personally or by mail not less
than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting. Written notice of a special
meeting stating the place, date and hour, and indicating that it is being issued
by or at the direction of the person or persons calling the meeting, and stating
the purpose or purposes for which the meeting is called, shall be given,
personally or by mail, not less than ten nor more than sixty days before the
date of the meeting to each stockholder entitled to vote at such meeting.
SECTION 6. ADJOURNED MEETINGS. The stockholders present may adjourn a
meeting despite the absence of a quorum. When a determination of stockholders of
record entitled to notice of or to vote at any meeting of stockholders has been
made, such determination shall apply to any adjournment thereof unless the board
of directors fixes a new record date for the adjourned meeting. When a meeting
is adjourned to another time or place, it shall not be necessary to give any
notice of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting at which the adjournment is taken, and at
the adjourned meeting any business may be transacted that might have been
transacted on the original date of the meeting. However, if after the
adjournment the board of directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record on the new record date entitled to notice.
SECTION 7. LIST OF STOCKHOLDERS AT MEETING. A list of stockholders as
of the record date, certified by the secretary or by the transfer agent, shall
be produced at any meeting of stockholders upon the request thereat or prior
thereto of any stockholder. If the right to vote at any meeting is challenged,
the inspectors of election, or person presiding thereat, shall require such list
of stockholders to be produced as evidence of the right of the persons
challenged to vote at such meeting, and all persons who appear from such list to
be stockholders entitled to vote thereat may vote at such meeting.
SECTION 8. QUORUM. At any meeting of the stockholders, the holders of a
majority of the shares entitled to vote thereat shall constitute a quorum for
the transaction of any business, provided that when a specified item of business
is required to be voted on by a class or series, voting as a class, the holders
of a majority of the shares of such class or series shall constitute a quorum
for the transaction of such specified item of business. When a quorum is once
present to organize a meeting, it is not broken by the subsequent withdrawal of
any stockholders. The stockholders present may adjourn the meeting despite the
absence of a quorum.
SECTION 9. CHAIR. At each and every meeting of the stockholders, the
president and CEO, or in his absence, the Chairman of the Board, shall preside
at and act as chair.
SECTION 10. VOTING. At each and every meeting of the stockholders,
every stockholder shall be entitled to vote in person or by proxy appointed by
an instrument in writing. Every holder of common stock of the corporation shall
be entitled to one vote for every share standing in its name on the record of
stockholders. Directors shall be elected by a plurality of the votes cast at a
meeting of the stockholders by the holders of shares entitled to vote in the
election, and any other corporate action to be taken by vote of the stockholders
shall be authorized by a
<PAGE>
majority of the votes cast at a meeting of stockholders by the holders of shares
entitled to vote thereon.
SECTION 11. PROXIES. Every stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy. Every proxy must be in
writing and signed by the stockholder or his attorney-in-fact. Every proxy shall
be revocable at the pleasure of the stockholder executing it, except as
otherwise provided by law.
SECTION 12. INSPECTORS AT STOCKHOLDERS' MEETINGS. The board of
directors, in advance of any stockholders' meeting, may appoint one or more
inspectors to act at the meeting or any adjournment thereof. If inspectors are
not so appointed, the person presiding at a stockholders' meeting may, and on
the request of any stockholder entitled to vote thereat shall appoint one or
more inspectors. In case any person appointed fails to appear or act, the
vacancy may be filled by appointment made by the board in advance of the meeting
or at the meeting by the person presiding thereat. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors shall
determine the number of shares outstanding and the voting power of each, the
shares represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all stockholders. On request of the person presiding at the meeting or any
stockholder entitled to vote thereat, the inspectors shall make a report in
writing of any challenge, question or matter determined by them and execute a
certificate of any fact found by them. Any report or certificate made by them
shall be prima facie evidence of the facts stated and of the vote as certified
by them.
SECTION 13. WRITTEN CONSENT OF STOCKHOLDERS. Unless otherwise provided
in the certificate of incorporation, any action required to be taken at any
annual or special meeting of stockholders of the corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. BOARD OF DIRECTORS. The business of this corporation shall
be managed under the direction of its board of directors.
SECTION 2. QUALIFICATIONS OF DIRECTORS. Each director shall be at least
eighteen years of age. A Director need not be a stockholder of the corporation.
SECTION 3. NUMBER OF DIRECTORS. The initial number of directors
constituting the entire board shall be one. Thereafter, the number of directors
may be increased or decreased by
<PAGE>
action of a majority of the entire board subject to the limitation that no
decrease shall shorten the term of any incumbent director.
SECTION 4. ELECTION AND TERM OF DIRECTORS. At each annual meeting of
stockholders, directors shall be elected to hold office until the expiration of
the term for which he is elected, and until his successor has been elected and
qualified.
SECTION 5. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the board of directors for any reason except the removal
of directors without cause may be filled by vote of a majority of the directors
then in office, although less than a quorum exists. Vacancies occurring in the
board by reason of the removal of directors without cause may be filled only by
vote of the stockholders. A director elected to fill a vacancy shall be elected
to hold office for the unexpired term of his predecessor, and until his
successor has been elected and qualified.
SECTION 6. REMOVAL OF DIRECTORS. Any or all of the directors may be
removed for cause by vote of the stockholders or by action of the board of
directors. Any or all of the directors may be removed without cause by vote of
the stockholders.
SECTION 7. RESIGNATION OF DIRECTORS. Any director may resign at any
time. Such resignation shall be made in writing, and shall take effect at the
time specified therein, and if no time be specified, at the time of its receipt
by the chairman of the board or secretary of the corporation. The acceptance of
a resignation shall not be necessary to make it effective, but no resignation
shall discharge any accrued obligation or duty of a director.
SECTION 8. NOTICE OF MEETINGS OF THE BOARD. The first meeting of each
newly elected board of directors may be held without notice. Regular meetings
may also be held without notice to the directors. Special meetings shall be held
upon written notice to the directors at the call of the chairman of the board or
any director. The notice of a special meeting shall state the place, date and
hour of the meeting, indicate that it is being issued by or at the direction of
the person or persons calling the meeting, and specify the purpose thereof. The
notice shall be given personally or by mail, not less than two nor more than ten
days before the date of the meeting to each director. Such notice shall be
deemed to be given when deposited in the United States mail, with postage
thereon prepaid, directed to the director at his address or if he has filed with
the secretary of the corporation a written request that notices to him be mailed
to some other address, then directed to him at such other address. Notice of any
adjourned meeting of the board, specifying the time and place of the next
meeting, shall be given to the directors who were not present at the time of the
adjournment and, unless such time and place are announced at the meeting, to the
other directors.
SECTION 9. QUORUM OF DIRECTORS. At all meetings of the board a majority
of the directors shall be necessary and sufficient to constitute a quorum for
the transaction of business or of any specified item of business. A majority of
the directors present, whether or not a quorum is present, may adjourn any
meeting to another time and place.
SECTION 10. MEETINGS OF THE BOARD. At all meetings of the board of
directors, the chairman of the board, or in his absence, a director chosen by a
majority of the directors present, shall preside at and act as chair. The act of
the majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, but in case of an equality of votes,
the person chairing the meeting shall have a second or deciding vote.
SECTION 11. ACTION BY BOARD OF DIRECTORS WITHOUT A MEETING. Any action
required or permitted to be taken by the board or any committee thereof may be
taken without a meeting if
<PAGE>
all the members of the board or the committee consent in writing to the adoption
of a resolution authorizing the action.
SECTION 12. DIRECTOR AND COMMITTEE ACTION BY CONFERENCE TELEPHONE. Any
one or more members of the board of directors, or any committee thereof, may
participate in a meeting of such board or committee by means of a conference
telephone or similar equipment which allows all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at such a meeting.
SECTION 13. COMMITTEES OF THE BOARD. The board of directors, by
resolution adopted by a majority of the entire board, may designate from among
its members an executive committee and other committees, each consisting of two
or more directors, and each of which, to the extent provided in such resolution,
shall have all the authority of the board, except as to the following matters:
(1) The submission to stockholders of any action that requires
stockholders' approval under the General Corporation Law of the State of
Delaware.
(2) The filling of vacancies in the board of directors or in any
committee.
(3) The fixing of compensation of any director for serving on the board
or on any committee.
(4) The amendment or repeal of the bylaws, or the adoption of new
bylaws.
(5) The amendment or repeal of any resolution of the board which by its
terms shall not be so amendable or repealable.
The board may designate one or more directors as alternate members of
any such committee, who may replace any absent member or members at any meeting
of such committee. Each such committee shall serve at the pleasure of the board
of directors.
SECTION 14. COMPENSATION OF DIRECTORS. Unless otherwise restricted by
the certificate of incorporation or these bylaws, the board of directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the board of
directors and may be paid a fixed sum for attendance at each meeting of the
board of directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees may
be allowed like compensation for attending committee meetings.
<PAGE>
ARTICLE IV
OFFICERS
SECTION 1. NUMBER. The officers of this corporation shall be a
president and CEO, a secretary and a treasurer, each of whom shall be elected or
appointed by the board of directors. The board of directors may also chose one
or more vice presidents, assistant secretaries and assistant treasurers. Any two
or more offices may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. All officers shall be elected
or appointed by the board to hold office for such term as the board deems
appropriate, and each shall hold office for such term and until his successor
has been elected or appointed and qualified.
SECTION 3. PRESIDENT AND CEO. The president and CEO shall in general,
supervise, manage, and control all of the business and affairs of the
corporation, subject to the control of the board of directors. He shall have
power to sign certificates representing shares of this corporation and to sign
and execute all contracts and instruments of conveyance in the name of the
corporation, to sign checks, drafts, notes and orders for the payment of money,
and to appoint and discharge agents and employees, subject to the approval of
the board of directors. He shall perform all the duties usually incident to the
office of president and CEO.
SECTION 4. VICE-PRESIDENT. The vice-president shall, in the absence or
disability of the president and CEO, perform the duties and exercise the powers
of the president and CEO. The vice-president shall have such powers and perform
such duties as may be delegated to him by the president and CEO or prescribed by
the board of directors.
SECTION 5. SECRETARY. The secretary shall keep the minutes of all
meetings of the board of directors, and the minutes of all meetings of the
stockholders, and also, unless otherwise directed, the minutes of all meetings
of committees in books provided for that purpose. He shall give, or cause to be
given, notice of all meetings of stockholders and directors, and all other
notices required by law or by these bylaws, and in case of his absence or
refusal so to do, any such notice may be given by any person thereunto directed
by the president and CEO or by the directors or stockholders upon whose
requisition the meeting is called. He shall have charge of the corporate books
and records. He shall have the custody of the seal of the corporation and affix
the same to all instruments requiring it when authorized by the directors or the
president and CEO, and attest the same. He shall file all written requests that
notices be mailed to stockholders at an address other than that which appears on
the record of stockholders. He shall sign with the president and CEO or
vice-president all certificates representing stock of the corporation. And he
shall, in general, perform all the duties incident to the office of secretary.
SECTION 6. TREASURER. The treasurer shall have custody of all funds,
securities, evidences of indebtedness and other valuable documents of the
corporation; when necessary or proper he shall indorse on behalf of the
corporation for collection checks, notes and other obligations and shall deposit
the same to the credit of the corporation in such bank or banks or depositary as
the board of directors or the finance committee, if any, may designate. He shall
receive and give or cause to be given receipts and acquittances for moneys paid
in on account of the corporation and shall pay out of the funds on hand all just
debts of the corporation of whatever nature upon maturity of the same; he shall
enter or cause to be entered in books of the corporation to be kept for that
purpose full and accurate accounts of all moneys received and paid out on
account of the corporation, and whenever required by the president and CEO or
the directors he shall render a statement of his accounts. He shall keep or
cause to be kept such other books as will show a true record of the expenses,
losses, gains, assets and liabilities of the
<PAGE>
corporation; he shall at all reasonable times exhibit his books and accounts to
any director of the corporation upon application at the office of the
corporation during business hours; he shall sign with the president and CEO or a
vice-president certificates representing stock of the corporation; he shall
perform all other duties and acts incident to the office of treasurer. He shall
give the corporation security for the faithful performance of his duties in such
sum and with such surety as the board of directors may require.
SECTION 7. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and the assistant treasurers may sign with the president
and CEO or vice-president, certificates representing stock of the corporation.
The assistant secretaries and the assistant treasurers shall have such other
powers and shall perform such other duties as may be assigned to them by the
board of directors, the president and CEO or by the secretary or treasurer,
respectively. In the absence or disability of the secretary or the treasurer,
the assistant secretary or the assistant treasurer, respectively, shall perform
all their duties and exercise all their powers. The assistant treasurer may be
required to give security for the faithful performance of his duties in such sum
and with such surety as the board of directors may require.
SECTION 8. REMOVAL OF OFFICERS. Any officer elected or appointed by the
board of directors may be removed by the board of directors with or without
cause.
SECTION 9. VACANCIES. If the office of any officer becomes vacant, the
directors may appoint any qualified person to fill such vacancy, who shall hold
office for the unexpired term of his predecessor and until his successor is
elected or appointed and qualified.
SECTION 10. COMPENSATION OF OFFICERS. The officers shall receive such
salary or compensation as may be determined by the board of directors. No
officer shall be precluded from receiving any compensation by reason of the fact
that he is also a director of the corporation.
<PAGE>
ARTICLE V
SHARES
SECTION 1. CERTIFICATE REPRESENTING SHARES. The shares of the
corporation shall be represented by certificates in such form as shall be
prepared or be approved by the board of directors and shall be numbered
consecutively. The certificates shall be signed by the president and CEO or a
vice-president and the secretary or an assistant secretary or the treasurer or
an assistant treasurer of the corporation, and may be sealed with the seal of
the corporation, if any, or a facsimile thereof. The signatures of the officers
upon a certificate may be facsimiles if the certificate is countersigned by a
transfer agent or registered by a registrar other than the corporation itself or
its employee. In case any officer who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be an officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of issue. Each certificate shall
state upon the face thereof: (1) that the corporation is formed under the laws
of the state of Delaware; (2) the name of the person or persons to whom issued;
and (3) the number and class of shares, and the designation of the series, if
any, which such certificate represents. The corporation will furnish to any
stockholder upon request and without charge, a full statement of the
designation, relative rights, preferences and limitations of the shares of each
class authorized to be issued and, if the corporation is authorized to issue any
class of preferred shares in series, the designation, relative rights,
preferences and limitations of each such series so far as the same have been
fixed and the authority of the board to designate and fix the relative rights,
preferences and limitations of other series.
SECTION 2. LOST, DESTROYED AND STOLEN STOCK CERTIFICATES. Any person
claiming a certificate representing shares to be lost, apparently destroyed or
wrongfully taken shall make an affidavit or affirmation of that fact and
advertise the same in such manner as the board of directors may require, and
shall give the corporation an indemnity bond in such form and with one or more
sureties satisfactory to the board, in such amount as the board may determine to
protect it or any person injured by the issue of the new certificate from any
liability or expense which it or they may incur by reason of the original
certificate remaining outstanding, whereupon a new certificate may be issued of
the same tenor and for the same number of shares as the one alleged to be lost,
destroyed or wrongfully taken if the claimant so requests prior to notice to
this corporation that the lost, apparently destroyed or wrongfully taken
certificate has been acquired by a bona fide purchaser.
SECTION 3. TRANSFER OF SHARES. The certificated stock of the
corporation shall be transferable only upon its books by the holders thereof in
person or by their duly authorized attorneys or legal representatives, and upon
such transfer the old certificates duly endorsed or accompanied by evidence of
succession, assignment or authority to transfer shall be surrendered to the
corporation by the delivery thereof to the person in charge of the list of
stockholders and the transfer books and ledgers, or the transfer agent, or to
such other person as the directors may designate, by whom they shall be
cancelled, and new certificates shall thereupon be issued. A record shall be
made of each transfer, and whenever a transfer shall be made for collateral
security, and not absolutely, it shall be so expressed in the entry of the
transfer on the record of stockholders of the corporation.
SECTION 4. RECORD OF STOCKHOLDERS. The corporation shall keep at its
office in this state or at the office of its transfer agent or registrar in this
state, a record containing the names and addresses of all stockholders, the
number and class of shares held by each and the dates when they respectively
became the owners of record thereof in written form or in any other form
<PAGE>
capable of being converted into written form within a reasonable time. The
corporation shall be protected in treating the persons in whose names shares
stand on the record of stockholders as the owners thereof for all purposes.
SECTION 5. FIXING RECORD DATE. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the board of directors may fix, in advance, a date
as the record date for any such determination of stockholders. Such date shall
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 1. FISCAL YEAR. The fiscal year of the corporation shall begin
on the first day of January in each year and end on the last day of December in
each year, or such other dates as may be determined by the board of directors.
SECTION 2. DIVIDENDS. The board of directors may but shall not be
required to declare, and the corporation may pay, dividends in cash or its bonds
or its property, including the shares or bonds of other corporations, on its
outstanding shares. Such dividends may be declared or paid out of surplus only
and upon such terms and conditions provided by the certificate of incorporation
or bylaws. Before the declaration and payment of any dividend, there may be set
aside out of the surplus available for dividends such sum or sums as the
directors, from time to time, in their absolute discretion, think proper, as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purposes as the directors shall think conducive to the interests of the
corporation.
SECTION 3. SEAL OF CORPORATION. A seal of the corporation shall not be
required but, if used, shall be circular in form and have inscribed thereon the
name of the corporation, the year of its organization, and the words "Corporate
Seal" and "Delaware". The seal shall be in the charge of the secretary. If and
when so directed by the board of directors or the president and CEO, a duplicate
of the seal may be kept and used by the secretary, assistant secretary,
treasurer or assistant treasurer. The seal may be used by causing it or a
facsimile to be affixed or impressed or reproduced in any other manner.
SECTION 4. ANNUAL STATEMENT. The board of directors shall submit to the
stockholders at least ten days before the annual meeting of the stockholders, a
statement of the physical and financial condition of the corporation, including
a consolidated balance sheet showing the assets and liabilities of the
corporation and a profit and loss statement covering the preceding fiscal year,
and, if the board deems appropriate, certified by independent public
accountants.
SECTION 5. NOTICES AND WAIVERS THEREOF. Whenever communication with any
stockholder or director is unlawful under any statute of this state or of the
United States or any regulation, proclamation or order issued under said
statutes, then the giving of such notice or communication to such person shall
not be required and there shall be no duty to apply for license or other
permission to do so. Notice of meeting need not be given to any stockholder who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any stockholder at a meeting, in person or
by proxy, without
<PAGE>
protesting prior to the conclusion of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by him. Notice of a meeting need
not be given to any director who submits a signed waiver of notice whether
before or after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to him. Waiver of
notice need not specify the purpose of any regular or special meeting of the
board.
SECTION 6. SIGNING OF OBLIGATIONS. All checks, drafts, notes or other
obligations of the corporation shall be signed by the president and CEO or such
of the officers of the corporation or by such other person or persons as may be
authorized by the board of directors.
SECTION 7. INDEMNIFICATION OF DIRECTORS AND OFFICERS. If a director or
officer of the corporation is made a party to any civil or criminal action or
proceeding in any matter arising from the performance by such director or
officer of his or her duties for or on behalf of the corporation, then, to the
full extent permitted by law, the corporation, upon affirmative vote of the
board of directors, a quorum of directors being present at the time of the vote
who are not parties to the action or proceeding, shall:
(1) Advance to such director or officer all sums found by the board, so
voting, to be reasonably necessary and appropriate to enable the director or
officer to conduct his or her defense, or appeal, in the action or proceeding;
and
(2) Indemnify such director or officer for all sums paid by him or her
in the way of judgments, fines, amounts paid in settlement, and reasonable
expenses, including attorneys' fees actually and necessarily incurred, in
connection with the action or proceeding, or appeal therein, subject to the
proper application of credit for any sums advanced to the director or officer
pursuant to clause (1) of this paragraph.
