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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CAREERBUILDER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7370 54-1779164
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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11495 SUNSET HILLS ROAD
RESTON, VIRGINIA 20190
(703) 709-1001
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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ROBERT J. MCGOVERN
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
CAREERBUILDER, INC.
11495 SUNSET HILLS ROAD
RESTON, VIRGINIA 20190
(703) 709-1001
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
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Copies to:
DAVID SYLVESTER, ESQ. JOCELYN M. AREL, ESQ.
BRENT B. SILER, ESQ. TESTA, HURWITZ & THIBEAULT, LLP
HALE AND DORR LLP HIGH STREET TOWER
1455 PENNSYLVANIA AVENUE, NW 125 HIGH STREET
WASHINGTON, D.C. 20004 BOSTON, MA 02110
TELEPHONE: (202) 942-8400 TELEPHONE: (617) 248-7000
TELECOPY: (202) 942-8484 TELECOPY: (617) 248-7100
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date hereof.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
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If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
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Common Stock, $.001 par value per share..................... $51,750,000 $14,387
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933,
as amended.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 8, 1999
SHARES
[LOGO]
COMMON STOCK
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We are selling shares of common stock and the selling
stockholders are selling shares of common stock. We
will not receive any of the proceeds from the shares of
common stock sold by the selling stockholders.
The underwriters have an option to purchase a maximum of
additional shares from
us to cover over-allotments of shares.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price of the common stock is
expected to be between $ and $ per share. We
will make application to list the common stock on The
Nasdaq Stock Market's National Market under the
symbol "CBDR".
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
STARTING ON PAGE 6.
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO PROCEEDS TO
PUBLIC COMMISSIONS CAREERBUILDER SELLING STOCKHOLDERS
-------- ------------- ------------- --------------------
Per Share.............................. $ $ $ $
Total.................................. $ $ $ $
Delivery of the shares of common stock will be made on or about
, 1999, against payment in immediately available funds.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
CREDIT SUISSE FIRST BOSTON
BANCBOSTON ROBERTSON STEPHENS
HAMBRECHT & QUIST
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
Prospectus dated , 1999.
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TABLE OF CONTENTS
PAGE
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PROSPECTUS SUMMARY.......................................... 3
RISK FACTORS................................................ 6
USE OF PROCEEDS............................................. 19
DIVIDEND POLICY............................................. 19
CAPITALIZATION.............................................. 20
DILUTION.................................................... 22
SELECTED FINANCIAL DATA..................................... 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 25
BUSINESS.................................................... 33
MANAGEMENT.................................................. 43
CERTAIN TRANSACTIONS........................................ 49
PRINCIPAL AND SELLING STOCKHOLDERS.......................... 52
DESCRIPTION OF CAPITAL STOCK................................ 55
SHARES ELIGIBLE FOR FUTURE SALE............................. 58
UNDERWRITING................................................ 60
NOTICE TO CANADIAN RESIDENTS................................ 62
LEGAL MATTERS............................................... 63
EXPERTS..................................................... 63
ADDITIONAL INFORMATION...................................... 63
INDEX TO FINANCIAL STATEMENTS............................... F-1
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
"CareerBuilder(R)," "TeamBuilder(R)," "CareerBuilder Achieve(R),"
"CareerBuilder Network," "TeamBuilder Online," "Personal Search Agent," "PSA"
and the CareerBuilder logo are trademarks or service marks of CareerBuilder.
Other trademarks or service marks appearing in this prospectus are the property
of their respective holders.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THE
OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS AN UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and does not contain all of the information you
should consider before investing in the common stock. You should read the entire
prospectus carefully. Unless otherwise indicated, all information contained in
this prospectus assumes that the underwriters will not exercise their
over-allotment option and reflects the mandatory conversion into common stock of
all outstanding shares of preferred stock upon the closing of this offering.
This prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors" and elsewhere in this prospectus.
CAREERBUILDER, INC.
We are a leading provider of comprehensive online recruitment offerings for
employers and job seekers. Through our network of more than 550 subscriber
customers, job seekers who have registered over 320,000 Personal Search Agents
and 18 premier interactive media companies, we bring employers and job seekers
together by:
- providing employers with the ability to advertise job openings and manage
their online recruiting efforts on a premier network of integrated
Internet sites, including CareerBuilder.com and career sites for 18
interactive media companies, including cYnet, Business Week, USA Today
and NBC Interactive; and
- providing job seekers with the tools to find, explore, evaluate and
compare job opportunities.
The emergence of the Internet and the growth in its use have created an
opportunity to more efficiently recruit job seekers. Companies from a broad
range of industries are expected to do at least a portion of their employee
recruiting over the Internet. Forrester Research, Inc., an independent research
firm, estimates that the size of the online recruitment market will be $1.7
billion by 2003, an increase from $105 million in 1998. Forrester also forecasts
that, by 2003, most large companies, 60% of medium-sized companies and 20% of
small companies will use the Internet for recruiting purposes.
We believe there is significant need for online recruitment offerings that
leverage the attributes of the Internet. These offerings should enable employers
both to advertise job openings on a variety of sites and to focus their
recruiting efforts on select communities of potential employees. These offerings
should also be easily accessible to employers, allowing them to effectively
manage their online recruiting efforts, and should allow potential job seekers
to easily locate, compare, explore, evaluate and apply for jobs.
Our solution is to provide offerings which fulfill these online recruitment
needs. Our offerings consist of:
- THE CAREERBUILDER NETWORK. The CareerBuilder Network consists of
CareerBuilder.com and career sites located on the Internet sites of 18
premier interactive media companies. Through the use of the CareerBuilder
Network, an employer can directly solicit and target job seekers in a
broad range of online communities.
- CAREERBUILDER.COM. CareerBuilder.com is the flagship site of the
CareerBuilder Network and one of the largest independent career sites on
the Internet.
- TEAMBUILDER. TeamBuilder consists of TeamBuilder Online and TeamBuilder
Software. Through the use of TeamBuilder, employers can access the
CareerBuilder Network to post job advertisements and manage their online
recruiting efforts.
As of December 31, 1998, our customer base included more than 550
subscriber customers in industries such as technology, financial services,
health care, professional services, retail and
telecommunications/communications. Our customers include Microsoft Corporation,
Network Associates, Inc., Capital One
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Financial Corporation, Freddie Mac, Bristol-Meyers Squibb Company, Bowne and
Co., Inc. and GTE Internetworking.
Our strategy is to be the leading provider of online recruitment offerings.
To do this, we plan to:
- enhance and expand our online recruitment offerings;
- employ a multi-channel sales strategy to address a greater portion of the
recruitment market;
- expand the CareerBuilder Network;
- strengthen CareerBuilder.com as a premier branded career site on the
Internet;
- expand internationally; and
- pursue acquisitions of providers of related online recruitment services.
We sell our online recruitment offerings through our own direct and
telesales organizations and through ADP's 470-person major accounts division
sales force, which is our primary sales channel for customers with between 100
and 1000 employees.
We were incorporated in Delaware on November 6, 1995 under the name
NetStart, Inc. and changed our name to CareerBuilder, Inc. on March 2, 1998. Our
principal office is located at 11495 Sunset Hills Road, Reston, Virginia 20190.
Our telephone number is (703)709-1001.
THE OFFERING
Common stock offered by us............. shares
Common stock offered by the selling
stockholders........................... shares
Common stock to be outstanding after
the offering........................... shares
Proposed Nasdaq National Market
symbol................................. CBDR
Use of proceeds........................ - repayment of $2.0 million of debt;
- working capital;
- general corporate purposes; and
- potential acquisitions.
The number of shares of common stock to be outstanding after the offering
excludes (1) an aggregate of 3,300,000 shares of common stock reserved for
issuance under our stock plans, of which 1,428,655 shares were subject to
outstanding options as of February 28, 1999 at a weighted average exercise price
of $0.98 per share and (2) 567,889 shares of common stock issuable upon exercise
of outstanding warrants. See "Management -- Stock Plans," "Description of
Capital Stock -- Warrants" and Note 8 of Notes to Financial Statements.
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PERIOD FROM
INCEPTION
(NOVEMBER 1995)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1995 1996 1997 1998
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STATEMENT OF OPERATIONS DATA:
Total revenue......................................... $ -- $ 138 $ 1,925 $ 7,006
Gross profit.......................................... -- 102 1,608 5,315
Income (loss) from operations......................... (52) (2,412) (7,421) (12,018)
Net income (loss)..................................... (52) (2,416) (7,314) (11,987)
Preferred stock dividend requirements................. -- (71) (549) (1,128)
Net income (loss) available to common stockholders.... (52) (2,487) (7,863) (13,115)
Basic and diluted net income (loss) available per
share............................................... $(0.01) $ (0.48) $ (1.80) $ (2.92)
Shares used to compute basic and diluted net income
(loss) available per share.......................... 5,468 5,133 4,366 4,494
Unaudited pro forma basic and diluted net income
(loss) per share.................................... $ (0.87)
Shares used to compute unaudited pro forma basic and
diluted net income (loss) per share................. 13,850
DECEMBER 31, 1998
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PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 2,709 $ 13,709
Working capital (deficit)................................... (3,899) 7,101
Total assets................................................ 6,042 17,042
Convertible preferred stock................................. 18,931 -- --
Total stockholders' equity (deficit)........................ (21,520) 8,411
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For an explanation of basic and diluted net income (loss) available per share,
unaudited pro forma basic and diluted net income (loss) per share and the
weighted average shares used to determine the basic and diluted net income
(loss) available per share and unaudited pro forma basic and diluted net income
(loss) per share, see Note 2 to Notes to Financial Statements.
The pro forma balance sheet data gives effect to the issuance of 2,018,350
shares of Class F convertible preferred stock on January 26, 1999 and the
receipt of the net proceeds therefrom and the conversion of all shares of
preferred stock into common stock, which will occur automatically upon the
closing of this offering.
The pro forma as adjusted balance sheet data gives effect to the sale of the
shares of common stock offered by us in the offering at an assumed
initial public offering price of $ per share, after deducting the estimated
underwriting discounts and commissions and offering expenses payable by us.
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RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus,
including our financial statements and related notes, before you purchase any
common stock. The risks and uncertainties described below are not the only ones
facing CareerBuilder. Additional risks and uncertainties, including those not
presently known to us or that we currently deem immaterial, may also impair our
business.
WE HAVE A LIMITED OPERATING HISTORY WITH WHICH YOU CAN EVALUATE OUR BUSINESS AND
PROSPECTS
We commenced operations in November of 1995, recorded our first revenue in
the third quarter of 1996 and introduced the first commercial version of
TeamBuilder Online in November 1997. Accordingly, we have only a limited
operating history with which you can evaluate our business and prospects. In
addition, our prospects must be considered in light of the risks and
uncertainties encountered by companies in the early stages of development in new
and rapidly evolving markets, specifically the online recruitment market. These
risks include:
- our ability to attract and retain a larger number of employers to recruit
online using the CareerBuilder Network instead of other online
recruitment providers and traditional recruiting methods;
- our ability to attract a larger number of job seekers to the
CareerBuilder.com flagship site and our interactive media company
affiliates' ability to continue to attract potential job seekers to the
other sites on the CareerBuilder Network; and
- our ability to maintain our current, and add new, online interactive
media companies to the CareerBuilder Network.
If we fail to manage these risks successfully, our business, results of
operations and financial condition will be materially and adversely affected.
WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE
We have incurred substantial net losses in every fiscal period since we
began operations. As of December 31, 1998, our accumulated deficit was
approximately $21.8 million. We are not certain when we will become profitable,
if at all. Even if we do achieve profitability, we may not sustain or increase
profitability on a quarterly or annual basis. Failure to achieve or maintain
profitability may materially and adversely affect the market price of our common
stock. We have generated relatively small amounts of revenue until recent fiscal
quarters, while increasing operating expenditures in all areas, particularly in
sales and marketing. If revenues grow more slowly than we anticipate, or if
operating expenses exceed our expectations or cannot be adjusted accordingly,
our business, results of operations and financial condition will be materially
and adversely affected.
OUR QUARTERLY RESULTS MAY FLUCTUATE WHICH COULD CAUSE THE PRICE OF OUR COMMON
STOCK TO FALL
Our quarterly revenue and results of operations are difficult to predict
and may fluctuate significantly from quarter to quarter. If our quarterly
revenue or results of operations fall below expectations of investors or public
market analysts, the price of our common stock could fall substantially. Our
quarterly revenue is difficult to predict and our results of operations may
fluctuate for several reasons, including:
- the online recruitment market is at an early stage of development and
therefore it is difficult to predict customer demand for online
recruitment offerings;
- ADP is our principal sales channel for customers with 100 to 1,000
employees, and ADP's selling efforts will significantly affect our
results of operations in any quarter;
- customers may choose to pay for our services on a per-job posting basis
instead of a multi-month subscription basis; and
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- our cost of revenue, and therefore our operating results, could be
affected by the allocation of our customers' job advertisements among the
CareerBuilder.com site and the other sites on the CareerBuilder Network,
as well as the relative mix of sales between our sales force and sales
made through ADP.
A significant percentage of our expenses, such as employee compensation and
rent, are relatively fixed. Moreover, our expense levels are based, in part, on
our expectations of future revenue. As a result, any shortfall in revenue in
relation to our expectations could cause significant changes in our results of
operations from quarter to quarter and could result in increased or continued
quarterly losses.
Because of these factors, we believe that period to period comparisons of
our results of operations are not necessarily meaningful, and therefore you
should not rely on our quarterly revenue and results of operations to predict
our future performance.
OUR EARNINGS COULD BE SUBJECT TO SEASONAL FLUCTUATIONS
Because our online recruitment business model is new, we do not know if the
online recruitment market is subject to seasonal fluctuations. We believe that
revenue from print media, recruiting search firms and other traditional
recruiting services are generally lower in the months of August, November and
December because of reduced recruiting and job search activity during vacation
periods and holiday seasons. As the online recruitment market develops, seasonal
and cyclical patterns in online recruiting may affect our revenue. In addition,
we believe that we may experience lower sales through our ADP sales channel from
November through January because of a year-end focus by ADP's sales force on
ADP's core business, which may adversely affect our revenue. If seasonal
fluctuations develop in the online recruitment market or as a result of ADP's
selling efforts, our business, results of operations and financial condition
could be materially and adversely affected.
