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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(Rule 14d-101)
Solicitation/Recommendation Statement Pursuant to
Section 14(d) (4) of the Securities Exchange Act of 1934
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HEADHUNTER.NET, INC.
(Name of Subject Company)
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HEADHUNTER.NET, INC.
(Name of Person Filing Statement)
COMMON STOCK, $0.01 PAR VALUE PER SHARE
(Including Associated Junior Participating Preferred Stock Purchase Rights)
(Title of Classes of Securities)
422077107
(CUSIP Number of Class of Securities)
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Robert M. Montgomery, Jr.
Chief Executive Officer
HeadHunter.NET, Inc.
333 Research Court, Suite 200
Norcross, Georgia 30092
(770) 349-2400
(Name, Address and Telephone Number of Person authorized to Receive Notices and
Communications on Behalf of the Person Filing Statement)
With a copy to:
J. Vaughan Curtis
Alston & Bird LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309
(404) 881-7000
[_] Check the box if the filing relates solely to preliminary communications made before the commencement of
a tender offer.
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[Headhunter_LOGO]
August 31, 2001
Dear Fellow Shareholders:
We are pleased to inform you that on August 24, 2001, HeadHunter.NET, Inc.
entered into a merger agreement with Career Holdings, Inc. and its wholly owned
subsidiary, CB Merger Sub, Inc., pursuant to which CB Merger Sub has today
commenced a tender offer to purchase all of the outstanding shares of
Headhunter's common stock, $0.01 par value per share, together with the
associated junior participating preferred stock purchase rights issued pursuant
to our shareholder protection rights agreement, as amended, for $9.25 per share
in cash. Following the tender offer, subject to the terms of the merger
agreement, CB Merger Sub will be merged with and into Headhunter. At that time,
all shares not purchased in the offer, other than shares owned by Career
Holdings, CB Merger Sub, Headhunter or any of their subsidiaries, and any
shares held by dissenting shareholders, will be converted into the right to
receive $9.25 per share in cash.
Your board of directors has (1) determined that the offer and the merger are
fair to and in the best interests of HeadHunter's shareholders and (2) approved
the merger agreement and the transactions contemplated thereby, including the
offer and the merger. Your board of directors recommends that you accept the
offer and tender your shares pursuant to the offer.
In arriving at its recommendation, the board gave careful consideration to a
number of factors described in the attached Schedule 14D-9, which has been
filed today with the Securities and Exchange Commission, including, among other
things, the August 24, 2001 opinion of Credit Suisse First Boston Corporation,
Headhunter's financial advisor, to the effect that, as of such date, based on
and subject to the assumptions, limitations and qualifications set forth in its
written opinion, the consideration to be received by holders of shares of
Headhunter common stock pursuant to the merger agreement was fair to such
shareholders from a financial point of view. In addition to the Schedule 14D-9,
enclosed is the Offer to Purchase, dated August 31, 2001 of Career Holdings and
CB Merger Sub, together with related materials, including a Letter of
Transmittal to be used for tendering your shares of Headhunter common stock.
These documents set forth the terms and conditions of the offer and the merger
and provide instructions as to how to tender your shares. We urge you to read
the enclosed materials carefully.
Sincerely,
/s/ Robert M. Montgomery, Jr.
Robert M. Montgomery, Jr.
Chief Executive Officer
Item 1. Subject Company Information.
(a) Name and Address. The name of the subject company is HeadHunter.NET,
Inc., a Georgia corporation ("Headhunter" or the "Company"). The address of the
principal executive offices of the Company is 333 Research Court, Suite 200,
Norcross, Georgia, 30092. The telephone number of the Company at its principal
executive offices is (770) 349-2400.
(b) Securities. The title of the class of equity securities to which this
Solicitation/ Recommendation Statement on Schedule 14D-9 (this "Statement")
relates is the common stock, $0.01 par value per share, of the Company (the
"Common Stock") and the associated junior participating preferred stock
purchase rights (the "Rights" and collectively with the Common Stock, the
"Shares") issued pursuant to the Shareholder Protection Rights Agreement, dated
as of April 15, 2000, between the Company and American Stock Transfer & Trust
Company, as Rights Agent, as amended by Amendment No. 1, dated as of February
27, 2001, and Amendment No. 2, dated as of August 24, 2001 (the "Rights
Agreement").
As of August 28, 2001, there were 20,407,872 shares of Common Stock
outstanding.
Item 2. Identity and Background of Filing Person.
(a) Name and Address. The filing person is the subject company. The
Company's name, business address and business telephone number are set forth in
Item 1 above.
(b) Tender Offer. This Statement relates to the tender offer to acquire all
of the Shares for $9.25 per Share by CB Merger Sub, Inc., a Georgia corporation
(the "Purchaser") and a wholly owned subsidiary of Career Holdings, Inc., a
Delaware corporation ("Career Holdings"), pursuant to the Agreement and Plan of
Merger, dated as of August 24, 2001, among Headhunter, Career Holdings and
Purchaser (the "Merger Agreement"). The Offer to Purchase filed as Exhibit
(a)(1)(A) to the Schedule TO, which is being mailed to shareholders together
with this Statement, and incorporated herein by reference, and the related
Letter of Transmittal are referred to collectively as the "Offer." The Offer is
described in a Tender Offer Statement on Schedule TO, dated August 31, 2001
(the "Schedule TO"), filed by the Purchaser and Career Holdings with the
Securities and Exchange Commission (the "SEC"). The Offer to Purchase and the
Letter of Transmittal are being sent to the Company's shareholders with this
Statement. Following consummation of the Offer, and satisfaction or waiver of
certain conditions, CB Merger Sub, Inc. will merge with and into the Company
(the "Merger").
The Schedule TO states that the principal executive offices of Career
Holdings and Purchaser are located at 10790 Parkridge Boulevard, Suite 200,
Reston, Virginia 20191.
All information contained or incorporated by reference in this Statement
concerning Career Holdings or Purchaser, including but not limited to
information with respect to the respective directors and executive officers of
Career Holdings and Purchaser or actions or events with respect to any of them,
was provided by them, and the Company takes no responsibility for such
information.
Item 3. Past Contacts, Transactions, Negotiations and Agreements.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates and certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Rule 14f-1 (the "Information Statement") under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), that is attached as Annex B to this
Statement and is incorporated herein by reference. Except as described in this
Statement (including in Annex B hereto) or incorporated herein by reference, to
the knowledge of the Company, as of the date of this Statement there exists no
material agreement, arrangement or understanding or any actual or potential
conflict of interest between the Company or its affiliates and (1) the
Company's executive officers, directors or affiliates or (2) Career Holdings or
Purchaser or their respective executive officers, directors or affiliates.
The Merger Agreement
The following is a summary of certain provisions of the Merger Agreement,
which relates to agreements, arrangements and understandings of a type
described above. The summary of the Merger Agreement contained in the Offer to
Purchase is more complete. In addition, the following summary is qualified in
its entirety by
reference to the Merger Agreement, a copy of which is filed as Exhibit (e)(1)
hereto and is incorporated herein by reference. Capitalized terms used and not
otherwise defined herein shall have the meaning set forth in the Merger
Agreement.
Board Representation. The Merger Agreement provides that promptly after such
time as Purchaser purchases Shares pursuant to the Offer, Purchaser will be
entitled to designate at its option up to that number of directors of
Headhunter's Board of Directors (the "Headhunter Board" or the "Board of
Directors"), subject to compliance with Section 14(f) of the Exchange Act, as
will make the percentage of Headhunter's directors designated by Purchaser
equal to the percentage of the aggregate voting power of the Shares held by
Career Holdings or any of its subsidiaries; provided, however, that in the
event that Purchaser's designees are elected to the Headhunter Board, until the
effective time of the Merger, the Headhunter Board shall have at least two
directors who were directors of Headhunter on the date of the Merger Agreement
and who are not officers of Headhunter (the "Independent Directors").
If the number of Independent Directors shall be reduced below two for any
reason, the Independent Director shall designate an Independent Director for
purposes of the Merger Agreement or, if no Independent Directors then remain,
the other directors of Headhunter shall designate two persons to fill such
vacancies who shall not be directors, officers, employees or affiliates of
Career Holdings or any of its subsidiaries, and such persons shall be deemed to
be Independent Directors for purposes of the Merger Agreement. Following the
time that Purchaser's designees to the Headhunter Board constitute a majority
of the Headhunter Board and prior to the effective time of the Merger, any
amendment or modification of the Merger Agreement, any termination of the
Merger Agreement by Headhunter, any extension by Headhunter of the time for the
performance of any of the obligations or other acts of Career Holdings or
Purchaser or any waiver of any condition to Headhunter's obligations under the
Merger Agreement or any of Headhunter's rights under the Merger Agreement will
require the concurrence of at least one of the Independent Directors.
Headhunter shall take all actions requested by Career Holdings to effect any
such election. These actions include the mailing of the Information Statement
with this Statement. In connection with the foregoing, Headhunter will
promptly, at the option of Career Holdings, either increase the size of the
Headhunter Board and/or obtain the resignation of such number of its current
directors as is necessary to enable Purchaser's designees to be elected or
appointed to the Headhunter Board as provided above.
Indemnification. Pursuant to the Merger Agreement, for a period of six years
from and after the effective time of the Merger, in the event of any threatened
or actual claim, action, suit, proceeding, or investigation, whether civil,
criminal, or administrative, including, without limitation, any such claim,
action, suit, proceeding or investigation in which any person who is now, or
has been at any time prior to the date of the Merger Agreement, a director or
officer of Headhunter (the "Indemnified Parties") is, or is threatened to be,
made a party based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he or she is or was a director, officer,
or employee of Headhunter, or (ii) the Merger Agreement or any of the
transactions contemplated hereby, whether in any case asserted or arising
before or after the effective time of the Merger, the Company as the surviving
corporation in the Merger (the "Surviving Corporation"), shall indemnify and
hold harmless, as and to the fullest extent permitted by law, each such
Indemnified Party against any liability (including reasonable attorneys' fees
and expenses in advance of the final disposition of any claim, suit,
proceeding, or investigation to each Indemnified Party to the fullest extent
permitted by law upon receipt of any undertaking required by applicable law in
form and substance which is reasonably satisfactory to the Surviving
Corporation), judgments, fines, and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit, proceeding, or
investigation, and in the event of any such threatened or actual claim, action,
suit, proceeding, or investigation (whether asserted or arising before or after
the effective time of the Merger), the Indemnified Parties may retain counsel
reasonably satisfactory to them; provided, however, that (a) the Surviving
Corporation shall have the right to assume the defense thereof and upon such
assumption the Surviving Corporation shall not be liable to any Indemnified
Party for any legal expenses of other counsel or any other expenses
subsequently incurred by any Indemnified Party in connection with the defense
thereof, except that if the Surviving Corporation elects not to assume such
defense or counsel for the Indemnified Parties reasonably
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advises the Indemnified Parties that there are issues which raise conflicts of
interest between the Surviving Corporation and the Indemnified Parties, the
Indemnified Parties may retain one (but only one) counsel reasonably
satisfactory to them and the Surviving Corporation, and in such instance the
Surviving Corporation shall pay the reasonable fees and expenses of such
counsel for the Indemnified Parties, (b) the Surviving Corporation shall not be
liable for any settlement effected without its prior written consent, and (c)
the Surviving Corporation shall have no obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
Under the Merger Agreement, the Surviving Corporation agrees that all rights
to indemnification and all limitations on liability existing in favor of the
directors, officers, and employees of Headhunter and its subsidiaries as
provided in their respective articles of incorporation, bylaws, or similar
governing instruments as in effect as of the date of the Merger Agreement with
respect to matters occurring prior to the effective time of the Merger, shall
survive the Merger and shall continue in full force and effect, and shall be
honored by such entities or their respective successors as if they were the
indemnifying party thereunder, without any amendment thereto, for a period of
six years after the effective time of the Merger; provided, further, however,
that nothing contained in this section shall be deemed to preclude the
liquidation, consolidation, or merger of Headhunter or any subsidiary, in which
case all of such rights to indemnification and limitations on liability shall
be deemed to so survive and continue notwithstanding any such liquidation,
consolidation, or merger. Without limiting the foregoing, in any case in which
approval by the Surviving Corporation is required to effectuate any
indemnification, Career Holdings shall direct, at the election of the
Indemnified Party, that the determination of any such approval shall be made
after consultation with independent counsel mutually agreed upon between the
Surviving Corporation and the Indemnified Party.
Pursuant to the Merger Agreement, Career Holdings, from and after the
effective time of the Merger, will directly or indirectly cause the persons who
served as directors or officers of Headhunter at or before the effective time
of the Merger to be covered by Headhunter's existing directors' and officers'
liability insurance policy (provided that Career Holdings may substitute
therefor policies of substantially similar coverage and amounts containing
terms and conditions which are not less advantageous than such policy),
provided that Career Holdings shall not be required to pay an annual premium
for such insurance in excess of 200% of the last annual premiums paid prior to
the date of the Merger Agreement, but in such case shall purchase as much
coverage as possible for such amount. Such insurance coverage shall commence at
the effective time of the Merger and will be provided for a period of no less
than six years after the effective time of the Merger.
Stock Options and Warrants. Pursuant to the Merger Agreement, Headhunter
shall adjust the terms of all outstanding stock options and warrants to provide
that each stock option and warrant outstanding shall be canceled in exchange
for a cash payment by Headhunter at the effective time of the Merger of an
amount equal to (i) the excess, if any, of (x) $9.25 in cash per Share, without
interest, or any higher price paid per Share in the Offer (the "Merger
Consideration") over (y) the exercise price per Share subject to such stock
option or warrant, multiplied by (ii) the number of Shares subject to such
stock option or warrant. Headhunter shall use its best efforts to obtain all
necessary consents of the holders of the stock options and warrants necessary
to effectuate this cancellation.