ARTICLE VII
AMENDMENT AND REPEAL
SECTION 1. AMENDMENT AND REPEAL. The bylaws may be altered, amended or
repealed and new bylaws adopted at any meeting of the board of directors of the
corporation by the affirmative vote of a majority of the members of the board.
<PAGE>
Exhibit 10.2
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (this "AGREEMENT") dated as
of May 11, 1999 among HOTJOBS.COM, LTD., a Delaware corporation (the "COMPANY"),
the parties set forth on the signature pages hereto under the caption "SERIES A
INVESTORS" (collectively, the "SERIES A INVESTORS"), the parties set forth on
the signature pages hereto under the caption "EXISTING STOCKHOLDERS"
(collectively, the "EXISTING STOCKHOLDERS") and each other Stockholder who may
hereafter become a party hereto.
RECITALS
A. The Company and the Series A Investors are parties to a Series A
Preferred Stock Purchase Agreement (the "STOCK PURCHASE AGREEMENT") dated as of
May 10, 1999, pursuant to which the Series A Investors are purchasing, in the
aggregate, 2,000,000 shares of Series A Convertible Preferred Stock, $0.01 par
value per share (the "SERIES A PREFERRED STOCK"), of the Company.
B. On February 22, 1997, the Company entered into a Shareholders'
Agreement with its shareholders (the "Shareholders' Agreement"). In order to
induce the Series A Investors to purchase the Series A Preferred Stock (as
defined below), the parties to the Shareholders' Agreement have agreed to amend
and restate the Shareholders' Agreement.
C. The Series A Investors and the Existing Stockholders, collectively
being on the date hereof the holders of all of the issued and outstanding
capital stock of the Company, desire to enter into this Agreement with the
Company.
D. It is a condition precedent to the purchase and sale of the Series A
Preferred Stock pursuant to the Stock Purchase Agreement that the Company, the
Series A Investors and the Existing Stockholders shall have executed and
delivered this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS. The following terms are defined as follows:
(a) "Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such
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Person and when used with respect to any natural Person, shall also include
such Person's spouse, parents and descendants (whether by blood or adoption and
including stepchildren) if living in same household. For purposes of this
definition, a Person shall be deemed to control another Person if such first
Person directly or indirectly owns or holds ten (10%) percent or more of the
ownership interests in such other Person.
(b) "Bessemer" means Bessemer Venture Partners IV L.P. and Bessec Ventures
IV L.P.
(c) "Common Stock" means shares of the Company's common stock, $0.01 par
value per share.
(d) "Common Stock Equivalents" means, with respect to any Stockholder, the
number of shares of Common Stock owned by such Stockholder and the number of
shares of Common Stock into or for which any Convertible Securities owned by
such Stockholder, including the Preferred Stock, shall be convertible,
exchangeable or exercisable as of the date of determination thereof.
(e) "Company Stock" means any shares of capital stock of the Company,
including the Preferred Stock and the Common Stock, now or hereafter issued.
(f) "Convertible Securities" means, at any time, any options, warrants,
convertible notes or other securities or rights exchangeable or exercisable,
with or without the payment of additional consideration, into or for shares of
Common Stock, directly or indirectly.
(g) "Generation" means Generation Capital Partners L.P., State Board of
Administration of Florida and Generation Parallel Management Partners L.P.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the relevant time.
(i) "Independent Director" means an individual that possesses such
experience and background in matters of business and corporate governance that
reasonably qualifies such Person for service on the Board of Directors as an
independent director and that has no material pre-existing business relationship
with the Company or any Stockholder or any of their respective Affiliates,
whether directly or indirectly as an employee, agent, investor or otherwise.
(j) "Joinder Agreement" has the meaning ascribed to such term in Section
4.3 hereof.
(k) "Legal Representative" means and includes all Persons who shall at the
time in question have any legal or equitable interest in any Company Stock of a
deceased Stockholder or a predeceased spouse of a Stockholder or is the guardian
or conservator of a Stockholder or his or her spouse.
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(l) "Lien" means any lien, pledge, mortgage, deed of trust, security
interest, claim, lease, charge, option, right of first refusal, transfer
restriction under any stockholder or similar agreement, or other encumbrance.
(m) "Line of Business" means the business of the Company conducted on the
date hereof.
(n) "Major Stockholder" means, as of any date, any holder, other than the
holders of Series A Preferred Stock, of not less than ten percent (10%) of the
outstanding Common Stock Equivalents as of such date who is a party to this
Agreement or who has executed a Joinder Agreement.
(o) "Majority Series A Holders" means, as of any date, the holders of the
outstanding shares of Series A Preferred Stock or Common Stock issued upon
conversion of the Series A Preferred Stock (or any combination thereof)
representing a majority of the shares of Common Stock issued or issuable upon
conversion of the Series A Preferred Stock as of such date.
(p) "Management Stockholder" means, at any time, any Stockholder that is
employed by the Company at such time.
(q) "Material Adverse Effect" means any material adverse effect on the
business, properties, results of operations, or condition (financial or
otherwise) of the Company or its subsidiaries taken as a whole.
(r) "Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, governmental body or other entity.
(s) "Pro Rata Share" means the percentage of Transfer Securities (as
defined in Section 4.3) being offered by a Transferring Stockholder (as defined
in Section 4.3) that each other Stockholder shall be entitled to purchase, if
any. Such percentage shall be determined by dividing the number of Common Stock
Equivalents of such other Stockholder by the aggregate number of all Common
Stock Equivalents of Stockholders entitled to participate in the purchase of
such Transfer Stock (as defined in Section 4.3).
(t) "Qualified Public Offering" means an underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, concerning the offering and sale of shares of Common Stock for
the account of the Company (i) in which the aggregate gross proceeds to the
Company at the public offering price equals or exceeds $30.0 million and (ii)
the public offering price per share equals or is not less than an amount equal
to two times the Conversion Price (as such term is defined in the Company's
Certificate of Incorporation) of the Series A Preferred Stock, in each case
appropriately adjusted for subdivisions and combinations of Common Stock
pursuant to the terms of Company's Certificate of Incorporation.
(u) "SEC" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
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(v) "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the relevant time.
(w) "Stockholders" shall mean, collectively, the Series A Investors, the
Existing Stockholders and any other Person who, after the date hereof, acquires
any Company Stock or Convertible Securities and executes a Joinder Agreement, in
accordance with and subject to the terms and conditions of this Agreement.
ARTICLE II
VOTING; BOARD MATTERS; MATERIAL DECISIONS
2.1 Nomination and Election of Directors.
(a) Selection of Nominees. On the date hereof, and at each annual meeting
of stockholders of the Company or any special meeting called for the purpose of
electing directors of the Company (or by consent of stockholders in lieu of any
such meeting) or at such other time or times as the Stockholders may agree:
(i) the Majority Series A Holders shall have the right to nominate
two (2) directors to the Board (such nominees hereinafter referred to as
the "SERIES A DESIGNEES"); PROVIDED, that one (1) of the Series A
Designees shall be the designee of Generation, for so long as Generation
continues to own not less than 20,000 Common Stock Equivalents as
presently constituted and subject to adjustment for stock splits, stock
dividends, reverse stock splits, recapitalizations and the like;
(ii) the Management Stockholders shall have the right to nominate
three (3) directors to the Board (the "MANAGEMENT DESIGNEES"); and
(iii) in addition to the Series A Designees and the Management
Designees, the Board as presently constituted shall have the right, by a
decision of a majority thereof, to nominate at least two (2) directors,
and, subject to the provisions of Section 2.3 hereof, not more than four
(4) directors, each of which shall be an Independent Director.
(b) Election of Nominees. The Stockholders shall vote all of their
respective shares of Company Stock entitled to vote, in favor of the election of
all of the nominees specified in Section 2.1(a) and no other Person.
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2.2 Removal of Directors. No Stockholder shall vote any shares of Company
Stock in favor of the removal of a director nominated by one or more of the
other Stockholders hereunder unless the right of any such Stockholder so to
nominate such director shall no longer exist pursuant to Section 2.1(a);
PROVIDED, HOWEVER, that upon the request of any party to remove a director
previously designated for nomination by such Person, the Stockholders shall vote
all of their shares of Company Stock in favor of (i) the removal of such
director and (ii) the election of any replacement director as may be designated
by such Person, subject to the provisions of Section 2.1(a); and, PROVIDED,
FURTHER, that any director may be removed by the Stockholders for cause in
accordance with applicable law provided that the Person that designated such
director for nomination shall be entitled to designate a successor to such
director and the Stockholders shall vote all of their shares of Company Stock in
favor of the election of such replacement director, subject to the provisions of
Section 2.1(a).
2.3 Number of Directors. Each of the Stockholders agrees to take such
action in accordance with this Article 2, including the voting of shares of
Company Stock owned or controlled by such Stockholder, as may be necessary to
cause the Company to be managed by a Board consisting initially of seven (7)
members, including two (2) Independent Directors. In no event shall there be
more than nine (9) directors constituting the Board, including at least four (4)
Independent Directors. In the event the number of directors on the Board is
increased from the initial seven (7) members, any additional director (which
must be an Independent Director) shall be nominated jointly by (i) the majority
of the Board, as required pursuant to Section 2.1(a)(iii) hereof, and (ii) the
Majority Series A Holders.
2.4 Vacancies. If any vacancy occurs on the Board because of death,
incapacity, resignation, retirement or removal of a director in accordance with
this Agreement, the Person entitled to designate such director in accordance
with Section 2.1(a) shall designate a successor, and all Stockholders shall vote
their shares of Company Stock in favor of the election of such successor to the
Board, subject to the provisions of Section 2.1(a).
2.5 Proxies. Neither the Company nor any Stockholder shall give any proxy
or power of attorney to any Person that permits the holder thereof to vote in
his discretion on any matter that may be submitted to the Company's stockholders
for their consideration and approval, unless such proxy or power of attorney is
made subject to and is exercised in conformity with the provisions of this
Agreement.
2.6 Director Compensation and Expenses. No directors fees shall be paid by
the Company, other than, if approved by the Board, to Independent Directors. All
directors shall be entitled to reimbursement from the Company for all reasonable
direct out-of-pocket expenses incurred in connection with their service as
directors, which shall include travel expenses for attending Board meetings and,
other travel expenses related to the Company or the activities of the Board.
2.7 Director Information. The Company shall furnish to each member of the
Board of Directors:
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(a) promptly after the delivery thereof, all management letters of
accountants relating to the Company or any of its subsidiaries;
(b) promptly upon any executive officer obtaining actual knowledge thereof
and in any event promptly upon delivery or receipt by the Company or any of its
subsidiaries of any notice relating thereto, written notification of:
(i) the occurrence of any default or breach under any material
agreement to which the Company or any of its subsidiaries is a
party that would reasonably be expected to have a Material
Adverse Effect;
(ii) the commencement of any material legal or regulatory
proceeding, action or investigation to which the Company or
any of its subsidiaries is a party; and
(iii) copies of any material regulatory requests, documentation
relating to governmental investigations, and governmental or
regulatory orders, decisions and rulings.
ARTICLE III
INFORMATION
3.1 Information. The Company shall furnish to all holders of Series A
Preferred Stock (or Common Stock issued upon conversion of the Series A
Preferred Stock, or any combination thereof) that own not less than 10,000
Common Stock Equivalents as presently constituted and subject to adjustment for
stock splits, stock dividends, reverse stock splits, recapitalizations and the
like (on the applicable date such information becomes available) the following
information:
(a) Financial Statements. As soon as available (i) yearly audited
financial statements of the Company prepared in accordance with generally
accepted accounting principles and audited by a nationally recognized firm (or
other firm reasonably acceptable to the Majority Series A Holders) within ninety
(90) days of each fiscal year end; and (ii) unaudited consolidated monthly
financial statements of the Company for each month prepared in accordance with
generally accepted accounting principles consistently applied (together with
additional financial information showing a comparison of actual results of
operations for such period to budgeted results for such period and to the
results of operations from the same period of the immediately preceding year)
within thirty (30) days of each month end.
(b) Budgets. As soon as available, but in no event later than thirty (30)
days prior to the beginning of each fiscal quarter of the Company, a
comprehensive operating budget forecasting the Company's revenues, expenses and
cash position on a month to month basis for the upcoming two (2) fiscal quarters
of the Company, including any updates or revisions to prior quarterly or annual
plans that are available. In addition,
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similar projections for the entire fiscal year of the Company shall be provided
no less than thirty (30) days prior to the beginning of such fiscal year.
ARTICLE IV
TRANSFER OF COMPANY STOCK
4.1 Restrictions on Transfer.
(a) So long as this Agreement is in effect, no Stockholder (or transferee
of a Stockholder) shall effect or facilitate any transfer, sale, assignment,
pledge, hypothecation, gift, placement in trust (voting or otherwise) or
transfer by operation of law (other than by way of a merger or consolidation of
the Company) of, creation of a security interest in or Lien on, or any other
encumbering or disposal (directly or indirectly and whether or not voluntary)
of, any Company Stock or any Convertible Securities (any of which being a
"TRANSFER," and the recipient thereof being a "TRANSFEREE"), except as provided
in this Agreement. No Transfer in violation of this Agreement shall be made or
recorded on the books of the Company and any such Transfer shall be void and of
no force or effect. Subject to the terms of this Agreement, the Stockholders
shall be entitled to exercise all rights of ownership of their Company Stock and
Convertible Securities.
(b) No Stockholder shall effect or facilitate a Transfer of any Company
Stock, directly or indirectly controlled by such Stockholder, and the Company
shall not reflect on its books any Transfer of Company Stock to any Persons
(other than the Company and its subsidiaries) that are engaged in the Company's
Line of Business (a "COMPETITOR") or to any Person that is an Affiliate,
director, officer, partner or stockholder of any Competitor.
4.2 Certain Permitted Transfers. None of the restrictions contained in
this Agreement with respect to Transfers of Company Stock or Convertible
Securities (other than those set forth in Section 4.1(b) and this Section 4.2)
shall apply (provided that such Transferee agrees that notwithstanding the terms
of this Section 4.2, such Transferee shall not thereafter effect or allow a
Transfer of such Company Stock or Convertible Securities to any Person to whom
such transferor Stockholder would not be permitted to effect or allow a Transfer
of such Company Stock pursuant to the terms of this Agreement):
(a) to any Transfer (i) by any Stockholder who is a natural person to such
Stockholder's parents, spouse or former spouse, "domestic partner" or any of
such Stockholder's issue (natural and adopted) (collectively, "RELATIVES"); (ii)
to a Legal Representative of such Stockholder if such Stockholder becomes
incapacitated or upon death of a Stockholder; (iii) by a Stockholder who is a
natural person by will, intestacy laws or the laws of descent or survivorship;
(iv) by a Stockholder who is a natural Person by the laws of community property
or otherwise pursuant to a court order upon the divorce of such Stockholder; or
(v) to a trust or limited partnership of which there are no
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principal beneficiaries or partners other than such Stockholder and/or one or
more Relatives of such Stockholder;
(b) to any Transfer by either of Bessemer or Generation to its respective
direct or indirect owners, including, without limitation, any of its respective
partners, stockholders or equity owners thereof, and in respect of any such
owner, to any Transfer that such owner would be permitted to make pursuant to
this Section 4.2 as a Stockholder hereunder, including any such Transfer by way
of a distribution, in connection with any dissolution, partial or complete
liquidation or otherwise;
(c) to any Transfer by operation of law; or
(d) the Transfers set forth on Schedule 4.2(d) hereto;
provided, however, that in the case of any Transfer described in one or more of
clauses (a) through (d) above (each a "PERMITTED TRANSFER" and collectively the
"PERMITTED TRANSFERS"):
(i) each Permitted Transferee shall have executed and delivered to
the Company, as a condition precedent to any Transfer or acquisition of
Company Stock or Convertible Securities, an executed consent to be bound
by the provisions of, and to become a party to, this Agreement, in the
form of EXHIBIT A hereto (a "JOINDER AGREEMENT"), and shall have submitted
to the Company such evidence as the Company may reasonably request to
demonstrate that such Transferee is a Permitted Transferee; and
(ii) the certificates issued to the Permitted Transferee which
represent the Company Stock or Convertible Securities so Transferred shall
bear the legends provided herein;
provided, further, that the occurrence, following a Permitted Transfer referred
to in clause (a)(v), of any event immediately following which the conditions set
forth in clause (a)(v) are no longer satisfied shall be deemed a Transfer of any
Company Stock or Convertible Securities held by the applicable entity; and
PROVIDED, FURTHER, that any Transfer hereunder shall be effected in compliance
with applicable securities laws.
4.3 Rights of First Refusal.
(a) Each Stockholder agrees that, subject to the restrictions on Transfers
contained in Sections 4.4 and 4.5 hereof, if any Stockholder (for purposes of
this Section 4.3, a "TRANSFER STOCKHOLDER") wishes to Transfer any or all of the
Company Stock or Convertible Securities then owned by such Transferring
Stockholder, other than to a Permitted Transferee in accordance with Section
4.2, pursuant to the right to participate in any Transfer under Section 4.5, and
subject to Section 5.1(d) hereof, then such Transferring Stockholder shall first
give a written notice (the "TRANSFER NOTICE") to the Company specifying the
number of shares of Company Stock or Convertible Securities such Transferring
Stockholder wishes to Transfer (the "TRANSFER SECURITIES"), containing
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an irrevocable offer (open to acceptance for a period of sixty 60) days after
the date such Transfer Notice is received) to sell the Transfer Securities to
the Transfer Offerees (as defined below) at the price stated in the Transfer
Notice, which price shall be equal to the price offered to such Stockholder by a
bona fide third party offeror or in a letter of intent (the "TRANSFER PRICE"),
and which Transfer Notice shall identify the offeror. No Transfer to which this
Section 4.3 is applicable shall be permitted unless the third party offer is for
cash.
(b) The Company shall have the right to purchase all or a portion of the
Transfer Securities; provided, HOWEVER, that the Company must determine the
number of Transfer Securities it will purchase within thirty (30) days after its
receipt of the Transfer Notice. If the Company elects to purchase less than all
of the Transfer Securities, it shall, within thirty (30) days after its receipt
of the Transfer Notice, deliver a copy of the Transfer Notice and a written
statement of the number of Transfer Securities it has elected not to purchase
(the "REMAINING TRANSFER SECURITIES") to each holder of Series A Preferred Stock
and each Major Stockholder, other than the Transferring Stockholder (the
"STOCKHOLDER OFFEREES" and, together with the Company, the "TRANSFER Offerees").
A Stockholder Offeree who wishes to purchase any Remaining Transfer Securities
shall provide the Company with written notice specifying the number of Remaining
Transfer Securities (up to such Stockholder Offeree's Pro Rata Share) which such
Stockholder Offeree desires to accept within thirty (30) days of the delivery of
the Transfer Notice by the Company, and may, at the Stockholder Offeree's
option, indicate the maximum number of Remaining Transfer Securities such
Stockholder Offeree irrevocably commits to purchase in excess of such
Stockholder Offeree's Pro Rata Share (the "EXCESS AMOUNT"). If one or more
Stockholder Offeree declines to participate in such purchase or elects to
purchase less than such Stockholder Offeree's Pro Rata Share, then the Remaining
Transfer Securities shall automatically be deemed to be accepted by Stockholder
Offerees who specified an Excess Amount in their respective notice of
acceptance, allocated among such Stockholder Offerees (with rounding to avoid
fractional Stock) in proportion to their respective Pro Rata Share but in no
event shall an amount greater than a Stockholder Offeree's Excess Amount be
allocated to such Stockholder Offeree. Any excess Remaining Transfer Securities
shall be allocated among the remaining Stockholder Offerees whose specified
Excess Amount has not been satisfied (with rounding to avoid fractional Stock)
in proportion to each Stockholder Offeree's respective Pro Rata Share, and such
procedure shall be employed until the entire Excess Amount of each Stockholder
Offeree has been satisfied or all Remaining Transfer Securities have been
allocated. The Company shall have the right but not the obligation to purchase
any Remaining Transfer Securities remaining thereafter.