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY A RECESSION
Online recruitment is a new industry and we do not know how sensitive our
industry is to general economic conditions. Demand for online recruitment
offerings may be significantly and adversely affected by the level of economic
activity and employment in the United States and abroad. A recession could cause
employers to reduce or postpone their recruiting efforts generally, and their
online recruiting efforts in particular. Therefore, if a significant economic
downturn or recession occurs in the United States or abroad, our business,
results of operations and financial condition could be materially and adversely
affected.
WE ARE DEPENDENT ON ADP'S SALES FORCE FOR A SIGNIFICANT PORTION OF OUR REVENUE
ADP is our principal sales channel for customers with between 100 and 1,000
employees. Sales of our offerings by ADP accounted for approximately 21% of our
revenue in the quarter ended December 31, 1998, as compared to 9% in the quarter
ended September 30, 1998. We expect ADP's contribution to our revenue to
continue to increase at least through 1999. Our existing agreement with ADP may
be terminated by ADP at any time after January 2002 upon 120 days notice. It is
possible that ADP's sales force will not continue to market our services beyond
January 2002.
ADP may not continue to market our services at the current levels even
during the remaining term of the agreement. Although our agreement with ADP
provides certain financial incentives for ADP to market our recruitment
offerings and ADP is subject to certain sales and marketing commitments, ADP is
not required to achieve specific revenue targets. Our agreement with ADP
generally prohibits us from entering into any reseller, distribution or similar
agreement with any other payroll or benefits administration provider. Moreover,
under the terms of the ADP agreement, it is possible that under certain limited
circumstances ADP could seek to market alternative online recruitment services,
including those of our competitors, during the term of our agreement. Even after
the termination of our agreement with ADP, ADP will continue to receive a share
of recurring revenue derived from customers originally identified by ADP in its
capacity as a sales agent for as long as these customers continue to receive any
of our services for which orders were procured by ADP.
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We may not be able to attract a sufficient number of employer customers
without the ADP sales channel. In addition, we may compete with ADP for sales of
our services to companies employing between 500 and 1,000 persons. It is
possible that we may not manage this channel conflict effectively and that our
relationship with ADP could be materially and adversely affected. If our
relationship with ADP is discontinued or damaged, or if the level of sales
through the ADP channel is lower than expected, our business, results of
operations and financial condition would be materially and adversely affected.
See "Certain Transactions -- Transactions with ADP."
WE COULD BE REQUIRED TO RECORD SIGNIFICANT EXPENSES IF ADP ACHIEVES CERTAIN
REVENUE GOALS
Should ADP achieve certain revenue milestones, warrants to purchase shares
of common stock would become exercisable to purchase up to 457,026 shares of
common stock commencing on each of March 31, 2001 and March 31, 2002 at an
exercise price of $5.00 per share. The ADP warrant contains certain antidilution
provisions that increase the number of shares for which the warrant is
exercisable if we issue additional shares, particularly for financing purposes
(not including the shares sold in this offering). After the completion of this
offering, the antidilution provisions are limited so that the number of shares
of common stock for which each of the installments of the warrant may be
exercisable is limited to a maximum of 502,729 shares. For more information
regarding this warrant, see "Certain Transactions -- Transactions with ADP."
If and when it becomes probable that the net revenue we will receive from
ADP will reach the necessary level for either installment of the warrant to
vest, we would begin to record an expense reflecting the fair value of the
warrant, which will be determined in part based on the market price of the
common stock. We would begin to recognize this expense on the determination of
probability that the revenue targets would be achieved, continuing through the
actual vesting date. We would initially estimate the amount of the expense at
the time of the determination that achievement is probable, based in part on the
market price of the common stock at that time. At the time of actual vesting,
the fair value of the warrant would be remeasured and, if different from the
value used in initially estimating the expense, the difference would be
reflected as an additional charge or credit at that time. Accordingly, the
higher our stock price is at the time probability is determined, or the actual
vesting occurs, the more significant would be the expense we would be required
to record. That expense could be spread over multiple quarters or concentrated
in one quarter. If we are required to record significant expense, our results of
operations for that period could fall below the expectations of our investors or
public market analysts, which could cause the price of our common stock to fall
substantially.
THE INTERNET IS UNPROVEN AS A RECRUITING MEDIUM
Our future is highly dependent on a significant increase in the use of the
Internet as a recruiting medium. The online recruitment market is new and
rapidly evolving, and we cannot yet gauge its effectiveness as compared to
traditional recruiting methods. As a result, demand and market acceptance of
online recruitment offerings are uncertain. Most of our current and potential
employer customers have little or no experience using the Internet for
recruiting purposes and have allocated only a limited portion of their
recruiting budgets to online recruiting. The adoption of online recruiting,
particularly by those entities that have historically relied upon traditional
methods of recruiting, requires the acceptance of a new way of conducting
business, exchanging information and advertising for jobs. Such customers may
find online recruiting to be less effective for meeting their hiring needs
relative to traditional methods of recruiting employees. We cannot assure you
that the online recruitment market will continue to emerge or become
sustainable. If the online recruitment market fails to develop or develops more
slowly than we expect, our business, results of operations and financial
condition would be materially and adversely affected.
OUR BUSINESS MODEL IS UNPROVEN
We first recorded revenue in September 1996 from sales of TeamBuilder
Software. At that time, software sales were a significant component of our
revenue. Beginning in late 1997, we began offering online subscriptions by means
of TeamBuilder Online and software sales became a smaller component of our
revenue. In May 1998,
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we again evolved our business model when we introduced the CareerBuilder
Network, enabling our customers to advertise job openings across a network of
affiliate sites. Accordingly, our business model and profit potential are
unproven. To be successful, we must develop and market online recruitment
offerings that achieve broad market acceptance by employers, job seekers and
interactive media companies. In addition, CareerBuilder.com and the
CareerBuilder Network affiliate sites must generate sufficient job seeker
traffic with demographic characteristics attractive to our employer customers.
It is possible that we will be required to further adapt our business model
in response to additional changes in the online recruitment market or if our
current business model is not successful. If we are not able to anticipate
changes in the online recruitment market or if our business model is not
successful, our business, financial condition and results of operations would be
materially and adversely affected.
WE MAY BE UNABLE TO CONTINUE TO BUILD AWARENESS OF THE "CAREERBUILDER.COM" BRAND
NAME
We believe that continuing to build awareness of the "CareerBuilder.com"
brand name is critical to achieving widespread acceptance of our online
recruitment offerings. Brand recognition is a key differentiating factor among
providers of online recruitment offerings and we believe it could become more
important as competition in the online recruitment market increases. In order to
promote our brand, we may find it necessary to increase our marketing budget or
otherwise increase our financial commitment to creating and maintaining brand
awareness among potential customers. If we fail to successfully promote and
maintain our brand or incur significant expenses in promoting our brand, our
business, results of operations and financial condition could be materially and
adversely affected.
WE MAY HAVE DIFFICULTY MAINTAINING AND EXPANDING THE CAREERBUILDER NETWORK
We believe that a primary reason the CareerBuilder Network is valuable to
employers is that our major interactive media affiliates appeal to a variety of
distinct Internet user communities in strategic broad-based, vertical,
geographic and diversity categories. Our agreements with affiliate members
generally have one-year terms, subject to extension. In addition, one of our key
business strategies is to expand the CareerBuilder Network by adding additional
interactive media affiliates targeting a variety of distinct online communities.
If an affiliate member declines to renew its agreement with us and withdraws
from the CareerBuilder Network, and if we are unable to find a suitable
replacement for that affiliate member, or if we otherwise are not successful in
our efforts to expand the CareerBuilder Network, the CareerBuilder Network may
be less valuable to employers, and our business, results of operations and
financial condition could be materially and adversely affected.
OUR PLANS FOR INTERNATIONAL EXPANSION INVOLVE RISKS
Our strategy includes expansion into international markets through a
combination of partnerships, acquisitions and internal business expansion. We
may experience difficulty in managing international operations due to
competition from local and foreign-based recruitment services, technical
problems, distance, language barriers and cultural differences. Accordingly, we
may not be able to successfully execute our business plan in foreign markets.
Our future international operations will be subject to additional risks,
including difficulties in staffing and managing foreign operations, legal
uncertainties inherent in transnational operations such as export and import
regulations, tariffs and other trade barriers, taxation issues, unexpected
changes in trading policies, regulatory requirements and exchange rates,
operational issues such as longer customer payment cycles and greater
difficulties in collecting accounts receivable, seasonal reductions in business
activity, language and cultural differences, and issues relating to
uncertainties of laws and enforcement relating to the protection of intellectual
property. General political and economic trends may also affect our future
international operations.
In addition, we cannot accurately predict the impact of future fluctuations
in foreign currency exchange rates on our results of operations and financial
condition. To the extent future revenue from international expansion is
denominated in foreign currencies, we would be subject to increased risks
relating to foreign
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currency exchange rate fluctuations. Although we may attempt to hedge currency
rate exposure in the future, any hedging policies that we might implement could
be unsuccessful.
If revenue from international ventures are not adequate to cover our
investment in those ventures, our business, results of operations and financial
condition could be materially and adversely affected.
OUR ACQUISITION STRATEGY INVOLVES RISKS
Our business strategy includes the pursuit of strategic acquisitions. From
time to time, we have engaged in discussions with third parties concerning
potential acquisitions of product lines, technologies and businesses. We
currently do not have active negotiations, commitments or agreements with
respect to any acquisition.
In executing our acquisition strategy, we may be unable to identify
suitable acquisition candidates. In addition, we expect to face competition from
other providers of online recruitment solutions for acquisition candidates,
making it more difficult to acquire suitable companies on favorable terms.
Furthermore, if we pursue any acquisition, our management could spend a
significant amount of time and effort in identifying, negotiating and completing
the acquisition. If we complete an acquisition, we may have to devote a
significant amount of time and management resources to integrate the acquired
business with our existing business. In addition, an acquisition may not produce
the revenue, earnings or business synergies that we anticipated, and an acquired
service or technology may not perform as expected. Accordingly, our acquisition
efforts may not succeed, and the time, capital and management and other
resources spent on an acquisition that failed to meet our expectations could
cause our business, results of operations and financial condition to be
materially and adversely affected.
Acquisitions also involve numerous other risks, including:
- difficulties in the assimilation of the operations, technologies,
products and personnel of the acquired company;
- risks of entering markets in which we have no or limited prior
experience;
- the applicability of rules and regulations that might restrict our
ability to operate; and
- the potential loss of key employees of the acquired company.
To pay for an acquisition, we might use capital stock, or cash, including
the proceeds from this offering, or a combination of both. Alternatively, we may
borrow money from a bank or other lender. If we use capital stock, our
stockholders will experience dilution. If we use cash or debt financing, our
financial liquidity will be reduced. In addition, from an accounting
perspective, an acquisition may involve non-recurring charges or involve
amortization of significant amounts of goodwill that could adversely affect our
results of operations.
WE MAY HAVE DIFFICULTY IN MANAGING OUR GROWTH
Our rapid growth has sometimes strained, and may in the future strain, our
managerial and other resources. Our acquisition strategy and plans for
international expansion could further increase our growth and place additional
burdens on our resources. Our ability to manage growth will depend, in part, on
our ability to continue to enhance our operating, financial and management
information systems. Our personnel, systems, procedures and controls may not be
adequate to support our growth. If we are unable to manage growth effectively,
our business, results of operations and financial condition could be materially
and adversely affected.
WE ARE DEPENDENT ON A NUMBER OF KEY EXECUTIVES
Our future success depends upon the skills, experience and efforts of our
executive officers and key technical employees, in particular Robert J.
McGovern, our Chairman of the Board, President and Chief Executive Officer. Mr.
McGovern founded CareerBuilder in 1995 and has been instrumental in determining
our structure, direction and focus. None of our employees have employment
agreements with us. If we lose the
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services of Mr. McGovern or any of our other executive officers or other key
employees, our business, results of operations and financial condition could be
materially and adversely affected.
WE MUST COMPETE FOR SKILLED PERSONNEL
We depend upon the ability to attract, hire, train and retain highly
skilled technical, sales and marketing, and support personnel, particularly with
expertise in Internet solutions and online recruiting. Competition for qualified
personnel throughout our industry is intense. If we fail to attract, hire or
retain such personnel, our business, results of operations and financial
condition could be materially and adversely affected. In particular, we plan to
expand our sales and marketing and customer support organizations. Based on our
experience, it takes an average of four months for a new salesperson to achieve
targeted levels of productivity. If we are not successful in hiring additional
qualified salespeople or increasing the productivity of our existing sales
force, our business, results of operations and financial condition could be
materially and adversely affected.
OUR MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE
Our success is dependent on our ability to develop new and enhanced
software, services and related products to meet rapidly evolving requirements
for online recruitment software and solutions. Trends that could have a critical
impact on our success include:
- rapidly changing technology in the area of online recruiting;
- evolving industry standards, including both formal and de facto standards
relating to online recruiting;
- developments and changes relating to the Internet;
- competing products and services that offer increased functionality; and
- changes in employer and job seeker requirements.
If we are unable to develop and introduce new products and services, or
enhancements to existing products and services, in a timely and successful
manner, our business, results of operations and financial condition could be
materially and adversely affected.
WE HAVE SIGNIFICANT COMPETITION FROM A VARIETY OF SOURCES
The market for online recruitment solutions is intensely competitive and
highly fragmented. We compete with companies, including recruiting search firms,
that offer a single database "job board" solution, such as Monster.com and
Career Mosaic, as well as newspapers, magazines and other traditional media
companies that provide online job search services, such as CareerPath.com. We
also compete with large Internet information hubs, or portals, such as AOL.com.
We may experience competition from potential customers to the extent that they
develop their own online recruitment offerings internally. In addition, we
compete with traditional recruiting services, such as newspapers and employee
recruiting agencies, for a share of employers' total recruiting budgets. We
expect to face additional competition as other established and emerging
companies, including print media companies and employee recruiting agencies with
established brands, enter the online recruitment market. We may also face
competition from organizations that choose to develop online recruitment
offerings internally. It is also possible that, as the online recruitment market
develops and new products and services are introduced, we may face competition
from the members of the CareerBuilder Network.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, greater brand recognition and a larger installed customer base than
we do. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships to expand their offerings
and to offer more comprehensive solutions.