Headhunter's stock plans shall terminate as of the effective time of the
Merger, and the provisions in any other of Headhunter's employee plans
providing for the issuance, transfer or grant of any Headhunter capital stock
or any interest in respect of any Headhunter capital stock shall terminate and
be deleted as of the effective time of the Merger or (if permissible) at
Purchaser's request, upon the initial acceptance of the Shares pursuant to the
Offer, and Headhunter shall ensure that following the effective time of the
Merger no holder of a stock option or any participant in any stock plan or
other employee plan shall have any right thereunder to acquire any capital
stock of Headhunter.
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Headhunter has agreed that, as soon as practicable following the date of the
Merger Agreement, the Headhunter Board or, if appropriate, any committee
administering Headhunter's 2000 Employee Stock Purchase Plan, shall, if
permitted by the terms of such plan, adopt such resolutions or take such
actions as are required to (i) cancel all options under such plan and (ii)
terminate such plan prior to the effective time of the Merger and return all
payroll deductions credited to the participants in such plan entitled thereto.
The Company has granted options to acquire Shares to certain of its
directors and executive officers under the Company's 1998 Long-Term Incentive
Plan (the "1998 Plan"), the Headhunters, L.L.C. Employee Common Unit Option
Plan and, in two instances, a stand-alone option agreement. The 1998 Plan
provides, with certain exceptions, that the vesting of stock options issued
under the 1998 Plan will accelerate upon a "Change in Control" of the Company,
which is defined in the 1998 Plan to occur, with certain exceptions, at the
time that any person, entity, or group acquires beneficial ownership of 50% or
more of the combined voting power of the Company's then-outstanding voting
securities. The consummation of the Offer will trigger this accelerated vesting
provision.
Further, the Merger Agreement provides that, at the effective time of the
Merger, each of the Company's outstanding stock options under any of the
Company's stock option plans or stand-alone stock option agreements, whether
vested or unvested at such time, will be cancelled in exchange for a cash
payment equal to the amount that the Merger Consideration exceeds the exercise
price of such option multiplied by the number of Shares subject to such option.
Also, the Board of Directors has taken action to provide that, to the extent
they are not or do not become fully vested and exercisable pursuant to their
own terms immediately prior to the effective time of the Merger, any
outstanding stock options granted by the Company under any of its stock option
plans or stand-alone option agreements will accelerate and be 100% vested and
exercisable immediately prior to the effective time of the Merger, provided
however, that such acceleration and vesting will be contingent upon the
consummation of the Merger.
The following table sets forth, with respect to each of the executive
officers and directors of the Company, (1) the number of Shares subject to
options held by such persons with an exercise price lower than $9.25, (2) the
exercise price of such options and (3) the total amount that each such
executive officer and director will receive as consideration for the
cancellation of such options (i.e., $9.25 less the exercise price for such
options that are in-the-money, multiplied by the total number of Shares subject
to such options). As described above, all of such options will be vested as of
the effective time of the Merger.
Name Option Shares (#) Exercise Price Total Payment
---- ----------------- -------------- -------------
J. Douglas Cox.......... 3,900 $7.69 $ 6,084
10,000/(1)/ $0.40 88,500
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$ 94,584
Matthew W. Ferguson..... 50,000 $5.85 $170,000
50,300 $7.69 78,468
25,000 $7.94 32,750
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$281,218
Burton B. Goldstein, Jr. 4,550 $7.69 $ 7,098
10,000 $1.40 78,500
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$ 85,598
Judith G. Hackett....... 25,600 $7.69 $ 39,936
100,000 $7.94 131,000
30,000 $1.40 235,500
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$406,436
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Name Option Shares (#) Exercise Price Total Payment
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Michael G. Misikoff....... 3,900 $7.69 $ 6,084
10,000 $2.00 72,500
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$ 78,584
Robert M. Montgomery, Jr.. 100,000 $4.53 $ 472,000
600 $7.69 936
200,000 $7.94 262,000
66,667 $2.00 483,334
10,000 $0.40 88,500
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$1,306,770
William H. Scott, III/(2)/ 3,900 $7.69 $ 6,084
10,000 $0.40 88,500
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$ 94,584
Ronald T. Self............ 400,000 $4.53 $1,888,000
W. Craig Stamm............ 25,000 $5.85 $ 85,000
50,600 $7.69 78,936
50,000 $7.94 65,500
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$ 229,436
Kimberley E. Thompson/(2)/ 3,250 $7.69 $ 5,070
10,000 $2.00 72,500
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$ 77,570
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(1)The benefits of a portion of such option have been assigned by such director
to ITC Holding Company, Inc. The formula for calculating the assigned
portion of such option on any particular date is calculated pursuant to the
following formula: [16/number of months since March 19, 1998] x 10,000.
(2)The benefits of such options have been assigned by such directors to ITC
Holding Company, Inc.
At the effective time of the Merger, a warrant to purchase 416,667 Shares
held by ITC Service Company, a wholly owned subsidiary of ITC Holding Company
Inc., shall be cancelled in exchange for a cash payment equal to the difference
between $9.25 and $1.50, the exercise price of the warrant, multiplied by the
number of Shares subject to the warrant, for a total payment of approximately
$3,229,169.
The Stockholder Agreements
The following summary description of the Stockholder Agreements is qualified
in its entirety by reference to the Stockholder Agreements themselves, copies
of which are filed as Exhibits (e)(2) through (e)(8) hereto and are
incorporated herein by reference.
Career Holdings and Purchaser entered into Stockholder Agreements dated
August 24, 2001 (the "Stockholder Agreements") with each of the following
shareholders of Headhunter: William H. Scott, III, Burton B. Goldstein, Jr.,
Robert M. Montgomery, Jr., Michael G. Misikoff, J. Douglas Cox, Kimberly E.
Thompson and ITC Holding Company, Inc. (the "Tendering Shareholders"). The
Tendering Shareholders have agreed to tender 5,524,966 Shares in the Offer (the
"Subject Shares"), consisting of approximately 27.1% of the total number of
Shares issued and outstanding as of August 28, 2001.
Pursuant to the Stockholder Agreements, each Tendering Shareholder has
agreed that, (a) if necessary, such Tendering Shareholder shall vote the
Subject Shares held by such Tendering Shareholder in favor of the Merger and
the Merger Agreement, provided that the terms of the Merger Agreement shall not
have been amended to adversely affect such Tendering Shareholder; (b) if
necessary, such Tendering Shareholder shall vote the Subject Shares held by
such Tendering Shareholder against: (i) any other merger agreement or merger,
consolidation,
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combination, sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by Headhunter or any other
Acquisition Proposal (as defined in the Merger Agreement) or (ii) any amendment
of Headhunter's articles of incorporation or by-laws or other proposal or
transaction involving Headhunter or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent or
nullify the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement; (c) such Tendering Shareholder shall not
(i) sell, transfer, pledge, assign or otherwise dispose of or enter into any
contract, option or other arrangement (including any profit sharing
arrangement) with respect to the sale, transfer, pledge, assignment or other
disposition of any or all of the Subject Shares or any interest therein or (ii)
grant any other proxy, power-of-attorney or other authorization in or with
respect to the Subject Shares; (d) such Tendering Shareholder shall not, and
shall not permit any investment banker, attorney or other adviser or
representative of the Tendering Shareholder to (i) directly or indirectly
solicit, initiate or encourage the submission of any Acquisition Proposal or
(ii) directly or indirectly participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take
any other action to facilitate any inquires or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
in any manner inconsistent with the provisions of the Merger Agreement; and (e)
the Tendering Shareholder shall tender and not withdraw the Subject Shares. The
Stockholder Agreements terminate upon the earlier of (i) the effective time of
the Merger and (ii) a termination of the Merger Agreement in accordance with
its terms.
The Confidentiality Agreement
The following summary description of the Confidentiality Agreement (as
defined below) is qualified in its entirety by reference to the Confidentiality
Agreement itself, a copy of which is filed as Exhibit (e)(9) hereto and is
incorporated herein by reference.
Headhunter and CareerBuilder entered into a Confidentiality Agreement dated
August 6, 2001 (the "Confidentiality Agreement"). The Confidentiality Agreement
applies to confidential information (as that term is defined in the
Confidentiality Agreement) exchanged for the purpose of evaluating a possible
transaction such as the Merger. The Confidentiality Agreement provides that
none of the parties shall disclose confidential information provided to it by
another party and that each party shall use confidential information provided
to it by another party only for the purpose of evaluating the possible
transaction. Each party agrees that, without the consent of the other party, it
shall not (i) communicate with any employee of the other party concerning the
possible transaction, (ii) discuss with or offer to any third party an equity
participation in the possible transaction and (iii) solicit any person who is
employed by the other party in an executive or management level position or
otherwise considered to be a key employee for a period of one year. In
addition, each party agrees for one year not to act or seek to control or
influence the management of the other party. The parties are bound by the
provisions of the Confidentiality Agreement until August 6, 2002.
The Investment Agreement
The following summary is qualified in its entirety by reference to the
Investment Agreement, a copy of which is filed as Exhibit (e)(16) hereto and is
incorporated herein by reference.
On August 24, 2001, the stockholders of Career Holdings (Knight Ridder
Digital, Tribune, Robert J. McGovern and James Winchester) and Career Holdings
entered into the Investment Agreement pursuant to which each of Tribune and
Knight Ridder Digital agreed to purchase 1,005,000 shares of preferred stock of
Career Holdings at a purchase price of $100 per share. The proceeds of such
issuance will be sufficient to provide funds to purchase all of the Shares
pursuant to the Offer. The Investment Agreement does not contain any conditions
to the purchase of shares by the Knight Ridder Digital and Tribune Company. The
Investment Agreement provides that it may not be terminated while the Merger
Agreement is in effect and that Headhunter is an express beneficiary of the
obligations of the parties under the Investment Agreement.
6
Item 4. The Solicitation or Recommendation.
(a) Recommendation of the Board of Directors. The Headhunter Board, at a
meeting held on August 24, 2001, determined that the terms of the Offer and the
Merger are fair to and in the best interests of the shareholders of the
Company. At this meeting, the Headhunter Board unanimously approved the Merger
Agreement, the Offer, the Merger and the other transactions contemplated by the
Merger Agreement, and unanimously approved the Merger Agreement and the
Stockholder Agreements for purposes of (a) satisfying the unanimous approval
requirements for "continuing directors" under Section 14-2-1111 of the Georgia
Business Corporation Code (the "GBCC") and thus avoiding the necessity of
compliance with the fair pricing and procedural requirements contained in
Section 14-2-1112 of the GBCC and (b) rendering inapplicable to the foregoing,
Sections 14-2-1131 through 14-2-1133 of the GBCC. The Headhunter Board
unanimously recommends that shareholders accept the Offer and tender their
Shares in the Offer.
(b) (i) Background of the Offer
In late June 2001, Robert M. Montgomery, Jr., the Chief Executive Officer of
Headhunter, had a telephone call with a senior executive of a party (the "Other
Party"), in which such senior executive indicated that the Other Party was
interested in discussing a business combination with Headhunter. Subsequent to
this telephone call, at a meeting of the Board of Directors, Mr. Montgomery
described his telephone conversation to the Headhunter Board and the Board
authorized him to contact Credit Suisse First Boston ("CSFB"), Headhunter's
financial advisor. CSFB then sent to the Other Party a draft confidentiality
agreement. On July 4, 2001, the confidentiality agreement was discussed and
executed by the Other Party and preliminary meetings were held in Chicago,
Illinois on July 5 and 6, 2001.
On July 11 and 12, 2001, representatives of the Other Party met with
representatives of Headhunter in Atlanta, Georgia at the offices of Alston &
Bird LLP ("A&B"), counsel to Headhunter, to conduct business, financial and
legal due diligence reviews. Thereafter, between July 13 and 26, numerous
discussions were held between Headhunter and the Other Party and their
respective advisors in connection with due diligence matters.
On July 27, 2001, the Other Party sent a preliminary, non-binding proposal
to Headhunter in which the Other Party proposed to acquire Headhunter in a cash
tender offer followed by a merger in which all Headhunter shareholders would be
paid $7.00 per share in cash. After consideration of the Other Party's proposal
on July 31, 2001, the Board of Directors directed CSFB to call the Other
Party's financial advisor to discuss the proposal and indicate that $7.00 per
share was not adequate. After further guidance from the Board of Directors and
management team, on August 1 and 2, 2001, CSFB initiated calls to other
potentially interested parties. CSFB contacted a total of seven additional
parties on behalf of Headhunter. Among the additional parties contacted during
this two-day period were Knight Ridder Digital and Tribune Company, the parent
companies of Career Holdings. The contact with Knight Ridder Digital and
Tribune Company followed a telephone call by Robert McGovern, the Chief
Executive Officer of Career Holdings, to Mr. Montgomery.
On August 3, 2001, Dan Finnigan of Knight Ridder Digital returned the
telephone call from CSFB and indicated that they were interested in discussing
a business combination with Headhunter and that Knight Ridder Digital would
coordinate with Tribune Company and Career Holdings. Following the telephone
call on August 3, 2001, CSFB forwarded a confidentiality agreement to Mr.
Finnigan, to be executed by Career Holdings, and it was agreed that a due
diligence review would begin on August 7, 2001 at the offices of A&B in
Atlanta. On August 3, 2001, CSFB also had additional discussions with the Other
Party's financial advisor in which CSFB reiterated that the Other Party's
initial $7.00 per share offer was inadequate.