(c) If the offer is accepted by any Transfer Offerees, the Company, on
behalf of all purchasing Transfer Offerees, shall provide the Transferring
Stockholder with written notice of such acceptance specifying the number of the
Transfer Securities as to which each Transfer Offeree is accepting the offer (a
"NOTICE OF ACCEPTANCE") within sixty (60) days after the Transfer Notice is
received.
(d) The closing of the purchase by the Transfer Offerees of the Transfer
Securities pursuant to this Section 4.3 shall take place at the principal
offices of the
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Company no later than the thirtieth (30th) day after the Notice of Acceptance is
given. At such closing, each of the Transfer Offerees who has elected to
purchase Transfer Securities shall deliver a certified check or checks in the
appropriate amount to the Transferring Stockholder against delivery of duly
endorsed certificates representing the Transfer Securities to be purchased. The
Transfer Securities shall be delivered free and clear of all Liens other than
those imposed by this Agreement and excluding any registration requirements
imposed by federal and state securities laws.
(e) If any Transfer Securities allocated to a Transfer Offeree are not
purchased by such Transfer Offeree (the "TRANSFER DEFAULT SECURITIES"), such
Transfer Default Securities may be purchased by the Company. Nothing contained
herein shall prejudice any Person's right to maintain any cause of action or
pursue any other remedies available to it as a result of such default.
(f) If, at the end of the sixtieth (60th) day after the Transfer Notice is
received, the Company has not delivered an effective Notice of Acceptance of the
offer contained in such Transfer Notice, or if it has delivered a Notice of
Acceptance covering less than all of the Transfer Securities, then the
Transferring Stockholder shall have sixty (60) days in which to Transfer any or
all of the Transfer Securities not accepted for purchase by the Transfer
Offerees, at a price not lower than the Transfer Price and on terms no more
favorable to the transferee than those contained in the Transfer Notice, to the
third party offeror referred to in Section 4.3(a) hereof; PROVIDED, HOWEVER,
that no Transfer may be made to such third party offeror unless and until such
party delivers to the Company an executed Joinder Agreement and such Transfer
complies with applicable securities law. Promptly after any Transfer pursuant to
this Section 4.3, the Transferring Stockholder shall notify the Company of the
consummation thereof and shall furnish such evidence of the completion and time
of completion of such Transfer and of the terms thereof as the Company may
request. If, at the end of such sixty (60) day period, the Transferring
Stockholder has not completed the Transfer of all of the Transfer Securities,
the Transferring Stockholder shall no longer be permitted to Transfer such
Securities pursuant to this Section 4.3(f) without again complying with this
Section 4.3 in its entirety. If the Transferring Stockholder determines at any
time within such sixty (60) day period that the Transfer of all or any part of
such Transfer Securities at a price not lower than the Transfer Price and on
terms no more favorable to the transferee than those contained in the Transfer
Notice is impractical, such Stockholder may terminate all attempts to Transfer
such Transfer Securities and recommence the procedures of this Section 4.3 in
their entirety without waiting for the expiration of such sixty (60) day period
by delivering written notice of such decision to the Company.
4.4 Restrictions in Connection with Registrations. Each Stockholder agrees
not to effect any public sale or distribution of Company Stock or Convertible
Securities (or any other Transfer if requested by the underwriter of such
offering), including any sale pursuant to Rule 144, during the seven (7) days
prior to the effective date of a registration statement relating to a sale of
Company Stock or Convertible Securities and during such period of time beginning
on such effective date and ending up to one hundred and eighty (180) days
thereafter, as may be required by the underwriters of such offering and agreed
to by the Company (in each case except as part of such
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registration). Each Stockholder hereby acknowledges that such Stockholder shall
have no right to include its Company Stock or Convertible Securities in any
registration of Company Stock or Convertible Securities, except as expressly
provided in Article V hereof.
4.5 Co-Sale Rights.
(a) If, after complying with any applicable right of first refusal
procedures contained in Section 4.3 hereof, any Stockholder wishes to Transfer
any Company Stock or Convertible Securities (other than to a Permitted
Transferee in accordance with Section 4.2, pursuant to the right to participate
in any Transfer under Section 4.5, and subject to Section 5.1(d)), then such
Stockholder shall, as a condition to such Transfer, permit each other
Stockholder (or cause each such Stockholder to be permitted) to sell (either to
the prospective purchaser of the selling Stockholder's Common Stock or to
another financially reputable purchaser reasonably acceptable to such parties)
the same proportion of the Common Stock and Convertible Securities then owned by
such other Stockholders, as the proportion that the number of Common Stock
Equivalents the selling Stockholder proposes to sell held by such selling
Stockholder on the date of the Co-Sale Notice (as defined below) bears to the
total number of Common Stock Equivalents held by such selling Stockholder on
such date, on substantially equivalent terms and at a substantially equivalent
price to that offered by the third party offeror taking into account any
difference in the type of securities (i.e., Common Stock or Convertible
Securities) held by the selling Stockholder and each other Stockholder who
desires to sell Common Stock.
(b) In connection with any transaction to which Section 4.5(a) hereof
shall be applicable, the selling Stockholder shall send notice (the "CO-SALE
NOTICE") to the Company and the other Stockholders setting forth the
consideration per share to be paid in the subject Transfer, the proposed closing
date for such transaction (which shall be not less than thirty (30) days after
the date of such Co-Sale Notice) and the other terms and conditions of such
transaction. Not later than twenty (20) days after the delivery of the Co-Sale
Notice, the other Stockholders shall elect whether or not to participate in such
transaction and shall provide notice to the selling Stockholder thereof and
shall thereafter take such actions as may reasonably be requested by the selling
Stockholder in order to facilitate the closing of the applicable transaction and
to effectuate the provisions of Section 4.5(a) hereof. Each Stockholder's
obligation under Section 4.5(a) hereof to afford the other Stockholders (or to
cause each of them to be afforded) the rights referred to herein will be
discharged if the other Stockholders are given notice hereof simultaneously with
the giving of the Transfer Notice required by Section 4.3 hereof and if such
notice provides that the other Stockholders may elect to avail themselves of
such rights by a written reply given on or before the expiration of the sixty
(60) day time period referred to in Section 4.3 hereof, addressed to such Person
as may be designated in the Transfer Notice.
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4.6 Pre-Emptive Rights of Series A Preferred Holders.
(a) Each Series A Preferred Holder shall have the right to purchase,
pro-rata, a portion of any New Securities (as hereinafter defined) that the
Company may, from time to time hereafter, propose to sell and issue. Each such
Series A Preferred Holder's pro-rata share of New Securities, for the purposes
of this right, is the ratio of the number of Common Stock Equivalents held by
such holder at the time the New Securities are offered (treating the Series A
Preferred Stock as if fully converted) to the total number of outstanding Common
Stock Equivalents (including only then presently exercisable Convertible
Securities). "NEW SECURITIES" shall mean any shares of capital stock or
securities or rights convertible or exchangeable for capital stock of the
Company; PROVIDED, HOWEVER, that New Securities does not include:
(i) Common Stock issued or issuable on conversion of Series A
Preferred Stock or options to purchase Common Stock outstanding on the
date hereof;
(ii) Common Stock issued pursuant to any Convertible Securities,
provided that the rights established by this Section 4.6 applied with
respect to the initial issuance by the Company of such Convertible
Securities;
(iii) Common Stock issued in connection with any stock split, or
recapitalization of the Company or as a dividend or distribution in
respect of the Series A Preferred Stock;
(iv) Common Stock or Convertible Securities issued to a third party
in an arms-length transaction for fair value in connection with any
acquisition of another Person by the Company by merger, purchase of all or
substantially all of its assets, or other reorganization;
(v) Common Stock or Convertible Securities issued to employees,
officers or Independent Directors of the Company, provided that any such
issuance is or has been duly approved by the Board in accordance with the
terms of this Agreement; and
(vi) Common Stock or Convertible Securities issued to a third
party lender in an arms-length transaction for fair value in connection
with a bona-fide loan to the Company.
(b) If the Company proposes to undertake an issuance of New Securities, it
shall give each Series A Preferred Holder written notice of its intention,
describing the type of New Securities, the price and the general terms and
conditions upon which the Company proposes to issue the same. Each such Series A
Preferred Holder shall have ten (10) days from the giving of such notice to
agree to purchase its pro rata share of New Securities for the price and upon
the terms and conditions specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased. The
Company shall give each Series A Preferred Holder written notice
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on the date following such ten (10) day period as to any New Securities with
respect to which Series A Preferred Holders have not exercised their right. Each
such Series A Preferred Holder shall have a right of over-allotment such that if
any Series A Preferred Holder fails to exercise its rights to purchase its pro
rata portion of the New Securities, the other holders of Series A Preferred
Stock may purchase the non-purchasing Series A Preferred Holder's portion on a
pro rata basis, by agreeing in writing to purchase such New Securities within
ten (10) days after the end of such first ten (10) day period.
(c) If any Series A Preferred Holder fails to exercise its right under
this Section 4.6 to purchase its pro-rata portion of the New Securities within
forty (40) days following the date of the first notice contemplated by Section
4.6(b), the Company shall have until the ninetieth (90th) day following such
date to enter into a letter of intent or definitive agreement, and a period of
ninety (90) days thereafter to sell any of the New Securities in respect of
which such Series A Preferred Holders' rights were not exercised, at a price and
upon terms and conditions no more favorable to the purchasers thereof than
specified in the Company's notice to the Series A Preferred Holders pursuant to
Section 4.6(b). If the Company has not sold such New Securities within such
ninety (90) days, the Company shall not thereafter issue or sell any such New
Securities, without again first offering such securities to the Series A
Preferred Holders in the manner provided in this Section 4.6.
(d) Notwithstanding the foregoing provisions of Sections 6.1(b) and (c)
hereof, in the event that the Board of Directors of the Company and the Majority
Series A Holders determine that observing the time periods in such Sections
could adversely affect the Company in light of the Company's business and
financing requirements, the Company may shorten such time periods, provided the
Company uses commercially reasonable efforts to provide expedited notice to all
Stockholders entitled to such rights.
4.7 Company Disposition.
(a) If the Board and the Majority Series A Holders each approve a Company
Disposition (as defined below) to an unaffiliated third party, the Stockholders
agree to vote in favor of and to approve any corporate action required to effect
such Company Disposition and shall be deemed to have voted for, consented to and
approved such Company Disposition, and each Stockholder shall participate in
such Company Disposition in accordance with the terms thereof. As used herein
"COMPANY DISPOSITION" means the consummation of a merger or consolidation of the
Company with or into another Person that is not a parent or subsidiary of the
Company as a result of which those Persons who were stockholders of the Company
immediately prior to such transaction own, in the aggregate, less than a
majority of the voting capital stock of the surviving or resulting corporation,
a sale of the Company Stock or the consummation of the sale of all or
substantially all of the Company's assets to an unaffiliated third party.
(b) In connection with any Company Disposition approved as contemplated by
Section 4.7(a), each Stockholder hereby:
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(i) constitutes and appoints, to the extent necessary in connection
therewith, the Company as such Stockholder's true and lawful agent and
attorney-in-fact, with full power and authority in such Stockholder's
name, place and stead to execute (A) any agreement containing (x) the
terms of such Company Disposition in accordance with the foregoing, (y)
such representations, warranties, covenants and indemnities as shall be
approved by the Board and the Majority Series A Holders (provided that any
indemnification obligation shall be several and not joint, allocated in
proportion to the number of Common Stock Equivalents sold and limited to
an amount not greater than the consideration received in such
transaction), and (z) such other reasonable terms and provisions binding
on such Stockholder as shall be necessary to consummate such transaction,
(B) such instruments of conveyance and assignment as may be customary and
necessary to consummate such transaction, (C) such receipts and related
instruments as may be necessary to evidence such consummation and (D) such
proxies and stockholder consents necessary or useful to effect a Company
Disposition in accordance with the terms of the foregoing;
(ii) in the case of a purchase of Company Stock, agrees to deliver
to the Company or its designee, acting as a custodian, at or prior to the
completion of such transaction, certificates representing all of the
Company Stock to be sold by such Stockholder, which certificates shall be
free of all liens, encumbrances and restrictive legends (except as
required by this Agreement) or endorsements and shall be fully endorsed in
blank or in the name of the purchaser thereof; and
(iii) consents to, and ratifies and confirms the terms of, any
Company Disposition effected in accordance with this Section 4.7 and
agrees to sell such Stockholder's shares of Company Stock on such terms
notwithstanding that such Stockholder withholds consent or approval to
such sale, give any notice to the Company or any other Person of any
nature or takes any other action inconsistent with such sale, except a
legal challenge, actively pursued in a court of law, to the authority of
the Company to execute such transaction on the specific grounds that the
terms of this Agreement were not satisfied.
ARTICLE V
REGISTRATION RIGHTS
5.1 Public Offering of Company Stock.
(a) Demand Registration Rights. At any time or from time to time after the
date hereof, if the Company receives written notice from the Majority Series A
Holders, which notice demands the registration of all or any portion of Company
Stock
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issued or issuable upon the conversion or exercise of the Series A Preferred
Stock and specifies the intended method or methods of disposition thereof, then
the Company shall promptly cause to be prepared and filed a registration
statement, as soon as reasonably practicable (but not later than forty-five (45)
days after the date of such demand or, in the case of an initial public offering
of Company Stock, seventy-five (75) days following such demand), and exercise
its best efforts to cause such registration statement to become effective as
soon as practicable thereafter under the Securities Act to the end that such
Company Stock issued or issuable upon the conversion or exercise of the Series A
Preferred Stock may be sold thereunder as soon as practicable after the
registration statement is declared effective, and the Company will use its best
efforts to ensure that the Company Stock may be sold pursuant to the
registration statement for up to sixty (60) days from the date of the effective
date of the registration statement; PROVIDED, HOWEVER, that the Company shall
not be obligated to take any action to effect such registration, qualification
or compliance pursuant to this Section 5.1(a): (i) within one hundred twenty
(120) days immediately following the effective date of any registration
statement pertaining to a firmly underwritten offering of equity securities of
the Company unless otherwise consented to by the underwriter of such offering;
or (ii) at the request of the Majority Series A Holders if the Company shall
have previously effected three (3) such registrations pursuant to requests by
the Majority Series A Holders under this Section 5.1(a). In addition, the
Company may postpone its obligation to file a registration statement for up to a
maximum of one hundred and twenty (120) days in the event the Company determines
in good faith that circumstances exist that make it impractical or inadvisable
for the Company to file a registration statement at such time, such as a pending
transaction or other event that would require disclosure under applicable
securities laws and to which the Company has a bona fide business purpose for
preserving confidentiality. Upon the expiration of such postponement period, the
Company shall again proceed with the preparation and filing of the required
registration statement. Such registration shall hereinafter be called a "DEMAND
REGISTRATION." Promptly following receipt of any notice under this Section
5.1(a), the Company shall immediately notify any other holders of Series A
Preferred Stock from whom notice has not been received and shall use its best
efforts to register under the Securities Act, for public sale in accordance with
the method of disposition specified in such notice from the requesting Majority
Series A Holders, the number of shares of Company Stock specified in any notices
received from other holders within ten (10) days after their receipt of such
notice from the Company.
(b) "Piggyback" Registration Rights. At least thirty (30) days prior to
the proposed filing of a registration statement under the Securities Act for any
offering of any class of equity securities for the account of the Company or any
other Person (other than a registration statement on Form S-4 or S-8 (or any
successor forms under the Securities Act) or other registrations relating solely
to employee benefit plans or any transaction governed by Rule 145 of the
Securities Act), the Company shall give written notice of such proposed filing
and of the proposed date thereof to each Stockholder and if, on or before the
twentieth (20th) day following the date on which such notice is given, the
Company shall receive a written request from any such Stockholder requesting
that the Company include among the securities covered by such registration
statement any Company Stock issued to such Stockholder or issuable by the
Company upon the
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conversion or exercise of the Convertible Securities owned by such Stockholder
for offering for sale in a manner and on terms set forth in such request, the
Company shall include such Company Stock in such registration statement, if
filed, so as to permit such Company Stock to be sold or disposed of in the
manner and on the terms of the offering thereof set forth in such request. Such
registration, including the initial public offering made by the Company, shall
hereinafter be called a "PIGGYBACK REGISTRATION".
(c) Terms and Conditions of Registration or Qualification. In connection
with any registration statement filed pursuant to Section 5.1(a) or 5.1(b)
hereof, the following provisions shall apply:
(i) If the managing underwriter advises that the inclusion in such
registration or qualification of some or all of the Company Stock sought
to be registered exceeds the number (the "SALEABLE NUMBER") that can be
sold in an orderly fashion without a substantial risk that the price per
share to be derived from such registration will be materially and
adversely affected, then the number of shares of Company Stock offered
shall be limited to the Saleable Number and shall be allocated, subject to
Section 5.1(c)(ii) below, as follows:
(A) if such registration is being effected in connection with
an initial public offering of equity securities of the Company or,
in the case of any Piggyback Registration requests by Stockholder
for inclusion pursuant to Section 5(b), otherwise at the Company's
determination to sell Company Stock for its own account, (1) first,
all the shares of Company Stock the Company proposes to register and
(2) second, the difference between the Saleable Number and the
number to be included pursuant to clause (1) above, allocated among
all selling Stockholders pro rata on the basis of the relative
number of shares of Company Stock offered for sale by each such
Stockholder; and
(B) If the registration is being effected pursuant to a Demand
Registration other than in connection with an initial public
offering of equity securities of the Company, the entire Saleable
Number allocated among all selling Stockholders pro rata on the
basis of the relative number of shares of Company Stock owned by
each such Stockholder with respect to any request by the Majority
Series A Holders pursuant to Section 5(a);
(ii) Notwithstanding Sections 5.1(c)(i)(A) and (B) above:
(A) At any time prior to the effectiveness of the registration
statement for any offering pursuant to any Demand Registration
(other that an initial public offering of equity
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securities of the Company) or any Piggyback Registration, the
Majority Series A Holders can give notice of their election to have
the entire Saleable Number allocated to the holders of Series A
Preferred Stock, provided that such right can only be exercised with
respect to one Demand Registration and one Piggyback Registration;
(B) In the event that the number of shares of Company Stock
sought to be registered by the Majority Series A Holders pursuant to
a Demand Registration under Section 5.1(a) in any registration
statement filed hereunder exceeds the number of shares of Company
Stock allocated to the Series A Preferred Holders pursuant to
Sections 5.1(c)(i)(A) and (B) above, such that the number of shares
of Company Stock allocated to the Series A Preferred Holders
pursuant to Sections 5.1(c)(i)(A) and (B) above is less than
two-thirds (2/3) of the number of shares of Company Stock contained
in the demand notice submitted by the Majority Series A Holders
pursuant to a Demand Registration under Section 5.1(a), then the
Series A Preferred Holders shall receive one (1) additional Demand
Registration pursuant to Section 5.1(a), exercisable in the same
manner as the other Demand Registration rights granted to the
Majority Series A Holders pursuant thereto.
(iii) The selling Stockholders will promptly provide the Company
with such information as the Company shall reasonably request in order to
prepare such registration statement and, upon the Company's request, each
selling Stockholder shall provide such information in writing and signed
by such holder and stated to be specifically for inclusion in the
registration statement. In the event that the distribution of the Company
Stock covered by the registration statement shall be effected by means of
an underwriting, the right of any selling Stockholder to include its
Company Stock in such registration shall be conditioned on such holder's
execution and delivery of a customary underwriting agreement, lock-up
agreement for the lock-up period specified in the underwriting agreement
(which shall not be less than one hundred eighty (180) days in connection
with the Company's initial public offering and shall not be less than
ninety (90) days in the case of any other underwritten offering), custody
agreement, selling Stockholder power of attorney and similar agreements
with respect thereto; PROVIDED, HOWEVER, that except with respect to
information concerning such holder and -------- ------- such holder's
intended manner of distribution of the Company Stock, no selling
Stockholder shall be required to make any representations or warranties in
such agreement as a condition to the inclusion of its Company Stock in
such registration.