We believe that there will be rapid business consolidation in the online
recruitment industry. Accordingly, new competitors may emerge and rapidly
acquire significant market share. In addition, new technologies will
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likely increase the competitive pressures that we face. The development of
competing technologies by market participants or the emergence of new industry
standards may adversely affect our competitive position. As a result of these
and other factors, if we are not able to compete effectively with current or
future competitors, our business, results of operations and financial condition
could be materially and adversely affected.
WE HAVE A NUMBER OF RISKS ASSOCIATED WITH THE YEAR 2000
Computer systems and software must accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, many software and
computer systems may need to be upgraded in order to be year 2000 compliant.
Significant uncertainties exist in the software industry concerning the
potential effects associated with the failure of computer systems and software
to be year 2000 compliant. We have completed an assessment of the year 2000
readiness of our products and systems. We cannot, however, be certain that we
have identified all of the potential risks to our business that could result
from matters related to the year 2000. We have identified the following risks
that you should be aware of:
- UNDETECTED YEAR 2000 PROBLEMS COULD MATERIALLY AND ADVERSELY AFFECT OUR
CURRENTLY SUPPORTED PRODUCTS. We believe that all of the products and
services we currently offer to our customers were year 2000 compliant at
the time of installation or launch, and we have conducted tests to
validate their compliance. We cannot be certain, however, that these
tests would have detected all potential year 2000 problems. The failure
of our currently supported products to be fully year 2000 compliant could
result in claims by or liability to our customers, job seekers and
members of the CareerBuilder Network, in which case our business, results
of operations and financial condition could be materially and adversely
affected.
- YEAR 2000 PROBLEMS COULD MATERIALLY AND ADVERSELY AFFECT THE
CAREERBUILDER NETWORK. It is possible that members of the CareerBuilder
Network will experience problems with their Internet sites due to
software that is not year 2000 compliant, leading to disruptions on the
CareerBuilder Network, which could cause our business, results of
operations and financial condition to be materially and adversely
affected.
- YEAR 2000 PROBLEMS COULD MATERIALLY AND ADVERSELY AFFECT OUR INTERNAL
SYSTEMS. Although we have reviewed year 2000 compliance statements made
by the vendors for certain of our internal software systems, such as
accounting and database management, we have not conducted tests to
validate the year 2000 compliance of any of our internal software
systems. Accordingly, it is possible that such systems could contain
undetected problems that could cause serious and costly disruptions which
would have a material adverse effect on our business, results of
operations and financial condition. We are developing contingency plans
to address issues that we believe are critical to our operations in the
event that internal systems fail to be year 2000 compliant and anticipate
finalizing such plans by June 30, 1999.
- PURCHASING PATTERNS OF OUR CUSTOMERS COULD BE MATERIALLY AND ADVERSELY
AFFECTED BY YEAR 2000 ISSUES. The purchasing patterns of our customers
and potential customers may be materially and adversely affected by year
2000 issues because they may be required to expend significant resources
on year 2000 compliance matters, rather than investing in new online
recruitment services such as those we offer. In addition, as the new year
approaches, employers may elect to spend a greater portion of their
recruiting budgets on traditional recruitment methods rather than risk
disruption in their job advertisements in the event of technical
difficulties related to year 2000 problems. We have not conducted a year
2000 review of ADP. Should ADP experience year 2000 problems, they could
be distracted from marketing our services at current levels, which could
reduce revenue derived from ADP.
- YEAR 2000 PROBLEMS COULD AFFECT THE INTERNET. Disruptions caused by year
2000 problems could affect Internet usage generally, which could cause
our business, results of operations and financial condition to be
materially and adversely affected.
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OUR COMPUTER SYSTEMS AND THE COMPUTER SYSTEMS OF OUR CAREERBUILDER NETWORK
AFFILIATES COULD FAIL OR OVERLOAD
The success of our online recruitment offerings is highly dependent on the
efficient and uninterrupted operation of our computer and communications
hardware systems. Substantially all of our communications hardware and certain
of our other computer hardware operations that maintain the CareerBuilder
Network are located at Global Center's facilities in Herndon, Virginia. Fire,
floods, earthquakes, power loss, telecommunications failures and similar events
could damage or cause interruptions in these systems. Computer viruses,
electronic break-ins or other similar disruptive problems could also adversely
affect CareerBuilder.com or other sites on the CareerBuilder Network. If our
systems or the systems of any of the Internet sites of the members of the
CareerBuilder Network are affected by any of these occurrences, our business,
results of operations and financial condition could be materially and adversely
affected. Our insurance policies may not cover, or if covered, may not
adequately compensate us for, any losses that may occur due to any failures or
interruptions in our systems or the systems of the Internet sites of the members
of the CareerBuilder Network. We do not presently have any secondary "off-site"
systems or a formal disaster recovery plan.
In addition, CareerBuilder.com and the Internet sites of the other members
of the CareerBuilder Network must accommodate a high volume of traffic and
deliver frequently updated information. CareerBuilder.com and the Internet sites
of each of the members of the CareerBuilder Network have in the past and may in
the future experience slower response times or decreased traffic for a variety
of reasons. In addition, our users depend on Internet service providers and
other Internet site operators for access to CareerBuilder.com and the Internet
sites of the members of the CareerBuilder Network. Many of the Internet service
providers have experienced significant outages in the past, and could experience
outages, delays and other difficulties due to system failures unrelated to our
systems. If we experience any of these problems, our business, results of
operations and financial condition could be materially and adversely affected.
WE RELY ON TECHNOLOGY THAT IS OWNED BY THIRD PARTIES
We license technology that is incorporated into our services and related
products from third parties. Examples include licenses from Centura Software
Corporation, for certain database technology, and from Verity, Inc., for
full-text indexing and searching technology. In light of the rapidly evolving
nature of Internet technology, we may increasingly need to rely on technology
from other vendors. Technology from others may not continue to be available to
us on commercially reasonable terms, if at all. The loss or inability to access
such technology could result in delays in our development and introduction of
new services and related products or enhancements until equivalent or
replacement technology could be accessed, if available, or developed internally,
if feasible. If we experience such delays, our business, results of operations
and financial condition could be materially and adversely affected.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR SOFTWARE CONTAINS BUGS
Our software products, including TeamBuilder Online and TeamBuilder
Software, could contain undetected errors or "bugs" that could adversely affect
their performance. Additionally, we regularly introduce new releases and
periodically introduce new versions of our software products. The occurrence of
errors in our current products or new products or enhancements could result in
loss of or delay in revenue, loss of market share, failure to achieve market
acceptance, diversion of development resources, injury to our reputation and
damage to our efforts to build brand awareness, any of which could cause our
business, results of operations and financial condition to be materially and
adversely affected.
OUR BUSINESS IS DEPENDENT ON THE INTERNET INFRASTRUCTURE
Our success will depend, in large part, upon the development and
maintenance of the Internet infrastructure as a reliable network backbone with
the necessary speed, data capacity and security, and timely development of
enabling products, such as high speed modems, for providing reliable Internet
access and services. We cannot assure you that the Internet infrastructure will
continue to effectively support the demands placed on it as the
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Internet continues to experience increased numbers of users, greater frequency
of use or increased bandwidth requirements of users. Even if the necessary
infrastructure or technologies are developed, we may have to spend considerable
resources to adapt our offerings accordingly. Furthermore, in the past, the
Internet has experienced a variety of outages and other delays. Any future
outages or delays could affect the Internet sites on which our customers' job
advertisements are posted and the willingness of employers and job seekers to
use our online recruitment offerings. If any of these events occur, our
business, results of operations and financial condition could be materially and
adversely affected.
INTERNET SECURITY CONCERNS COULD HINDER THE GROWTH OF THE INTERNET AND INTERNET
USAGE
The need to securely transmit confidential information over the Internet
has been a significant barrier to electronic commerce and communications over
the Internet. Any well-publicized compromise of security on the Internet could
deter more people from using the Internet or from using it to conduct
transactions that involve transmitting confidential information, such as a job
seeker's resume or an employer's hiring needs. We may be required to incur
significant costs to protect against the threat of security breaches to
CareerBuilder.com and the CareerBuilder Network or to alleviate problems caused
by such breaches. If any of these events occur, our business, results of
operations and financial condition could be materially and adversely affected.
WE MAY BE ADVERSELY AFFECTED BY GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES
ASSOCIATED WITH THE INTERNET
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent, but the legislative and
regulatory treatment of the Internet remains largely unsettled. The United
States Congress recently adopted Internet laws regarding copyrights, taxation
and the protection of children. In addition, a number of other legislative and
regulatory proposals under consideration by federal, state, local and foreign
governments could lead to additional laws and regulations affecting the right to
collect and use personally identifiable information, online content, user
privacy, taxation, access charges and liability for third-party activities,
among other things. For example, the growth and development of the market for
Internet commerce may prompt calls for more stringent consumer protection laws,
both in the United States and abroad, that may impose additional burdens on
companies conducting business over the Internet.
Although our transmissions originate from Virginia, the governments of
other states or foreign countries might attempt to regulate our transmissions or
levy sales or other taxes relating to our activities. The European Union
recently enacted its own privacy regulations that may result in limits on the
collection and use of certain user information. Courts may seek to apply
existing laws not explicitly relating to the Internet in ways that could impact
the Internet, and it may take years to determine whether and how laws such as
those governing intellectual property, privacy, libel and taxation will affect
the Internet and the online recruitment industry.
Existing or future laws or regulations affecting the Internet could lessen
the growth in use of the Internet generally and decrease the acceptance of the
Internet as a communications, commercial and advertising medium, and could
reduce the demand for our services or increase our cost of doing business, all
of which could cause our business, financial condition and results of operations
to be materially and adversely affected.
WE MAY BE LIABLE FOR INFORMATION RETRIEVED FROM OR TRANSMITTED OVER THE INTERNET
We may be sued for defamation, negligence, copyright or trademark
infringement, personal injury or other legal claims relating to information that
is published or made available on CareerBuilder.com and the other sites on the
CareerBuilder Network. These types of claims have been brought, sometimes
successfully, against online services in the past. We could also be sued for the
content that is accessible from CareerBuilder.com and the other CareerBuilder
Network sites through links to other Internet sites or through content and
materials that may be posted by members in chat rooms or bulletin boards. We
also offer email services, which may subject us to potential risks, such as
liabilities or claims resulting from unsolicited email (spamming), lost or
misdirected messages, security breaches, illegal or fraudulent use of email, or
interruptions or delays in email service. Our insurance does not specifically
provide for coverage of these types of claims and therefore may not adequately
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protect us against these types of claims. In addition, we could incur
significant costs in investigating and defending such claims, even if we
ultimately are not found liable. If any of these events occur, our business,
results of operations and financial condition could be materially and adversely
affected.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
PROPRIETARY TECHNOLOGY
Our success depends to a significant degree upon the protection of our
proprietary technology, including TeamBuilder Software and TeamBuilder Online.
The unauthorized reproduction or other misappropriation of our proprietary
technology could enable third parties to benefit from our technology without
paying us for it. If this were to occur, our business, results of operations and
financial condition could be materially and adversely affected.
We rely upon a combination of patents, copyright, trade secret and
trademark laws and non-disclosure and other contractual arrangements to protect
our proprietary rights. The steps we have taken to protect our proprietary
rights, however, may not be adequate to deter misappropriation of proprietary
information. We may not be able to detect unauthorized use of our proprietary
information and take appropriate steps to enforce our intellectual property
rights. Moreover, the laws of other countries in which we may market our
services in the future may afford little or no effective protection of our
intellectual property.
If we resort to legal proceedings to enforce our intellectual property
rights, the proceedings could be burdensome and expensive and could involve a
high degree of risk.
OTHERS COULD CLAIM THAT WE INFRINGE THEIR INTELLECTUAL PROPERTY
Although we attempt to avoid infringing known proprietary rights of third
parties, we are subject to the risk of claims alleging infringement of third
party proprietary rights. If we were to discover that any element of our online
recruitment offerings violates third party proprietary rights, we might not be
able to obtain licenses on commercially reasonable terms to continue offering
our entire online recruitment offerings without substantial reengineering and
that any effort to undertake such reengineering might not be successful. In
addition, product development is inherently uncertain in a rapidly evolving
technological environment in which there may be numerous patent applications
pending, which are confidential when filed, with regard to similar technologies.
Any claim of infringement could cause us to incur substantial costs
defending against the claim, even if the claim is invalid, and could distract
our management from our business. Furthermore, a party making such a claim could
secure a judgment that requires us to pay substantial damages. A judgment could
also include an injunction or other court order that could prevent us from
selling our products. If any of these events occurred, our business, results of
operations and financial condition could be materially and adversely affected.
WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND SUCH ADDITIONAL FINANCING MAY
NOT BE AVAILABLE
We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least the next 12
months. We may need to raise additional capital, however, to fund more rapid
expansion, both in the United States and internationally, to develop new and to
enhance existing services to respond to competitive pressures, and to acquire
complementary services, businesses or technologies. We have raised capital
through the issuance of equity securities three times since January 1998. If we
raise additional funds through further issuances of equity or convertible debt
securities, the percentage of ownership of our current stockholders will be
reduced and such securities may have rights, preferences and privileges senior
to those of our current stockholders, including stockholders purchasing shares
in this offering. In addition, we may not be able to obtain additional financing
on terms favorable to us, if at all. If adequate funds are not available or are
not available on terms favorable to us, our business, results of operations and
financial condition could be materially and adversely affected.
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YOU WILL HAVE A NUMBER OF MARKET RISKS TYPICALLY ASSOCIATED WITH INITIAL PUBLIC
OFFERINGS
Before this offering, there has been no public market for our common stock.
If you purchase shares of common stock in the offering, you will pay a price
that was not established in a competitive market, but was negotiated between us
and the underwriters. The price of the common stock that will prevail in the
market after the offering may be higher or lower than the price you pay.
Although our common stock will be listed on The Nasdaq Stock Market's National
Market, an active trading market may not develop or be sustained after this
offering.
The stock market in general has recently experienced extreme price and
volume fluctuations. In particular, the market prices of shares in newly public
technology companies, particularly those offering Internet-based products and
services, have been extremely volatile and have experienced fluctuations that
have often been unrelated or disproportionate to the operating performance of
such companies. The market price of our common stock could be highly volatile
and subject to wide fluctuations in response to many factors, including the
following:
- quarterly variations in our results of operations;
- adverse business developments impacting CareerBuilder;
- changes in financial estimates by securities analysts;
- investor perception of CareerBuilder and online recruitment services in
general;
- announcements by our competitors of new products and services; and
- general economic conditions both in the United States and in foreign
countries.