On August 4, 2001, CSFB had telephone discussions with Mr. McGovern and with
representatives of Updata Capital, Inc. ("Updata"), the financial advisor to
Career Holdings, to organize the scheduled due diligence review sessions. The
confidentiality agreement was executed by both parties on August 6, 2001,
whereupon Headhunter promptly forwarded certain confidential financial
information to Career Holdings, Knight Ridder Digital and Tribune Company. On
August 7, 2001, as previously agreed, representatives of Career Holdings,
Knight Ridder Digital and Tribune Company began their due diligence review in
A&B's offices in Atlanta.
7
Meanwhile, on August 7, 2001, CSFB had additional discussions with the Other
Party's financial advisor in which CSFB was informed that the Other Party had
increased its offer to $8.00 in cash, but that it wanted Headhunter to
negotiate exclusively with the Other Party. Other potential terms were also
discussed, including that the Other Party wanted an option to purchase all
shares held by ITC Holding Company, Inc. ("ITC"), Headhunter's largest
shareholder, and all shares held by directors and executive officers of
Headhunter as part of any transaction. CSFB responded to the Other Party's
financial advisor that Headhunter was willing to consider a business
combination but that $8.00 in cash was still inadequate. On August 9, 2001, the
Other Party's financial advisor contacted CSFB and increased its offer to $8.25
per share, provided that Headhunter would agree to certain other terms of the
transaction.
On August 10, 2001, Career Holdings sent a written indication of its
interest to acquire Headhunter at $8.50 to $9.00 per share in cash, subject to
completion of a due diligence review. On August 13, 2001, after discussions
between Updata and CSFB, Career Holdings sent a letter in which it confirmed a
revised offer of $9.00 per Share in cash. Also, on August 13, 2001, CSFB
contacted the financial advisor for the Other Party and told them that
Headhunter had now received another all-cash offer at a higher price, that
Headhunter was not in a position to agree to an exclusivity arrangement with
any party, and that Headhunter hoped the Other Party would remain interested
and consider increasing its offer. Later on August 13, 2001, Mr. Montgomery
spoke with a senior executive of the Other Party and it was agreed that the
Other Party would complete its remaining due diligence review in Atlanta
immediately. Finally, on August 13, 2001, as a result of Career Holdings'
revised offer, Headhunter gave the ten-day written notice to the Other Party as
required under one of Headhunter's contracts with the Other Party (the
"Contract") indicating that the Company may enter into a change of control
transaction. This notice was required under the Contract before Headhunter
could enter into a definitive merger or acquisition agreement with any other
party.
From August 14 to 17, 2001, business, financial and legal representatives of
both Career Holdings and the Other Party met separately in A&B's offices in
Atlanta to complete their due diligence reviews.
On August 16, 2001, at 8:30 a.m., the Board of Directors held a meeting in
which CSFB updated the Board once again on discussions to date with Career
Holdings and the Other Party. CSFB also discussed with the Board all of the
other parties contacted by CSFB about a possible business combination within
the past month. A&B also went through a detailed review with the Board of its
fiduciary duties in the context of the potential transactions it was
considering.
On August 17, 2001, the Board of Directors met to discuss the draft of a
definitive agreement delivered by the Other Party. The Headhunter Board was
advised that a draft of a definitive agreement was expected from Career
Holdings later that day. The Headhunter Board then discussed the next steps in
the negotiations with each of Career Holdings and the Other Party.
On August 18, 2001, the Other Party sent a letter to Headhunter in which it
increased its offer to $8.50 per share in cash and stated that its offer would
expire at 11:59 p.m. on Monday, August 20, 2001. On August 19, 2001, at 12:30
p.m., the Headhunter Board again met to discuss the revised offer from the
Other Party and the deadline to accept or reject it. Because the Contract
included the ten-day notice provision, the Other Party was the only party with
whom Headhunter could enter into a definitive agreement for a business
combination prior to the expiration of the ten-day notice period on August 24,
2001. As the offer from the Other Party was scheduled to expire on August 20,
the Company determined to negotiate simultaneously with the Other Party and
Career Holdings but informed Career Holdings that it would need to obtain all
necessary corporate approvals, negotiate and execute a definitive agreement and
deliver such documents to Headhunter in the form of an offer that would remain
open until such time as the Company could accept it.
After much discussion among representatives for Headhunter and Career
Holdings, Career Holdings increased its offer to $9.25 per share in cash, but
indicated it would not be able to obtain the required board approvals by Career
Holdings, Knight Ridder Digital and Tribune Company until August 22, 2001.
8
On August 19, 2001, CSFB also contacted the financial advisor for the Other
Party and indicated that Headhunter was willing to work with the Other Party to
negotiate a definitive agreement, but advised that another party still had made
and not withdrawn a higher cash price per share. Finally, on August 19, 2001,
at 9:00 p.m., the Headhunter Board met again in order to be updated by its
legal and financial advisors on the status of all negotiations with the Other
Party and Career Holdings.
Between August 20 and 22, 2001, the Board met repeatedly to review the
status of and direct the course of negotiations with the Other Party and Career
Holdings. During such time period, Headhunter and its representatives also
worked diligently with representatives of both the Other Party and Career
Holdings to identify all open issues and negotiate final proposed definitive
agreements even though, in the case of the Other Party, the original deadline
for the expiration of its offer had passed.
At 6:00 p.m. on Monday, August 20, 2001, the Headhunter Board met and was
updated by its legal and financial advisors on the status of negotiations. The
Headhunter Board requested CSFB to seek clarity from each of the bidders about
their respective approval processes and timing. In response to questions from
directors, A&B once again reviewed with the Board of Directors its fiduciary
obligations under these circumstances. Again at 11:00 p.m. on August 20, 2001,
the Board of Directors met to be updated on the status of contract negotiations
with Career Holdings and the Other Party.
On Tuesday, August 21, 2001, senior executives of Knight Ridder Digital and
Tribune Company each telephoned William H. Scott III, the Chairman of the Board
of Directors, to provide assurances that their respective management teams
fully supported the transaction and that they believed their respective boards
of directors would approve the transaction, but that it was just not possible
to have an actual meeting before August 22. At 6:00 p.m. on Tuesday, August 21,
2001, the Headhunter Board met again. It was reported that the required board
approvals by Career Holdings, Knight Ridder Digital and Tribune Company were
scheduled for the next day, August 22. Once again, the Headhunter Board
discussed with counsel its fiduciary obligations.
By early evening on Wednesday, August 22, 2001, the proposed definitive
agreements between Headhunter and the Other Party and Headhunter and Career
Holdings had been substantially negotiated. Each party's proposed definitive
agreements provided for an all-cash tender offer and a follow-up merger at the
same cash consideration as to be paid in the tender offer. The Other Party's
offer stood at $8.50 per share in cash and Career Holdings' offer stood at
$9.25 in cash. The proposed definitive agreements of each bidder were
substantially the same in most material respects, except that the proposed
definitive agreement with the Other Party reflected several issues that had not
been finalized, the most important of which was that the Other Party insisted
on a stock option agreement from ITC and the Headhunter directors and executive
officers and Career Holdings had agreed not to require such an option. ITC,
which holds approximately 26.5% of the Headhunter shares, had steadfastly
refused to execute such an option arrangement with either Career Holdings or
the Other Party.
On August 22, 2001, the boards of directors of Career Holdings, Knight
Ridder Digital and Tribune Company each unanimously approved a proposed
definitive agreement with Headhunter. Career Holdings executed the definitive
agreement on August 22, 2001 and delivered it to Headhunter along with
assurances that the offer represented by the executed definitive agreement
would remain open for acceptance by Headhunter until early Friday morning,
August 24, 2001. At a meeting on the evening of August 22, 2001, the Headhunter
Board met again and decided, in view of the offer made by Career Holdings for a
deal at $9.25 per share in cash, that it could no longer proceed with the cash
proposal of $8.50 from the Other Party. Following its meeting on the evening of
August 22, the Headhunter Board instructed CSFB to communicate to the Other
Party that Headhunter could not proceed with an offer at $8.50 but would
consider a higher offer together with improved terms approved by the board of
directors of the Other Party if such an improved offer could be made prior to
August 24, 2001.
CSFB spoke by telephone to the financial advisor for the Other Party on the
evening of August 22 and communicated this information. The financial advisor
for the Other Party indicated that the Other Party was likely to be unable to
reconvene its board of directors to consider a higher bid by August 24, 2001
and, in any event, may not wish to increase its offer under any circumstances.
9
On August 23, 2001, at 6:00 p.m., the Headhunter Board met again and
reviewed the status and received reports from CSFB and A&B. CSFB also
summarized its analysis that had been done in connection with an anticipated
request from the Headhunter Board for a fairness opinion about the
consideration to be received by the Headhunter shareholders from a financial
point of view. CSFB did not, however, deliver its fairness opinion at this
meeting.
At approximately 3:05 a.m. on August 24, 2001, the Headhunter Board convened
a meeting. The offer made by Career Holdings was scheduled to expire at 5:00
a.m., Eastern Time, on August 24, 2001. At this meeting CSFB reiterated its
fairness opinion analysis from the Headhunter Board meeting the preceding
evening and delivered its opinion that the consideration to be received in a
transaction with Career Holdings was fair to the Headhunter shareholders from a
financial point of view. After discussion and consideration of the factors and
reasons described below under " -- Reasons for the Recommendation of the Board
of Directors," the Headhunter Board unanimously determined that the Merger
Agreement and the transactions contemplated thereby, including the Offer and
the Merger, are fair to and in the best interests of the Headhunter
shareholders, unanimously approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, and unanimously
recommended that the Headhunter shareholders accept the Offer and tender their
Shares pursuant to the Offer. In addition, the Headhunter Board unanimously
approved the terms of the Stockholder Agreements.
Following the meeting of the Headhunter Board, on August 24, 2001,
Headhunter, Career Holdings and Purchaser executed the Merger Agreement, and
ITC and each of the members of the Board of Directors executed the Stockholder
Agreements.
On August 24, 2001, prior to the opening of the financial markets,
CareerBuilder, Inc., a subsidiary of Career Holdings, along with Knight Ridder
Digital and Tribune Company, issued a press release announcing the execution of
the Merger Agreement and the related documents.
On August 31, 2001, Career Holdings and Purchaser commenced the Offer.
(ii) Reasons for the Recommendation of the Board of Directors
In determining that it would approve and recommend the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, to
the shareholders, the Board of Directors considered the following factors, each
of which, in the view of the Board of Directors, supported such determination:
(1) The historical market prices, price to earnings ratios, EBITDA and
other multiples, recent trading activity and trading range of the Common
Stock, including the fact that the offer price of $9.25 per Share
represented a premium of (x) approximately 33% over the $6.95 per Share
closing price on the Nasdaq National Market on August 23, 2001, the last
full trading day before the Offer was publicly announced, (y) approximately
49% over $6.21 per Share, which was the average closing price for the 30-day
trading period prior to the public announcement of the Offer, and (z)
approximately 175% over $3.36 per Share, which was the 52-week low closing
price prior to the public announcement of the Offer.
(2) The fact that the Board had received other indications of interest in
acquiring the Company, and no other party had presented the Company with an
acquisition proposal that, taken as a whole, would be as favorable to the
Company and its shareholders as the Offer and the Merger.
(3) The oral opinion of CSFB delivered at the August 24, 2001 meeting of
the Board, subsequently confirmed in writing, to the effect that, as of the
date of such opinion and based upon and subject to the assumptions, factors
and limitations set forth therein, the $9.25 per Share cash price being
offered in the Offer and to be received in the Merger is fair, from a
financial point of view, to the Company's shareholders.
10
A copy of CSFB's written opinion setting forth the assumptions made,
matters considered and limitations on the review undertaken by CSFB is
attached as Annex A to this Statement and is incorporated herein by
reference. Shareholders are urged to, and should, read the opinion of CSFB
carefully and in its entirety.
(4) The benefits of the transaction being structured as an immediate cash
tender offer for all of the outstanding Shares, thereby enabling the
shareholders of the Company the opportunity to obtain cash for all of their
Shares at the earliest possible time and the fact that the per Share
consideration to be paid in the Offer and the Merger is the same. The
Headhunter Board also considered the fact that if the Merger is approved,
the holders of the Shares will not participate in the future growth of the
Company.
(5) The terms of the Merger Agreement including (x) the provision that
the Headhunter Board may, in the exercise of its fiduciary duties, furnish
or provide access to information concerning the Company to, and engage in
discussions and negotiate with, third parties who make an unsolicited
written acquisition proposal that the Headhunter Board determines is more
favorable to the Company's shareholders than the Offer and the Merger and
for which financing is reasonably available, (y) the ability of the
Headhunter Board, in the exercise of its fiduciary duties, to terminate the
Merger Agreement on 72 hours notice in order to permit the Company to enter
into a superior transaction upon a determination that failing to terminate
the Merger Agreement would be inconsistent with the Headhunter Board's
fiduciary duties, and (z) the obligation to pay an $8.0 million termination
(or "break up") fee, inclusive of all of Career Holdings' expenses, if the
Headhunter Board exercises the termination right described in (y) above or
the Merger Agreement is terminated because of a withdrawal or change in the
Headhunter Board's recommendation to shareholders favoring the Offer and the
Merger or because the Company breached the Merger Agreement at a time when
an alternative transaction has been proposed if the Company later enters
into an agreement with respect to such alternative transaction. The
Headhunter Board decided, after consideration of these provisions, that the
terms of the Merger Agreement and the Stockholder Agreements would not
unduly deter a third party from making, or inhibit the Headhunter Board in
evaluating, negotiating and, if appropriate, approving, an alternative
transaction.