(iv) All fees and expenses in connection with the preparation and
filing of any registration statement filed pursuant to
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Section 5.1(a) or 5.1(b) hereof (other than underwriting fees, discounts
or commissions with respect to Company Stock of the selling Stockholders)
shall be borne solely by the Company. In connection with the preparation
and filing of any registration statement filed pursuant to Section 5.1(a)
or 5.1(b) hereof, the selling Stockholders shall be entitled to retain and
be represented by one law firm, to be selected by the Majority Series A
Holders (or in the case of any registration pursuant to Section 5.1(b), if
the Series A Preferred Holders are not selling Stockholders, then the
holders of a majority of the shares of Common Stock of the selling
Stockholders). The Company shall be obligated to pay the fees and expenses
of such counsel so retained in connection with the preparation and filing
of such registration statement. Nothing contained in this Section
5.1(c)(iv) shall be deemed to prohibit any selling Stockholder from
retaining counsel of its own selection at its own expense in connection
with the preparation and filing of such registration statement.
(v) Following the effective date of such registration statement,
the Company shall, upon the request of the selling Stockholders, forthwith
supply such number of prospectuses (including preliminary prospectuses and
amendments and supplements thereto) meeting the requirements of the
Securities Act or such other securities laws where the registration
statement or prospectus has been filed and such other documents as are
referred to in the registration statement as shall be reasonably requested
by the selling Stockholders.
(vi) The Company shall prepare and file such amendments and
supplements to such registration statement as may be necessary to keep
such registration statement effective and to comply with the provisions of
the Securities Act or such other securities laws where the registration
statement has been filed with the respect to the offer and sale or other
disposition of the Company Stock covered by such registration statement
during the period required for distribution of the Company Stock, which
period shall not be in excess of sixty (60) days from the effective date
of such registration statement.
(vii) The Company shall use its best efforts to register or qualify
the Company Stock of the selling Stockholders covered by any such
registration statement under such securities or "Blue Sky" laws in such
jurisdictions as the Stockholders may request; PROVIDED, HOWEVER, that the
Company shall not be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction where it is not so qualified in order to comply with such
request.
(viii) In connection with any registration pursuant to Section 5.1
hereof, the Company will as expeditiously as possible:
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A. use reasonable best efforts to cause the Company Stock covered by
such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue
of the business and operations of the Company to enable the selling
Stockholders to consummate the disposition of such Company Stock;
B. promptly notify each selling Stockholder at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, and the Company will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such
Company Stock, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
C. cause all Company Stock covered by the registration statement to
be listed on each securities exchange or quotation system on which similar
securities issued by the Company are then listed, and, unless the same
already exists, provide a transfer agent, registrar and CUSIP number for
all such Company Stock not later than the effective date of the
registration statement;
D. enter into such customary agreements (including an underwriting
agreement in customary form) and take all such other actions as the
holders of a majority of the voting power of the Company Stock being sold
or the underwriters retained by such holders, if any, reasonably request
in order to expedite or facilitate the disposition of such Company Stock;
E. make available for inspection by any selling Stockholder, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by any
such seller or underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and properties of the
Company as shall be necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information requested by any such Inspector in
connection with such registration statement;
F. obtain "cold comfort" letters and updates thereof from the
Company's independent public accountants and an opinion from the Company's
counsel (naming the selling Stockholder as additional addressees) in
customary form and covering such matters of the type
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customarily covered by "cold comfort" letters and opinions of counsel,
respectively, as the holders of a majority of the voting power of Company
Stock of the selling Stockholders shall request;
G. supply copies of the registration statement and any amendments
thereto to each selling Stockholder at least two (2) business days prior
to filing such document with the SEC, and shall reasonably consult with
such persons and their counsel with respect to the form and content of
such filing. The Company will immediately amend such registration
statement to include such reasonable changes as the selling Stockholders
reasonably agree should be included therein. Any selling Stockholder
requesting a change refused by the Company may withdraw his or her Company
Stock from the Registration Statement;
H. upon request by any one or more of the selling Stockholders,
promptly provide each selling Stockholder with copies of any comment
letters or other correspondence with the SEC;
I. promptly notify each selling Stockholder (i) of the issuance by
the SEC of any stop order or order suspending the effectiveness of any
registration statement or the initiation of any proceedings for that
purpose, or (ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Company Stock for
sale in any jurisdiction, or the initiation of any proceedings for such
purpose. The Company, with the reasonable cooperation of the selling
Stockholders, shall make every reasonable effort to contest any such
proceedings and to obtain the withdrawal of any such order at the earliest
possible moment;
J. with a view to making available to the Stockholders the benefits
of Rule 144, (i) file with the SEC in a timely manner all reports and
other documents required of the Company under the Exchange Act, and (ii)
furnish to any Stockholder, so long as the Stockholder holds any Company
Stock subject to this Agreement, forthwith upon request (a) a written
statement by the Company that it has complied with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, (b) a
copy of the most recent annual or quarterly report of the Company and such
other reports and documents so filed by the Company, and (c) such other
information as may be reasonably requested in availing any Stockholder of
any rule or regulation of the SEC which permits the selling of any such
securities without registration under the Securities Act; and
K. otherwise comply with all applicable rules and regulations of the
Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering a period of twelve
(12) months, beginning within three (3) months after the effective date of
the registration statement, which earnings statement shall
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satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
(ix) Each selling Stockholder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind
described in Section 5.1(c)(viii)(B) hereof, such holder will forthwith
discontinue disposition of its Company Stock pursuant to the registration
statement covering such Company Stock until such holder's receipt of the
copies of the supplemented or amended prospectus contemplated by such
Section 5.1(c)(viii)(B) hereof and, if so directed by the Company, such
holder will deliver to the Company (at the Company's expense) all copies,
other than permanent file copies then in such holder's possession, of the
prospectus covering such its Company Stock current at the time of receipt
of such notice.
(x) The Company shall not be required to register any Company Stock
with respect to any proposed offer or sale after a registration statement
with respect to the sale of such securities shall have become effective
under the Securities Act and such securities shall have been disposed of
in accordance with such registration statement or if such securities shall
have been previously sold pursuant to Rule 144 under the Securities Act.
(xi) If any of the Company Stock covered by any registration
statement filed pursuant to Section 5.1(a) hereof are to be sold pursuant
to an underwritten offering, the managing underwriter or underwriters
thereof shall be designated by the Company.
(xii) In the event of any Company Stock registered under the
Securities Act are to be sold pursuant to an underwritten offering,
including, without limitation, in any primary offering by the Company, any
over-allotment option to be granted to the managing underwriter or
underwriters shall be allocated to and granted by the Majority Series A
Holders at the election of the Majority Series A Holders, subject to the
consent of such underwriter.
(xiii) The Company will not, at any time after the date hereof,
grant any registration rights that conflict with, or have any priority
over, the registration rights granted hereby.
(d) Transfer Restrictions. The transfer restrictions contained in Article
IV of this Agreement shall not apply to any offering of Company Stock registered
under the Securities Act pursuant to this Section 5.1.
(e) Indemnification.
(i) In the event of the registration or qualification of any Company
Stock of the Stockholders under the Securities Act or any other
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applicable securities laws pursuant to the provisions of this Section 5.1,
the Company agrees to indemnify and hold harmless each Stockholder thereby
offering such Company Stock for sale (a "SELLER"), underwriter, broker or
dealer, if any, of such Company Stock, the Seller's legal counsel and each
other Person, if any, who controls any such Seller, underwriter, broker or
dealer within the meaning of the Securities Act or any other applicable
securities, from and against any and all losses, claims, damages or
liabilities (or actions in respect thereof), joint or several, to which
such Seller, underwriter, broker or dealer or controlling Person may
become subject under the Securities Act or any other applicable securities
laws or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
any registration statement under which such Company Stock was registered
or qualified under the Securities Act or any other applicable securities
laws, any preliminary prospectus or final prospectus relating to such
Company Stock, or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by the Company of any
rule or regulation under the Securities Act or any other applicable
securities laws applicable to the Company or relating to any action or
inaction required by the Company in connection with any such registration
or qualification and will reimburse each such Seller, underwriter, broker
or dealer, legal counsel and each such controlling Person for any legal or
other expenses reasonably incurred by such Seller, underwriter, broker or
dealer or controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that
the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an
untrue statement or omission made in such registration statement, such
preliminary prospectus, such final prospectus or such amendment or
supplement thereto in reliance upon and in conformity with written
information furnished to the Company by such Seller, underwriter, broker,
dealer or controlling Person specifically and expressly for use in the
preparation thereof or, with respect to any misstatement or omission, to
the extent such misstatement or omission was corrected in a revised
prospectus made available for delivery prior to the consummation of the
subject transaction. The Company shall have no obligation to indemnify the
Stockholders for amounts paid in settlement if the settlement is effected
without the Company's consent (which consent shall not be unreasonably
withheld).
(ii) In the event of the registration or qualification of any
Company Stock of the Stockholders under the Securities Act or any other
applicable securities laws for sale pursuant to the provisions hereof,
each selling Stockholder, each underwriter, broker and dealer, if any, of
such
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Company Stock, and each other person, if any, who controls any such
selling Stockholder, underwriter, broker or dealer within the meaning of
the Securities Act, agrees severally, and not jointly, to indemnify and
hold harmless the Company, each Person who controls the Company within the
meaning of the Securities Act, and each officer and director and legal
counsel of the Company from and against any losses, claims, damages or
liabilities, joint or several, to which the Company, such controlling
Person or any such officer or director may become subject under the
Securities Act or any other applicable securities laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement of
any material fact contained in any registration statement under which such
Company Stock was registered or qualified under the Securities Act or any
other applicable securities laws, any preliminary prospectus or final
prospectus relating to such Company Stock, or any amendment or supplement
thereto, or arise out of or are based upon an untrue statement or the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which untrue
statement or omission was made therein in reliance upon and in conformity
with written information furnished to the Company by such selling
Stockholder, underwriter, broker, dealer or controlling Person
specifically for use in connection with the preparation thereof, and will
reimburse the Company, such controlling Person and each such officer or
director or legal counsel for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such
loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that no
selling Stockholder shall be liable under this Section 5.1(e)(ii) for any
amount in excess of the net proceeds to such selling Stockholder of
Company Stock sold by it. No Stockholder shall have any obligation to
indemnify the Company for amounts paid in settlement if the settlement is
effected without the consent of such indemnifying Stockholder (which
consent shall not be unreasonably withheld).
(iii) Promptly after receipt by a person entitled to indemnification
under this Section 5.1(e) (an "INDEMNIFIED PARTY") of notice of the
commencement of any action or claim relating to any registration statement
filed under Section 5.1(a) hereof or 5.1(b) hereof or as to which
indemnity may be sought hereunder, such indemnified party will, if a claim
for indemnification hereunder in respect thereof is to be made against any
other party hereto (an "INDEMNIFYING PARTY"), give written notice to such
indemnifying party of the commencement of such action or claim, but the
omission to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than
pursuant to the provisions of this Section 5.1(e) and shall also not
relieve the indemnifying party of its obligations under this Section
5.1(e) except to the extent that the indemnifying party is actually
prejudiced thereby. In case any such action is brought against an
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indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled (at its own
expense) to participate in and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the
defense, with counsel reasonably satisfactory to such indemnified party,
of such action and/or to settle such action and, after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof, other than
the reasonable cost of investigation; PROVIDED, HOWEVER, that no
indemnifying party shall enter into any settlement agreement without the
prior written consent of the indemnified party unless such indemnified
party is fully released and discharged from any such liability.
Notwithstanding the foregoing, the indemnified party shall have the right
to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (A)
the employment of such counsel shall have been authorized in writing by
the indemnifying party in connection with the defense of such suit,
action, claim or proceeding, (B) the indemnifying party shall not have
employed counsel (reasonably satisfactory to the indemnified party) to
take charge of the defense of such action, suit, claim or proceeding, or
(C) such indemnified party shall have reasonably concluded, based upon the
advice of counsel, that there may be defenses available to it which are
different from or additional to those available to the indemnifying party
which, if the indemnifying party and the indemnified party were to be
represented by the same counsel, could result in a conflict of interest
for such counsel or materially prejudice the prosecution of the defenses
available to such indemnified party. If any of the events specified in
clauses (A), (B) or (C) of the preceding sentence shall have occurred or
shall otherwise be applicable, then the fees and expenses of one counsel
or firm of counsel selected by a majority in interest of the indemnified
parties (and reasonably acceptable to the indemnifying party) shall be
borne by the indemnifying party. If, in any such case, the indemnified
party employs separate counsel, the indemnifying party shall not have the
right to direct the defense of such action, suit, claim or proceeding on
behalf of the indemnified party and the indemnified party shall assume
such defense and/or settle such action; provided, HOWEVER, that, an
indemnifying party shall not be liable for the settlement of any action,
suit, claim or proceeding effected without its prior written consent,
which consent shall not be unreasonably withheld.
(iv) If the indemnification provided for in this Article V is held
by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, claim, damage, liability or action
referred to herein, then the indemnifying party, in lieu of indemnifying
such indemnified party hereunder, shall contribute to the amounts paid or
payable by such indemnified party as a result of such loss,
24
<PAGE>
claim, damage, liability or action in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and
of the indemnified party on the other in connection with the statements or
omissions which resulted in such loss, claim, damage, liability or action.
The relative fault of the indemnifying party and of the indemnified party
shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied
by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
ARTICLE VI
TERMINATION
6.1 The provisions of Article II, Article III, Sections 4.1, 4.2, 4.3,
4.5, 4.6 and 4.7 hereof shall terminate automatically upon the consummation of a
Qualified Public Offering.
ARTICLE VII
MISCELLANEOUS
7.1 Certificate Legend. Upon execution of this Agreement, the certificates
representing Company Stock and Convertible Securities held by the Stockholders
shall contain substantially the following legend, in addition to any other
legends deemed appropriate or necessary by the Company:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND ACCORDINGLY NEITHER SUCH SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND
ANY SUCH LAWS APPLICABLE THERETO AND THE RULES AND REGULATIONS THEREUNDER.
IN ADDITION, THIS CERTIFICATE IS TRANSFERABLE ONLY UPON COMPLIANCE WITH
AND SUBJECT TO ANY APPLICABLE PROVISIONS OF A STOCKHOLDERS' AGREEMENT
AMONG THE COMPANY, ITS STOCKHOLDERS AND THEIR RESPECTIVE SPOUSES, A COPY
OF WHICH AGREEMENT IS ON FILE IN THE OFFICE OF THE SECRETARY OF THE
COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS. THE COMPANY WILL FURNISH A
COPY OF SUCH AGREEMENT TO THE
25
<PAGE>
RECORD HOLDER OF THIS CERTIFICATE, WITHOUT CHARGE, UPON WRITTEN REQUEST TO
THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
7.2 Negotiable Form. Whenever any shares of Company Stock are to be
delivered or sold pursuant to this Agreement, the Person selling such Company
Stock shall deliver such certificates or other instruments duly endorsed or
accompanied by appropriate stock powers or assignments separate from the
instrument.
7.3 Enforcement. No Company Stock or Convertible Securities shall be
transferred on the books of the Company and no sale, assignment, transfer,
pledge or other disposition thereof shall be effective unless and until the
terms and provisions of this Agreement are complied with, and in cases of
violation of this Agreement by the attempted transfer of Company Stock or
Convertible Securities without compliance with the terms and provisions thereof,
such sale, assignment, transfer, pledge or other disposition shall be invalid
and of no effect, and the Company and/or any of the Stockholders who are not
attempting to transfer Company Stock or Convertible Securities shall have the
right to compel the Stockholder who is attempting to transfer Company Stock or
Convertible Securities, and/or the purported transferee, to transfer and deliver
the same in accordance with the applicable provisions of this Agreement.
7.4 Specific Performance. The parties hereto recognize that the Company
Stock and Convertible Securities cannot be readily purchased or sold on the open
market and that it is to the benefit of the Company and the Stockholders that
this Agreement be carried out; and for those and other reasons, the parties
hereto would be irreparably damaged if this Agreement is not specifically
enforced in the event of a breach hereof. If any controversy concerning the
rights or obligations to purchase or sell any Company Stock and Convertible
Securities arises, or if this Agreement is breached, the parties hereto hereby
agree that remedies at law might be inadequate and that, therefore, such rights
and obligations, and this Agreement, shall be enforceable by specific
performance. The remedy of specific performance shall not be an exclusive
remedy, but shall be cumulative of all other rights and remedies of the parties
hereto at law, in equity or under this Agreement.
7.5 Transferees and Future Stockholders. The Company and the Stockholders
shall cause any transferee of any Company Stock or Convertible Securities that
is not already a party to this Agreement and any future Stockholder of the
Company to execute a Joinder Agreement and upon execution thereof, provided such
transfer shall not have been made in contravention of this Agreement, such
Stockholder shall be entitled to the rights of an owner of the Company Stock or
Convertible Securities held by such Stockholder hereunder; PROVIDED, HOWEVER,
that the foregoing shall not apply to Company Stock or Convertible Securities
that have been sold pursuant to an effective registration statement under the
Securities Act or Rule 144 thereunder.
7.6 Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing and delivered in person,
transmitted by telecopier or sent by registered or certified mail (return
receipt requested)
26
<PAGE>
or recognized overnight delivery service, postage pre-paid, addressed as
follows, or to such other address as any such party may notify to the other
parties in writing:
(a) if to the Company:
HotJobs.com, Ltd.
24 West 40th Street
14th Floor
New York, NY 10018
Attn: President and Chief Executive Officer
Facsimile No: (212) 944-8962
With a copy to:
Brobeck, Phleger & Harrison LLP
701 Pennsylvania Avenue, N.W.
Suite 220
Washington, D.C. 20004
Attn: Stephen A. Riddick, Esq.
Facsimile: (202) 824-0949
(b) if to Generation:
c/o Generation Partners Management LLC
551 Fifth Avenue
Suite 3100
New York, NY 10176
Attn: Lloyd Mandell
Facsimile No.: (212) 450-8550
With a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attn: Norman D. Chirite, Esq.
S. Wade Angus, Esq.
Facsimile No.: (212) 310-8007
(c) if to any of the other Series A Investors or the Existing
Stockholders: to the addresses specified in the books and records of the
Company for such Persons;
(d) if to any other Stockholder: such address specified in the applicable
Joinder Agreement.
A notice or communication will be effective (i) if delivered in person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the
27
<PAGE>
business day of actual confirmed receipt by the addressee thereof, and (iii) if
sent by registered or certified mail, three (3) business days after dispatch.
7.7 Binding Effect; Assignment. This Agreement, including the rights and
conditions contained herein in connection with disposition of Company Stock and
Convertible Securities, shall, subject to the provisions of Section 7.5 hereof,
be binding upon the parties hereto, together with their respective executors,
administrators, successors, personal representatives, heirs and assigns
permitted under this Agreement.
7.8 Governing Law. The Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Delaware.
7.9 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws effective during
the term hereof, such provisions shall be fully severable and this Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision never comprised a part hereof; and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
7.10 Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings relating to the
subject matter hereof.
7.11 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one instrument.
7.12 Amendments. This Agreement may be amended, modified or supplemented
only with the consent of the Majority Series A Holders and by a written
instrument executed by the Company and the holders of shares having a majority
of the voting power of the Common Stock Equivalents held by the Stockholders.
7.13 Captions. The captions of this Agreement are for convenience of
reference only and shall not limit or otherwise affect any of the terms or
provisions hereof.
7.14 Pronouns. Any masculine personal pronoun shall be considered to mean
the corresponding feminine or neuter personal pronoun, and vice versa, as the
context requires.