In the event of broad fluctuations in the market price of our common stock,
you may be unable to resell your shares at or above the offering price.
Securities class action litigation has often been brought against companies
that experience volatility in the market price of their securities. Litigation
brought against us could result in substantial costs to us in defending against
the lawsuit and a diversion of management's attention that could cause our
business, results of operations and financial condition to be materially and
adversely affected.
YOU WILL EXPERIENCE AN IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF
YOUR INVESTMENT
Purchasers of shares of common stock in this offering will experience
immediate and substantial dilution of $ in the pro forma net tangible
book value per share of common stock (assuming a public offering price of
$ per share). The public offering price per share of common stock is
expected to be substantially higher than the net tangible book value per share
of common stock. This dilution is due in large part to the fact that earlier
investors in CareerBuilder paid substantially less than the public offering
price when they purchased their shares of common stock. The exercise of
outstanding options and warrants to purchase our common stock will result in
additional dilution per share. See "Certain Transactions -- Transactions with
ADP."
CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BY-LAWS MAY MAKE A
TAKEOVER OF OUR COMPANY MORE DIFFICULT
Delaware corporate law and our certificate of incorporation and by-laws
contain certain provisions that could have the effect of delaying, deferring or
preventing a change in control of CareerBuilder or our management. These
provisions could discourage proxy contests and make it more difficult for you
and other stockholders to elect directors and take other corporate actions.
These provisions could also limit the price that certain investors might be
willing to pay in the future for shares of our common stock. Certain of these
provisions:
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- authorize the issuance of "blank check" preferred stock (preferred stock
which can be created and issued by the Board of Directors without prior
stockholder approval) with rights senior to those of common stock;
- provide for a staggered Board of Directors (so that it would take three
successive annual meetings to replace all directors);
- prohibit stockholder action by written consent; and
- establish advance notice requirements for submitting nominations for
election to the Board of Directors and for proposing matters that can be
acted upon by stockholders at a meeting.
FUTURE SALES BY EXISTING STOCKHOLDERS COULD DEPRESS THE MARKET PRICE OF OUR
COMMON STOCK
Immediately following this offering, there will be shares of our
common stock outstanding, or shares if the underwriters exercise their
over-allotment option in full. Sales of our common stock in the public market
following this offering could adversely affect the market price of our common
stock. Moreover, the perception in the public market that such sales could occur
could depress the market price of the common stock. All of the shares sold in
this offering will generally be freely tradable in the open market.
Substantially all of the restricted securities are subject to lock-up agreements
with the underwriters. Person subject to lock-up agreements have agreed not to
sell shares of common stock for a period of 180 days after the completion of
this offering without the underwriters' prior permission. The following sets
forth information regarding potential sales of restricted securities:
- no shares will be eligible for immediate resale;
- 33,625 shares will be eligible for resale beginning 90 days after the
date of this prospectus;
- 14,721,765 additional shares will be eligible for resale beginning 180
days after the date of this prospectus; and
- the remainder of the shares will be eligible for resale from time to time
thereafter.
We intend to register an aggregate of up to 3,300,000 shares of common
stock, which may be issued under our Stock Option Plan, 1999 Stock Incentive
Plan, 1999 Director Stock Option Plan and 1999 Employee Stock Purchase Plan
after this offering. No shares will be issuable under the 1999 Employee Stock
Purchase Plan until at least six months after the closing of this offering.
Some of our existing stockholders and warrantholders have the right to
require us to register their shares of common stock with the Securities and
Exchange Commission. If we register their shares of common stock, they can sell
those shares in the public market.
OUR OFFICERS AND DIRECTORS WILL EXERCISE SIGNIFICANT CONTROL OVER OUR AFFAIRS
We anticipate that the executive officers, directors and entities
affiliated with them will control approximately % of our outstanding common
stock following the completion of this offering. These stockholders, if they act
together, may be able to exercise substantial influence over all matters
requiring approval by our stockholders, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may also have the effect of delaying or preventing a change in control of
CareerBuilder and might affect the market price of the common stock.
WE HAVE BROAD DISCRETION IN USE OF PROCEEDS
We have not identified specific uses for the proceeds from the offering,
and we can spend most of the proceeds of this offering in ways with which you
may not agree. You will not have the opportunity to evaluate the economic,
financial or other information on which we base our decisions on how to use the
proceeds.
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USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately
$ million (approximately $ million if the underwriters' overallotment
option is exercised in full) from the sale of the shares of common stock offered
by us, at an assumed initial public offering price of $ , after deducting
the estimated underwriting discounts and commissions and offering expenses
payable by us. We will not receive any proceeds from the sale of shares of
common stock by the selling stockholders.
We intend to use a portion of the net proceeds to repay all amounts
outstanding under our bridge loan. The bridge loan is secured by substantially
all of our assets and bears interest at a variable rate. As of December 31,
1998, the interest rate for the bridge loan was 11.75%. The bridge loan matures
on the earlier of June 30, 1999 or the date of certain other events, including
the closing of this offering. As of December 31, 1998, the outstanding balance
of the bridge loan was $2.0 million.
We expect to use the remaining net proceeds from this offering for working
capital and other general corporate purposes, including potential acquisitions.
We are not currently participating in any active negotiations and have no
commitments or agreements with respect to any acquisition. We intend to invest
the net proceeds from this offering in short-term, investment grade,
interest-bearing instruments until they are used.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and
we do not anticipate paying cash dividends in the foreseeable future. We
currently intend to retain earnings, if any, to fund the development and growth
of our business. The terms of our revolving credit agreement restrict our
ability to declare and pay cash dividends.
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CAPITALIZATION
The following table sets forth as of December 31, 1998 (1) the actual
capitalization of CareerBuilder, (2) the pro forma capitalization of
CareerBuilder as described in footnote 1 below, and (3) the pro forma as
adjusted capitalization of CareerBuilder after giving effect to the sale by
CareerBuilder of the shares of common stock offered hereby at an
assumed initial public offering price of $ per share and after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by CareerBuilder. This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and Notes thereto appearing elsewhere in this
prospectus.
DECEMBER 31, 1998
------------------------------------------
PRO FORMA
ACTUAL PRO FORMA (1) AS ADJUSTED
-------- ------------- ---------------
(IN THOUSANDS)
Short term debt............................................. $ 3,450 $ 3,450
Convertible preferred stock:
Class A convertible preferred stock, $.001 par value per
share; 1,562,500 shares authorized, 1,507,500 shares
issued and outstanding (actual); no shares authorized,
issued or outstanding (pro forma and pro forma as
adjusted)............................................... 482 -- --
Class B convertible preferred stock, $.001 par value per
share; 2,151,420 shares authorized, 2,071,420 shares
issued and outstanding (actual); no shares authorized,
issued or outstanding (pro forma and pro forma as
adjusted)............................................... 1,574 -- --
Class C convertible preferred stock, $.001 par value per
share; 3,188,889 shares authorized, issued and
outstanding (actual); no shares authorized, issued or
outstanding (pro forma and pro forma as adjusted)....... 4,566 -- --
Class D convertible preferred stock, $.001 par value per
share; 2,045,785 shares authorized, issued and
outstanding (actual); no shares authorized, issued or
outstanding (pro forma and pro forma as adjusted)....... 7,279 -- --
Class E convertible preferred stock, $.001 par value per
share; 1,024,351 shares authorized, issued and
outstanding (actual); no shares authorized, issued or
outstanding (pro forma and pro forma as adjusted)....... 5,030 -- --
Class F convertible preferred stock, $.001 par value per
share; no shares authorized, issued and outstanding
(actual); no shares authorized, issued and outstanding
(pro forma and pro forma as adjusted)(1)................ -- -- --
-------- -------- ------
Total convertible preferred stock.................. 18,931 -- --
Stockholders' equity (deficit):
Preferred stock, $.001 par value; no shares authorized,
issued or outstanding (actual); 10,000,000 shares
authorized, no shares issued or outstanding (pro forma
and pro forma as adjusted).............................. -- -- --
Common stock, $.001 par value per share; 17,500,000 shares
authorized, 4,855,333 shares issued and outstanding
(actual); 21,000,000 shares authorized; 16,711,628
shares issued and outstanding (pro forma); 50,000,000
shares authorized, shares issued and
outstanding (pro forma as adjusted)(2).................. 5 17
Additional paid-in capital................................ 244 30,163
Accumulated deficit....................................... (21,769) (21,769)
-------- -------- ------
Total stockholders' equity (deficit)............... (21,520) 8,411
-------- -------- ------
Total capitalization........................................ $ 861 $ 11,861 $
======== ======== ======
19
21
- -------------------------
(1) Gives effect to (a) issuance of 2,018,350 shares of Class F convertible
preferred stock on January 26, 1999 and the receipt of the net proceeds
therefrom, (b) the automatic conversion of all outstanding shares of
convertible preferred stock into an aggregate of 11,856,295 shares of common
stock upon the closing of this offering and (c) the filing upon the closing
of the offering of CareerBuilder's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of common stock to
50,000,000 and authorize CareerBuilder to issue 10,000,000 shares of
preferred stock.
(2) Excludes (a) an aggregate of 2,100,000 shares of common stock reserved for
issuance under CareerBuilder's Stock Option Plan, of which 1,483,517 shares
were subject to outstanding options as of December 31, 1998 at a weighted
average exercise price of $0.64 per share and (b) 40,568 shares of common
stock issuable upon exercise of outstanding warrants. See
"Management -- Stock Plans," "Description of Capital Stock -- Warrants," and
Note 8 of Notes to Financial Statements.
20
22
DILUTION
The pro forma net tangible book value of CareerBuilder as of December 31,
1998 was $8,242,000 or $0.49 per share of common stock. Pro forma net tangible
book value per share represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding, after
giving effect to the issuance of 2,018,350 shares of Class F convertible
preferred stock in January 1999 and the receipt of the proceeds therefrom and
the automatic conversion of all shares of preferred stock into common stock at
the closing of the offering. After giving effect to the sale of the shares of
common stock offered by CareerBuilder pursuant to this offering at an assumed
initial public offering price of $ per share and after deducting the
estimated underwriting discounts and commissions and offering expenses payable
by CareerBuilder, CareerBuilder's pro forma net tangible book value as of
December 31, 1998 would have been approximately $ million, or $ per
share. This value represents an immediate increase in such pro forma net
tangible book value of $ per share to existing stockholders and an immediate
dilution of $ per share to new investors purchasing shares in this offering.
If the initial public offering price is higher or lower, the dilution to the new
investors will in turn be greater or less. The following table illustrates the
per share dilution:
Assumed initial public offering price....................... $
Pro forma net tangible book value at December 31,
1998.................................................. $ 0.49
Increase attributable to this offering.................
Pro forma net tangible book value after this offering.......
--------
Dilution to new investors................................... $
========
The following table summarizes, as of December 31, 1998 on the pro forma
basis described above, the total number of shares of common stock purchased from
CareerBuilder, the total consideration paid and the average price paid per share
by the existing stockholders and by the new investors based upon an assumed
initial public offering price of $ per share before deducting the estimated
underwriting discounts and commissions and offering expenses payable by
CareerBuilder:
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
Existing stockholders........................ 16,711,628 % $30,180,000 % $1.81
New investors................................
---------- ----- ----------- ----- -----
Total.............................. 100.0% $ 100.0% $
========== ===== =========== ===== =====
As of December 31, 1998, there were also outstanding options to purchase an
additional 1,483,517 shares of common stock at a weighted average exercise price
of $0.64 per share. In addition, warrants to purchase 40,568 shares of common
stock at an exercise price of $4.93 per share were then outstanding. To the
extent these options or the warrants are exercised, there will be further
dilution to new investors in the pro forma net tangible book value of their
shares. See "Management -- Stock Plans" and Note 8 of Notes to Financial
Statements.
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23
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with the Financial Statements and Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," appearing elsewhere
in this prospectus. The statement of operations data for the years ended
December 31, 1996, 1997 and 1998, and the balance sheet data as of December 31,
1997 and 1998, are derived from, and are qualified by reference to, audited
financial statements included elsewhere in this prospectus. The balance sheet
data as of December 31, 1995 and 1996 and the statement of operations data for
the period from inception (November 1995) through December 31, 1995 are derived
from unaudited financial statements of the Company that do not appear in this
prospectus. The unaudited financial statements have been prepared on the same
basis as the audited financial statements and, in the opinion of CareerBuilder's
management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the information set forth
therein. The historical results are not necessarily indicative of the operating
results to be expected in the future.
PERIOD FROM
INCEPTION
(NOVEMBER 1995) YEAR ENDED DECEMBER 31,
THROUGH ------------------------------------
DECEMBER 31, 1995 1996 1997 1998
----------------- ------- ------- --------
(IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Revenue:
Service fees.................................. $ -- $ 94 $ 1,263 $ 6,648
Software license fees......................... -- 44 662 358
------ ------- ------- --------
Total revenue.............................. -- 138 1,925 7,006
Cost of revenue:
Service fees.................................. -- 30 197 1,629
Software license fees......................... -- 6 120 62
------ ------- ------- --------
Total cost of revenue...................... -- 36 317 1,691
------ ------- ------- --------
Gross profit.................................... -- 102 1,608 5,315
------ ------- ------- --------
Operating expenses:
Product development........................... -- 521 1,310 2,293
General and administrative.................... 52 663 1,267 2,305
Sales and marketing........................... -- 1,330 6,452 12,735
------ ------- ------- --------
Total operating expenses................... 52 2,514 9,029 17,333
------ ------- ------- --------
Income (loss) from operations................... (52) (2,412) (7,421) (12,018)
Net interest income (expense)................... -- (4) 107 31
------ ------- ------- --------
Net income (loss)............................... (52) (2,416) (7,314) (11,987)
------ ------- ------- --------
Preferred stock dividend requirements........... -- (71) (549) (1,128)
Net income (loss) available to common
stockholders.................................. $ (52) $(2,487) $(7,863) $(13,115)
====== ======= ======= ========
Basic and diluted net income (loss) available
per share..................................... $(0.01) $ (0.48) $ (1.80) $ (2.92)
Shares used to compute basic and diluted net
income (loss) available per share............. 5,468 5,133 4,366 4,494
Unaudited pro forma basic and diluted net income
(loss) per share.............................. $ (0.87)
Shares used to compute unaudited pro forma basic
and diluted net income (loss) per share....... 13,850
22
24
DECEMBER 31,
-----------------------------------------------
1995 1996 1997 1998
---- ------- ------- --------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................................. $454 $ 82 $ 1,909 $ 2,709
Working capital (deficit)................................. 454 (520) (131) (3,899)
Total assets.............................................. 475 371 3,589 6,042
Convertible redeemable preferred stock.................... -- 2,135 10,700 18,931
Stockholders' equity (deficit)............................ $475 $(2,440) $(9,752) $(21,520)
23
25
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of CareerBuilder should be read in conjunction with
"Selected Financial Data" and Financial Statements and Notes thereto appearing
elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks and uncertainties. CareerBuilder's
actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including, but not
limited to, those set forth under "Risk Factors" and elsewhere in this
prospectus.