(6) The limited ability of Career Holdings or the Purchaser to terminate
the Offer or the Merger Agreement.
(7) The fact that the Merger Agreement provides that holders of
outstanding options and warrants to acquire Shares will receive in exchange
for cancellation of their options and warrants the excess, if any, of the
per Share consideration in the Offer over the exercise price of such options
and warrants multiplied by the number of Shares subject to such options and
warrants.
(8) The fact that Career Holdings' and the Purchaser's obligations under
the Offer are not subject to any financing condition and the fact that
Tribune Company and Knight Ridder Digital had entered into the Investment
Agreement that would provide Career Holdings and the Purchaser with the
necessary funds to purchase the Shares being acquired pursuant to the Offer
and the Merger. See "Item 3 -- The Investment Agreement."
(9) In connection with the transactions contemplated by the Merger
Agreement, Career Holdings had required that holders of approximately 27.1%
of the outstanding Shares enter into the Stockholder Agreements. The
Headhunter Board noted particularly that the Stockholder Agreements would
terminate upon a termination of the Merger Agreement.
(10) The business, financial condition, results of operations and
prospects and the nature of the industry in which the Company operates,
including the prospects of the Company if it were to remain independent. The
Board of Directors noted that the results of operations for the Company for
the fiscal year ended December 31, 2000 and the six months ended June 30,
2001 reflected net losses of approximately $23.9 million and $10.9 million,
respectively. The Headhunter Board also noted that the Company might need
additional funding at a time when the funding environment for Internet
companies had turned negative. In
11
addition, the Headhunter Board recognized that the Company faces an
increasingly competitive environment.
(11) The possibility that if a business combination transaction with
Career Holdings was not negotiated and the Company remained as a publicly
owned corporation, in the event of a decline in the market price of the
Common Stock or the stock market in general, the price that might be
received by the holders of the Shares in the open market or in a future
transaction might be less than the $9.25 per Share cash price to be received
by shareholders in connection with the Offer and the Merger.
(12) The fact that there are relatively few regulatory approvals or
consents required to consummate the Offer and the Merger, and that the
prospects for receiving such approvals and consents are favorable.
(13) The fact that dissenters' rights will be available to the holders of
Shares under Georgia law in connection with the Merger.
In its examination of the Offer and the Merger, the Headhunter Board
considered the interests of the Company's executive officers and directors that
are different from, or in addition to, the interests of the Company's
shareholders. The Headhunter Board did not believe that these interests
affected its decision to approve the Offer and the Merger.
The foregoing includes all material factors considered by the Board of
Directors. In light of the number and variety of factors that the Headhunter
Board considered in connection with its evaluation of the Offer and the Merger,
the Headhunter Board did not find it practicable to quantify or otherwise
assign relative weights to the foregoing factors, and, accordingly, it did not
do so. In addition, individual members of the Board may have given different
weights to different factors. Consequently, the Board viewed its position and
recommendation as being based on the totality of the information presented to
and considered by it. After weighing all of these considerations, the Board
determined to approve the Merger Agreement and recommend that holders of Shares
tender their Shares in the Offer.
(c) Intent to Tender. Simultaneously with entering into the Merger
Agreement, Career Holdings and Purchaser entered into Stockholder Agreements
with ITC and each of the members of the Board of Directors pursuant to which
ITC and the members of the Board have agreed to tender all Shares beneficially
owned by them in the Offer and, if applicable, to vote their shares in favor of
the Merger. To the Company's knowledge, after reasonable inquiry, the Company
believes that all executive officers of the Company intend to tender all Shares
held of record or beneficially owned by them pursuant to the Offer.
Item 5. Persons/Assets, Retained, Employed, Compensated or Used.
The Company retained CSFB to act as its exclusive financial advisor in
connection with a sale, merger, consolidation or any other business
combination, in one or a series of transactions, involving all or a substantial
amount of the business, securities or assets of the Company. The Company
selected CSFB as its financial advisor because CSFB is an internationally
recognized investment banking firm that has substantial experience providing
strategic advisory services. As part of its investment banking and financial
advisory business, CSFB is continuously engaged in the valuation of businesses
and securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. In addition, CSFB is a full service securities firm engaged in
securities trading, brokerage and financing activities. In the ordinary course
of CSFB's trading and brokerage activities, CSFB or its affiliates may at any
time hold long or short positions, and may trade or otherwise effect
transactions, for its own account or the accounts of customers, in equity
securities of the Company or affiliates of Career Holdings and Purchaser.
Pursuant to the terms of its engagement agreement with CSFB, the Company has
agreed to pay CSFB an aggregate fee equal to 1.5% of the total consideration
payable in connection with the Offer and the Merger, a
12
substantial portion of which is contingent upon the consummation of the Offer.
In addition, the Company agreed to reimburse CSFB, upon CSFB's request from
time to time, for all out-of-pocket expenses, including the reasonable fees and
expenses of counsel, CSFB incurred in connection with its engagement and to
indemnify CSFB and certain related persons against certain liabilities in
connection with its engagement, including liabilities under U.S. federal
securities laws. In the past, CSFB has performed certain investment banking and
financial services to affiliates of Career Holdings and Purchaser in connection
with matters unrelated to the Offer and Merger for which CSFB received
compensation.
Except as described above, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any person to make
solicitations or recommendations to shareholders on its behalf concerning the
Offer or the Merger.
Item 6. Interest in Securities of the Subject Company.
No transactions in the Common Stock have been effected during the last 60
days by the Company, and, to the knowledge of the Company, no transactions in
the Common Stock have been effected during the last 60 days by any executive
officer, director, affiliate or subsidiary of the Company other than: (1) the
entry of the Company's directors and ITC into the Stockholder Agreements as
described in Item 3, which description is incorporated herein by reference; (2)
the grant by the Company to W. Craig Stamm, Chief Financial Officer of the
Company on August 1, 2001, of options to purchase 25,000 Shares at $5.85 per
Share; and (3) the grant by the Company to Matt Ferguson, Vice President of
Business Development of the Company, on August 1, 2001, of options to purchase
50,000 Shares at $5.85 per Share.
Item 7. Purposes of the Transaction and Plans or Proposals.
Currently, Headhunter has $10.0 million in convertible subordinated debt
outstanding under its Amended and Restated Credit Agreement, dated February 27,
2001, between Headhunter and Omnicom Finance, Inc. ("OFI"), as amended by the
Amendment to Amended and Restated Credit Agreement dated May 10, 2001 (the
"Omnicom Credit Agreement"). Pursuant to the Merger Agreement, Headhunter is
required to repay all unpaid amounts of principal and interest under the
Omnicom Credit Agreement in full prior to the effective time of the Merger.
Further, but subject to certain restrictions based on the trading price of
the Common Stock, OFI has the right to convert outstanding principal and unpaid
interest into shares of Common Stock at the "Applicable Conversion Price" (as
defined in the Omnicom Credit Agreement). Headhunter has the right to block
such conversion rights of OFI by delivering a blockage notice to OFI within 5
business days of receipt of the OFI conversion notice and repaying the amount
OFI desires to be converted no later than 10 business days after delivery of
the blockage notice to OFI. The Merger Agreement provides that Headhunter shall
take all actions necessary to block any attempted conversion by OFI.
On August 28, 2001, OFI delivered notice to Headhunter that it was
exercising its conversion rights in connection with all amounts outstanding
under the Omnicom Credit Agreement as of such date. On August 31, 2001,
Headhunter delivered a notice to OFI that it was exercising its right to block
OFI's conversion rights. Under the Merger Agreement, Career Holdings has agreed
to provide financing to Headhunter on commercially reasonable terms in light of
the nature of the transactions proposed under the Merger Agreement in an amount
necessary to enable Headhunter to repay the Omnicom Credit Agreement prior to
the effective time of the Merger or to effect a conversion blockage. As a
result of Headhunter's delivery of the conversion blockage notice to OFI,
Career Holdings intends to extend the necessary financing to Headhunter to
repay the Omnicom Credit Agreement in full no later than September 17, 2001.
Headhunter also has $5.0 million of indebtedness outstanding under a Loan
and Security Agreement with Wachovia Capital Investments, Inc. ("Wachovia")
dated May 10, 2001 (the "Wachovia Credit Agreement"). Under the Wachovia Credit
Agreement, the purchase by a third party of 30% or more of Headhunter's capital
stock constitutes a "Change in Control" and an event of default which would
permit Wachovia to accelerate the indebtedness of Headhunter thereunder. The
consummation of the transactions contemplated by the Merger Agreement would
constitute a "Change in Control" requiring that Headhunter must repay all
indebtedness under the Wachovia Credit Agreement at the time of the
consummation of the Offer.
13
The Wachovia Credit Agreement constitutes senior debt of Headhunter and the
Omnicom Credit Agreement is subordinated to the Wachovia Credit Agreement
pursuant to customary subordination provisions. Upon the occurrence of an event
of default under the Wachovia Credit Agreement, Wachovia may block payments
under the Omnicom Credit Agreement, subject to the conversion rights of OFI
described above. In addition, Headhunter's repayment of amounts outstanding
under the Omnicom Credit Agreement would also constitute an event of default
under the Wachovia Credit Agreement, unless Wachovia consents to such
repayment.
Except as set forth in this Statement, the Company is not undertaking or
engaged in any negotiations in response to the Offer that relate to: (1) a
tender offer or other acquisition of the Company's securities by the Company,
any of its subsidiaries, or any other person; (2) any extraordinary
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries; (3) any purchase, sale or transfer of a
material amount of assets of the Company or any of its subsidiaries; or (4) any
material change in the present dividend rate or policy, or indebtedness or
capitalization of the Company.
Except as set forth in this Statement, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to one or more of the matters referred to in the preceding
paragraph.
Item 8. Additional Information.
Information Provided Pursuant to Rule 14f-1 Under the Exchange Act
The Information Statement attached hereto as Annex B is being furnished to
the shareholders of the Company in connection with the possible designation by
Purchaser, pursuant to the Merger Agreement, of certain persons to be appointed
to Headhunter's Board other than at a meeting of the Company's shareholders,
and such information is incorporated herein by reference.
Georgia Takeover Laws
Headhunter is incorporated under the laws of the State of Georgia.
Headhunter has elected in its by-laws to be subject to Sections 14-2-1131
through 14-2-1133 (the "Business Combination Provisions") and Sections
14-2-1110 through 14-2-1113 (the "Fair Price Provisions") of the GBCC. In
general, the Business Combination Provisions prevent an "interested
shareholder" (including a person who is the beneficial owner of 10% or more of
the voting power of the outstanding voting shares of a corporation) from
engaging in a "business combination" (defined to include mergers and certain
other actions) with a Georgia corporation for a period of five years following
the date such person became an interested shareholder. However, this
prohibition does not apply if prior to the time that such person became an
interested shareholder, the "business combination" or the transaction which
resulted in such person becoming an interested shareholder is approved by the
board of directors of the corporation. In addition, the Fair Price Provisions
provide that a business combination with an interested shareholder must meet
specified fair pricing criteria and certain other tests unless the business
combination is approved by all the directors of the corporation that are not
affiliated or otherwise associated with the interested shareholder, provided
that there are at least three such directors. The Headhunter Board has
unanimously approved the Merger Agreement, including the Offer and the Merger,
and the related Stockholder Agreements. Accordingly, the substantive
restrictions of the Business Combination Provisions and the Fair Price
Provisions will not apply to the Offer and the Merger.
Georgia "Short-Form" Merger Statute
Pursuant to Section 14-2-1104 of the GBCC, if a corporation owns 90% or more
of the outstanding shares of each class of a subsidiary corporation, the parent
may cause the subsidiary to merge into the parent without the approval of the
shareholders of the parent or the subsidiary (the "short-form merger"). If
Purchaser acquires 90% or more of the Shares in the Offer, it will be able to
consummate the Merger as a short-form merger without holding a meeting of the
Company's shareholders. If Purchaser does not acquire 90% of the Shares in the
Offer, the Merger cannot be consummated until the Company holds a special
meeting of its shareholders (and solicits proxies for such meeting in
compliance with the requirements of the Exchange Act and regulations
promulgated thereunder and the requirements of the Nasdaq) and the Company's
shareholders vote to approve the merger, which will take substantially more
time than consummation of a short-form merger.
14
Dissenters' Rights
No dissenters' rights are available in connection with the Offer. However,
if the Merger is submitted to the shareholders for approval or is consummated
by the Headhunter Board without shareholder approval being required,
shareholders will have certain rights under Article 13 of the GBCC, including
the right to dissent, and the right to demand and receive payment in cash of
the fair value of their Shares. Such dissenters' rights, if the statutory
procedures are met, could lead to a judicial determination of the fair value of
the Shares immediately before the effectuation of the Merger (excluding any
change in value arising in anticipation of the Merger) and a judgment requiring
payment of the fair value in cash to such dissenting holders for their Shares.
In addition, such dissenting shareholders would be entitled to receive payment
of a fair rate of interest from the date of consummation of the Merger on the
amount determined to be the fair value of their Shares. Any determination of
the fair value of Shares in a court proceeding could be based upon
considerations other than, or in addition to, the price paid in the Offer and
the market value of the Shares, including, among other things, asset values and
earning capacity. Therefore, the value so determined in any court proceeding
could be the same as, or more or less than, the price paid in the Offer and the
Merger.