7.15 Spouses. By executing this Agreement, the spouse of each Stockholder
that is an individual acknowledges that he or she has read this Agreement and
knows its contents and agrees to be bound in all respects by the terms of this
28
<PAGE>
Agreement to the same extent as the Stockholders. Each spouse further agrees
that should he or she predecease the Stockholder to whom he or she is married or
should he or she become divorced from such Stockholder, any shares of Company
Stock which such spouse may own or in which he or she may have any interest
shall remain subject to all of the restrictions and to all of the rights of the
Stockholders contained in this Agreement.
7.16 Action by Certain Stockholders. Each determination, decision, action,
election or exercise of any right that the Series A Preferred Holders shall be
permitted or required to make or take pursuant to this Agreement may be made or
taken (as the case may be) by the Majority Series A Holders. For purposes of
determining the percentage of the outstanding Common Stock Equivalents held by
any Stockholder, Common Stock Equivalents held by affiliated Stockholders shall
be aggregated and shall be treated as being held by one such Stockholder for
purposes hereof.
7.17 Binding Effect of Agreement. This Agreement shall be binding on the
parties signatory hereto, notwithstanding the failure of any stockholder to
execute this Agreement.
[Remainder of page intentionally left blank.]
29
<PAGE>
STOCKHOLDERS' AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
THE COMPANY:
HOTJOBS.COM, LTD.
By: /s/
----------------------------
Name:
Title:
30
<PAGE>
STOCKHOLDERS' AGREEMENT SIGNATURE PAGE
SERIES A INVESTORS:
GENERATION CAPITAL PARTNERS L.P.
By: Generation Partners L.P.,
as General Partner
By: Generation Capital Company LLC,
its General Partner
By: /s/
--------------------------------
John Hawkins
Managing Director
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Generation Partners L.P.,
as General Partner
By: Generation Capital Company LLC,
its General Partner
By: /s/
--------------------------------
John Hawkins
Managing Director
GENERATION PARALLEL MANAGEMENT PARTNERS L.P.
By: Generation Capital Company LLC,
its General Partner
By: /s/
--------------------------------
John Hawkins
Managing Director
31
<PAGE>
STOCKHOLDERS' AGREEMENT SIGNATURE PAGE
BESSEMER VENTURE PARTNERS IV L.P.
By: Deer IV & Co. LLC
its General Partner
By: /s/
--------------------------------
Name: Robert H. Buescher
Title: Manager
BESSEC VENTURES IV L.P.
By: Deer IV & Co. LLC
its General Partner
By: /s/
--------------------------------
Name: Robert H. Buescher
Title: Manager
32
<PAGE>
STOCKHOLDERS' AGREEMENT SIGNATURE PAGE
BT ALEX.BROWN INC. CUSTODIAN FBO JOHN G.
MURRAY IRA, DATED 07/08/98
By: /s/
--------------------------------
Name:
Title:
ORION TECHNOLOGY VENTURES
By: /s/
--------------------------------
Name: David Kohl
Title: General Partner
FSA CAPITAL, INC.
By: /s/
--------------------------------
Name: Stephen W. Ellis
Title: President and CEO
33
<PAGE>
STOCKHOLDERS' AGREEMENT SIGNATURE PAGE
/s/
---------------------------------------
Kevin O'Connor
/s/
---------------------------------------
Andrew G. Matthes and Tracy Matthes
/s/
---------------------------------------
George Bolton
/s/
---------------------------------------
John Murray
/s/
---------------------------------------
Anne Martin
/s/
---------------------------------------
Stephen Oxman
/s/
---------------------------------------
Bob Packard
/s/
---------------------------------------
Shaun Andrikopoulos
/s/
---------------------------------------
Ray Yeung
/s/
---------------------------------------
Joelle Kayden
34
<PAGE>
STOCKHOLDERS' AGREEMENT SIGNATURE PAGE
/s/
---------------------------------------
Dyan Triffo
/s/
---------------------------------------
John Varughese
/s/
---------------------------------------
Karl Will
/s/
---------------------------------------
Tony Meneghetti
/s/
---------------------------------------
Jeff Liu
/s/
---------------------------------------
Buz Walters
/s/
---------------------------------------
Carleigh Jacques
/s/
---------------------------------------
Zach Maurus
/s/
---------------------------------------
Jim Mahern
35
<PAGE>
STOCKHOLDERS' AGREEMENT
SIGNATURE PAGE
EXISTING STOCKHOLDERS
Otec, Inc.
By /s/
---------------------------
Bennett Carroccio
President
/s/
- ------------------------------
Richard S. Johnson
/s/
- ------------------------------
Bennett Carroccio
/s/
- ------------------------------
Thomas Chin
/s/
- ------------------------------
Allen Murabayashi
/s/
- ------------------------------
Dimitri Boylan
/s/
- ------------------------------
Christopher J. March
/s/
- ------------------------------
Earl Ady
36
<PAGE>
The Richard and Carole Johnson 1999 Trust
By /s/
------------------------------
Alice Johnson Kelly
Trustee
The Bennett and Brenda Carroccio 1999 Trust
By /s/
------------------------------
Daniel Nascimento
Trustee
/s/
- ------------------------------
Liz Johnson
/s/
- ------------------------------
Kelly Michaelian
- ------------------------------
David Nichols
- ------------------------------
Danielle Sklarevski
/s/
- ------------------------------
Dulce O'Connor
/s/
- ------------------------------
Davis Carvajal
37
<PAGE>
/s/
- ------------------------------
Lisa Goddard
- ------------------------------
Ginna Basinger
- ------------------------------
Nicholas Gordon
38
<PAGE>
STOCKHOLDERS' AGREEMENT SIGNATURE PAGE
MANAGEMENT INVESTORS: SPOUSE OF MANAGEMENT INVESTOR (if any)
[TO BE PROVIDED]
39
<PAGE>
EXHIBIT A
FORM OF JOINDER AGREEMENT
The undersigned, having purchased shares of capital stock of HotJobs.com,
Ltd., hereby agrees to be bound by the terms and conditions of, and to become a
party to, the Amended and Restated Stockholders' Agreement of the Company as a
"Stockholder" thereunder, the form of which is attached hereto, as if the
undersigned had been a party to such agreement as of the date thereof.
Name:______________________________________________________________
Signature:_________________________________________________________
Address:___________________________________________________________
Telecopy No.:______________________________________________________
No. of Shares:_____________________________________________________
I, the undersigned, being the spouse of the above-named Stockholder,
hereby acknowledge that I have read and understand the Amended and Restated
Stockholders' Agreement, and I agree to be bound by the terms thereof,
including, without limitation, Section 8.15 thereof.
Name:______________________________________________________________
Signature:____________________________________________________
40
<PAGE>
EXHIBIT A
FORM OF JOINDER AGREEMENT
The undersigned, having purchased shares of capital stock of HotJobs.com,
Ltd., hereby agrees to be bound by the terms and conditions of, and to become a
party to, the Amended and Restated Stockholders' Agreement of the Company as a
"Stockholder" thereunder, the form of which is attached hereto, as if the
undersigned had been a party to such agreement as of the date thereof.
Name: GREENACRE VENTURES LLC
By: John Murray, its Managing Member
Signature: /s/
---------------------------------------------------------
Address:
Telecopy No.:
------------------------------------------------------
No. of Shares: 11,000 shares of Common Stock
I, the undersigned, being the spouse of the above-named Stockholder,
hereby acknowledge that I have read and understand the Amended and Restated
Stockholders' Agreement, and I agree to be bound by the terms thereof,
including, without limitation, Section 8.15 thereof.
Name:
---------------------------------------------
Signature:
----------------------------------------
41
<PAGE>
FORM OF JOINDER AGREEMENT
The undersigned, having purchased shares of capital stock of HotJobs.com,
Ltd., hereby agrees to be bound by the terms and conditions of, and to become a
party to, the Amended and Restated Stockholders' Agreement of the Company as a
"Stockholder" thereunder, the form of which is attached hereto, as if the
undersigned had been a party to such agreement as of the date thereof.
Name: BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership
Signature: /s/
---------------------------------------------------------
Address:
Telecopy No.:
No. of Shares: 24,548 shares of Common Stock
I, the undersigned, being the spouse of the above-named Stockholder,
hereby acknowledge that I have read and understand the Amended and Restated
Stockholders' Agreement, and I agree to be bound by the terms thereof,
including, without limitation, Section 8.15 thereof.
Name:
---------------------------------------------
Signature:
----------------------------------------
42
<PAGE>
FORM OF JOINDER AGREEMENT
The undersigned, having purchased shares of capital stock of HotJobs.com,
Ltd., hereby agrees to be bound by the terms and conditions of, and to become a
party to, the Amended and Restated Stockholders' Agreement of the Company as a
"Stockholder" thereunder, the form of which is attached hereto, as if the
undersigned had been a party to such agreement as of the date thereof.
Name: BOSTON MILLENNIA ASSOCIATES I PARTNERSHIP
Signature: /s/
---------------------------------------------------------
Address:
Telecopy No.:
No. of Shares: 452 shares of Common Stock
I, the undersigned, being the spouse of the above-named Stockholder,
hereby acknowledge that I have read and understand the Amended and Restated
Stockholders' Agreement, and I agree to be bound by the terms thereof,
including, without limitation, Section 8.15 thereof.
Name:
---------------------------------------------
Signature:
----------------------------------------
43
<PAGE>
FORM OF JOINDER AGREEMENT
The undersigned, having purchased shares of capital stock of HotJobs.com,
Ltd., hereby agrees to be bound by the terms and conditions of, and to become a
party to, the Amended and Restated Stockholders' Agreement of the Company as a
"Stockholder" thereunder, the form of which is attached hereto, as if the
undersigned had been a party to such agreement as of the date thereof.
Name: Jerry Murdock
Signature: /s/
---------------------------------------------------------
Address:
Telecopy No.:
No. of Shares: 100,000 shares of Series A Preferred Stock
Date: May 14, 1999
I, the undersigned, being the spouse of the above-named Stockholder,
hereby acknowledge that I have read and understand the Amended and Restated
Stockholders' Agreement, and I agree to be bound by the terms thereof,
including, without limitation, Section 8.15 thereof.
Name:
---------------------------------------------
Signature:
----------------------------------------
44
<PAGE>
SCHEDULE 4.2(D)
Christopher J. March, Esp. is permitted to sell 6,000 shares of the Common Stock
of HotJobs.com, Ltd. owned by him to GreenAcre Ventures LLC in return for the
purchase price of $592,980.00. This sale is currently scheduled to close on May
10, 1999.
Allen Murabayashi is permitted to sell 5,000 shares of the Common Stock of
HotJobs.com, Ltd. owned by him to GreenAcre Ventures LLC in return for the
purchase price of $494,150.00. This sale is currently scheduled to close on May
10, 1999.
Richard S. Johnson, OTEC, Inc. and Thomas Chin are permitted to sell 4,848
shares, 15,152 shares and 5,000 shares, respectively, of Common Stock of
HotJobs.com, Ltd. owned by them to Boston Millennia Partners Limited Partnership
and Boston Millennia Associates I Partnership for the purchase price of
$479,128, $1,497,472 and $494,150, respectively.
Bennett Carroccio is permitted to sell shares of Common Stock of HotJobs.com,
Ltd. owned by him to Richard S. Johnson pursuant to the Option Agreement, dated
as of March 2, 1999, between Bennett Carroccio and Richard Johnson.
Any transfer by each of GreenAcre Ventrures LLC, Boston Millennia Partners
Limited Partnership and Boston Millennia Associates I Partnership, respectively,
to its respective direct or indirect owners, including, without limitation, any
of its respective partners, stockholders or equity owners therof, and in respect
of any such owner, to any Transfer that such owner would be permitted to make
pursuant to Section 4.2 as a Stockholder under the Amended and Restated
Stockholders' Agreement, of which this schedule is a part, including any such
Transfer by way of a distribution, in connection with any dissolution, partial
or complete liquidation or otherwise.
45
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
BETWEEN
HOTJOBS.COM, LTD.
AND
RICHARD JOHNSON
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), effective as of the 6th
day of May, 1999 by and between HOTJOBS.COM, LTD. a Delaware corporation having
its principal place of business at 24 West 40th Street, New York, NY 10018 (the
"Corporation") and RICHARD JOHNSON, an individual residing at 30 Broadview
Terrace, Chatham, NJ 07928 (the "Executive").
WITNESSETH THAT:
WHEREAS, the Corporation desires to employ the Executive on the
terms and conditions set forth in this Agreement; and
WHEREAS, the Executive desires to be employed by the Corporation on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I. EMPLOYMENT TERM AND DUTIES
SECTION 1.1 EMPLOYMENT. The Corporation hereby agrees to employ the
Executive, and the Executive hereby agrees to accept such employment, upon the
terms and conditions herein contained.
SECTION 1.2 TERM. The term of employment under this Agreement (the
"Employment Term") shall commence on May 6, 1999 (the "Effective Date"), and
shall continue until May 5, 2002. Thereafter, this Agreement shall automatically
renew for additional one-year terms with a
<PAGE>
minimum increase of 10% per year unless the Corporation gives the Executive
written notice stating that it does not desire to renew at least six months
before the end of the term.
SECTION 1.3 DUTIES. During the Employment Term, the Executive shall serve
as President and Chief Executive Officer of the Corporation, and shall be the
highest ranking officer of the Corporation. The Executive shall perform such
duties as are reasonable and customary for an individual holding such office and
such other duties as are set forth in the Bylaws of the Corporation or as may be
agreed to from time to time by the Executive. Executive shall devote
substantially his full and exclusive professional time and attention to
performing his obligations hereunder.
ARTICLE II. COMPENSATION
SECTION 2.1 BASIC COMPENSATION. During the Employment Term (but commencing
only after the closing of the Corporation's first sale of securities to a
venture capital investor), the Corporation shall pay to the Executive an annual
base salary (which shall accrue proportionately from day to day and shall be
payable in accordance with the Corporation's usual payroll practices with
respect to officers of the Corporation) of $200,000 (the "Basic Compensation").
SECTION 2.2 ANNUAL BONUS. In addition to Basic Compensation, the Executive
may also receive other bonus or incentive compensation and salary increases as
shall be determined by the Board of Directors of the Corporation (the "Board")
in accordance with applicable Corporation policies in effect at such time.
-2-
<PAGE>
SECTION 2.3 BENEFITS. During the Employment Term, Executive shall be
entitled to participate in all benefit plans, if any, provided to other
similarly situated senior executives of the Corporation.
SECTION 2.4 VACATION. During the Employment Term, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Corporation as in effect generally with respect to
other executives of the Corporation.
ARTICLE III. BOARD SEAT
During the Employment Term, the Corporation shall use its best
efforts to nominate Executive for election as a member of and Chairman of the
Board and cause Executive to be elected thereto.
ARTICLE IV. TERMINATION OF EMPLOYMENT
SECTION 4.1 EVENTS OF TERMINATION.
(a) DEATH. The Executive's employment shall terminate automatically
upon the Executive's death.
(b) WITHOUT CAUSE. Notwithstanding any other provision hereunder,
the Corporation shall have the right to terminate the Executive's employment
hereunder without "Cause" (as defined in Section 4.1(c)) at any time during the
Employment Term for any reason in the sole discretion of the Corporation upon
not less than ninety (90) days' notice to the Executive.
-3-
<PAGE>
(c) CAUSE. The Corporation may terminate the Executive's employment
during the Employment Term for Cause. For purposes of this Agreement, "Cause"
shall mean: (i) gross negligence or willful misconduct of the Executive in the
performance of any of his duties under this Agreement (including the willful
failure by the Executive to perform his duties hereunder); (ii) any embezzlement
or misappropriation of funds or property or intellectual property of the
Corporation; (iii) any conviction or plea of guilty or NOLO CONTENDERE in
connection with fraud or any crime that constitutes a felony in the jurisdiction
involved; and (iv) any material breach by the Executive of the terms of this
Agreement, which is not cured within thirty (30) days of notice of the breach
given by the Corporation.
(d) GOOD REASON. The Executive may terminate his employment during
the term of this Agreement for Good Reason upon thirty (30) days' notice to the
Corporation as long as such notice is given within ninety (90) days of the date
Executive becomes aware of the occurrence of any of the events specified below.
For purposes of this Agreement, "Good Reason" shall mean the occurrence, without
the Executive's express written consent, of any one or more of the following
events:
(i) A material change in the Executive's titles or duties
described in Section 1.3, or any removal of the Executive from, or any failure
to re-elect the Executive to, any of such positions.
(ii) A failure by the Corporation to pay Executive's Basic
Compensation, not caused by Executive, which failure to pay is not cured within
30 days after written notice from Executive.
-4-
<PAGE>
(iii) The filing of a voluntary or involuntary petition of
bankruptcy by or against the Corporation or the insolvency of the Corporation.
(iv) A Change of Control as defined in Section 4.2(c) below.
(v) Removal of Executive from the Board or as Chairman of the
Board. (vi) Executive is no longer the highest ranking officer of the
Corporation.
(vii) Executive is forced to work outside of the New York
metropolitan area on a permanent basis.
(viii) The Corporation breaches any material term hereof.
(e) WITHOUT GOOD REASON. The Executive may terminate his employment
during the Employment Term without Good Reason upon thirty (30) days notice to
the Corporation.
SECTION 4.2 TERMINATION PROCEDURES AND CERTAIN DEFINITIONS.
(a) NOTICE OF TERMINATION. Any termination by the Corporation for
Cause or without Cause or by the Executive for Good Reason or without Good
Reason, shall be communicated by Notice of Termination to the other party. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date. The failure
-5-
<PAGE>
by the Executive or the Corporation to set forth in the Notice of Termination
any fact orcircumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Corporation, respectively,
hereunder or preclude the Executive or the Corporation, respectively, from
asserting the fact or circumstance in enforcing the Executive's or the
Corporation's rights hereunder. The Executive's continued employment with the
Corporation after a Notice of Termination is provided shall not constitute
consent to, or a waiver of any rights with respect to, any circumstance
constituting Good Reason hereunder.
(b) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Corporation for Cause, the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is terminated by the Corporation
other than for Cause or death, the Date of Termination shall be the date not
less than ninety (90) days after the date on which the Corporation notifies the
Executive of such termination, (iii) if the Executive terminates his employment
for Good Reason, the Date of Termination shall be the date, not less than thirty
(30) days after the date on which the Executive notifies the Corporation of such
termination, and (iv) if the Executive's employment is terminated by reason of
death, the Date of Termination shall be the date of death of the Executive.
(c) CHANGE OF CONTROL. A "Change of Control" shall have occurred if:
(i) any "person" within the meaning of Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the
Corporation, a subsidiary of the Corporation, any employee benefit plan
sponsored by the Corporation or any subsidiary of the Corporation, Richard
Johnson or an underwriter who has acquired securities for the purpose of
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distributing them in a firmly underwritten public offering, becomes the
"beneficial owner" as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of 49% or more of the combined voting power of the securities of the
Corporation entitled to vote in an election of directors to the Board; or
(ii) a merger or equivalent combination occurs after which 49%
or more of the voting stock of the surviving corporation is held by persons
other than former stockholders of the Corporation; or
(iii) the sale, assignment, transfer or other disposition of
assets of the Corporation having a value in excess of 49% of the total assets of
the Corporation.
SECTION 4.3 OBLIGATIONS OF THE CORPORATION ON TERMINATION.
(a) TERMINATION UPON DEATH. If the Executive's Employment is
terminated upon his death:
(i) IN GENERAL. The Corporation shall immediately pay the
Executive in cash the amount of Basic Compensation previously earned but not yet
paid.
(ii) SEVERANCE BENEFITS. The Corporation shall pay the
Executive his Basic Compensation for the remainder of the Employment Term (the
"Severance Period") or one year of Basic Compensation, whichever is greater,
payable in accordance with the Corporation's usual payroll practices. Any
amounts payable under this Agreement shall be paid to Executive's estate.