OVERVIEW
CareerBuilder provides comprehensive online recruitment offerings for
employers and job seekers. CareerBuilder was founded in November 1995 and has
grown from 7 employees as of March 31, 1996 to 111 employees as of December 31,
1998. During the period from inception (November 1995) to September 1996,
CareerBuilder had insignificant revenue and was primarily engaged in developing
online recruiting technology, specifically TeamBuilder Software and the
CareerBuilder.com career site. During July and August of 1996, CareerBuilder
expanded its operations by adding direct sales and marketing personnel.
CareerBuilder's sales commenced in September 1996. CareerBuilder began
generating more significant revenue in the fourth quarter of 1996 through the
sale of perpetual licenses for TeamBuilder Software and through customer service
fees for monthly subscriptions. In November 1997, CareerBuilder introduced
TeamBuilder Online, to provide Internet-based access to its online recruitment
offerings. In May 1998, CareerBuilder launched the CareerBuilder Network by
hosting the career sites located on the Internet sites of interactive media
companies.
CareerBuilder's revenue is derived principally from service fees and, to a
lesser extent, license fees for TeamBuilder Software. From inception (November
1995) through December 31, 1997, CareerBuilder generated approximately 66% of
its total revenue from service fees and 34% from software license fees. In 1998,
service fees accounted for more than 95% of total revenue. CareerBuilder expects
that service fee revenue will continue to account for a substantial portion of
its revenue for the foreseeable future.
- SERVICE FEES. Service fees include (1) subscription fees received from
customers that post up to a specific number of job advertisements per
month on the career sites that constitute the CareerBuilder Network, (2)
banner and other employment advertising fees and (3) fees for recruiting
services provided by CareerBuilder. The majority of CareerBuilder's
service revenue comes from monthly subscription fees. Customers typically
subscribe for three-, six- or twelve-month subscriptions. Customers may
also subscribe on an individual posting basis. TeamBuilder Online is
provided to customers as part of their monthly service or individual
advertising fee. The monthly subscription fees are recognized ratably
over the subscription period. Revenue from specific numbers of individual
monthly postings are recognized during the month following the month such
postings are made. Revenue from banner and other employment advertising
on CareerBuilder.com is recognized when the advertising impressions are
delivered. Recruitment services revenue is recognized as the services are
performed.
- SOFTWARE LICENSE FEES. Software license fees are generated from sales of
TeamBuilder Software. Customers generally purchase a perpetual license
for TeamBuilder Software and associated features, with an average license
fee for sales made in 1998 of approximately $8,100. Revenue from the sale
of perpetual software licenses is composed of gross revenue less
estimated returns, and is recognized upon delivery to customers.
The members of the CareerBuilder Network receive a portion of the
subscription fee from customers that choose to post job advertisements on their
respective career sites. The portion of the subscription fee paid to members of
the CareerBuilder Network is included in cost of revenue. In addition,
CareerBuilder pays certain
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26
fees, including advertising and marketing fees, to four current CareerBuilder
Network members, and, in one case, may offset a portion of these advertising
fees through job advertising fees paid to this member.
CareerBuilder is party to a joint marketing and sales representative
agreement with ADP. Pursuant to the joint marketing and sales representative
agreement, ADP receives a percentage of the total monthly revenue received by
CareerBuilder from orders procured by ADP. This sales commission fee is included
in CareerBuilder's cost of revenue. The sales commission fee as a percentage of
service fee revenue varies based on the relative job posting activity of these
customers between CareerBuilder.com and the other sites on the CareerBuilder
Network. CareerBuilder recognizes all of the revenue derived from the ADP sales
channel. ADP is generally responsible for billing and collecting from these
customers. Revenue from orders procured by ADP accounted for approximately 11%
of CareerBuilder's total revenue in 1998, including 21% of its total revenue for
the quarter ended December 31, 1998. CareerBuilder expects revenue from this
joint marketing and sales representative agreement to increase in 1999 as a
percentage of its total revenue.
CareerBuilder's cost of revenue as a percentage of revenue has increased
over the last several quarters. This increase primarily resulted from two
factors: (1) an increase in sales commissions paid to ADP and (2) an increase in
fees paid to members of the CareerBuilder Network. CareerBuilder believes that
cost of revenue will continue to increase in 1999 as a percentage of revenue due
to these factors.
In connection with the execution of the joint marketing and sales
representative agreement and its amendment and the sale of shares of capital
stock to ADP, CareerBuilder issued a warrant to ADP, which vests in three
installments. The first installment of 380,000 shares vested at the signing of
the amendment. CareerBuilder also issued a warrant representing the right to
purchase up to 147,321 shares of common stock in connection with an agreement
with an affiliate member of the CareerBuilder Network. CareerBuilder expects to
recognize approximately $2.4 million of expense related to these warrants
between 1999 and 2002, ratably, based on the duration of these agreements. In
addition, if and when ADP achieves certain revenue milestones, CareerBuilder
could incur additional expenses that could be substantial. For more information
regarding the ADP warrant and these potential expenses, see "Certain
Transactions -- Transactions with ADP" and Note 14 of Notes to Financial
Statements.
CareerBuilder has incurred substantial net losses in every fiscal period
since its inception (November 1995), and as of December 31, 1998 had an
accumulated deficit of $21.8 million. Losses totaled $7.3 million in 1997 and
$12.0 million in 1998. Such net losses and the accumulated deficit resulted from
CareerBuilder's lack of substantial revenue and the significant costs incurred
in developing its online recruitment offerings, including establishing the
CareerBuilder Network.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1998
REVENUE
CareerBuilder's total revenue increased 264% from $1.9 million in 1997 to
$7.0 million in 1998. Service revenue increased 426% from $1.3 million in 1997
to $6.6 million in 1998. The increases in total revenue and service revenue were
primarily due to an increase in the number of customers subscribing to the
CareerBuilder Network as a result of increased direct and telesales efforts and
increased marketing and promotional activities. These increases were also
attributable, in part, to the fact that, during 1998, ADP began offering
CareerBuilder's online. Revenue derived from ADP's efforts comprised 11% of
total revenue in 1998. Revenue from software license fees declined 46% from
$662,000 in 1997 to $358,000 in 1998. This decrease was primarily due to
CareerBuilder's introduction of TeamBuilder Online at the end of 1997 and more
customers choosing to use TeamBuilder Online rather than TeamBuilder Software to
access CareerBuilder's online recruitment services.
COST OF REVENUE
Cost of revenue consists of commissions paid to ADP for its sales of
CareerBuilder's online recruitment offerings, fees paid to CareerBuilder Network
affiliates, and expense associated with the cost of hosting the career sites on
the CareerBuilder Network, including depreciation. Cost of revenue also includes
expenses
25
27
associated with customer support and the delivery of professional services and
royalties to third parties for certain software included in TeamBuilder
Software. Cost of revenue in absolute dollars increased 433% from $317,000 in
1997 to $1.7 million in 1998 and as a percentage of revenue increased from 16%
in 1997 to 24% in 1998. These increases were primarily due to commissions paid
to ADP, fees paid to the members of the CareerBuilder Network and expenses,
including depreciation, associated with hosting the career sites on the
CareerBuilder Network, offset in part by a decline in royalties paid to third
parties. In 1997, CareerBuilder did not pay any sales commission fees to ADP or
service fees to the CareerBuilder Network affiliates. CareerBuilder anticipates
that cost of revenue as a percentage of revenue will increase in 1999 to the
extent revenue from ADP continues to increase relative to total revenue and
customers increase their usage of affiliate sites on the CareerBuilder Network.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and related benefits for sales and marketing personnel, advertising and
promotional expenses, trade show expenses, advertising and marketing fees paid
to certain members of the CareerBuilder Network and depreciation expense. Sales
and marketing expenses increased 97% from $6.5 million in 1997 to $12.7 million
in 1998. The increase in sales and marketing expenses was due primarily to an
increase in sales personnel, including the establishment of a telesales force
and a channel sales force that supports ADP's sales effort, costs related to the
continued development of CareerBuilder's marketing and branding campaigns, and,
to a lesser extent, commissions associated with higher revenue. CareerBuilder
also incurred expenses for advertising fees to certain CareerBuilder Network
affiliates in 1998 amounting to approximately $872,000. No advertising fees were
paid to members of the CareerBuilder Network in 1997. CareerBuilder expects
sales and marketing expenses to increase in 1999 in absolute dollars but
decrease as a percentage of revenue as CareerBuilder hires additional personnel,
continues to promote its CareerBuilder.com brand and adds affiliates to the
CareerBuilder Network.
Product Development. Product development expenses include expenses for
research, design and development of CareerBuilder's proprietary technology
incorporated in the TeamBuilder offerings and the CareerBuilder Network, and
expenses associated with operating TeamBuilder Online and the operation of the
CareerBuilder Network. CareerBuilder, to date, has expensed all development
costs as they have been incurred. Product development expenses increased 75%
from $1.3 million in 1997 to $2.3 million in 1998. The increase in product
development expenses was due primarily to the establishment of the career sites
of the CareerBuilder Network and the substantial increase in the number of
customers utilizing TeamBuilder Online. CareerBuilder believes that continued
investment in the CareerBuilder Network and its associated network
infrastructure is critical to attaining its strategic objectives, and as a
result, expects product development expenses in 1999 to increase in absolute
dollars but to decrease as a percentage of revenue.
General and Administrative. General and administrative expenses consist
primarily of compensation for administrative and executive staff, fees for
professional services, bad debt expense, depreciation expense and general office
expenses. General and administrative expenses increased 82% from $1.3 million in
1997 to $2.3 million in 1998. The increase in general and administrative
expenses was due primarily to the increase in administrative and executive
personnel. CareerBuilder expects general and administrative expenses to increase
in absolute dollars but decrease as a percentage of revenue in 1999 as
CareerBuilder hires additional personnel and incurs additional costs related to
the growth of its business and with being a public company.
NET INTEREST INCOME (EXPENSE)
Net interest income (expense) was approximately $107,000 in 1997 and
$31,000 in 1998. Interest income was attributable to cash, cash equivalents and
short-term investments primarily attributable to the net proceeds received by
CareerBuilder from its issuance of equity securities, net of interest expenses
primarily from CareerBuilder's revolving credit line.
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28
TAXES
CareerBuilder has incurred significant operating losses for all periods
from inception (November 1995) through December 31, 1998. CareerBuilder has
recorded a valuation allowance for 100% of its net deferred tax assets as the
future realization of the tax benefit is not sufficiently assured.
YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1997
REVENUE
Revenue increased from $138,000 in 1996 to $1.9 million in 1997. The
increase in revenue was due primarily to an increase in the number of companies
purchasing TeamBuilder Software and utilizing CareerBuilder's services. This
increase in the number of customers utilizing CareerBuilder's services was due
to CareerBuilder's substantially increasing its direct sales efforts and
marketing and promotional activities.
COST OF REVENUE
From 1996 to 1997, cost of revenue consisted of expenses associated with
customer support, and a small royalty paid to a third party for an embedded
database included with TeamBuilder Software. Cost of revenue increased from
$36,000 in 1996 to $317,000 in 1997. This increase in cost of revenue was due to
an increase in the sales of software products and the expansion of the Company's
support activities. Cost of revenue as a percentage of total revenue decreased
from 26% in 1996 to 16% in 1997. Cost of revenue as a percentage of total
revenue decreased in 1997 relative to 1996 because expenses associated with
customer support activity as a percentage of total revenue declined.
CareerBuilder invested in developing a customer support function in 1996 in
anticipation of future revenue.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses increased 385% from $1.3
million in 1996 to $6.5 million in 1997. The increase in sales and marketing
expenses was due primarily to an increase in sales personnel, greater costs
associated with opening sales offices across the United States, an increase in
commissions due to higher revenue and costs related to the continued development
of CareerBuilder's marketing and branding campaigns.
Product Development. Product development expenses increased 151% from
$521,000 in 1996 to $1.3 million in 1997. The increase in product development
expenses was due primarily to an increase in the number of employees and to the
development of CareerBuilder's customer support infrastructure.
General and Administrative. General and administrative expenses increased
91% from $663,000 in 1996 to $1.3 million in 1997. The increase in general and
administrative expenses was due primarily to the increase in administrative and
executive personnel and professional services fees.
NET INTEREST INCOME (EXPENSE)
Net interest income (expense) was $(4,000) in 1996 and $107,000 in 1997.
PERIOD FROM INCEPTION (NOVEMBER 1995) THROUGH DECEMBER 31, 1995
During the period from inception (November 1995) through December 31, 1995,
CareerBuilder was in the development stage and its operating activities
consisted primarily of recruiting of personnel and research and development of
its product line. CareerBuilder generated no revenue and incurred operating
expenses totaling $52,000 during this period. Accordingly, a comparison of the
operating results for that period and 1996 is not meaningful and has been
omitted.
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29
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth a summary of CareerBuilder's quarterly
operating results for the eight quarters ended December 31, 1998. This
information was derived from unaudited interim financial statements that, in the
opinion of management, were prepared on a basis consistent with the financial
statements contained elsewhere in this prospectus and include all adjustments,
consisting of only normal recurring adjustments, necessary for a fair statement
of such information when read in conjunction with the Financial Statements and
Notes thereto. The results of operations for any quarter are not necessarily
indicative of the results of operations for any future period.