Amendment to Rights Agreement
On August 24, 2001, prior to the execution and delivery of the Merger
Agreement, the Company amended the Rights Agreement so that the execution and
delivery of, and the consummation of the transactions contemplated by, the
Merger Agreement, the Offer, the Merger and the Stockholder Agreements, would
not result in (i) Career Holdings or Purchaser becoming an Acquiring Person or
(ii) the occurrence of a Stock Acquisition Date or a Separation Time. The
Rights Agreement was also amended so that it would expire upon the earliest of
the consummation of the Merger, April 15, 2010, the Termination Time and the
merger of the Company into another corporation pursuant to an agreement entered
into prior to a Flip-In Date.
For the purposes hereof, the terms ''Acquiring Person,'' ''Stock Acquisition
Date,'' ''Separation Time,'' ''Termination Time,'' and ''Flip-In Date'' have
the meanings given to such terms in the Rights Agreement. A copy of the Rights
Agreement is incorporated into this Statement by reference to Exhibits (e)(10)
through (e)(12) to this Statement.
Certain Legal Matters
Except as otherwise disclosed herein, the Company is not aware of any
licenses or other regulatory permits that appear to be material to the business
of the Company and that might be adversely affected by the acquisition of
Shares by Purchaser pursuant to the Offer or of any approval or other action by
any governmental, administrative or regulatory agency or authority which would
be required for the acquisition or ownership of Shares by Purchaser pursuant to
the Offer. Should any such approval or other action be required, Career
Holdings and Purchaser have stated that it is currently contemplated that such
approval or action would be sought or taken. There can be no assurance that any
such approval or action, if needed, would be obtained or, if obtained, that it
will be obtained without substantial conditions or that adverse consequences
might not result to the Company's or Career Holdings' business or that certain
parts of the Company's or Career Holdings' business might not have to be
disposed of in the event that such approvals were not obtained or such other
actions were not taken, any of which could cause Purchaser to elect to
terminate the Offer without the purchase of the Shares thereunder. Purchaser's
obligation under the Offer to accept for payment and pay for shares is subject
to certain conditions, which are set forth in Section 15 of the Offer to
Purchase attached hereto as Exhibit (a)(1) and incorporated herein by
reference.
The transactions contemplated by the Offer and the Merger are or may be
subject to a number of applicable laws and regulations, including but not
limited to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules that have been promulgated thereunder by the Federal
Trade Commission, and certain state takeover laws. Information concerning these
matters is set forth in Section 16 of the Offer to Purchase attached hereto as
Exhibit (a)(1) and incorporated herein by reference.
15
Item 9. Material to be Filed as Exhibits.
The following Exhibits are filed herewith:
Exhibit No. Description
- ----------- --------------------------------------------------------------------------------------------------
(a)(1) Offer to Purchase, dated August 31, 2001 (incorporated by reference to Exhibit (a)(1)(A) to the
Schedule TO of Career Holdings, Inc. and CB Merger Sub, Inc. filed on August 31, 2001).
(a)(2) Letter of Transmittal (incorporated by reference to Exhibit (a)(1)(B) to the Schedule TO of Career
Holdings, Inc. and CB Merger Sub, Inc. filed on August 31, 2001).
(a)(3)+ Letter to Shareholders of the Company, dated August 31, 2001.
(a)(4)+ Opinion of Credit Suisse First Boston Corporation, dated August 24, 2001 (included as Annex A
to the Statement).
(a)(5) Press Release, dated August 24, 2001 (incorporated by reference to Exhibit 99.2 of the Current
Report on Form 8-K of the Company filed on August 24, 2001).
(e)(1) Agreement and Plan of Merger, dated as of August 24, 2001, among Career Holdings, Inc.,
CB Merger Sub, Inc. and the Company (incorporated by reference to Exhibit 2.1 to the Current
Report on Form 8-K of the Company filed on August 24, 2001).
(e)(2) Stockholder Agreement, dated August 24, 2001, by and among Career Holdings, Inc.,
CB Merger Sub, Inc. and William H. Scott III (incorporated by reference to Exhibit 2.2 to the
Current Report on Form 8-K of the Company filed on August 24, 2001).
(e)(3) Stockholder Agreement, dated August 24, 2001, by and among Career Holdings, Inc.,
CB Merger Sub, Inc. and Burton B. Goldstein, Jr. (incorporated by reference to Exhibit 2.3 to the
Current Report on Form 8-K of the Company filed on August 24, 2001).
(e)(4) Stockholder Agreement, dated August 24, 2001, by and among Career Holdings, Inc.,
CB Merger Sub, Inc. and Robert M. Montgomery (incorporated by reference to Exhibit 2.4 to the
Current Report on Form 8-K of the Company filed on August 24, 2001).
(e)(5) Stockholder Agreement, dated August 24, 2001, by and among Career Holdings, Inc.,
CB Merger Sub, Inc. and Michael G. Misikoff (incorporated by reference to Exhibit 2.5 to the
Current Report on Form 8-K of the Company filed on August 24, 2001).
(e)(6) Stockholder Agreement, dated August 24, 2001, by and among Career Holdings, Inc.,
CB Merger Sub, Inc. and J. Douglas Cox (incorporated by reference to Exhibit 2.6 to the Current
Report on Form 8-K of the Company filed on August 24, 2001).
(e)(7) Stockholder Agreement, dated August 24, 2001, by and among Career Holdings, Inc.,
CB Merger Sub, Inc. and Kimberley E. Thompson (incorporated by reference to Exhibit 2.7 to the
Current Report on Form 8-K of the Company filed on August 24, 2001).
(e)(8) Stockholder Agreement, dated August 24, 2001, by and among Career Holdings, Inc.,
CB Merger Sub, Inc. and ITC Holding Company, Inc. (incorporated by reference to Exhibit 2.8 to
the Current Report on Form 8-K of the Company filed on August 24, 2001).
(e)(9) Confidentiality Agreement, dated as of August 6, 2001, between CareerBuilder, Inc. and the
Company (incorporated by reference to Exhibit (d)(3) to the Schedule TO of Career Holdings, Inc.
and CB Merger Sub, Inc. filed on August 31, 2001).
(e)(10) Shareholder Protection Rights Agreement, dated as of April 15, 2000, between the Company and
American Stock Transfer & Trust Company, as rights agent (incorporated by reference to
Exhibit 99.3 to the Current Report on Form 8-K of the Company filed on April 19, 2000).
(e)(11) Amendment No. 1 to Shareholder Protection Rights Agreement, dated as of February 27, 2001
(incorporated by reference to Exhibit 4.4 to the Annual Report on Form 10-K of the Company for
the year ended December 31, 2000).
16
Exhibit No. Description
- ----------- -------------------------------------------------------------------------------------------
(e)(12) Amendment No. 2 to Shareholder Protection Rights Agreement, dated as of August 24, 2001
(incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K of the Company
filed on August 24, 2001).
(e)(13) Employment Agreement, dated August 16, 2001, between the Company and W. Craig Stamm.
(e)(14) Employment Agreement, dated March 30, 2001, between the Company and Ronald T. Self.
(e)(15)+ The Information Statement of the Company, dated August 31, 2001 (included as Annex B to the
Statement).
(e)(16) Investment Agreement, dated as of August 24, 2001, among Career Holdings, Inc., Tribune
Company and Knight Ridder Digital (incorporated by reference to Exhibit (d)(2) to the
Schedule TO of Career Holdings, Inc. and CB Merger Sub, Inc. filed on August 31, 2001).
(g) Not Applicable.
- --------
+ Included with this Statement and mailed to shareholders.
17
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.
HEADHUNTER.NET, INC.
By: /s/ ROBERT M. MONTGOMERY, JR.
----------------------------------
Name: Robert M. Montgomery, Jr.
Title: Chief Executive Officer
Dated: August 31, 2001
18
Annex A
[CSFB LETTERHEAD]
August 24, 2001
Board of Directors
HeadHunter.NET Inc.
333 Research Court, Suite 200
Norcross, Georgia 30092
Dear Sirs and Mesdames:
You have asked us to advise you with respect to the fairness to the holders of
Company Common Stock (as defined below) of HeadHunter.NET Inc. (the "Company")
from a financial point of view of the Consideration (as defined below) to be
received by such holders pursuant to the terms of the Agreement and Plan of
Merger, dated as of August 24, 2001 (the "Merger Agreement"), among the
Company, Career Holdings, Inc. (the "Acquiror") and CB Merger Sub, Inc.
("Merger Sub"), a wholly subsidiary of the Acquiror. The Merger Agreement
provides for (i) Merger Sub to commence a tender offer (the "Offer") for all
outstanding shares of common stock, par value $0.01 per share ("Company Common
Stock"), of the Company at $9.25 per share (the "Consideration") and (ii)
following the Offer, the merger (the "Merger", and together with the Offer, the
"Transaction") of the Company with and into the Merger Sub pursuant to which
the Company will become a wholly owned subsidiary of the Acquiror and each
outstanding share of Company Common Stock will be converted into the right to
receive the Consideration.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company, as well as the
Merger Agreement. We have also reviewed certain other information, including
financial forecasts, provided to or discussed with us by the Company and have
met with the Company's management to discuss the business and prospects of the
Company.
We have also considered certain financial and stock market data of the Company,
and we have compared those data with similar data for other publicly held
companies in businesses similar to the Company and we have considered the
financial terms of certain other business combinations and other transactions
which have recently been effected or announced. We also considered such other
information, financial studies, analyses and investigations and financial,
economic and market criteria which we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
Company's management as to the future financial performance of the Company. In
addition, we have not been requested to make, and have not made, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of the Company, nor have we been furnished with any such evaluations or
appraisals. Our opinion is necessarily based upon information available to us
and financial, economic, market and other conditions as they exist and can be
evaluated on the date hereof. Our opinion does not address the relative merits
of the Transaction as compared to other business strategies that might be
available to the Company or the Company's underlying business decision to
engage in the Transaction. In connection with our engagement, we approached
third parties to solicit indications of interest in a possible acquisition of
the Company and held preliminary discussions with certain of these parties
prior to the date hereof.
A-1
We have acted as financial advisor to the Company in connection with the
Transaction and will receive a fee for our services, a significant portion of
which is contingent upon the consummation of the Transaction. We will also
receive a fee for rendering this opinion.
In the past, we have performed certain investment banking and financial
services to the Acquiror in connection with matters unrelated to the
Transaction, for which we have received compensation.
In the ordinary course of our business, we and our affiliates may actively
trade the debt and equity securities of both the Company and the owners of the
Acquiror (Knight Ridder Inc. and Tribune Co.) for our and such affiliates' own
accounts and for the accounts of customers and, accordingly, may at any time
hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the
Transaction and does not constitute a recommendation as to whether any
stockholder of the Company should tender shares of Company Common Stock
pursuant to the Offer or how such stockholder should vote or act on any matter
relating to the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Consideration to be received by the holders of Company Common Stock
in the Transaction is fair to such holders from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ William S. Oglesby
William S. Oglesby
Managing Director
A-2
Annex B
HeadHunter.NET, Inc.
333 Research Court, Suite 200
Atlanta, Georgia 30092
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about August 31, 2001 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Statement") of HeadHunter.NET, Inc. (the "Company") that has been filed with
the Securities and Exchange Commission (the "SEC") on August 31, 2001. You are
receiving this Information Statement in connection with the possible election
of persons designated by CB Merger Sub, Inc., a Georgia corporation
("Purchaser") and a wholly owned subsidiary of Career Holdings, Inc., a
Delaware corporation ("Career Holdings"), to a majority of the seats on the
Company's Board of Directors (the "Board of Directors" or the "Headhunter
Board"). On August 24, 2001, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Career Holdings and Purchaser, pursuant to
which (1) Purchaser is required to commence a tender offer (the "Offer") to
purchase any and all outstanding shares of the Company's common stock, $.01 par
value (the "Common Stock"), including the associated junior participating
preferred stock purchase rights (collectively, the "Shares") issued pursuant to
the Shareholder Protection Rights Agreement, dated April 15, 2000, between the
Company and American Stock Transfer & Trust Company, as Rights Agent, as
amended by Amendment No. 1 thereto, dated February 27, 2001, as further amended
by Amendment No. 2 thereto, dated August 24, 2001, at a price per Share of
$9.25 in cash and (2) following the consummation of the Offer, Purchaser will
be merged with and into the Company (the "Merger"). As a result of the Merger,
the Company will be the surviving corporation, governed by the laws of the
State of Georgia and will become a wholly owned subsidiary of Career Holdings.
All Shares not purchased in the Offer (other than the Shares owned by Career
Holdings, Purchaser, any of their respective subsidiaries and the Company or
any of its subsidiaries that will be cancelled, and Shares, if any, held by
dissenting shareholders) will be converted into the right to receive a price
per Share of $9.25. The Offer, the Merger and the Merger Agreement are more
fully described in the Statement to which this Information Statement forms
Annex B.
The Merger Agreement provides that upon the consummation of the Offer, the
Company shall cause Purchaser's designees to be elected to the Board of
Directors under circumstances described in the Merger Agreement. This
Information Statement is being mailed to you in accordance with Section 14(f)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
Rule 14f-1 promulgated thereunder. The information contained herein supplements
certain information contained in the Statement. Information herein related to
Career Holdings and the Purchaser has been provided to the Company by Career
Holdings and the Purchaser, and the Company assumes no responsibility for the
accuracy or completeness of such information.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action in connection with the matters set forth
herein. Capitalized terms used herein and not otherwise defined herein shall
have the meaning set forth in the Statement.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on August
31, 2001. The Offer is currently scheduled to expire at 12:00 midnight, New
York City time, on September 28, 2001, unless the Offer is extended.