(b) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If Executive's
employment is terminated without Cause or for Good Reason:
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<PAGE>
(i) IN GENERAL. The Corporation shall immediately pay the
Executive in cash the amount of Basic Compensation previously earned but not yet
paid.
(ii) SEVERANCE BENEFITS. The Corporation shall pay the
Executive either his Basic Compensation for the remainder of the Employment Term
(the "Severance Period") or one year of Basic Compensation, which ever is
greater, payable in a lump sum within thirty (30) days following said
termination.
(iii) STOCK OPTIONS; RESTRICTED STOCK. Upon the Date of
Termination, when Executive is terminated without Cause or for Good Reason (i)
all options to purchase stock of the Corporation held by Executive shall become
immediately exercisable as to all shares of stock which are subject thereto and
shall remain exercisable for the remainder of the term thereof and (ii) any
contractual restrictions including, but not limited to, risks of forfeiture with
respect to stock of the Corporation held by Executive shall immediately
terminate.
(c) TERMINATION FOR CAUSE OR TERMINATION WITHOUT GOOD REASON. In
case of a Termination for Cause or Termination without Good Reason, the
Executive shall be entitled to his Basic Compensation accrued to the Date of
Termination and any other benefits or awards vested prior to such date. Except
as otherwise provided in this Agreement or under any employee benefit plan
maintained by the Corporation, the Corporation shall have no further obligations
to the Executive.
(d) GROSS UP PAYMENTS.
(i) If, on account of the termination of the Executive
following a Change in Control, the "Severance Payment" (as defined below) paid
by the Corporation to the Executive pursuant to this Agreement constitutes an
"excess parachute payment" within the
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meaning of Section 280G of the Code subject to the tax imposed by Section 4999
of the Code (the "Excise Tax"), then the Corporation shall pay to the Executive
an additional amount (the "Gross Up Payment") such that the amount paid or
transferred to the Executive after deduction of any Excise Tax on the Severance
Payment, and any federal, state and local income tax, employment tax and Excise
Tax upon the Gross Up Payment, shall be equal to the Severance Payment. For
purposes of this Section 4.3(d) only, "Severance Payment" shall mean any payment
or other benefit paid pursuant to this Agreement.
(ii) For purposes of determining whether any portion of a
Severance Payment will be subject to the Excise Tax and the amount of such
Excise Tax, (A) the Severance Payment and payments provided for in Section
4.3(d)(i) shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of Section 280(G)(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless and to the extent that tax counsel selected by the Corporation's
independent auditors and acceptable to the Executive is of the opinion that the
Severance Payment (in whole or in part) does not constitute a "parachute
payment" or such "excess parachute payment" (in whole or in part) represents
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the allocable base amount within the
meaning of Section 280G(b)(3) of the Code, or the Severance Payment is otherwise
not subject to the Excise Tax, (B) the amount of the Severance Payment that is
treated as subject to the Excise Tax shall be equal to the lesser of (X) the
total amount of the Severance Payment and (Y) the amount of "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code (after applying
clause (A) above), (C) any Gross Up Payment pursuant to Section 4.3(d)(i) shall
be
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treated as subject to the Excise Tax in its entirety and (D) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by the
Corporation's independent auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
(iii) If in circumstances described in Section 4.3(d)(i), by
reason of the filing by the Executive of an amended tax return, an audit by the
Internal Revenue Service or other taxing authority, or a final determination by
a court of competent jurisdiction, it is determined that "excess parachute
payments" exceeding those previously reported in his tax returns were received
by the Executive and as a result an additional Excise Tax (the "Additional
Excise Tax") shall become due, the Corporation shall pay the Executive an
additional amount (the "Subsequent Gross Up Payment") such that the amount paid
or transferred to the Executive, after deduction of (A) any Additional Excise
Tax and (B) on an after tax basis, any interest, additions and penalties with
respect to the Additional Excise Tax and (C) any federal, state and local income
tax, employment tax and Excise Tax upon the Subsequent Gross Up Payment and (D)
the payments provided for in Section 4.3(d)(i), shall be equal to the Severance
Payment.
(iv) Any Gross Up Payment required hereunder shall be made at
least ten days prior to the due date (without regard to extensions) of the
Executive's federal income tax return for the year with respect to which the
"excess parachute payment" is deemed made under the Code. Any Subsequent Gross
Up Payment required hereunder shall be made to the Executive within 30 days
after the amount thereof is determined. Notwithstanding the two immediately
preceding sentences, the Executive shall pay any federal, state and local tax or
taxes and employment taxes required to be withheld from the Executive's wages
(within the meaning of Section 3121 and 3402 of the Code) with respect to the
"excess parachute payment" and any
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such tax or taxes paid by the Corporation to the Internal Revenue Service or
state or local taxing authority shall constitute payment to the Executive.
(v) If the Excise Tax is finally determined (whether by the
filing of an amended tax return by the Executive, by audit of the Internal
Revenue Service or other taxing authority, or by a final determination of a
court of competent jurisdiction) to be less than the amount paid to or on behalf
of the Executive under the provisions of Sections 4.3(d)(i)-(iv) and the
overpayment is refunded to the Executive, the Executive shall repay to the
Corporation, promptly following the receipt of the refund, the portion of the
Gross Up Payment (and/or Subsequent Gross Up Payment) attributable to such
reduction of the Excise Tax (plus the portion attributable to federal, state and
local income tax and employment taxes imposed on the portion being repaid by the
Executive but only to the extent that the repayment may result in a tax benefit
to the Officer under Section 1341 of the Code and similar provisions of
applicable state and local law).
(vi) The provisions of this Section 4.3(d) shall inure to the
benefit of the Executive during the Employment Term regardless of whether or not
his employment is terminated, and if the Executive's employment is terminated,
the rights and obligations of the Executive and the Corporation under this
Section 4.3(d) shall survive the termination of this Agreement.
ARTICLE V. PURPOSE
SECTION 5.1 PURPOSE. The Corporation recognizes that the Executive is a
key executive of the Corporation and is expected to be a factor in the growth
and success of the
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Corporation. The Corporation also recognizes that the continued success of the
Corporation depends, to a significant degree, upon the effective performance of
the Executive's duties as set forth in this Agreement. Therefore, one of the
primary purposes of this Agreement is to provide for the long-term financial
security of the Executive and his family so that he will be better able to
direct his undivided attention to the successful performance of his duties on
behalf of the Corporation.
SECTION 5.2 NON-COMPETE AND CONFIDENTIALITY. Except as to such actions
within the ordinary course of the Executive's employment by the Corporation
which the Executive in good faith believes to be in the best interests of the
Corporation, the Executive shall not at any time during the Employment Term or
two years thereafter, without the prior written consent of the Corporation: (i)
request or advise any supplier, or other person, firm, partnership, association,
corporation or business organization, entity or enterprise having business
dealings with the Corporation or any subsidiary or affiliate of the Corporation
to withdraw, curtail or cancel such business dealings; (ii) disclose to any
third party including, but not limited to, any competitor or potential
competitor of the Corporation or any subsidiary or affiliate of the Corporation
any trade secret, know-how or knowledge relating to costs, products, equipment,
merchandising and marketing methods, business plans, or research results used
by, or useful to, the Corporation or any subsidiary or affiliate of the
Corporation or other confidential information of the Corporation (the
"Confidential Information"); (iii) induce or attempt to influence any executive
of the Corporation or any subsidiary or affiliate of the Corporation to
terminate, or in any way violate the terms of, his or her employment; or (iv)
engage directly or engage indirectly in any business in competition with the
business of the Corporation or its subsidiaries, provided, however, that
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the ownership by Executive of not more than 5% of the equity securities of any
company or similar business venture shall not be deemed a violation of this
Section 5.2(iv). For purposes of this Section 5.2, Confidential Information
shall not include: (a) information that is in the public domain; provided that
Executive was not responsible for the disclosure to the public; (b) information
that was already known to Executive prior to his employment by the Corporation;
and (c) information required to be disclosed in connection with any judicial or
administrative proceeding or inquiry; provided that Executive shall notify the
Corporation as promptly as practicable of such proceeding or inquiry and
cooperate with the Corporation in taking legally available steps to resist or
narrow the required disclosure.
ARTICLE VI. MISCELLANEOUS
SECTION 6.1 ENFORCEABILITY. If the scope of any provision of this
Agreement is too broad to permit enforcement of such provision to its fullest
extent, then such provision shall be enforced to the maximum extent permitted by
applicable law, and, if necessary, the scope of any such provision may be
judicially modified (to the extent necessary in any proceeding brought to
enforce such provision) and thereafter fully enforced.
SECTION 6.2 WORKS FOR HIRE. Executive agrees that all improvements in the
Corporation's method of conducting its business as well as all inventions
conceived of or developed by Executive related directly or indirectly to the
Corporation's business during the Employment Term, the negotiation thereof or
the period of six months after the expiration or termination of this Agreement,
regardless of the time and place made, and all proprietary rights therein, shall
belong exclusively to the Corporation as works-for-hire, having been specially
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commissioned by the Corporation, and Executive will promptly disclose such work
product to the Chairman of the Board of the Corporation. To the extent necessary
to supplement the foregoing, Executive hereby transfers and assigns to the
Corporation the proprietary rights in perpetuity in all such work product and
all rights therein of any kind in all media now or hereafter known. In addition
to the rights granted to the Corporation in this Section 6.2, Executive agrees
that all patents related directly or indirectly to the Corporation's business
obtained by or issued in the name of Executive during the Employment Term are
property of the Corporation. Executive further agrees to assign any such patents
to the Corporation without payment of any additional compensation other than the
compensation specified in Article II above.
SECTION 6.3 REMEDIES. The parties acknowledge that the remedy at law for
any breach of any party's obligations hereunder would be inadequate and consent
to the granting of temporary and permanent injunctive relief in any proceeding
brought to enforce any of such provisions without the necessity of proof of
actual damages; provided, however, that the foregoing shall not be construed to
limit any other right or remedy available to the Corporation or the Executive at
law or in equity, and all such rights and remedies shall be cumulative to the
extent permitted by applicable law, and the exercise of any one or more of such
rights or remedies shall be without prejudice to the exercise of any other such
right or remedy.
SECTION 6.4 ASSIGNMENT BY THE EXECUTIVE; SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Corporation shall not be assignable by the
Executive otherwise than by will or the
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laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) Except as is otherwise herein expressly provided, this Agreement
shall inure to the benefit of and be binding upon the Corporation, its
successors and assigns, and upon the Executive, his spouse, heirs, executors and
administrators, provided, however, that the obligations of the Executive
hereunder shall not be delegated.
(c) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this Agreement, "Corporation" shall mean
Corporation as hereinbefore defined and any successor to its business or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
SECTION 6.5 WAIVER. Failure of either party hereto to insist upon strict
compliance by the other party with any term, covenant or condition hereof shall
not be deemed a waiver of such term, covenant or condition, nor shall any waiver
or relinquishment or failure to insist upon strict compliance with any right or
power hereunder at any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 6.6 SURVIVAL. Notwithstanding the expiration or termination of
this Agreement, Sections 4.3, 5.2 and 6.2 shall survive.
SECTION 6.7 NOTICE. Except as otherwise provided in Section 4.2(a) hereof,
any notice required or desired to be given pursuant to this Agreement shall be
sufficient if in writing sent by
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registered or certified mail to the addresses set forth above or to such other
address as any party hereto may designate in writing, transmitted by hand
delivery or by registered or certified mail to the other; provided, the failure
by the Executive to observe the notice provisions hereof shall not in any way
limit, reduce or effect the Executive's rights and benefits hereunder.
SECTION 6.8 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to any otherwise applicable choice of law rules.
SECTION 6.9 TAXES. The Corporation may deduct from all amounts paid under
this Agreement all federal, state, local and other taxes required by law to be
withheld with respect to such payments.
SECTION 6.10 ENTIRE AGREEMENT. The parties hereto agree that this
Agreement (together with, to the extent benefits or rights are otherwise
affected by this Agreement, any employee benefit plan maintained or sponsored by
the Corporation) contains the entire understanding and agreement between them
and supersedes all previous agreements and arrangements, if any, relating to the
employment of the Executive. This Agreement shall not be amended, modified or
supplemented in any respect except by an agreement in writing signed by the
Executive and the Corporation.
SECTION 6.11 COUNTERPARTS. This Agreement may be signed in counterparts,
each of which shall be an original, and all of which, taken together shall be
deemed to be one instrument.
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IN WITNESS WHEREOF, the Corporation and the Executive have duly
executed this Agreement as of the day and the year first above written.
HOTJOBS.COM, LTD. EXECUTIVE
By: /s/ /s/
------------------------ ----------------------------
Name: Richard Johnson
Title:
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Exhibit 10.4
EMPLOYMENT AGREEMENT
BETWEEN
HOTJOBS.COM, LTD.
AND
DIMITRI BOYLAN
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), effective as of the 6th
day of May, 1999 by and between HOTJOBS.COM, LTD. a Delaware corporation having
its principal place of business at 24 West 40th Street, New York, NY 10018 (the
"Corporation") and DIMITRI BOYLAN, an individual residing at 82-67 Austin
Street, Apartment 605, Kew Gardens, NY 11415 (the "Executive").
WITNESSETH THAT:
WHEREAS, the Corporation desires to employ the Executive on the
terms and conditions set forth in this Agreement; and
WHEREAS, the Executive desires to be employed by the Corporation on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I. EMPLOYMENT TERM AND DUTIES
SECTION 1.1 EMPLOYMENT. The Corporation hereby agrees to employ the
Executive, and the Executive hereby agrees to accept such employment, upon the
terms and conditions herein contained.
SECTION 1.2 TERM. The term of employment under this Agreement (the
"Employment Term") shall commence on May 6, 1999 (the "Effective Date"), and
shall continue until May 5, 2002. Thereafter, this Agreement shall automatically
renew for additional one-year terms with a
<PAGE>
minimum increase of 10% per year unless the Corporation gives the Executive
written notice stating that it does not desire to renew at least six months
before the end of the term.
SECTION 1.3 DUTIES. During the Employment Term, the Executive shall serve
as Chief Operating Officer of the Corporation. The Executive shall perform such
duties as are reasonable and customary for an individual holding such office and
such other duties as are set forth in the Bylaws of the Corporation or as may be
agreed to from time to time by the Executive. Executive shall devote
substantially his full and exclusive professional time and attention to
performing his obligations hereunder. The Executive shall report directly to the
President and CEO of the Corporation.
ARTICLE II. COMPENSATION
SECTION 2.1 BASIC COMPENSATION. During the Employment Term (but commencing
only after the closing of the Corporation's first sale of securities to a
venture capital investor), the Corporation shall pay to the Executive an annual
base salary (which shall accrue proportionately from day to day and shall be
payable in accordance with the Corporation's usual payroll practices with
respect to officers of the Corporation) of $175,000 (the "Basic Compensation").
SECTION 2.2 ANNUAL BONUS. In addition to Basic Compensation, the Executive
may also receive other bonus or incentive compensation and salary increases as
shall be determined by the Board of Directors of the Corporation (the "Board")
in accordance with applicable Corporation policies in effect at such time.
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SECTION 2.3 BENEFITS. During the Employment Term, Executive shall be
entitled to participate in all benefit plans, if any, provided to other
similarly situated senior executives of the Corporation.
SECTION 2.4 VACATION. During the Employment Term, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Corporation as in effect generally with respect to
other executives of the Corporation.
ARTICLE III. BOARD SEAT
During the Employment Term, the Corporation shall use its best
efforts to nominate Executive for election as a member of the Board and cause
Executive to be elected thereto.
ARTICLE IV. TERMINATION OF EMPLOYMENT
SECTION 4.1 EVENTS OF TERMINATION.
(a) DEATH. The Executive's employment shall terminate automatically
upon the Executive's death.
(b) WITHOUT CAUSE. Notwithstanding any other provision hereunder,
the Corporation shall have the right to terminate the Executive's employment
hereunder without "Cause" (as defined in Section 4.1(c)) at any time during the
Employment Term for any reason in the sole discretion of the Corporation upon
not less than ninety (90) days' notice to the Executive.
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(c) CAUSE. The Corporation may terminate the Executive's employment
during the Employment Term for Cause. For purposes of this Agreement, "Cause"
shall mean: (i) gross negligence or willful misconduct of the Executive in the
performance of any of his duties under this Agreement (including the willful
failure by the Executive to perform his duties hereunder); (ii) any embezzlement
or misappropriation of funds or property or intellectual property of the
Corporation; (iii) any conviction or plea of guilty or NOLO CONTENDERE in
connection with fraud or any crime that constitutes a felony in the jurisdiction
involved; and (iv) any material breach by the Executive of the terms of this
Agreement, which is not cured within thirty (30) days of notice of the breach
given by the Corporation.
(d) GOOD REASON. The Executive may terminate his employment during
the term of this Agreement for Good Reason upon thirty (30) days' notice to the
Corporation as long as such notice is given within ninety (90) days of the date
Executive becomes aware of the occurrence of any of the events specified below.
For purposes of this Agreement, "Good Reason" shall mean the occurrence, without
the Executive's express written consent, of any one or more of the following
events:
(i) A material change in the Executive's titles or duties
described in Section 1.3, or any removal of the Executive from, or any failure
to re-elect the Executive to, any of such positions.
(ii) A failure by the Corporation to pay Executive's Basic
Compensation, not caused by Executive, which failure to pay is not cured within
30 days after written notice from Executive.
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(iii) The filing of a voluntary or involuntary petition of
bankruptcy by or against the Corporation or the insolvency of the Corporation.
(iv) A Change of Control as defined in Section 4.2(c) below.
(v) Removal of Executive from the Board.
(vi) Executive is forced to work outside of the New York
metropolitan area on a permanent basis.
(vii) The Corporation breaches any material term hereof.
(e) WITHOUT GOOD REASON. The Executive may terminate his employment
during the Employment Term without Good Reason upon thirty (30) days notice to
the Corporation.
SECTION 4.2 TERMINATION PROCEDURES AND CERTAIN DEFINITIONS.
(a) NOTICE OF TERMINATION. Any termination by the Corporation for
Cause or without Cause or by the Executive for Good Reason or without Good
Reason, shall be communicated by Notice of Termination to the other party. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date. The failure by the Executive or the Corporation
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Corporation, respectively, hereunder or preclude the
Executive or the
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Corporation, respectively, from asserting the fact or circumstance in enforcing
the Executive's or the Corporation's rights hereunder. The Executive's continued
employment with the Corporation after a Notice of Termination is provided shall
not constitute consent to, or a waiver of any rights with respect to, any
circumstance constituting Good Reason hereunder.
(b) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Corporation for Cause, the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is terminated by the Corporation
other than for Cause or death, the Date of Termination shall be the date not
less than ninety (90) days after the date on which the Corporation notifies the
Executive of such termination, (iii) if the Executive terminates his employment
for Good Reason, the Date of Termination shall be the date, not less than thirty
(30) days after the date on which the Executive notifies the Corporation of such
termination, and (iv) if the Executive's employment is terminated by reason of
death, the Date of Termination shall be the date of death of the Executive.
(c) CHANGE OF CONTROL. A "Change of Control" shall have occurred if:
(i) any "person" within the meaning of Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the
Corporation, a subsidiary of the Corporation, any employee benefit plan
sponsored by the Corporation or any subsidiary of the Corporation, Richard
Johnson or an underwriter who has acquired securities for the purpose of
distributing them in a firmly underwritten public offering, becomes the
"beneficial owner" as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of 49% or more of the
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combined voting power of the securities of the Corporation entitled to vote in
an election of directors to the Board; or
(ii) a merger or equivalent combination occurs after which 49%
or more of the voting stock of the surviving corporation is held by persons
other than former stockholders of the Corporation; or
(iii) the sale, assignment, transfer or other disposition of
assets of the Corporation having a value in excess of 49% of the total assets of
the Corporation.
SECTION 4.3 OBLIGATIONS OF THE CORPORATION ON TERMINATION.