QUARTER ENDED
-------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
---------- --------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
Revenue:
Service fees...................... $ 139 $ 259 $ 359 $ 506 $ 903 $ 1,413 $ 1,978 $ 2,354
Software license fees............. 130 134 214 184 151 91 41 75
------- ------- ------- ------- ------- ------- ------- -------
Total revenue................... 269 393 573 690 1,054 1,504 2,019 2,429
Cost of revenue:
Service fees...................... 30 33 32 102 173 273 485 698
Software license fees............. 24 22 56 18 17 26 15 4
------- ------- ------- ------- ------- ------- ------- -------
Total cost of revenue........... 54 55 88 120 190 299 500 702
------- ------- ------- ------- ------- ------- ------- -------
Gross profit........................ 215 338 485 570 864 1,205 1,519 1,727
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Product development............... 226 260 364 460 592 508 606 587
General and administrative........ 185 317 277 488 508 454 556 787
Sales and marketing............... 987 1,308 1,997 2,160 2,858 3,261 3,244 3,372
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses........ 1,398 1,885 2,638 3,108 3,958 4,223 4,406 4,746
------- ------- ------- ------- ------- ------- ------- -------
Income (loss) from operations....... (1,183) (1,547) (2,153) (2,538) (3,094) (3,018) (2,887) (3,019)
Net interest income (expense)....... 39 23 15 30 8 2 18 3
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)................... $(1,144) $(1,524) $(2,138) $(2,508) $(3,086) $(3,016) $(2,869) $(3,016)
======= ======= ======= ======= ======= ======= ======= =======
QUARTER ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- --------- -------- --------- -------- --------- --------
(AS A PERCENTAGE OF TOTAL REVENUE)
Revenue:
Service fees........................ 52% 66% 63% 73% 86% 94% 98% 97%
Software license fees............... 48 34 37 27 14 6 2 3
---- ---- ---- ---- ---- ---- ---- ----
Total revenue..................... 100 100 100 100 100 100 100 100
Cost of revenue:
Service fees........................ 11 8 6 15 16 18 24 29
Software license fees............... 9 6 10 3 2 2 1 0
---- ---- ---- ---- ---- ---- ---- ----
Total cost of revenue............. 20 14 16 18 18 20 25 29
---- ---- ---- ---- ---- ---- ---- ----
Gross profit.......................... 80 86 84 82 82 80 75 71
---- ---- ---- ---- ---- ---- ---- ----
Operating expenses:
Product development................. 84 66 64 67 56 34 30 24
General and administrative.......... 69 81 48 71 48 30 28 32
Sales and marketing................. 367 333 349 313 271 217 161 139
---- ---- ---- ---- ---- ---- ---- ----
Total operating expenses.......... 520 480 461 451 375 281 219 195
---- ---- ---- ---- ---- ---- ---- ----
Income (loss) from operations......... (440) (394) (377) (369) (293) (201) (144) (124)
Net interest income (expense)......... 14 6 3 4 1 -- 1 --
---- ---- ---- ---- ---- ---- ---- ----
Net income (loss)..................... (426)% (388)% (374)% (365)% (292)% (201)% (143)% (124)%
==== ==== ==== ==== ==== ==== ==== ====
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30
CareerBuilder's total revenue has increased in each consecutive quarter
during the eight fiscal quarters ending December 31, 1998, as a result of
increased market acceptance of CareerBuilder's online recruitment offerings.
Service fees have increased from 52% of total revenue in the first quarter of
1997 to 97% of total revenue in the fourth quarter of 1998, which reflects
CareerBuilder's transition from selling TeamBuilder Software to selling
TeamBuilder Online to access its online recruitment services. ADP began selling
CareerBuilder's online recruitment services in 1998, increasing from 3% of total
revenue in the second quarter of 1998 to 9% in the third quarter of 1998 and 21%
in the fourth quarter of 1998.
In 1997, cost of revenue as a percentage of total revenue declined from 20%
in the first quarter of 1997 to 18% in the fourth quarter of 1997. The decrease
in cost of revenue was due primarily to the growth in total revenue in relation
to customer support expenses, and a reduction, relative to total revenue, in
expenses associated with third party providers of technology embedded in
TeamBuilder Software. This trend was reversed in 1998, as cost of revenue as a
percentage of total revenue increased to 29% in the fourth quarter of 1998. The
increase in cost of revenue as a percentage of total revenue was primarily due
to:
- commissions paid to ADP, which began selling CareerBuilder's online
recruitment offerings in February 1998;
- service fees paid to affiliates of the CareerBuilder Network, which was
offered to CareerBuilder's customers beginning in May 1998; and
- expenses, including depreciation, associated with hosting the career
sites on the CareerBuilder Network.
These relative increases in fees and expenses were partially offset by a
decline in third-party royalties related to TeamBuilder Software. Cost of
revenue as a percentage of total revenue is affected on a quarterly basis by the
proportion of revenue from ADP relative to other sales channels, as well as
customers' relative use of affiliates' career sites within the CareerBuilder
Network.
Operating expenses have increased in each consecutive quarter during 1997
and 1998 primarily due to an increase in personnel and in marketing and
promotional activities. Sales and marketing expenses increased substantially in
each quarter in 1997 as CareerBuilder expanded its sales and marketing presence
to major cities in the United States. The increase in sales and marketing
expenses in 1998 was primarily due to the increase in personnel associated with
the telesales force and an increase in marketing communications expenses.
General and administrative expenses have increased, especially since the third
quarter of 1997, as CareerBuilder increased its executive and administrative
personnel and invested in its financial and business infrastructure.
In light of the evolving nature of its business and limited operating
history, CareerBuilder believes that period to period comparisons of its
historical revenue and operating results may not be meaningful and should not be
relied on as indications of future performance. Although CareerBuilder has
experienced sequential quarterly revenue growth during the last two years,
CareerBuilder does not believe that its historical revenue growth rates are
necessarily sustainable or indicative of future revenue growth.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, CareerBuilder has financed its activities primarily
through net cash proceeds from private placements of equity securities, totaling
$19.0 million through December 31, 1998. In January 1999, CareerBuilder
completed a private placement of Class F convertible preferred securities of
$11.0 million.
Net cash used in operating activities was $2.2 million in 1996, $5.8
million in 1997 and $9.2 million in 1998. Net cash used in operating activities
resulted from net operating losses and increases in accounts receivable,
partially offset by increases in deferred revenue, accrued expenses and accounts
payable.
Net cash used in investing activities was $242,000 in 1996, $1.2 million in
1997 and $1.1 million in 1998. Net cash used in investing activities was
primarily related to purchases of computer and network equipment, as well as
leasehold improvements.
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31
Cash provided by financing activities was $2.0 million in 1996, $8.8
million in 1997 and $11.1 million in 1998. Net cash provided by financing
activities was primarily due to private placements of equity securities. In
addition, CareerBuilder has utilized revolving credit lines secured by accounts
receivable and computer equipment to fund its operations.
As of December 31, 1998, CareerBuilder had $2.7 million of cash and cash
equivalents. In addition, CareerBuilder completed a private placement of Class F
convertible preferred securities of $11.0 million in January 1999.
CareerBuilder's principal commitments at December 31, 1998 consisted of
obligations under a revolving credit facility and bridge loan.
In December 1998, CareerBuilder entered into a $2.0 million revolving
credit facility and a $4.0 million bridge loan. The credit facility and the
bridge loan are secured by substantially all of the Company's assets, and bear
interest at a variable rate. The credit facility is renewable annually at the
lender's discretion. The bridge loan becomes due in full on the closing of this
offering. Each of the credit facility and the bridge loan is evidenced by a
promissory note in the amount borrowed. On December 31, 1998, the amount
available for borrowings under the credit facility was $1.5 million and
outstanding borrowings were $1.45 million. At that date, the amount borrowed
under the bridge loan was $2.0 million.
CareerBuilder anticipates it will spend up to $600,000 for capital
equipment in 1999. CareerBuilder has also entered into agreements that provide
for CareerBuilder to pay certain advertising and marketing fees to four of its
current CareerBuilder Network affiliates of up to approximately $3.1 million in
1999. One of these agreements allows the payments to be offset by job posting
fees paid to such affiliate.
CareerBuilder believes that the net proceeds of this offering, together
with its existing cash and cash equivalents, will be sufficient to meet its
anticipated cash requirements for working capital and capital expenditures for
at least the next 12 months.
YEAR 2000 COMPLIANCE
Computer systems and software must accept four digit entries to distinguish
21st century dates from 20th century dates. As a result, many software and
computer systems may need to be upgraded in order to be year 2000 compliant.
Significant uncertainties exist in the software industry concerning the
potential effects associated with the failure of computer systems and software
to be year 2000 compliant. We have completed an assessment of the year 2000
readiness of our products and systems.
CareerBuilder believes that all of the products and services it currently
offers to its customers were year 2000 compliant at the time of installation or
launch and has conducted tests internally to validate the compliance of these
products. We cannot be certain, however, that these tests have detected all
potential year 2000 problems. It is also possible that members of the
CareerBuilder Network will experience problems with their Internet sites due to
software that is not year 2000 compliant, which could lead to disruptions on the
CareerBuilder Network.
CareerBuilder currently believes that its internal software systems are
year 2000 compliant. Although CareerBuilder has reviewed year 2000 compliance
statements made by the vendors of certain of its software systems, such as
accounting and database management systems, CareerBuilder has not conducted
tests to validate the year 2000 compliance of any of its internal software
systems. Accordingly, it is possible that such systems could contain undetected
problems that could cause serious and costly disruptions. CareerBuilder is
developing contingency plans to address issues that it believes are critical to
its operations in the event that internal systems fail to be year 2000 compliant
and anticipates finalizing such plans by June 30, 1999. To date, CareerBuilder
has not incurred significant incremental costs in order to comply with year 2000
requirements and does not believe it will incur significant incremental costs in
the foreseeable future.
The purchasing patterns of customers and potential customers may be
affected by year 2000 issues as companies may be required to expend significant
resources on year 2000 compliance. These expenditures may result in reduced
funds available for online recruiting activities, which could have a material
adverse effect on
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CareerBuilder's business, results of operations and financial condition. Year
2000 complications may disrupt the operations, viability or commercial
acceptance of the Internet, which could also have a material adverse impact on
the CareerBuilder's business, results of operations and financial condition. In
addition, employers may elect to spend a greater portion of their recruiting
budgets on traditional recruitment methods rather than risk disruption in their
job advertisements in the event of technical difficulties related to year 2000
problems. We have not conducted a year 2000 review of ADP. Should ADP experience
year 2000 problems, they could be distracted from marketing our services at
current levels, which could reduce revenue derived from ADP.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, Disclosures about
Segments of an Enterprise and Related Information, which supersedes SFAS No. 14,
Financial Reporting for Segments of a Business Enterprise. This statement
changes the way that public business enterprises report segment information,
including financial and descriptive information about their selected segment
information. Under SFAS No. 131, operating segments are defined as
revenue-producing components of the enterprise which are generally used
internally for evaluating segment performance. SFAS No. 131 is effective for
CareerBuilder's fiscal year ending December 31, 1998 and CareerBuilder has
determined that it does not have any separately reportable business segments as
of December 31, 1998.
In February 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. SOP 98-1 establishes the
accounting for costs of software products developed or purchased for internal
use, including when such costs should be capitalized. CareerBuilder does not
expect SOP 98-1, which is effective for CareerBuilder beginning January 1, 1999,
to have a material effect on CareerBuilder's financial condition or results of
operations.
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BUSINESS
CareerBuilder is a leading provider of comprehensive online recruitment
offerings for employers and job seekers. Through its network of more than 550
subscriber customers, job seekers who have registered over 320,000 Personal
Search Agents and 18 premier interactive media companies, CareerBuilder brings
employers and job seekers together by:
- providing employers with the ability to advertise job openings and manage
their online recruitment efforts on a premier network of integrated
Internet sites, including CareerBuilder.com and career sites for 18
interactive media companies such as cYnet, Business Week, USA Today and
NBC Interactive; and
- providing both active job seekers and passive job seekers, individuals
who are not actively looking for new jobs, with the tools to find,
explore, evaluate and compare job opportunities.
INDUSTRY BACKGROUND
RECRUITMENT MARKET
Employee recruiting is one of the most critical business processes
performed by companies today. According to industry sources, businesses in the
United States spent in excess of $13 billion in 1997 to hire new employees by
advertising job openings in newspapers and by hiring recruitment search firms.
Recruiting employees has become increasingly more challenging in recent
years as a result of the following trends:
- GROWING LABOR SHORTAGE: CareerBuilder believes that the labor pool is
growing more slowly than it has in the past, making it more difficult for
employers to find adequate staffing. The U.S. Bureau of Census projects a
continued growth in the elderly population, with one in five United
States citizens being considered elderly by the year 2030. Additionally,
the U.S. Bureau of Labor Statistics estimates the growth in the labor
force to drop to 11% during the period from 1996 to 2006 compared to 14%
over the previous ten year period. This indicates both a large population
leaving the workforce and fewer replacements for them.
- LABOR SUPPLY AND DEMAND DISPARITY: CareerBuilder believes that many
industries are creating more jobs than there are qualified individuals
available to fill them. For example, an Information Technology
Association of America study indicates that 10% of three core information
technology positions, programmers, systems analysts and computer
engineers, are currently vacant.
- REDUCED TENURE: CareerBuilder believes that employees currently change
jobs more often than in the past, making it more difficult for employers
to retain qualified, experienced individuals.
Traditionally, businesses have recruited employees by advertising job
openings in newspapers, magazines and other print and broadcast media as well as
using third party services, including recruitment search firms, temporary
staffing agencies, career fairs and college recruiters. These traditional
recruiting methods have inherent limitations for both employers and job seekers.
It is difficult for employers, using traditional methods, to effectively
advertise their job openings to a broad base of people while efficiently
targeting their reach to select communities of potential employees, especially
passive job seekers. Traditional methods tend to focus on a geographically
limited pool of potential employees, making it hard for employers to recruit
outside of their particular geographies. From the job seekers' perspective, it
is relatively difficult to search for, find, compare, evaluate and apply for
employment opportunities using traditional methods. Traditional methods are also
relatively slow, both in the time it takes for an employer to effectively
advertise a job and for the job seeker to locate the job and respond to it.
Finally, traditional methods are expensive. For example, according to a 1997
case study conducted by iLogos Corporation, a research firm, an employer with
several years of prior online recruiting experience spent approximately $5,000
for each employee recruited primarily through print media and approximately
$12,500 for each employee recruited using a recruiting search firm.