B-1
Purchaser Designees
Effective upon the consummation of the Offer, Purchaser will be entitled to
designate the number of directors, rounded up to the next whole number, of the
Board of Directors that equals the product of the total number of directors on
the Board of Directors multiplied by the percentage that the number of Shares
accepted for payment by Purchaser bears to the total number of Shares then
outstanding. Pursuant to the Merger Agreement, the Company will promptly, upon
the request of, and as specified by Purchaser, either (a) increase the size of
the Board of Directors or (b) secure the resignations of such number of
incumbent directors, or both, as would be necessary to enable Purchaser's
designees to be elected or appointed to the Board of Directors. Additionally,
the Company will, on the request by Purchaser, cause the Purchaser's designees
to constitute at least the same percentage (rounded up to the next whole
number) of directors serving on (i) each committee of the Board of Directors,
(ii) each board of directors (or similar body) of each of the Company's
subsidiaries and (iii) each committee (or similar body) of any such
subsidiaries' board.
Prior to the effective time of the Merger, the Company's Board of Directors
will have at least two directors (the "Independent Directors") who were
directors of the Company on August 24, 2001, who shall remain as directors of
the Company until the effective time of the Merger. If the number of
Independent Directors is reduced to less than two for any reason prior to the
effective time of the Merger, the remaining Independent Director is entitled to
designate one person to fill the vacancy or, if no Independent Director then
remains, the other directors shall designate two persons to fill such vacancies
who shall not be shareholders, affiliates, or associates of Career Holdings or
Purchaser.
In the event that Purchaser's designees are elected to the Board of
Directors and constitute a majority of the Headhunter Board, and prior to the
effective time of the Merger, in addition to any other applicable requirements,
the affirmative vote of at least one of the Independent Directors then in
office shall be required to (i) amend or modify the Merger Agreement, (ii) have
the Company terminate the Merger Agreement, (iii) grant any extension of time
for performance of any of the obligations of Career Holdings or the Purchaser
under the Merger Agreement, or (iv) waive any condition of the Company's
obligations or rights under the Merger Agreement.
Purchaser has informed the Company that it will choose its designees to the
Board of Directors from the directors and executive officers of Career Holdings
and/or Purchaser listed on Schedule I of Career Holdings' Offer to Purchase,
dated August 31, 2001 (the "Offer to Purchase"), a copy of which is being
mailed to the Company's shareholders together with the Statement. Purchaser has
informed the Company that each of the directors and officers listed in Schedule
I has consented to act as a director of the Company. The address of each person
is set forth Schedule I in such Offer to Purchase. The information in the Offer
to Purchase is incorporated herein by reference.
It is expected that Purchaser's designees may assume office following
consummation of the Offer, which cannot be earlier than September 28, 2001.
Certain Information Concerning the Company
The Common Stock is the only class of equity securities of the Company
outstanding that is entitled to vote at a meeting of the shareholders of the
Company. As of the close of business on August 28, 2001, there were 20,407,872
shares of Common Stock outstanding.
B-2
INFORMATION CONCERNING DIRECTORS AND
EXECUTIVE OFFICERS OF THE COMPANY
Directors, Executive Officers and Key Employees of the Company
The directors, executive officers and key employees of the Company and their
ages and positions as of August 31, 2001 are as follows:
Name Age Position
- ---- --- --------
William H. Scott, III 54 Chairman of the Board of Directors
Burton B. Goldstein, Jr. 53 Director
Robert M. Montgomery, Jr. 44 Director and Chief Executive Officer
Michael G. Misikoff 48 Director
J. Douglas Cox 50 Director
Kimberley E. Thompson 44 Director
W. Craig Stamm 36 Chief Financial Officer and Assistant Secretary
Judith G. Hackett 41 Senior Vice President - Marketing
Matthew W. Ferguson 34 Vice President - Business Development
James Dale 40 Chief Technology Officer
Ronald T. Self 45 President and Chief Operating Officer
William H. Scott, III has served as a director of the Company since October
1997 and became Chairman of the Board of Directors in July 1998. Since December
1991, Mr. Scott has served as President of ITC Holding Company, Inc., a
diversified telecommunications and technology holding company and a principal
shareholder of the Company, and has served on its board of directors since May
1989. Mr. Scott serves as a director of Knology, Inc., a broadband
telecommunications services provider; ITC(delta)DeltaCom, Inc., a regional
telecommunications services provider and Innotrac Corporation, a provider of
customized technology-based marketing and support services.
Burton B. Goldstein, Jr. has served as a director of the Company since July
1998. Mr. Goldstein is currently a venture partner with Mellon Ventures, a
venture capital arm of Mellon Bank. Mr. Goldstein co-founded Information
America, Inc., an online information services company in 1982, and served as
its President from November 1982 to June 1998. From 1996 until June 1998, Mr.
Goldstein served on the executive committee of West Group, a division of The
Thomson Corporation, an information and publishing company. Mr. Goldstein
serves as a director of Wire Access and Noviant and a Board adviser at eMusic
and Investor Force.
Robert M. Montgomery, Jr. has served as a director of the Company since January
1998 and its Chief Executive Officer since March 1999. From January 1999 to
April 2001, Mr. Montgomery served as the Company's President. Since 1992, Mr.
Montgomery has served as a Vice President of ITC Holding Company, Inc. In 1991,
Mr. Montgomery founded InterCall, Inc., a teleconferencing company and a wholly
owned subsidiary of ITC Holding Company, Inc., and served as its President and
Chief Executive Officer until April 1999. From 1993 to April 1999, Mr.
Montgomery served as Chairman of the Board and a director of InterCall's United
Kingdom division. From 1986 to 1991, Mr. Montgomery served in various
capacities with Telecom USA (which was purchased by MCI Communications Corp.),
including President of the Conference Calling Division.
Michael G. Misikoff has served as a director of the Company since May 1999.
Since February 1999, Mr. Misikoff has also served as a consultant to the
Company. From January 1995 to February 1999, Mr. Misikoff served as Vice
President, Chief Financial Officer, Secretary, Treasurer and a director of
Mindspring Enterprises, Inc. From January 1992 to December 1994, Mr. Misikoff
was the acting Chief Financial Officer and a director of InterCall, Inc.
B-3
J. Douglas Cox has served as a director of the Company since October 1997. From
September 1997 to September 1999, Mr. Cox served as Senior Vice President --
Corporate Development of ITC Holding Company, Inc. From March 1987 to September
1997 he served as Chief Financial Officer and Vice President (Finance) of ITC
Holding Company, Inc. and several of its subsidiaries. From 1980 to 1987, Mr.
Cox was a partner in the accounting firm of Cox & Rumsey, Certified Public
Accountants. From 1972 to 1979, Mr. Cox was employed by Arthur Andersen & Co.,
specializing in regulated industries.
Kimberley E. Thompson has served as a director of the Company and its Secretary
since May 1999. Since September 1997, Ms. Thompson has served as Senior Vice
President, General Counsel and Secretary of ITC Holding Company, Inc. and from
June 1996 to September 1997, she served as its Vice President, General Counsel
and Secretary. From 1989 to 1996, Ms. Thompson was a partner with Hogan &
Hartson LLP, a Washington D.C. law firm.
W. Craig Stamm has served as the Company's Chief Financial Officer since
December 2000 and served as Vice President of Corporate Development from
October 1999 until December 2000. Before joining the Company, Mr. Stamm was a
director of the Leveraged Finance Group at SG Cowen from 1997 to 1999. From
1995 to 1997 Mr. Stamm was a Vice President of Creditanstalt Corporate Finance
Corporation. He also was a Senior Associate with Citicorp Leveraged Capital in
New York City, with responsibility for leveraged buyouts, recapitalizations,
and restructurings from 1991 to 1995. Mr. Stamm is also a member of the Atlanta
Technology Angels (ATA), an investment group affiliated with the Atlanta
Technology Development Center that focuses on early-stage technology ventures.
Judith G. Hackett has served as the Company's Senior Vice President --
Marketing since May 1998. From 1995 to 1998, Ms. Hackett was the Senior Vice
President -- Advertising and Marketing with TBS Superstation, Inc., a national
cable network. From 1994 to 1995, Ms. Hackett was General Marketing Manager and
Creative Director of a CBS affiliate television station, WOIO in Cleveland, and
from 1988 to 1994 she served as its Creative Services Director while it was
part of the FOX broadcasting network.
Matthew W. Ferguson has served as the Company's Vice President of Business
Development since June 2000. Before joining the Company, Mr. Ferguson worked
for DigitalWork.com, an online "Do-it-Yourself" business agency, negotiating
strategic partnerships from 1998 to 2000. In 1995, Mr. Ferguson founded
Woodington Management, a real estate investment company, and was employed there
until 1998. In 1996, Mr. Ferguson founded Merg, Inc., a waste management
company, and sold the company in 1998. From 1992 to 1994, Mr. Ferguson was a
practicing attorney with Baker & McKenzie.
James Dale has served as the Company's Chief Technology Officer since December
2000. Before working at the Company, he held several positions with GE
Information Services where he worked from December 1994 to December 2000. His
most recent post with GE Information Services was as General Manager in their
Ireland office, where he worked to integrate the acquisition of Office
Integrated Solutions, an eProcurement solutions provider. Prior to joining GE
Information Services, Mr. Dale spent 13 years at American Software, Inc. in
Research and Development, Technical Services, and Project Management.
Ronald T. Self joined the Company in April 2001 as the President and Chief
Operating Officer. From January 2000 until April 2001, Mr. Self worked at
COMSYS Information Technology Services as the Company's Executive Vice
President and Chief Operating Officer. From 1990 until 2000, Mr. Self worked
for Norrell Corporation (later Spherion through a merger) where he held various
positions including Senior Vice President of Sales and Marketing, Senior Vice
President of Metro Markets, and Vice President and General Manager of the
Central Division. Prior to joining Norrell, Mr. Self spent 11 years working for
Procter & Gamble, Pepsi-Cola and Coca-Cola USA in various field sales,
marketing, national accounts, and general management positions of increasing
levels of responsibility.
B-4
Organization of the Board of Directors
The business of the Company is managed under the direction of the Board of
Directors. In accordance with the Company's bylaws, the number of directors on
the Board of Directors is currently fixed at six.
Our directors are elected at the annual meeting of shareholders. Directors
and executive officers are elected or appointed to serve until they resign, are
removed or are otherwise disqualified to serve or until their successors are
elected and qualified at the next annual meeting of shareholders. During 2000,
the Board of Directors held nine meetings. Each director, during the period
such person was a director, attended at least 75% of the aggregate number of
meetings of the Board of Directors and the committees of the Board of Directors
of which such person was a member.
Committees of the Board of Directors
The Board of Directors has standing audit and compensation committees and
does not have a nominating committee.
Audit Committee. The members of the audit committee are Michael G. Misikoff,
J. Douglas Cox and Burton B. Goldstein, Jr. The audit committee is primarily
responsible for: monitoring the integrity of the Company's financial reporting
process and the system of internal controls regarding finance, accounting and
legal compliance; monitoring the independence and performance of the Company's
independent auditors; providing an avenue of communication among the
independent auditors, management and the Board of Directors; and reviewing
areas of potential significant financial risk to the Company. The audit
committee was formed in May 2000 and held one meeting during 2000.
Compensation Committee. As of April 30, 2001, the members of the
compensation committee were Bernard S. Hodes, William H. Scott, III and Burton
B. Goldstein, Jr. Mr. Hodes resigned as a director effective as of May 1, 2001.
As a result, effective as of such date, Mr. Hodes is no longer a member of the
compensation committee and the compensation committee has a vacancy. The Board
of Directors will evaluate whether to fill such vacancy or reduce the size of
the compensation committee. The compensation committee reviews and recommends
to the Board of Directors all compensation and benefit arrangements of the
Company's executive officers and also administers its incentive and stock
option plans. The Compensation Committee held six meetings during 2000.
Director Compensation
The Company's bylaws allow the Board of Directors to determine from time to
time the compensation that directors may receive for their services as
directors. Through December 2000, directors of the Company were paid $500 for
physical attendance at Board meetings and $200 for attendance via telephone at
Board meetings in addition to being reimbursed for travel to and from the
meetings.
Beginning January 2001, the Headhunter Board members are no longer paid cash
for participating in board meetings, except for expense reimbursement. They now
receive an annual grant of options to purchase Common Stock valued at $25,000
at the date of the grant for each year that they are a member of the Headhunter
Board. Board members who are also a member of a committee receive an additional
annual grant of options to purchase Common Stock valued at $5,000 on the date
of the grant. These options have a vesting period of one year.
Concurrently with their respective elections to the Board of Directors,
Messrs. Scott, Montgomery, Cox, Goldstein, Hodes, and Misikoff, and Ms.
Thompson were each granted options to purchase 10,000 Shares at per share
exercise prices of $0.40, $0.40, $0.40, $1.40, $7.94, $2.00, and $2.00,
respectively. Directors are eligible to receive additional options and awards
under the Company's 1998 Long-Term Incentive Plan.
B-5
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to any person who has served as
Chief Executive Officer during 2000 and to our four most highly compensated
executive officers (our "named executive officers") for services rendered to us
during the year ended December 31, 2000. Except as set forth in the table
below, no other executive officer's salary and bonus exceeded $100,000 during
the year ended December 31, 2000.