(a) TERMINATION UPON DEATH. If the Executive's Employment is
terminated upon his death:
(i) IN GENERAL. The Corporation shall immediately pay the
Executive in cash the amount of Basic Compensation previously earned but not yet
paid.
(ii) SEVERANCE BENEFITS. The Corporation shall pay the
Executive his Basic Compensation for the remainder of the Employment Term (the
"Severance Period") or one year of Basic Compensation, whichever is greater,
payable in accordance with the Corporation's usual payroll practices. Any
amounts payable under this Agreement shall be paid to Executive's estate.
(b) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If Executive's
employment is terminated without Cause or for Good Reason:
(i) IN GENERAL. The Corporation shall immediately pay the
Executive in cash the amount of Basic Compensation previously earned but not yet
paid.
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(ii) SEVERANCE BENEFITS. The Corporation shall pay the
Executive either his Basic Compensation for the remainder of the Employment Term
(the "Severance Period") or one year of Basic Compensation, which ever is
greater, payable in a lump sum within thirty (30) days following said
termination.
(iii) STOCK OPTIONS; RESTRICTED STOCK. Upon the Date of
Termination, when Executive is terminated without Cause or for Good Reason (i)
all options to purchase stock of the Corporation held by Executive shall become
immediately exercisable as to all shares of stock which are subject thereto and
shall remain exercisable for the remainder of the term thereof and (ii) any
contractual restrictions including, but not limited to, risks of forfeiture with
respect to stock of the Corporation held by Executive shall immediately
terminate.
(c) TERMINATION FOR CAUSE OR TERMINATION WITHOUT GOOD REASON. In
case of a Termination for Cause or Termination without Good Reason, the
Executive shall be entitled to his Basic Compensation accrued to the Date of
Termination and any other benefits or awards vested prior to such date. Except
as otherwise provided in this Agreement or under any employee benefit plan
maintained by the Corporation, the Corporation shall have no further obligations
to the Executive.
(d) GROSS UP PAYMENTS.
(i) If, on account of the termination of the Executive
following a Change in Control, the "Severance Payment" (as defined below) paid
by the Corporation to the Executive pursuant to this Agreement constitutes an
"excess parachute payment" within the meaning of Section 280G of the Code
subject to the tax imposed by Section 4999 of the Code (the "Excise Tax"), then
the Corporation shall pay to the Executive an additional amount (the
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"Gross Up Payment") such that the amount paid or transferred to the Executive
after deduction of any Excise Tax on the Severance Payment, and any federal,
state and local income tax, employment tax and Excise Tax upon the Gross Up
Payment, shall be equal to the Severance Payment. For purposes of this Section
4.3(d) only, "Severance Payment" shall mean any payment or other benefit paid
pursuant to this Agreement.
(ii) For purposes of determining whether any portion of a
Severance Payment will be subject to the Excise Tax and the amount of such
Excise Tax, (A) the Severance Payment and payments provided for in Section
4.3(d)(i) shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of Section 280(G)(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless and to the extent that tax counsel selected by the Corporation's
independent auditors and acceptable to the Executive is of the opinion that the
Severance Payment (in whole or in part) does not constitute a "parachute
payment" or such "excess parachute payment" (in whole or in part) represents
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the allocable base amount within the
meaning of Section 280G(b)(3) of the Code, or the Severance Payment is otherwise
not subject to the Excise Tax, (B) the amount of the Severance Payment that is
treated as subject to the Excise Tax shall be equal to the lesser of (X) the
total amount of the Severance Payment and (Y) the amount of "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code (after applying
clause (A) above), (C) any Gross Up Payment pursuant to Section 4.3(d)(i) shall
be treated as subject to the Excise Tax in its entirety and (D) the value of any
non-cash benefits or
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any deferred payment or benefit shall be determined by the Corporation's
independent auditors in accordance with the principles of Sections 280G(d)(3)
and (4) of the Code.
(iii) If in circumstances described in Section 4.3(d)(i), by
reason of the filing by the Executive of an amended tax return, an audit by the
Internal Revenue Service or other taxing authority, or a final determination by
a court of competent jurisdiction, it is determined that "excess parachute
payments" exceeding those previously reported in his tax returns were received
by the Executive and as a result an additional Excise Tax (the "Additional
Excise Tax") shall become due, the Corporation shall pay the Executive an
additional amount (the "Subsequent Gross Up Payment") such that the amount paid
or transferred to the Executive, after deduction of (A) any Additional Excise
Tax and (B) on an after tax basis, any interest, additions and penalties with
respect to the Additional Excise Tax and (C) any federal, state and local income
tax, employment tax and Excise Tax upon the Subsequent Gross Up Payment and (D)
the payments provided for in Section 4.3(d)(i), shall be equal to the Severance
Payment.
(iv) Any Gross Up Payment required hereunder shall be made at
least ten days prior to the due date (without regard to extensions) of the
Executive's federal income tax return for the year with respect to which the
"excess parachute payment" is deemed made under the Code. Any Subsequent Gross
Up Payment required hereunder shall be made to the Executive within 30 days
after the amount thereof is determined. Notwithstanding the two immediately
preceding sentences, the Executive shall pay any federal, state and local tax or
taxes and employment taxes required to be withheld from the Executive's wages
(within the meaning of Section 3121 and 3402 of the Code) with respect to the
"excess parachute payment" and any
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<PAGE>
such tax or taxes paid by the Corporation to the Internal Revenue Service or
state or local taxing authority shall constitute payment to the Executive.
(v) If the Excise Tax is finally determined (whether by the
filing of an amended tax return by the Executive, by audit of the Internal
Revenue Service or other taxing authority, or by a final determination of a
court of competent jurisdiction) to be less than the amount paid to or on behalf
of the Executive under the provisions of Sections 4.3(d)(i)-(iv) and the
overpayment is refunded to the Executive, the Executive shall repay to the
Corporation, promptly following the receipt of the refund, the portion of the
Gross Up Payment (and/or Subsequent Gross Up Payment) attributable to such
reduction of the Excise Tax (plus the portion attributable to federal, state and
local income tax and employment taxes imposed on the portion being repaid by the
Executive but only to the extent that the repayment may result in a tax benefit
to the Officer under Section 1341 of the Code and similar provisions of
applicable state and local law).
(vi) The provisions of this Section 4.3(d) shall inure to the
benefit of the Executive during the Employment Term regardless of whether or not
his employment is terminated, and if the Executive's employment is terminated,
the rights and obligations of the Executive and the Corporation under this
Section 4.3(d) shall survive the termination of this Agreement.
ARTICLE V. PURPOSE
SECTION 5.1 PURPOSE. The Corporation recognizes that the Executive is a
key executive of the Corporation and is expected to be a factor in the growth
and success of the
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<PAGE>
Corporation. The Corporation also recognizes that the continued success of the
Corporation depends, to a significant degree, upon the effective performance of
the Executive's duties as set forth in this Agreement. Therefore, one of the
primary purposes of this Agreement is to provide for the long-term financial
security of the Executive and his family so that he will be better able to
direct his undivided attention to the successful performance of his duties on
behalf of the Corporation.
SECTION 5.2 NON-COMPETE AND CONFIDENTIALITY. Except as to such actions
within the ordinary course of the Executive's employment by the Corporation
which the Executive in good faith believes to be in the best interests of the
Corporation, the Executive shall not at any time during the Employment Term or
two years thereafter, without the prior written consent of the Corporation: (i)
request or advise any supplier, or other person, firm, partnership, association,
corporation or business organization, entity or enterprise having business
dealings with the Corporation or any subsidiary or affiliate of the Corporation
to withdraw, curtail or cancel such business dealings; (ii) disclose to any
third party including, but not limited to, any competitor or potential
competitor of the Corporation or any subsidiary or affiliate of the Corporation
any trade secret, know-how or knowledge relating to costs, products, equipment,
merchandising and marketing methods, business plans, or research results used
by, or useful to, the Corporation or any subsidiary or affiliate of the
Corporation or other confidential information of the Corporation (the
"Confidential Information"); (iii) induce or attempt to influence any executive
of the Corporation or any subsidiary or affiliate of the Corporation to
terminate, or in any way violate the terms of, his or her employment; or (iv)
engage directly or engage indirectly in any business in competition with the
business of the Corporation or its subsidiaries, provided, however, that
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<PAGE>
the ownership by Executive of not more than 5% of the equity securities of any
company or similar business venture shall not be deemed a violation of this
Section 5.2(iv). For purposes of this Section 5.2, Confidential Information
shall not include: (a) information that is in the public domain; provided that
Executive was not responsible for the disclosure to the public; (b) information
that was already known to Executive prior to his employment by the Corporation;
and (c) information required to be disclosed in connection with any judicial or
administrative proceeding or inquiry; provided that Executive shall notify the
Corporation as promptly as practicable of such proceeding or inquiry and
cooperate with the Corporation in taking legally available steps to resist or
narrow the required disclosure.
ARTICLE VI. MISCELLANEOUS
SECTION 6.1 ENFORCEABILITY. If the scope of any provision of this
Agreement is too broad to permit enforcement of such provision to its fullest
extent, then such provision shall be enforced to the maximum extent permitted by
applicable law, and, if necessary, the scope of any such provision may be
judicially modified (to the extent necessary in any proceeding brought to
enforce such provision) and thereafter fully enforced.
SECTION 6.2 WORKS FOR HIRE. Executive agrees that all improvements in the
Corporation's method of conducting its business as well as all inventions
conceived of or developed by Executive related directly or indirectly to the
Corporation's business during the Employment Term, the negotiation thereof or
the period of six months after the expiration or termination of this Agreement,
regardless of the time and place made, and all proprietary rights therein, shall
belong exclusively to the Corporation as works-for-hire, having been specially
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<PAGE>
commissioned by the Corporation, and Executive will promptly disclose such work
product to the Chairman of the Board of the Corporation. To the extent necessary
to supplement the foregoing, Executive hereby transfers and assigns to the
Corporation the proprietary rights in perpetuity in all such work product and
all rights therein of any kind in all media now or hereafter known. In addition
to the rights granted to the Corporation in this Section 6.2, Executive agrees
that all patents related directly or indirectly to the Corporation's business
obtained by or issued in the name of Executive during the Employment Term are
property of the Corporation. Executive further agrees to assign any such patents
to the Corporation without payment of any additional compensation other than the
compensation specified in Article II above.
SECTION 6.3 REMEDIES. The parties acknowledge that the remedy at law for
any breach of any party's obligations hereunder would be inadequate and consent
to the granting of temporary and permanent injunctive relief in any proceeding
brought to enforce any of such provisions without the necessity of proof of
actual damages; provided, however, that the foregoing shall not be construed to
limit any other right or remedy available to the Corporation or the Executive at
law or in equity, and all such rights and remedies shall be cumulative to the
extent permitted by applicable law, and the exercise of any one or more of such
rights or remedies shall be without prejudice to the exercise of any other such
right or remedy.
SECTION 6.4 ASSIGNMENT BY THE EXECUTIVE; SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Corporation shall not be assignable by the
Executive otherwise than by will or the
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<PAGE>
laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) Except as is otherwise herein expressly provided, this Agreement
shall inure to the benefit of and be binding upon the Corporation, its
successors and assigns, and upon the Executive, his spouse, heirs, executors and
administrators, provided, however, that the obligations of the Executive
hereunder shall not be delegated.
(c) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this Agreement, "Corporation" shall mean
Corporation as hereinbefore defined and any successor to its business or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
SECTION 6.5 WAIVER. Failure of either party hereto to insist upon strict
compliance by the other party with any term, covenant or condition hereof shall
not be deemed a waiver of such term, covenant or condition, nor shall any waiver
or relinquishment or failure to insist upon strict compliance with any right or
power hereunder at any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 6.6 SURVIVAL. Notwithstanding the expiration or termination of
this Agreement, Sections 4.3, 5.2 and 6.2 shall survive.
SECTION 6.7 NOTICE. Except as otherwise provided in Section 4.2(a) hereof,
any notice required or desired to be given pursuant to this Agreement shall be
sufficient if in writing sent by
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<PAGE>
registered or certified mail to the addresses set forth above or to such other
address as any party hereto may designate in writing, transmitted by hand
delivery or by registered or certified mail to the other; provided, the failure
by the Executive to observe the notice provisions hereof shall not in any way
limit, reduce or effect the Executive's rights and benefits hereunder.
SECTION 6.8 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to any otherwise applicable choice of law rules.
SECTION 6.9 TAXES. The Corporation may deduct from all amounts paid under
this Agreement all federal, state, local and other taxes required by law to be
withheld with respect to such payments.
SECTION 6.10 ENTIRE AGREEMENT. The parties hereto agree that this
Agreement (together with, to the extent benefits or rights are otherwise
affected by this Agreement, any employee benefit plan maintained or sponsored by
the Corporation) contains the entire understanding and agreement between them
and supersedes all previous agreements and arrangements, if any, relating to the
employment of the Executive. This Agreement shall not be amended, modified or
supplemented in any respect except by an agreement in writing signed by the
Executive and the Corporation.
SECTION 6.11 COUNTERPARTS. This Agreement may be signed in counterparts,
each of which shall be an original, and all of which, taken together shall be
deemed to be one instrument.
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IN WITNESS WHEREOF, the Corporation and the Executive have duly
executed this Agreement as of the day and the year first above written.
HOTJOBS.COM, LTD. EXECUTIVE
By:________________________ ________________________
Name: Dimitri Boylan
Title:
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<PAGE>
Exhibit 10.5
EMPLOYMENT AGREEMENT
BETWEEN
HOTJOBS.COM, LTD.
AND
STEPHEN ELLIS
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), effective as of the 6th
day of May, 1999 by and between HOTJOBS.COM, LTD. a Delaware corporation having
its principal place of business at 24 West 40th Street, New York, NY 10018 (the
"Corporation") and STEPHEN ELLIS, an individual residing at 30 Hampton Road,
Chatham, New Jersey 07928 (the "Executive").
WITNESSETH THAT:
WHEREAS, the Corporation desires to employ the Executive on the
terms and conditions set forth in this Agreement; and
WHEREAS, the Executive desires to be employed by the Corporation on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I. EMPLOYMENT TERM AND DUTIES
SECTION 1.1 EMPLOYMENT. The Corporation hereby agrees to employ the
Executive, and the Executive hereby agrees to accept such employment, upon the
terms and conditions herein contained.
SECTION 1.2 TERM. The term of employment under this Agreement (the
"Employment Term") shall commence on May 6, 1999 (the "Effective Date"), and
shall continue until May 5, 2002. Thereafter, this Agreement shall automatically
renew for additional one-year terms with a
<PAGE>
minimum increase of 10% per year unless the Corporation gives the Executive
written notice stating that it does not desire to renew at least six months
before the end of the term.
SECTION 1.3 DUTIES. During the Employment Term, the Executive shall serve
as Chief Financial Officer of the Corporation. The Executive shall perform such
duties as are reasonable and customary for an individual holding such office and
such other duties as are set forth in the Bylaws of the Corporation or as may be
agreed to from time to time by the Executive including, without limitation, (a)
being responsible for developing, subject to approval by the Board and the
President, overall financial strategy and planning; (b) developing the basic
financial objectives, policies, and operating procedures of the business and
submitting them to the President for approval; (c) implementing the financial
plans and policies adopted by the Board or the President through Executive's
personal efforts and through his delegation of the performance of duties to
subordinate employees of the Corporation and to other persons or companies; (d)
interpreting organizational policies and supervising the administration thereof
by subordinates and reviewing and approving proposed internal policies of
subordinate units; (e) supervising and directing the Corporation's financial
reporting and accounting functions; (f) preparing and presenting operating and
capital expenditure budgets for review and approval by the Board; and (g)
effectively managing and facilitating an initial public offering of the
Corporation's capital stock and/or other financing transactions. The Executive
shall devote substantially his full and exclusive professional time and
attention to performing his obligations hereunder. The Executive shall report
directly to the President and CEO of the Corporation.
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ARTICLE II. COMPENSATION
SECTION 2.1 BASIC COMPENSATION. During the Employment Term, the
Corporation shall pay to the Executive an annual base salary (which shall accrue
proportionately from day to day and shall be payable in accordance with the
Corporation's usual payroll practices with respect to officers of the
Corporation) of $175,000 (the "Basic Compensation").
SECTION 2.2 ANNUAL BONUS. In addition to Basic Compensation, the Executive
may also receive other bonus or incentive compensation and salary increases as
shall be determined by the Board of Directors of the Corporation (the "Board")
in accordance with applicable Corporation policies in effect at such time.
SECTION 2.3 BENEFITS. During the Employment Term, Executive shall be
entitled to participate in all benefit plans, if any, provided to other
similarly situated senior executives of the Corporation. The Corporation shall
be entitled to obtain key-man life insurance on the life of Executive with the
benefits thereof payable solely to the Corporation or its assigns, as the
Corporation shall determine, and Executive shall promptly submit to examinations
by medical personnel reasonably acceptable to Executive as the Corporation may
request to assist it in obtaining the key-man life insurance and shall otherwise
reasonably cooperate should the Corporation decide to obtain such insurance.
SECTION 2.4 VACATION. During the Employment Term, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Corporation as in effect generally with respect to
other executives of the Corporation.
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SECTION 2.5 STOCK OPTIONS.
(a) GRANT. The Corporation hereby grants to Executive a
non-qualified stock option ("NQSO") to purchase 15,000 shares of the
Corporation's Common Stock ("NQSO Shares") at a per-share price based on the
Corporation's fair market value as at March 31, 1999 (as determined by an
independent valuation company reasonably acceptable to the Corporation and the
Executive). This NQSO is granted subject to the terms and conditions set forth
below and in the Corporation's Stock Award Plan.
(b) VESTING TERM. The NQSO shall be exercisable for a period
of 10 years from the date of this Agreement and shall become exercisable as to
the number of NQSO Shares over the term at the times indicated below:
<TABLE>
<CAPTION>
Number of Shares On or After
- ---------------- -----------
<S> <C>
625 June 5, 1999
625 July 6, 1999
625 August 6, 1999
625 September 6, 1999
625 October 6, 1999
625 November 6, 1999
625 December 6, 1999
625 January 6, 2000
625 February 6, 2000
625 March 6, 2000
625 April 6, 2000
625 May 6, 2000
3,750 May 6, 2001
3,750 May 6, 2002
</TABLE>
Except that if prior to May 6, 2000 there shall be a closing of a
firm commitment underwritten registered public offering of the Corporation's
Common Stock, all NQSO Shares that are due to vest on or before May 6, 2000
shall vest as of the date of such closing.
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<PAGE>
(c) REPRESENTATIONS, WARRANTIES, COVENANTS AND ACKNOWLEDGMENTS OF
THE EXECUTIVE UPON EXERCISE OF NQSO. The Executive agrees that in the event that
the Corporation and the Corporation's counsel deem it necessary or advisable in
the exercise of their discretion, the issuance of NQSO Shares may be conditioned
upon the Executive's making certain representations, warranties, covenants and
acknowledgments relating to compliance with applicable securities laws.
(d) SHAREHOLDERS AGREEMENT. The Executive acknowledges and agrees
that upon exercise of this NQSO, in whole or in part, the NQSO shares will be
subject to that certain Shareholders Agreement dated as of February 22, 1997 (as
the same may be amended, supplemented and/or superseded, the "Shareholders
Agreement"), a copy of which is on file at the Corporation's corporate office
(to the extent it may then be in effect generally). Accordingly the Executive
agrees to be bound by the Shareholders Agreement upon exercise of this NQSO, as
if signatory thereto.
(e) EXPIRATION UPON A TERMINATION.
(i) If the Executive's employment with the Corporation is
terminated by the Corporation for "Cause" during the Employment Term, the term
of the NQSO shall be deemed to have automatically expired immediately upon such
termination of the Executive for "Cause" as defined in Section 4.1(c).