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ONLINE RECRUITMENT MARKET
The Internet is emerging as a medium that affords users the opportunity to
reach millions of individuals worldwide, provide and exchange more information
and streamline business processes. International Data Corporation, an
independent research organization, estimates that the total number of individual
Internet users worldwide will grow from approximately 69 million in 1997 to 320
million in 2002. In 1997, 69% of Internet users were between the ages of 18 and
44, according to eStat, a research firm, and 64% had at least a college degree.
CareerBuilder believes that job seekers in these age and education brackets are
highly sought after by employers.
The emergence of the Internet and the growth in its use have created an
opportunity to more efficiently recruit job seekers. For employers, online
recruiting can provide increased breadth, increased speed and more effective
targeting of their recruiting efforts. Employers using online recruiting have
the potential to quickly and easily advertise job openings. By advertising job
openings on selected Internet sites, employers have the opportunity to reach and
communicate with specific communities of potential active and passive job
seekers. Job advertisements on the Internet can be accessed anywhere in the
world, allowing businesses to recruit both globally and locally. Internet
recruiting can also be a cost-effective alternative to traditional recruiting
methods, as CareerBuilder believes it generally costs a company less to recruit
over the Internet than through traditional methods. According to the iLogos case
study described above, the same employer spent approximately $1,000 to recruit
each employee using online recruiting, representing approximately 20% of its
cost of recruiting an employee through print media and approximately 8% of its
cost of recruiting an employee using a recruiting search firm.
For job seekers, online recruiting can provide the ability to rapidly and
more easily conduct job searches and gather information about employers. In
addition, the Internet allows individuals to access information from many
different sources and view job advertisements from specific geographies and
industries. Online recruiting may also help to reduce the time of a job search
by permitting job seekers to define their specific job needs and be contacted
automatically when jobs that match their needs become available. Furthermore,
online recruiting can enable job seekers to compare and evaluate job
opportunities and apply for jobs electronically.
MARKET OPPORTUNITY
As Internet usage becomes more widespread, companies from a broad range of
industries are expected to do at least a portion of their employee recruitment
over the Internet. Forrester estimates that the size of the online recruitment
market will be $1.7 billion by 2003, an increase from $105 million in 1998.
Forrester also forecasts that, by 2003, most large companies, 60% of
medium-sized companies and 20% of small companies will use the Internet for
recruitment purposes.
While many online recruitment offerings available today provide significant
advantages over traditional methods, they do not take full advantage of the
benefits of the Internet. For example, certain recruiting search firms and
Internet career sites provide services that permit employers to post job
advertisements solely to a single Internet site. Because these services restrict
the potential interaction between the employer and the job seeker to a single
site, they do not utilize the Internet's capabilities to provide employers with
increased breadth and more effective targeting in their recruiting efforts.
Newspapers and other print media also advertise job openings on their Internet
sites in conjunction with print job advertisements. These services, including
consortia of newspapers, typically permit job seekers to search only one
publication at a time. These services also generally sell job advertisements to
employers on a per-publication basis, requiring employers to independently
contact many publications if the employer wants the job advertisement to be
placed in a variety of sources. Large Internet information hubs, or portals,
provide collections of job advertisements from their own customers as well as
other sources of online job advertisements. CareerBuilder believes Internet
portals provide these services mainly to add additional content to their
Internet offerings for consumers and, consequently, they do not adequately
address employers' online recruitment needs.
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CareerBuilder believes there is significant need for online recruitment
offerings that leverage the attributes of the Internet by:
- enabling employers both to advertise job openings on a wide variety of
sites and to focus their recruitment efforts on select communities of
potential employees;
- making Internet recruiting easily accessible to employers and allowing
them to effectively manage their online recruiting efforts; and
- allowing job seekers to easily locate and compare job openings, including
informing them of new job openings that match their interests.
THE CAREERBUILDER SOLUTION
CareerBuilder provides comprehensive, online recruitment offerings for
employers and job seekers. CareerBuilder's offerings consist of:
- THE CAREERBUILDER NETWORK. The CareerBuilder Network consists of
CareerBuilder.com and career sites located on the Internet sites of 18
premier interactive media companies, including cYnet, Business Week, USA
Today and NBC Interactive. Through the use of the CareerBuilder Network,
an employer can directly solicit and target job seekers in a broad range
of online communities.
- CAREERBUILDER.COM. CareerBuilder.com is the flagship site of the
CareerBuilder Network and one of the largest independent career sites on
the Internet.
- TEAMBUILDER. TeamBuilder consists of TeamBuilder Online and TeamBuilder
Software. Through the use of TeamBuilder, employers can access the
CareerBuilder Network to post job advertisements and manage their online
recruiting efforts.
CareerBuilder's offerings are differentiated from other recruitment
offerings, because they:
ENABLE EMPLOYERS TO REACH AND TARGET JOB SEEKERS ACROSS A WIDE VARIETY OF
PREMIER INTERNET SITES. Through the CareerBuilder Network, CareerBuilder's
employer customers have access to a diverse and expansive audience of potential
job seekers. By using the CareerBuilder Network, employers can choose their
desired reach and focus for each job opening. For example, a company with a job
opening wishing to reach as broad an audience as possible may advertise job
openings on major career sites such as CareerBuilder.com and USA Today's Career
Center, while a company with more specific industry, geographic or diversity
needs may choose to advertise job openings on key vertical industry sites such
as cYnet and American Banker Online, geographic sites such as the Dallas Morning
News, Chancellor Media's CareerFuture.com and NBC Interactive or major diversity
sites such as Microsoft Black Entertainment Television, Black Enterprise Online,
HISPANIC Online and WomenCONNECT.com. By becoming part of the CareerBuilder
Network, major interactive media companies can provide a complete, branded
career service to their online customers without having to build and maintain
their own career site and job advertising engines. This enables major
interactive media companies to take advantage of CareerBuilder's established
customer base and sales channels and create a new source of revenue.
PROVIDE EMPLOYERS WITH THE ABILITY TO EASILY ACCESS AND MANAGE ONLINE
RECRUITING. TeamBuilder enables an employer, using a single point of access, to
post job advertisements across their choice of sites on the CareerBuilder
Network and receive resumes from interested job seekers. Using TeamBuilder,
employers can manage and maximize the effectiveness of their online recruiting
efforts. TeamBuilder facilitates management of the recruiting process by
enabling employers to measure their online recruiting efforts by tracking the
number of times a job advertisement is viewed, the number of resumes received
for each job advertisement and the quality of the resumes received. TeamBuilder
also provides internal workflow and resume management capabilities.
PROVIDE JOB SEEKERS WITH THE ABILITY TO EASILY RESEARCH, FIND, COMPARE AND
APPLY FOR JOBS. CareerBuilder.com and each of the other sites on the
CareerBuilder Network are easily accessible and searchable databases of jobs
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and employer information. Job seekers can search CareerBuilder.com and the other
sites on the CareerBuilder Network based on a set of job characteristics that
they establish and can then easily send in their resumes electronically. Job
seekers may also establish a Personal Search Agent that reflects their profile
and job search characteristics. Job seekers with Personal Search Agents receive
by email specific job postings that match their search criteria, with electronic
links to more information regarding those positions.
STRATEGY
CareerBuilder's objective is to be the leading provider of online
recruitment offerings. The key elements of CareerBuilder's strategy are to:
ENHANCE AND EXPAND CAREERBUILDER'S ONLINE RECRUITMENT
OFFERINGS. CareerBuilder intends to continue to devote substantial resources to
enhance and expand its current offerings and add new and innovative services and
products to enable employers and job seekers to more effectively leverage the
benefits of the Internet. Current efforts include adding features that allow
employers to more effectively target potential job seekers through interactive
job advertising, improving job search capabilities and migrating features, such
as advanced search tracking and advanced workflow capability, from TeamBuilder
Software to TeamBuilder Online.
EMPLOY A MULTI-CHANNEL SALES STRATEGY TO ADDRESS A GREATER PORTION OF THE
RECRUITMENT MARKET. CareerBuilder uses a three-part channel strategy to expand
its reach into employers' human resources departments: (1) CareerBuilder's
direct sales force focuses on large employers, (2) its telesales force focuses
on small employers and companies outside of the direct sales force's targeted
geographies and (3) CareerBuilder utilizes ADP's 470-person Major Accounts
Division direct sales force to focus on medium-sized employers. CareerBuilder
intends to leverage its direct and telesales sales forces and its relationship
with ADP to reach a broad customer base. By building and strengthening ties to
employers' human resources departments, CareerBuilder believes it can increase
the use of its services and products by employers and also improve its online
recruitment offerings through better knowledge of employers' recruiting needs.
EXPAND THE CAREERBUILDER NETWORK. CareerBuilder intends to continue to
grow the CareerBuilder Network by adding major interactive media affiliates in
strategic, broad-based vertical, geographic and diversity categories.
CareerBuilder believes this expansion will enhance the ability of employers both
to widely disseminate their job advertisements and to reach passive job seekers
through focused recruiting efforts, thereby offering the greatest choice to
employers seeking to maximize recruiting across the Internet.
STRENGTHEN CAREERBUILDER.COM AS A PREMIER BRANDED CAREER SITE ON THE
INTERNET. CareerBuilder intends to strengthen its CareerBuilder.com brand
through increased marketing efforts and expanded and enhanced features and
functionalities. CareerBuilder believes that building its CareerBuilder.com
brand is important to the success of the CareerBuilder Network because it will
increase job seeker traffic to CareerBuilder.com, thereby increasing the
CareerBuilder Network's effectiveness as a recruiting tool.
EXPAND INTERNATIONALLY. CareerBuilder believes there is a significant need
for online recruitment offerings in international markets. Recent demographic
and technology adoption trends in countries around the world, particularly in
Europe, have created a growing opportunity for CareerBuilder to leverage its
technology and business expertise in these markets. CareerBuilder believes
international expansion will enable it to offer services and products to a new
and expansive client base, and provide existing customers the ability to reach a
much wider and more diverse group of prospective job seekers. CareerBuilder
expects to reach these markets of employers and job seekers through a
combination of partnerships, acquisitions and business expansion.
PURSUE ACQUISITIONS OF PROVIDERS OF RELATED ONLINE RECRUITMENT
SERVICES. CareerBuilder intends to become a driver of industry consolidation in
the worldwide online recruitment market. CareerBuilder has developed its
technology and its business model to quickly assimilate other career internet
sites. CareerBuilder believes that there are many geographically or vertically
specific Internet job sites that could provide incremental customers to the
CareerBuilder Network and additional job advertising options to CareerBuilder's
customers. CareerBuilder believes that scale is a key ingredient in the value of
online recruitment solutions and that by growing the
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employer and job seeker base of the CareerBuilder Network through related
acquisitions, CareerBuilder will improve the competitiveness of its offerings
and improve the efficiency of its operations.
PRODUCTS AND SERVICES
THE CAREERBUILDER NETWORK
The CareerBuilder Network is a growing network of 19 premier Internet
sites, including CareerBuilder.com, which allows employers to directly solicit,
reach and target job seekers in a broad range of online communities. By becoming
part of the CareerBuilder Network, major interactive media companies can provide
a complete, branded career service to their online customers without having to
build and maintain their own career site and job advertising engines. This
enables major interactive media companies to take advantage of CareerBuilder's
established customer base and sales channels and create a new source of revenue.
Using proprietary technology, CareerBuilder can quickly build a private label
career site for an interactive media partner, seamlessly integrated with that of
the interactive media organization's existing web site, including its "look and
feel." CareerBuilder hosts the sites and provides and maintains the search
engine and other technological features of the sites, as well as providing
customer support. The sites are also located on servers operated by
CareerBuilder. Each site is integrated into the CareerBuilder Network and
employers can readily advertise job openings on any site on the CareerBuilder
Network. Employers can immediately access information on the demographics of the
community of users of each site on the CareerBuilder Network, which helps
employers plan where to advertise their job openings. Employers are also able to
quickly measure the response to each job advertisement, which enables employers
to continually refine their recruiting efforts to more selectively reach their
intended audience and generate better responses. The CareerBuilder Network
consists of:
American Banker Online Dallas Morning News NBC Interactive (under
Black Enterprise Online developer.com construction)
Business Week ONLINE EDN Access Phillips Business Information
CareerBuilder.com HISPANIC Online QuestLink
Chancellor Media's Internet.com Test & Measurement World
CareerFuture.com Medical Economics USA Today
cYnet Microsoft Black Entertainment WomanCONNECT.com
Television
Companies' job advertisements placed on CareerBuilder.com will also appear
on Yahoo! and AOL's Digital City. For an additional fee, job advertisements can
also appear on CareerMosaic.
CAREERBUILDER.COM
The CareerBuilder.com career site is the flagship site of the CareerBuilder
Network and one of the largest independent Internet career sites.
CareerBuilder.com provides a broad career advisory experience for its community
of active and passive job seekers, including an easily accessible and searchable
database of jobs. Job seekers are able to search CareerBuilder.com, as well as
each of the other sites on the CareerBuilder Network, using a user-defined set
of job characteristics or through a Personal Search Agent. CareerBuilder has
developed content on its career site to attract multiple visits by potential job
seekers. For example, approximately 40,000 subscribers receive CareerBuilder's
online magazine Achieve. CareerBuilder also offers job seekers a free private
email account, permitting them to confidentially receive emails concerning
Personal Search Agent job matches.
TEAMBUILDER ONLINE AND TEAMBUILDER SOFTWARE
TeamBuilder Online and TeamBuilder Software are the service offering and
software package that enable employers to advertise their job openings on one or
more of the career sites on the CareerBuilder Network and manage their online
recruiting efforts. Employers use TeamBuilder to create and modify job
advertisements,
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determine where the job will be advertised, review and manage resumes from job
applicants, and review reports on effectiveness of their online recruiting
efforts. Job advertisements posted to sites on the CareerBuilder Network are
quickly accessible to job seekers visiting those sites. In addition, the job
advertisement is emailed to any of the Personal Search Agents on that site whose
profile matches the job description. Employers may also use TeamBuilder to
create a career Internet site that can easily be integrated into the employers'
existing home Internet sites. The TeamBuilder functionality may be deployed
either as an online service through TeamBuilder Online or as a client-server
application product through TeamBuilder Software.
TeamBuilder Online permits employers to:
- start or modify their online recruiting efforts in minutes;
- advertise job openings and receive resumes;
- document and track their online recruiting efforts;
- establish an online employment site on their home Internet sites;
- measure the effectiveness of their online recruiting efforts; and
- use a single control point to manage their online recruiting efforts.