Summary Compensation Table
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- ----------------------------------- ---- --------- -------- ------------ ---------------
Robert M. Montgomery, Jr............. 2000 228,000 70,000 400,000 210
Chief Executive Officer 1999 72,917 25,000 200,000 3,399
W. Craig Stamm /(1)/................. 2000 150,000 59,565 50,000 210
Chief Financial Officer and 1999 30,769 -- 75,000 --
Assistant Secretary
Judith G. Hackett.................... 2000 155,000 75,628 100,000 250
Senior Vice President - Marketing 1999 125,000 53,421 10,000 1,125
Mark W. Partin /(2)/................. 2000 150,000 40,341 11,000 210
Chief Financial Officer and 1999 61,195 42,841 100,000 --
Assistant Secretary
Jay M. Myer /(3)/.................... 2000 165,000 80,831 125,000 210
Senior Vice President - Corporate 1999 7,243 -- 100,000 --
Sales And Marketing
- --------
(1)Mr. Stamm has served as the Company's Chief Financial Officer and Assistant
Secretary since December 2000. He was Vice President of Corporate
Development from December 1999 until December 2000.
(2)Mr. Partin served as the Company's Chief Financial Officer and Assistant
Secretary from May 1999 until December 2000.
(3)Mr. Myer served as the Company's Senior Vice President of Corporate Sales
and Marketing from December 1999 until February 2001.
B-6
Option Grants in Last Fiscal Year
POTENTIAL
REALIZABLE
PERCENT VALUE AT ASSUMED
OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES OR BASE OPTIONS TERMS
- - OPTIONS IN FISCAL PRICE EXPIRATION -----------------
NAME GRANTED (#) YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- ----------- ---------- -------- ---------- ------- ---------
Robert M. Montgomery, Jr. 200,000 7.8% 7.94 7/19/10 936,285 2,339,124
Mark W. Partin........... 1,000 * 14.38 1/27/10 7,928 19,527
Mark W. Partin........... 50,376 2.0 7.94 7/19/10 235,831 589,179
Mark W. Partin........... 49,624 1.9 7.94 7/19/10 232,311 580,383
W. Craig Stamm........... 50,000 1.9 7.94 7/19/10 234,071 584,781
Judith G. Hackett........ 50,376 2.0 7.94 7/19/10 235,831 589,179
Judith G. Hackett........ 49,624 1.9 7.94 7/19/10 232,311 580,383
Jay M. Myer.............. 50,376 2.0 7.94 7/19/10 235,831 589,179
Jay M. Myer.............. 74,624 2.9 7.94 7/19/10 349,347 872,774
- --------
* Less than 1%
The above table sets forth summary information concerning individual grants
of stock options made during the year ended December 31, 2000 to each of the
named executive officers. The Company granted all options at the market value
on the date of grant as determined by its Board of Directors. Amounts reported
in the "Potential Realizable Value at Assumed Annual Rates of Stock Price
Appreciation for Options Terms" columns represent hypothetical amounts that may
be realized on exercise of options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation of our Common
Stock over the term of the options. These numbers are calculated based on rules
promulgated by the SEC and do not reflect an estimate of future stock price
growth. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the timing of such exercises and the future
performance of the Common Stock. The Company cannot assure you that it can
achieve the rates of appreciation assumed in this table or that the individuals
in this table will receive the amounts reflected.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year End Option
Values
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS OPTIONS AT
ACQUIRED VALUE AT FY-END (#) FY-END ($)
ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE ($) UNEXERCISABLE UNEXERCISABLE
---- -------- --------- ---------------- -------------
Robert M. Montgomery, Jr. 100,000 1,308,333 100,000/367,267 0/0
Judith G. Hackett........ 20,000 134,500 40,000 / 125,600 124,900/0
Employment Agreements, Termination of Employment and Change in Control
Arrangements
On March 30, 2001, the Company entered into an employment agreement with
Ronald T. Self, its President and Chief Operating Officer as of April 15, 2001.
The agreement provides for a base salary of $300,000, and eligibility to
receive a bonus of $37,500 per quarter for the first three fiscal quarters he
serves as Chief Operating Officer. Beginning on January 1, 2002, or if promoted
to Chief Executive Officer, whichever occurs earlier, he would be eligible to
receive an annual bonus of at least $150,000. Pursuant to the employment
agreement, Mr. Self was awarded options to purchase 400,000 Shares on April 19,
2001 at an exercise price of $4.53 per Share pursuant to the Company's 1998
Long-Term Incentive Plan. Such options will accelerate and become fully
B-7
vested upon the consummation of the Offer, pursuant to the terms of the 1998
Long-Term Incentive Plan. Mr. Self's employment agreement contemplated a
potential additional option to purchase 100,000 Shares if he were appointed
Chief Executive Officer in the future. If Mr. Self is terminated without
"cause" under the employment agreement, and Mr. Self executes a separation
agreement and general release, the Company would be obligated to provide him
with one year's base salary and benefits for up to one year following
termination or until Mr. Self is entitled to benefits from a new employer. Mr.
Self also executed, on March 30, 2001, a separate Confidentiality and
Non-Disclosure Agreement with the Company, which restricts his soliciting
employees and customers of the Company for one year following his termination
and prevents him from competing with the business for six months after
termination.
The Company entered into an employment agreement with W. Craig Stamm, its
Chief Financial Officer, on August 16, 2001. The term of the agreement is
through March 31, 2002. The agreement provides for a base annual salary of
$175,000 and Mr. Stamm is eligible to receive a bonus of up to $12,500 per
quarter for the quarters ending September 30, 2001 and December 31, 2001, with
and pursuant to the terms and conditions set forth in the Company's standard
Executive Incentive Bonus Plan. He will only be entitled to receive a bonus for
the quarter ending March 31, 2002 if employed during the entire quarter and if
he executes a separation agreement and general release. Under the employment
agreement, if Mr. Stamm is terminated without cause, or in connection with and
following a change of control of the Company. He shall be entitled to payment
of his base salary through the remaining term of the agreement. Additionally,
if he executes a separation agreement and general release, he would also be
eligible to receive an additional payment of $75,000 as severance pay. Mr.
Stamm's employment agreement contains restrictive covenants regarding the
solicitation of certain employees and customers for 18 months after
termination.
Mr. Montgomery, the Company's Chief Executive Officer, executed a
Non-Disclosure and Confidentiality Agreement with the Company on February 12,
1999. The agreement provides that, for a period of one year following the
termination of his employment, he shall not solicit employees or customers of
the Company.
Compensation Committee Interlocks and Insider Participation
Prior to establishing the compensation committee in July 1998, the Board of
Directors determined executive compensation. As of the date of this Information
Statement, Mr. Goldstein and Mr. Scott serve on the Company's compensation
committee. Except for Mr. Scott, none of the Company's executive officers
currently serve as a member of the compensation committee or as a director of
any entity of which any of our directors serve as an executive officer. Mr.
Scott is a director of ITC for which Ms. Thompson is an executive officer.
Compensation Committee Report on Executive Compensation
The compensation committee of the Board of Directors has prepared the
following report on the Company's policies with respect to the compensation of
executive officers for the fiscal year ended December 31, 2000. The
compensation committee is charged with making decisions with respect to the
compensation of the Company's executive officers and administering the
Company's stock option plans. No member of the compensation committee is an
employee of the Company or its subsidiaries.
Compensation Policies Toward Executive Officers
The compensation policies of the Company are designed to attract, motivate
and retain experienced and qualified executives, to increase the overall
performance of the Company, to increase shareholder value and to increase the
performance of individual executives.
The compensation committee seeks to provide competitive salaries based upon
individual performance together with annual cash bonuses awarded based on the
Company's overall performance relative to corporate
B-8
objectives, taking into account individual contributions, teamwork and
performance levels. In addition, it is the policy of the Company to grant stock
options to executives upon their commencement of employment with the Company
and annually thereafter in order to strengthen the alliance of interest between
such executives and the Company's shareholders and to give executives the
opportunity to reach the top compensation levels of the competitive market
depending on the Company's performance, as reflected in the market price of the
Company common stock.
The following describes in more specific terms the elements of compensation
that implement the compensation committee's compensation policies, with
specific reference to compensation reported for 2000.
Base Salaries. Base salaries of executives are initially determined by
evaluating the responsibilities of the position, the experience and knowledge
of the individual, and the competitive marketplace for executive talent,
including a comparison to base salaries for comparable positions at peer public
companies in the Company's geographic region. Base salaries for executive
officers are reviewed annually by the compensation committee based upon, among
other things, individual performance and responsibilities.
Annual salary adjustments are recommended by the Chief Executive Officer by
evaluating the performance of each executive officer after considering new
responsibilities and the previous year's performance. The compensation
committee performs the same review of the performance of the Chief Executive
Officer. Individual performance ratings take into account such factors as
achievement of specific goals that are driven by the Company's strategic plan
and attainment of specific individual objectives. The factors affecting base
salary levels are not assigned specific weights.
Bonuses. The Company's annual bonuses to its executive officers are based on
both corporate and individual performance, as measured by reference to factors
that reflect objective performance criteria over which management generally has
the ability to exert some degree of control. These corporate performance
factors consist of revenue and earnings targets established in the Company's
annual budget. Bonuses for 2000, which were paid in 2001, are based upon the
achievement of such financial and operating factors.
Stock Options. A third component of executive officers' compensation
consists of awards under the Company, Inc. 1998 Long-Term Incentive Plan,
pursuant to which the Company grants executive officers and other key employees
options to purchase shares of common stock.
The compensation committee grants stock options to the Company's executives
in order to align their interests with the interests of the shareholders. Stock
options are considered by the compensation committee to be an effective
long-term incentive because the executives' gains are linked to increases in
the value of the Company common stock, which in turn provides shareholder
gains. The compensation committee generally grants options to new executive
officers and other key employees upon their commencement of employment with the
Company and annually thereafter. The options generally are granted at an
exercise price equal to the closing market price of the Company common stock at
the date of the grant. Options granted to executive officers in 2000 typically
vest over a period of four years following the date of grant. The maximum
option term is ten years. Employees who held options with a grant date previous
to April 2000 received immediate vesting of all of those options in conjunction
with the acquisition by the Company of Career Mosaic. The full benefit of the
options is realized upon appreciation of the stock price in future periods,
thus providing an incentive to create value for the Company's shareholders
through appreciation of stock price. Management of the Company believes that
stock options have been helpful in attracting and retaining skilled executive
personnel.
Stock option grants made to executive officers in 2000 reflect significant
individual contributions relating to the Company's operations and
implementation of the Company's development and growth programs. Certain newly
hired executive officers also received stock option grants at the time of their
employment with the Company. During 2000, the Company granted stock options to
purchase an aggregate of 2,474,500 shares of common stock to approximately 220
employees, including options to purchase an aggregate of 375,000 shares of
B-9
common stock to the Company's five most highly compensated executive officers
at December 31, 2000. The per share option exercise prices of options granted
to employees during 2000 ranged from $6.00 to $14.38, which generally equaled
the fair market value of a share of the Company common stock on the respective
dates of grant.
Employee Stock Purchase Plan. The Company adopted an Employee Stock Purchase
Plan under which any employee of the Company, including executive officers, may
purchase shares of the Company's common stock at certain discounts.
Other. The Company adopted a contributory retirement plan, referred to as
the "401(k) plan." Employees become eligible to participate in the plan on the
first day of the quarter following two months of employment with the Company.
The 401(k) plan provides that each participant may contribute up to 15% of the
participant's salary, but not to exceed the annual statutory limit. In 2000,
the Company made matching contributions to each participant's account equal to
50% of the first 6% of such participant's annual contribution by salary and/or
bonus deferral to the 401(k) plan.
Chief Executive Officer Compensation
The executive compensation policy described above is applied in setting Mr.
Montgomery's compensation. Mr. Montgomery generally participates in the same
executive compensation plans and arrangements available to the other senior
executives. Accordingly, his compensation also consists of annual base salary,
annual bonus and long-term equity-linked compensation. The compensation
committee's general approach in establishing Mr. Montgomery's compensation is
to be competitive with peer companies, but to have a large percentage of his
target compensation based upon the long-term performance of the Company, as
reflected in part in the market price of the common stock.
Mr. Montgomery's compensation for the year ended December 31, 2000 included
$300,000 in base salary and a $70,000 cash bonus. Mr. Montgomery's salary and
bonus payments for 2000 were based on, among other factors, the Company's
performance and the 1999 compensation of chief executive officers of comparable
companies, although his compensation was not linked to any particular group of
these companies. Mr. Montgomery was also granted options to purchase 200,000
shares of common stock in 2000 under the Company's 1998 Long-Term Incentive
Plan.
Compensation Deductibility Policy
Under Section 162(m) of the Internal Revenue Code, and applicable Treasury
regulations, no tax deduction is allowed for annual compensation in excess of
$1 million paid to any of the Company's five most highly compensated executive
officers in any one calendar year. The compensation committee intends to
maximize the extent of tax deductibility of executive compensation under the
provisions of Section 162(m) so long as doing so is compatible with its
determinations as to the most appropriate methods and approaches for the design
and delivery of compensation to the Company's executive officers.
Respectfully submitted,
William H. Scott, III
Burton B. Goldstein, Jr.
Bernard S. Hodes
The foregoing report of the compensation committee on executive compensation
shall not be deemed to be incorporated by reference into any filing of the
Company under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates such
information by reference.
B-10
REPORT OF THE AUDIT COMMITTEE
The following report of the audit committee does not constitute "soliciting
material" and should not be deemed to be "filed" with the Securities and
Exchange Commission or incorporated by reference into any other filing of the
Company under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates this
report by reference in any of those filings.