(ii) If the Executive's employment with the Corporation is
terminated without Cause, for Good Reason or upon the Executive's death,
Executive shall be entitled to exercise the NQSO granted hereunder, to the
extent the right to so exercise had accrued at the
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date of termination and had not been previously exercised, for a period of
thirty days after such termination date, subject to all other provisions hereof.
(f) NON TRANSFERABILITY. The NQSO shall not be transferable by the
Executive otherwise than by will or the applicable laws of descent and
distribution and shall be exercisable during the Executive's lifetime only by
the Executive.
(g) TAX OBLIGATIONS. The Executive acknowledges that the transfer of
any NQSO Shares in accordance with this Agreement may have federal, state or
local tax implications for the Executive and the Executive understands that the
Corporation is not undertaking to bear any obligation of the Executive so
created. The Executive acknowledges and agrees that any and all such tax
obligations shall be the sole responsibility of the Executive and the
Corporation makes no warranties regarding the income tax consequences or any
other aspect of the NQSO.
(h) STOCK CERTIFICATES' RESTRICTIVE LEGENDS. Stock certificates
evidencing NQSO Shares may bear such restrictive legends as the Corporation and
Corporation's counsel deem necessary or advisable.
(i) NO TAX OR OTHER ADVICE. The Executive acknowledges that he has
not relied on, and none of the Corporation or any of its representatives has
given, any representations or warranties, or any advice, with respect to the
income tax or other consequences of the transactions contemplated by this
Agreement. The Executive represents that he has sufficient knowledge, and or has
consulted his own advisors, with respect to such consequences.
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ARTICLE III. BOARD SEAT
During the Employment Term, the Corporation shall use its best
efforts to nominate Executive for election as a member of and Chairman of the
Board and cause Executive to be elected thereto.
ARTICLE IV. TERMINATION OF EMPLOYMENT
SECTION 4.1 EVENTS OF TERMINATION.
(a) DEATH. The Executive's employment shall terminate automatically
upon the Executive's death.
(b) WITHOUT CAUSE. Notwithstanding any other provision hereunder,
the Corporation shall have the right to terminate the Executive's employment
hereunder without "Cause" (as defined in Section 4.1(c)) at any time during the
Employment Term for any reason in the sole discretion of the Corporation upon
not less than ninety (90) days' notice to the Executive.
(c) CAUSE. The Corporation may terminate the Executive's employment
during the Employment Term for Cause. For purposes of this Agreement, "Cause"
shall mean: (i) gross negligence or willful misconduct of the Executive in the
performance of any of his duties under this Agreement, (ii) the failure by the
Executive to perform his duties hereunder; (iii) any embezzlement or
misappropriation of funds or property or intellectual property of the
Corporation; (iv) any conviction or plea of guilty or NOLO CONTENDERE in
connection with fraud or any crime that constitutes a felony in the jurisdiction
involved; and (v) any material breach by the
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Executive of the terms of this Agreement, which is not cured within thirty (30)
days of notice of the breach given by the Corporation.
(d) GOOD REASON. The Executive may terminate his employment during
the Employment Term for Good Reason upon thirty (30) days' notice to the
Corporation as long as such notice is given within ninety (90) days of the date
Executive becomes aware of the occurrence of any of the events specified below.
For purposes of this Agreement, "Good Reason" shall mean the occurrence, without
the Executive's express written consent, of any one or more of the following
events:
(i) A material change in the Executive's titles or duties
described in Section 1.3, or any removal of the Executive from, or any failure
to re-elect the Executive to, any of such positions.
(ii) A failure by the Corporation to pay Executive's Basic
Compensation, not caused by Executive, which failure to pay is not cured within
30 days after written notice from Executive.
(iii) The filing of a voluntary or involuntary petition of
bankruptcy by or against the Corporation or the insolvency of the Corporation.
(iv) A Change of Control as defined in Section 4.2(c) below.
(v) Removal of Executive from the Board.
(vi) Executive is forced to work outside of the New York
metropolitan area on a permanent basis.
(vii) The Corporation breaches any material term hereof, after
an opportunity to cure.
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<PAGE>
(e) WITHOUT GOOD REASON. The Executive may terminate his employment
during the Employment Term without Good Reason upon thirty (30) days notice to
the Corporation.
SECTION 4.2 TERMINATION PROCEDURES AND CERTAIN DEFINITIONS.
(a) NOTICE OF TERMINATION. Any termination by the Corporation for
Cause or without Cause or by the Executive for Good Reason or without Good
Reason, shall be communicated by Notice of Termination to the other party. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date. The failure by the Executive or the Corporation
to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Corporation, respectively, hereunder or preclude the
Executive or the Corporation, respectively, from asserting the fact or
circumstance in enforcing the Executive's or the Corporation's rights hereunder.
The Executive's continued employment with the Corporation after a Notice of
Termination is provided shall not constitute consent to, or a waiver of any
rights with respect to, any circumstance constituting Good Reason hereunder.
(b) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Corporation for Cause, the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's
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employment is terminated by the Corporation other than for Cause or death, the
Date of Termination shall be the date not less than ninety (90) days after the
date on which the Corporation notifies the Executive of such termination, (iii)
if the Executive terminates his employment for Good Reason, the Date of
Termination shall be the date, not less than thirty (30) days after the date on
which the Executive notifies the Corporation of such termination, and (iv) if
the Executive's employment is terminated by reason of death, the Date of
Termination shall be the date of death of the Executive.
(c) CHANGE OF CONTROL. A "Change of Control" shall have occurred
if:
(i) any "person" within the meaning of Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the
Corporation, a subsidiary of the Corporation, any employee benefit plan
sponsored by the Corporation or any subsidiary of the Corporation, Richard
Johnson or an underwriter who has acquired securities for the purpose of
distributing them in a firmly underwritten public offering, becomes the
"beneficial owner" as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of 49% or more of the combined voting power of the securities of the
Corporation entitled to vote in an election of directors to the Board; or
(ii) a merger or equivalent combination occurs after which 49%
or more of the voting stock of the surviving corporation is held by persons
other than former stockholders of the Corporation; or
(iii) the sale, assignment, transfer or other disposition of
assets of the Corporation having a value in excess of 49% of the total assets of
the Corporation.
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<PAGE>
SECTION 4.3 OBLIGATIONS OF THE CORPORATION ON TERMINATION.
(a) TERMINATION UPON DEATH. If the Executive's Employment is
terminated upon his death:
(i) IN GENERAL. The Corporation shall immediately pay the
Executive in cash the amount of Basic Compensation previously earned but not yet
paid.
(ii) SEVERANCE BENEFITS. The Corporation shall pay the
Executive his Basic Compensation for the remainder of the Employment Term (the
"Severance Period") or one year of Basic Compensation, whichever is greater,
payable in accordance with the Corporation's usual payroll practices. Any
amounts payable under this Agreement shall be paid to Executive's estate.
(b) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If Executive's
employment is terminated without Cause or for Good Reason:
(i) IN GENERAL. The Corporation shall immediately pay the
Executive in cash the amount of Basic Compensation previously earned but not yet
paid.
(ii) SEVERANCE BENEFITS. The Corporation shall pay the
Executive either his Basic Compensation for the remainder of the Employment Term
(the "Severance Period") or one year of Basic Compensation, which ever is
greater, payable in a lump sum within thirty (30) days following said
termination.
(iii) STOCK OPTIONS; RESTRICTED STOCK. Upon the Date of
Termination, when Executive is terminated without Cause or for Good Reason (i)
all options to purchase stock of the Corporation held by Executive shall become
immediately exercisable as to all shares of
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<PAGE>
stock which are subject thereto and shall remain exercisable for the remainder
of the term thereof.
(c) TERMINATION FOR CAUSE OR TERMINATION WITHOUT GOOD REASON. In
case of a Termination for Cause or Termination without Good Reason, the
Executive shall be entitled to his Basic Compensation accrued to the Date of
Termination and any other benefits or awards vested prior to such date. Except
as otherwise provided in this Agreement or under any employee benefit plan
maintained by the Corporation, the Corporation shall have no further obligations
to the Executive.
(d) GROSS UP PAYMENTS.
(i) If, on account of the termination of the Executive
following a Change in Control, the "Severance Payment" (as defined below) paid
by the Corporation to the Executive pursuant to this Agreement constitutes an
"excess parachute payment" within the meaning of Section 280G of the Code
subject to the tax imposed by Section 4999 of the Code (the "Excise Tax"), then
the Corporation shall pay to the Executive an additional amount (the "Gross Up
Payment") such that the amount paid or transferred to the Executive after
deduction of any Excise Tax on the Severance Payment, and any federal, state and
local income tax, employment tax and Excise Tax upon the Gross Up Payment, shall
be equal to the Severance Payment. For purposes of this Section 4.3(d) only,
"Severance Payment" shall mean any payment or other benefit paid pursuant to
this Agreement.
(ii) For purposes of determining whether any portion of a
Severance Payment will be subject to the Excise Tax and the amount of such
Excise Tax, (A) the Severance Payment and payments provided for in Section
4.3(d)(i) shall be treated as "parachute payments"
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<PAGE>
within the meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280(G)(b)(1) of the Code shall be
treated as subject to the Excise Tax, unless and to the extent that tax counsel
selected by the Corporation's independent auditors and acceptable to the
Executive is of the opinion that the Severance Payment (in whole or in part)
does not constitute a "parachute payment" or such "excess parachute payment" (in
whole or in part) represents reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in excess of the
allocable base amount within the meaning of Section 280G(b)(3) of the Code, or
the Severance Payment is otherwise not subject to the Excise Tax, (B) the amount
of the Severance Payment that is treated as subject to the Excise Tax shall be
equal to the lesser of (X) the total amount of the Severance Payment and (Y) the
amount of "excess parachute payments" within the meaning of Section 280G(b)(1)
of the Code (after applying clause (A) above), (C) any Gross Up Payment pursuant
to Section 4.3(d)(i) shall be treated as subject to the Excise Tax in its
entirety and (D) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Corporation's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
(iii) If in circumstances described in Section 4.3(d)(i), by
reason of the filing by the Executive of an amended tax return, an audit by the
Internal Revenue Service or other taxing authority, or a final determination by
a court of competent jurisdiction, it is determined that "excess parachute
payments" exceeding those previously reported in his tax returns were received
by the Executive and as a result an additional Excise Tax (the "Additional
Excise Tax") shall become due, the Corporation shall pay the Executive an
additional amount (the "Subsequent Gross Up Payment") such that the amount paid
or transferred to the Executive,
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<PAGE>
after deduction of (A) any Additional Excise Tax and (B) on an after tax basis,
any interest, additions and penalties with respect to the Additional Excise Tax
and (C) any federal, state and local income tax, employment tax and Excise Tax
upon the Subsequent Gross Up Payment and (D) the payments provided for in
Section 4.3(d)(i), shall be equal to the Severance Payment.
(iv) Any Gross Up Payment required hereunder shall be made at
least ten days prior to the due date (without regard to extensions) of the
Executive's federal income tax return for the year with respect to which the
"excess parachute payment" is deemed made under the Code. Any Subsequent Gross
Up Payment required hereunder shall be made to the Executive within 30 days
after the amount thereof is determined. Notwithstanding the two immediately
preceding sentences, the Executive shall pay any federal, state and local tax or
taxes and employment taxes required to be withheld from the Executive's wages
(within the meaning of Section 3121 and 3402 of the Code) with respect to the
"excess parachute payment" and any such tax or taxes paid by the Corporation to
the Internal Revenue Service or state or local taxing authority shall constitute
payment to the Executive.
(v) If the Excise Tax is finally determined (whether by the
filing of an amended tax return by the Executive, by audit of the Internal
Revenue Service or other taxing authority, or by a final determination of a
court of competent jurisdiction) to be less than the amount paid to or on behalf
of the Executive under the provisions of Sections 4.3(d)(i)-(iv) and the
overpayment is refunded to the Executive, the Executive shall repay to the
Corporation, promptly following the receipt of the refund, the portion of the
Gross Up Payment (and/or Subsequent Gross Up Payment) attributable to such
reduction of the Excise Tax (plus the portion attributable to federal, state and
local income tax and employment taxes imposed on the portion
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<PAGE>
being repaid by the Executive but only to the extent that the repayment may
result in a tax benefit to the Officer under Section 1341 of the Code and
similar provisions of applicable state and local law).
(vi) The provisions of this Section 4.3(d) shall inure to the
benefit of the Executive during the Employment Term regardless of whether or not
his employment is terminated, and if the Executive's employment is terminated,
the rights and obligations of the Executive and the Corporation under this
Section 4.3(d) shall survive the termination of this Agreement.
ARTICLE V. PURPOSE
SECTION 5.1 PURPOSE. The Corporation recognizes that the Executive is a
key executive of the Corporation and is expected to be a factor in the growth
and success of the Corporation. The Corporation also recognizes that the
continued success of the Corporation depends, to a significant degree, upon the
effective performance of the Executive's duties as set forth in this Agreement.
Therefore, one of the primary purposes of this Agreement is to provide for the
long-term financial security of the Executive and his family so that he will be
better able to direct his undivided attention to the successful performance of
his duties on behalf of the Corporation.
SECTION 5.2 NON-COMPETE AND CONFIDENTIALITY. Except as to such actions
within the ordinary course of the Executive's employment by the Corporation
which the Executive in good faith believes to be in the best interests of the
Corporation, the Executive shall not at any time during the Employment Term or
two years thereafter, without the prior written consent of the
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<PAGE>
Corporation: (i) request or advise any supplier, or other person, firm,
partnership, association, corporation or business organization, entity or
enterprise having business dealings with the Corporation or any subsidiary or
affiliate of the Corporation to withdraw, curtail or cancel such business
dealings; (ii) disclose to any third party including, but not limited to, any
competitor or potential competitor of the Corporation or any subsidiary or
affiliate of the Corporation any trade secret, know-how or knowledge relating to
costs, products, equipment, merchandising and marketing methods, business plans,
or research results used by, or useful to, the Corporation or any subsidiary or
affiliate of the Corporation or other confidential information of the
Corporation (the "Confidential Information"); (iii) induce or attempt to
influence any executive of the Corporation or any subsidiary or affiliate of the
Corporation to terminate, or in any way violate the terms of, his or her
employment; or (iv) engage directly or engage indirectly in any business in
competition with the business of the Corporation or its subsidiaries, provided,
however, that the ownership by Executive of not more than 5% of the equity
securities of any company or similar business venture shall not be deemed a
violation of this Section 5.2(iv). For purposes of this Section 5.2,
Confidential Information shall not include: (a) information that is in the
public domain; provided that Executive was not responsible for the disclosure to
the public; (b) information that was already known to Executive prior to his
employment by the Corporation; and (c) information required to be disclosed in
connection with any judicial or administrative proceeding or inquiry; provided
that Executive shall notify the Corporation as promptly as practicable of such
proceeding or inquiry and cooperate with the Corporation in taking legally
available steps to resist or narrow the required disclosure.
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<PAGE>
ARTICLE VI. MISCELLANEOUS
SECTION 6.1 ENFORCEABILITY. If the scope of any provision of this
Agreement is too broad to permit enforcement of such provision to its fullest
extent, then such provision shall be enforced to the maximum extent permitted by
applicable law, and, if necessary, the scope of any such provision may be
judicially modified (to the extent necessary in any proceeding brought to
enforce such provision) and thereafter fully enforced.
SECTION 6.2 WORKS FOR HIRE. Executive agrees that all improvements in the
Corporation's method of conducting its business as well as all inventions
conceived of or developed by Executive related directly or indirectly to the
Corporation's business during the Employment Term, the negotiation thereof or
the period of six months after the expiration or termination of this Agreement,
regardless of the time and place made, and all proprietary rights therein, shall
belong exclusively to the Corporation as works-for-hire, having been specially
commissioned by the Corporation, and Executive will promptly disclose such work
product to the Chairman of the Board of the Corporation. To the extent necessary
to supplement the foregoing, Executive hereby transfers and assigns to the
Corporation the proprietary rights in perpetuity in all such work product and
all rights therein of any kind in all media now or hereafter known. In addition
to the rights granted to the Corporation in this Section 5.2, Executive agrees
that all patents related directly or indirectly to the Corporation's business
obtained by or issued in the name of Executive during the Employment Term are
property of the Corporation. Executive further agrees to assign any such patents
to the Corporation without payment of any additional compensation other than the
compensation specified in Article II above.
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<PAGE>
SECTION 6.3 REMEDIES. The parties acknowledge that the remedy at law for
any breach of any party's obligations hereunder would be inadequate and consent
to the granting of temporary and permanent injunctive relief in any proceeding
brought to enforce any of such provisions without the necessity of proof of
actual damages; provided, however, that the foregoing shall not be construed to
limit any other right or remedy available to the Corporation or the Executive at
law or in equity, and all such rights and remedies shall be cumulative to the
extent permitted by applicable law, and the exercise of any one or more of such
rights or remedies shall be without prejudice to the exercise of any other such
right or remedy.
SECTION 6.4 ASSIGNMENT BY THE EXECUTIVE; SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Corporation shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) Except as is otherwise herein expressly provided, this Agreement
shall inure to the benefit of and be binding upon the Corporation, its
successors and assigns, and upon the Executive, his spouse, heirs, executors and
administrators, provided, however, that the obligations of the Executive
hereunder shall not be delegated.
(c) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this Agreement, "Corporation" shall mean
Corporation as
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<PAGE>
hereinbefore defined and any successor to its business or assets as aforesaid
which assumes and agrees to perform this Agreement by operation of law, or
otherwise.
SECTION 6.5 WAIVER. Failure of either party hereto to insist upon strict
compliance by the other party with any term, covenant or condition hereof shall
not be deemed a waiver of such term, covenant or condition, nor shall any waiver
or relinquishment or failure to insist upon strict compliance with any right or
power hereunder at any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 6.6 SURVIVAL. Notwithstanding the expiration or termination of
this Agreement, Sections 4.3, 5.2 and 6.2 shall survive.
SECTION 6.7 NOTICE. Except as otherwise provided in Section 4.2(a) hereof,
any notice required or desired to be given pursuant to this Agreement shall be
sufficient if in writing sent by registered or certified mail to the addresses
set forth above or to such other address as any party hereto may designate in
writing, transmitted by hand delivery or by registered or certified mail to the
other; provided, the failure by the Executive to observe the notice provisions
hereof shall not in any way limit, reduce or effect the Executive's rights and
benefits hereunder.
SECTION 6.8 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to any otherwise applicable choice of law rules.
SECTION 6.9 TAXES. The Corporation may deduct from all amounts paid under
this Agreement all federal, state, local and other taxes required by law to be
withheld with respect to such payments.
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<PAGE>
SECTION 6.10 ENTIRE AGREEMENT. The parties hereto agree that this
Agreement (together with, to the extent benefits or rights are otherwise
affected by this Agreement, any employee benefit plan maintained or sponsored by
the Corporation) contains the entire understanding and agreement between them
and supersedes all previous agreements and arrangements, if any, relating to the
employment of the Executive. This Agreement shall not be amended, modified or
supplemented in any respect except by an agreement in writing signed by the
Executive and the Corporation.
SECTION 6.11 COUNTERPARTS. This Agreement may be signed in counterparts,
each of which shall be an original, and all of which, taken together shall be
deemed to be one instrument.
IN WITNESS WHEREOF, the Corporation and the Executive have duly
executed this Agreement as of the day and the year first above written.
HOTJOBS.COM, LTD. EXECUTIVE
By: /s/ /s/
-------------------------- ------------------------------
Name: Stephen Ellis
Title:
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<PAGE>
EXHIBIT 23.1
The Board of Directors
Hotjobs.com, Ltd.
The audits referred to in our report dated March 15, 1999, except for notes
2(a), 6 and 13(c) which are as of June 10, 1999, included the related financial
statement schedule for the period from February 20, 1997 (inception) to December
31, 1997 and the year ended December 31, 1998, included in the registration
statement. The financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG LLP
New York, New York
June 10, 1999
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