The audit committee oversees the Company's financial reporting process on
behalf of the board of directors. The audit committee operates under a written
charter adopted by the board of directors on May 19, 2000, which is included as
Annex B to the Company's Proxy Statement for its 2001 Annual Meeting of
Shareholders. This report reviews the actions taken by the audit committee with
regard to the Company's financial reporting process during 2000 and
particularly with regard to the Company's audited consolidated financial
statements as of December 31, 2000 and 1999 and for the three years in the
period ended December 31, 2000.
The audit committee is composed of two independent directors, as that term
is defined by the National Association of Securities Dealers, Inc. The third
member, J. Douglas Cox, is not independent under the rules of the National
Association Securities Dealers because he was employed by ITC Holding Company,
Inc., an affiliate of the Company, within the past three years. Mr. Cox ceased
to work for ITC Holding Company in September 1999. The rules of the National
Association of Securities Dealers permit the Company to appoint one
non-independent director to the audit committee if the Company's board of
directors, under exceptional and limited circumstances, determines that
membership on the audit committee by a non-independent director is in the best
interests of the Company and its shareholders. The Company's board of directors
believes that Mr. Cox's extensive background in financial, business and
accounting matters allow him to provide valuable advice to the audit committee.
In addition, the Company's board of directors believes that Mr. Cox's former
employment with ITC Holding Company will not impair his judgment as a member of
the audit committee. Therefore, the board of directors determined that Mr.
Cox's service on the audit committee is in the best interests of the Company
and its shareholders.
The Company's management has the primary responsibility for the Company's
financial statements and reporting process, including the systems of internal
controls. The Company's outside auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and issuing a report
thereon. The committee's responsibility is to monitor and oversee these
processes and to recommend annually to the board of directors the accountants
to serve as the Company's outside auditors for the coming year.
The audit committee has implemented procedures to ensure that during the
course of each fiscal year it devotes the attention that it deems necessary or
appropriate to fulfill its oversight responsibilities under the audit
committee's charter. To carry out its responsibilities, the audit committee met
one time during 2000.
In fulfilling its oversight responsibilities, the audit committee reviewed
and discussed with management the audited financial statements to be included
in the Company's Annual Report on Form 10-K for 2000, including a discussion of
the quality (rather than just the acceptability) of the accounting principles,
the reasonableness of significant judgments and the clarity of disclosures in
the financial statements.
The audit committee also reviewed with the Company's outside auditors,
Arthur Andersen LLP, their judgments as to the quality (rather than just the
acceptability) of the Company's accounting principles and such other matters as
are required to be discussed with the audit committee under Statement on
Auditing Standards No. 61, Communication with Audit Committees. In addition,
the audit committee discussed with Arthur Andersen LLP its independence from
management and the Company, including the matters in the written disclosures
received from Arthur Andersen LLP that are required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees. The audit
committee also considered whether the provision of services during 2000 by
Arthur Andersen LLP that were unrelated to their audit of the financial
B-11
statements referred to above and to their reviews of the Company's interim
financial statements during 2000 is compatible with maintaining Arthur
Andersen's independence.
Additionally, the audit committee discussed with the Company's internal and
outside auditors the overall scope and plan for their respective audits. The
audit committee met with the internal and outside auditors, with and without
management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls and the overall quality of the
Company's financial reporting.
In reliance on the reviews and discussions referred to above, the audit
committee recommended to the board of directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for 2000 for
filing with the Securities and Exchange Commission. The audit committee also
recommended to the board that the Company retain Arthur Andersen LLP as the
Company's outside auditors for 2001.
Michael G. Misikoff, Chairman
J. Douglas Cox, Member
Burton B. Goldstein, Jr., Member
B-12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following tables set forth information with respect to ownership of the
Shares held by the directors and executive officers of the Company, and with
respect to ownership by persons believed by the Company to be the beneficial
owners of more than 5% of its outstanding Shares, in each case, as of August
28, 2001. Also set forth below are shares of Common Stock subject to options or
warrants owned by such persons that are currently exercisable or exercisable
within 60 days of August 28, 2001. All information set forth below has been
taken from Exchange Act filings relating to the Company. In presenting the
number of Shares beneficially owned by a person and the percentage ownership of
that person, Shares subject to options or warrants owned by such person that
are currently exercisable or exercisable within 60 days of August 28, 2001 are
deemed outstanding; provided that such Shares are not deemed outstanding for
the purpose of computing the percentage of ownership of any other person. None
of Career Holdings, Purchaser, any of their respective directors or executive
officers or their associates or subsidiaries owns any Shares. ITC, Ms. Thompson
and Messrs. Scott, Montgomery, Goldstein, Cox and Misikoff have each entered
into a Stockholder Agreement with the Company, Career Holdings and Purchaser
granting an irrevocable proxy to certain officers of Career Holdings to vote
their Shares in favor of the Merger Agreement and with respect to certain other
matters. As a result, Career Holdings may be deemed to have a beneficial
interest in the Shares owned by ITC and such persons.
Directors and Executive Officers
Number of Shares Percentage
of Common Stock Beneficially
Holders Beneficially Owned Owned
- ------- ------------------ ------------
William H. Scott, III............................................... 16,200/(1)/ *
Robert M. Montgomery, Jr............................................ 556,666/(2)/ 2.7%
Burton B. Goldstein, Jr............................................. 46,100/(3)/ *
J. Douglas Cox...................................................... 16,000/(4)/ *
Michael G. Misikoff................................................. 44,000/(5)/ *
Kimberley E. Thompson............................................... 16,000/(6)/ *
Ronald T. Self...................................................... 2,000 *
W. Craig Stamm...................................................... 90,000/(7)/ *
Judith G. Hackett................................................... 95,000/(8)/ *
Matthew W. Ferguson................................................. 6,250/(9)/ *
All current directors and executive officers as a group (10 persons) 888,216/(10)/ 4.3%
- --------
* Less than 1%
(1) Includes 12,000 Shares subject to options exercisable within 60 days of
August 28, 2001, the benefit of which have been assigned to ITC, 300
Shares held by Mr. Scott's spouse and 900 Shares held by Mr. Scott's
children.
(2) Includes 193,333 Shares subject to options exercisable within 60 days of
August 28, 2001.
(3) Includes 12,000 Shares subject to options exercisable within 60 days of
August 28, 2001, 7,000 Shares held in Mr. Goldstein's IRA and 600 Shares
held by Mr. Goldstein's children.
(4) Includes 12,000 Shares subject to options exercisable within 60 days of
August 28, 2001, the benefit of 3,902 Shares of which have been assigned
to ITC.
(5) Includes 12,000 Shares subject to options exercisable within 60 days of
August 28, 2001.
(6) Includes 12,000 Shares subject to options exercisable within 60 days of
August 28, 2001, the benefit of which have been assigned to ITC.
(7) Includes 87,500 Shares subject to options exercisable within 60 days of
August 28, 2001.
(8) Includes 65,000 Shares subject to options exercisable within 60 days of
August 28, 2001.
(9) Represents 6,250 Shares subject to options exercisable within 60 days of
August 28, 2001.
(10) Includes 412,083 Shares subject to options exercisable within 60 days of
August 28, 2001.
B-13
Five Percent Owners
Number of Shares Percentage
of Common Stock Beneficially
Holders Beneficially Owned Owned
------- ------------------ ------------
ITC Holding Company, Inc.
3300 20th Avenue
Valley, Alabama 36854........... 5,527,902/(1)/ 26.5%
Warren L. Bare c/o InJesus.com
2385 Satellite Boulevard
Duluth, Georgia 30096........... 1,292,500 6.3%
Capital Guardian Trust Company
11100 Santa Monica Boulevard
Los Angeles, California 90025... 1,264,500/(2)/ 6.2%
Chaucer Investments Co., LLC
2304 Chandana Trail
Valpraiso, Indiana 46383........ 2,000,000/(3)/ 9.8%
(1)Includes 416,667 Shares subject to a warrant held by ITC Service Company, a
wholly owned subsidiary, exercisable within 60 days and 27,902 Shares
subject to options originally granted to Mr. Cox, Mr. Scott and Ms. Thompson
as directors of the Company, the benefits of which have been assigned to ITC
which are exercisable within 60 days.
(2)The numbers reported were derived from a Schedule 13G executed by Capital
Guardian Trust Company and filed with the Securities and Exchange Commission
on February 12, 2001.
(3)The numbers reported were derived from a Schedule 13G executed by Chaucer
Investments Co., LLC and filed with the Securities and Exchange Commission
on May 8, 2001.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company believes that all of the following transactions were made on
terms no less favorable to it than could have been obtained from unaffiliated
third parties. All future transactions, including loans, between the Company
and its officers, directors, principal shareholders and their affiliates will
be approved by a majority, but not fewer than two, of its disinterested
directors, and will continue to be on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.
On July 19, 2000, in conjunction with the acquisition of Career Mosaic, Inc.
by the Company, the Company entered into a credit agreement with Omnicom
Finance, Inc., a wholly owned subsidiary of Omnicom Group Inc., pursuant to
which Omnicom Finance made available to the Company a revolving line of credit
of up to $10.0 million. On February 27, 2001, HeadHunter. NET and Omnicom
Finance amended the credit agreement to, among other things, extend the
maturity date to June 30, 2004. The Company paid $213,594 to Omnicom Finance in
2000 for interest accrued-to-date. Subsequently, in the first quarter of 2001
the Company prepaid interest on the credit facility through March 2002 by
issuing 101,100 Shares. As of August 28, 2001, there was $10.0 million
outstanding under the line of credit. For a discussion of recent developments
relating to Omnicom Finance, see "Item 7. Purposes of the Transaction and Plans
or Proposals" in the Statement.
On July 19, 2000, in conjunction with the acquisition of Career Mosaic, Inc.
by the Company, the Company entered into a service agreement with Bernard Hodes
Group Inc., a wholly owned subsidiary of Omnicom Group Inc. The agreement
entitled Bernard Hodes Group to sell all the Company services and to receive a
more favorable discount than is generally offered to other advertising agencies
that do business with the Company.
B-14
From the date of the merger until September 30, 2000 the discount was fixed at
40%. Beginning October 2000, the discount is based on a sliding scale that is
directly tied to the total dollars that Bernard Hodes Group sells. The discount
rate is recalculated quarterly based on sales for the prior quarter.
In January 2000 the Company entered into a contract with ITC Service Company
to purchase a 1% equity interest in two airplanes; a Beech Jet and a King Air.
During 2000, the Company paid $102,769 toward the purchase of the interest.
Subsequently, in 2001 the Beech Jet was traded in for a Lear Jet and the
Company purchased a 1% interest in that airplane for an additional $37,050.
This equity interest makes the airplanes available to the Company's executives
on a limited basis. The Company was billed $27,239 for its portion of operating
expenses related to the planes for 2000.
A director of ITC, the Company's largest shareholder, owns a substantial
interest in an insurance company through which the Company obtains certain
insurance coverage. Insurance expense paid to that company for the year ended
December 31, 2000 was $290,849.
The Company utilizes InterCall for internal conference calls. InterCall is a
wholly owned subsidiary of ITC, and Mr. Montgomery was InterCall's Chief
Executive Officer until April 19, 1999. Telephone conferencing expenses with
InterCall were $68,140 for the year ended December 31, 2000.
Beginning in January 1998, the Company entered into an agreement with
ITC(delta)DeltaCom, Inc. to serve as the Company's Internet service provider
and host of the Company's web site. ITC(delta)DeltaCom is related to ITC
through both common ownership and board membership. Internet access and
long-distance telephone charges totaled $149,286 for the year ended December
31, 2000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors, officers
and beneficial owners of more than 10% of the Company's outstanding Common
Stock to file with the SEC initial reports of ownership of the Company's equity
securities and to file subsequent reports when there are changes to such
ownership Based solely on a review of the copies of reports furnished to the
Company, or written representations that annual forms (Form 5) were required in
order to report the grant of stock options only. The Company believes that
during 2000, all filing requirements of its officers, directors and 10% or
greater shareholders for reporting to the SEC their ownership and changes in
ownership of Common Stock (as required pursuant to Section 16(a) of the
Exchange Act) were complied with.
COMPARATIVE STOCK PERFORMANCE
The following graph shows a comparison of cumulative total stockholder
returns for the Common Stock, the Nasdaq Stock Market Index for U.S. Companies,
and the Media General Internet Information Providers Index (the "Peer Group
Index") as a peer group comparison. The graph assumes the investment of $100 on
August 19, 1999, the date of the Company's initial public offering, to December
31, 2000. The data regarding the Company assumes an investment at $10.188 per
share, the closing price on the day of our initial public offering. The Peer
Group Index is composed of companies that provide Internet navigation and
reference guide information for World Wide Web and that publish, provide or
present proprietary, advertising and/or third party content. the Company is
included in the calculation of the returns of the Peer Group Index.
B-15
Comparative Stock Performance Chart/(1)/
[CHART]
Cumulative Total Return 8/19/99 9/99 12/99 3/00 6/00 9/00 12/00
----------------------- ------- ------- ------- ------- ------- ------- -------
HEADHUNTER.NET, INC....... $100.00 $123.70 $123.32 $177.31 $ 99.39 $ 46.02 $ 69.94
NASDAQ STOCK MARKET (U.S.) 100.00 104.86 154.08 173.96 151.25 139.17 93.17
PEER GROUP INDEX.......... 100.00 132.74 287.48 287.11 257.83 282.00 192.41
- --------
(1) Assumes $100 invested on 8/19/99 in the Company's Common Stock, the Nasdaq
Stock Market or Peer Group Index - including reinvestment of dividends.
The foregoing performance graph and table shall not be deemed to be
incorporated by reference into any filing of the Company under the Securities
Act of 1933 or the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates such information by reference.
B-16