TeamBuilder Software is a robust Windows NT-based, client-server product
that incorporates the functionality of TeamBuilder Online, with the following
additional features:
- enhanced resume and workflow management capability, including features to
create internal workflow processes to organize resumes and evaluate
candidates;
- enhanced ability to establish a customized online employment site on an
employer's home Internet site; and
- enterprise-wide functionality and advanced workflow capabilities.
For a monthly fee, which generally lists from $500 to over $6,000 for 10 to
over 500 job posting slots, employers can post to a fixed number of job posting
slots on the CareerBuilder Network career sites of their choice. Customers may
also subscribe on an individual posting basis. TeamBuilder Software customers
also pay a one-time software license fee, which averaged approximately $8,100
for sales made in 1998, including associated features.
SERVICES
CareerBuilder's total customer care organization helps new CareerBuilder
customers establish their online recruiting programs by assisting them in
organizing, planning and placing their job advertisements. This organization
regularly contacts customers to help them integrate CareerBuilder's offerings
into their recruiting efforts and also provides technical support. For an
additional fee, the total customer care organization offers customers assistance
in designing and enhancing their online recruiting strategies as well as
assisting them with advertising specific job openings.
TECHNOLOGY
CareerBuilder believes that one of its principal strengths is the
proprietary technology it has developed and deployed in its service and product
offerings, and that the investments it has made and plans to make in its
technologies result in a superior solution for its customers.
The key architectural components of the CareerBuilder offering, including
the CareerBuilder Network and TeamBuilder, are proprietary to CareerBuilder.
These components employ an object-oriented design and implementation methodology
that can be quickly and efficiently upgraded to deliver new features and
functionality. CareerBuilder implements code in a wide variety of languages and
technologies, including C++, Java, Java Script, HTML, DHTML and XML. The core of
the components is a modern SQL compliant database architecture, with extensive
use of a text search engine. As newer alternative languages and technologies
become available, each is evaluated for suitability and employed where
appropriate. CareerBuilder's
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components use a proprietary scripting language to rapidly develop templates
that enable dynamic content replacement in the web pages that comprise much of
the job advertisement and job search applications. This scripting language
enables efficient access to databases, text search engines, operating system
structures and compiled-code constructs and provides a powerful and extensible
programming language for extending the functionality of CareerBuilder's
offerings.
CUSTOMERS
At December 31, 1998, CareerBuilder's customer base included more than 550
subscriber customers in industries such as technology, financial services,
health care, professional services, retail and
telecommunications/communications. Representative companies for which
CareerBuilder recognized at least $5,000 in revenue in the quarter ended
December 31, 1998 include:
TECHNOLOGY
Ascend Communications, Inc.
EMC Corporation
Microsoft Corporation
Network Associates, Inc.
Network Equipment Technologies, Inc.
Orbital Sciences Corporation
Sterling Software, Inc.
The Vantive Corporation
Veritas Software Corporation
FINANCIAL SERVICES
Capital One Financial Corporation
Edward D. Jones & Co.
Freddie Mac
West Coast Life Insurance Company
HEALTH CARE
Bristol-Myers Squibb Company
Children's Hospital
Owen Healthcare Inc.
PROFESSIONAL SERVICES
ABB Systems Control, Inc.
Bowne & Co., Inc.
ICMA Retirement Corporation
The MITRE Corporation
Trinity Consultants, Inc.
RETAIL
The Stop & Shop Supermarket Company
Taco Bell
24 Hour Fitness, Inc.
TELECOMMUNICATIONS/COMMUNICATIONS
ALLTEL Corporation
Bell Atlantic Network Integration
Frontier Communication
GTE Internetworking
Omnipoint Corporation
SBC Technology Resources, Inc.
Teleglobe Inc.
Thomson Technology Services Group
West Group
SALES, MARKETING AND BUSINESS DEVELOPMENT
SALES
CareerBuilder sells its offerings in the United States through a sales and
marketing organization which consisted of 64 employees as of December 31, 1998.
These employees are located at CareerBuilder's headquarters in Reston, Virginia,
and in CareerBuilder's offices in Atlanta, Boston, Chicago, Dallas, Houston, Los
Angeles, New York, San Francisco and Seattle. The sales organization is divided
into three dedicated groups:
- a direct sales force which focuses on employer customers with more than
500 employees;
- a telesales force which focuses on employer customers with under 100
employees, and on customers in geographies not actively addressed by the
direct sales force; and
- a channel sales force that currently supports ADP's CareerBuilder sales
efforts across the United States, which is generally focused on customers
with 100 to 1,000 employees.
MARKETING
To support and actively promote the CareerBuilder.com and CareerBuilder
Network brands among Internet users and particularly online job seekers, and to
support its direct and ADP sales efforts, CareerBuilder conducts comprehensive
marketing programs. These programs include public relations, local radio
advertising, targeted and national online advertising, online recruiting
seminars, print advertising, trade shows and customer communication programs.
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BUSINESS DEVELOPMENT
CareerBuilder has formed a business development group to identify, evaluate
and recruit appropriate interactive media companies as affiliate members of the
CareerBuilder Network. The business development group establishes key categories
of affiliates, based on the recruiting needs of CareerBuilder's customers, and
focuses on soliciting leading interactive media companies in each category.
ADP RELATIONSHIP
In January 1998, CareerBuilder and ADP entered into a joint marketing and
sales representative agreement. CareerBuilder and ADP amended this agreement in
March 1999. The agreement provides for ADP to market CareerBuilder's services to
ADP's customers using ADP's 470-person Major Accounts Division direct sales
force. CareerBuilder and ADP introduced CareerBuilder's products to this sales
force between April and September 1998. Sales of CareerBuilder's services by ADP
accounted for approximately 21% of CareerBuilder's total revenue in the quarter
ended December 31, 1998, up from 9% in the quarter ended September 30, 1998, and
CareerBuilder expects ADP's contribution to its revenues to continue to increase
at least until the year 2000. Although the agreement with ADP provides certain
financial incentives for ADP to market CareerBuilder's online recruitment
services, and ADP is subject to certain sales and marketing commitments, ADP is
not required to achieve specific revenue targets. The agreement generally
prohibits ADP's Employer Services Division, during the term of the agreement,
from entering into any new joint marketing, reseller, distribution or other
arrangement with another provider of Internet recruitment offerings which offers
products or services similar to TeamBuilder Online in the United States or
Canada. However, under the terms of this agreement, it is possible that ADP
could, under certain limited circumstances, seek to market alternative online
recruitment services, including those of CareerBuilder's competitors, during the
term of the agreement. This agreement also generally provides that, during the
term of the agreement, CareerBuilder will not enter into any new reseller,
distribution or similar agreement with any provider of human resource
information systems which offers payroll software or payroll processing services
similar to those offered by ADP to sell CareerBuilder's online recruiting
offerings in the United States or Canada, or with another payroll or benefits
administration provider. The ADP agreement may be terminated by ADP at any time
after January 23, 2002 upon at least 120 days notice.
In connection with the execution of the joint marketing and sales
representative agreement and its amendment and the sale of shares of capital
stock to ADP, CareerBuilder issued a warrant to ADP. See "Certain
Transactions -- Transactions with ADP" and Note 14 of Notes to Financial
Statements.
COMPETITION
CareerBuilder competes with companies, including recruiting search firms,
that offer a single database "job board" solution, such as Monster.com and
Career Mosaic, as well as newspapers, magazines and other traditional media
companies that provide online job search services, such as CareerPath.com.
CareerBuilder also competes with large Internet information hubs, or portals,
such as AOL.com. CareerBuilder may experience competition from potential
customers to the extent that they develop their own online recruitment solutions
internally. In addition, CareerBuilder competes with traditional recruiting
services, such as newspapers and employee recruiting agencies, for a share of
employers' total recruiting budgets. CareerBuilder believes that there will be
rapid business consolidation in the online recruitment industry. Accordingly,
competitors may rapidly acquire significant market share. CareerBuilder expects
to face additional competition as other established and emerging companies,
including print media companies and employee recruiting agencies with
established brands, enter the online recruitment market.
Although CareerBuilder believes it competes favorably in the online
recruitment market, the online recruitment market is intensely competitive and a
number of factors could adversely affect CareerBuilder's ability to compete in
the future.
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PROPRIETARY RIGHTS
CareerBuilder relies upon a combination of copyright, trade secret and
trademark laws, and non-disclosure and other contractual arrangements to protect
its proprietary rights. There can be no assurance that the steps CareerBuilder
has taken to protect its proprietary rights, however, will be adequate to deter
misappropriation of proprietary information, and CareerBuilder may not be able
to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights. Although CareerBuilder believes that its products
and services do not infringe upon the intellectual property rights of others and
that it has all rights necessary to utilize the intellectual property employed
in its business, CareerBuilder is subject to the risk of claims alleging
infringement of third-party intellectual property rights. Any such claims could
require CareerBuilder to spend significant sums on litigation, pay damages,
delay product installments, develop non-infringing intellectual property or
acquire licenses to intellectual property that is the subject of any such
infringement. Therefore, such claims could have a material adverse effect on
CareerBuilder's business, operating results and financial condition.
EMPLOYEES
As of December 31, 1998, CareerBuilder had a total of 111 employees. Of
these employees, 64 were involved in sales, marketing and business development,
34 were involved in technical support and engineering and 13 were involved in
finance, administration and corporate operations. None of CareerBuilder's
employees is represented by a labor union. CareerBuilder has not experienced any
work stoppages and considers relations with its employees to be good.
FACILITIES
CareerBuilder currently leases approximately 27,000 square feet of space at
its headquarters in Reston, Virginia under two separate leases. These leases
expire as to various portions of the facilities at various times from July 1999
to September 2001. CareerBuilder also maintains field sales offices in Atlanta,
Boston, Chicago, Dallas, Houston, Los Angeles, New York, San Francisco and
Seattle.
CareerBuilder contracts with Global Center to host substantially all of its
communications hardware and certain of its computer hardware operations that
maintain the CareerBuilder Network. Global Center provides site hosting, systems
management, network optimization, and environmental security consistent with
accepted standards for high availability around-the-clock data center
operations.
LEGAL PROCEEDINGS
CareerBuilder is not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of CareerBuilder, their
ages and position as of February 28, 1999, are as follows:
NAME AGE POSITION
---- --- --------
Executive officers and directors:
Robert J. McGovern......................... 37 Chairman of the Board of Directors, President
and Chief Executive Officer
James A. Tholen............................ 39 Senior Vice President, Chief Financial
Officer, Secretary and Director
Eugene J. Austin........................... 40 Senior Vice President of Sales
James A. Winchester, Jr.................... 47 Senior Vice President of Engineering and
Chief Technology Officer
Peter Barris (1)........................... 47 Director
Gary C. Butler (1)......................... 52 Director
D. Jarrett Collins (2)..................... 37 Director
J. Neil Weintraut.......................... 40 Director
David C. Wetmore (2)....................... 50 Director
Other key employees:
Partho Choudhury........................... 39 Vice President of Marketing
Joseph G. Monteil.......................... 40 Vice President of Client Services
William A. Klanke.......................... 42 Vice President of Business Development
- -------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
ROBERT J. MCGOVERN is the founder of CareerBuilder, and has served as
Chairman of the Board of Directors, President and Chief Executive Officer of
CareerBuilder since its founding in November 1995. From May 1993 until August
1995, he served as Vice President and General Manager of the Availability and
Performance Management Group, a division of Legent Corporation. Prior to that
time, he served in various senior positions in sales with Hewlett-Packard
Company.
JAMES A. THOLEN has served as a director of CareerBuilder since its
founding in November 1995 and as Senior Vice President and Chief Financial
Officer of CareerBuilder since September 1998. From April 1997 until September
1998, he served as Chief Operating Officer and Chief Financial Officer of FTP
Software, Inc., a software applications development company. From September 1995
to February 1997, he served as Chief Financial Officer of The Compucare Company,
a healthcare information systems provider. From August 1993 until August 1995,
he served as Vice President of Corporate Strategy and Development for Legent
Corporation.
EUGENE J. AUSTIN has served as Senior Vice President of Sales of
CareerBuilder since July 1996. From November 1994 to July 1996, he served as
Vice President of Marketing for the Systems Division of Compaq Computer
Corporation.
JAMES A. WINCHESTER, JR. has served as Senior Vice President of Engineering
and Chief Technology Officer of CareerBuilder since November 1995. From November
1987 until August 1995, he served as Manager and Director of Software
Development with Legent Corporation.
PETER BARRIS has served as a director of CareerBuilder since July 1996. Mr.
Barris has been a General Partner with New Enterprise Associates L.P., a private
investment firm, since 1992. Prior to that, he served as President and Chief
Operating Officer of Legent Corporation from 1988 to 1990. Prior to that, Mr.
Barris served
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as Senior Vice President and General Manager of the Systems Software Division of
UCCEL and held a variety of marketing and general management positions with
General Electric Company. Mr. Barris serves as a director of Mobius Management
Systems, Inc. and pcOrder.com, Inc.
GARY C. BUTLER has served as a director of CareerBuilder since January
1998. Mr. Butler has served as President, Chief Operating Officer and a director
of Automatic Data Processing, Inc. ("ADPI") since April 1998. From January 1995
to April 1998, he served as Group President of the Employer Services Group of
ADPI. Prior to that time, he served as Group President for the Dealer Services
Group of ADPI for more than five years. Mr. Butler serves as a director of
Convergys Corporation.
D. JARRETT COLLINS has served as a director of CareerBuilder since
September 1997. Mr. Collins has served as Director of TTC Ventures, a subsidiary
of Thomson Holdings, a publishing company, since September 1995. From July 1989
to September 1995, Mr. Collins was a principal in Copley Venture Partners, a
venture capital partnership.
J. NEIL WEINTRAUT has served as a director of CareerBuilder since January
1997. Mr. Weintraut has been a General Partner of 21st Century Internet Venture
Partners, a private investment firm, since October 1996. From 1987 to June 1996,
Mr. Weintraut held various positions at Hambrecht Quist, most recently as a
general partner.
DAVID C. WETMORE has served as a director of CareerBuilder since December
1995. Mr. Wetmore has served as Managing Director of Updata Capital, Inc., a
private investment firm, since November 1995. From 1992 to August 1995, Mr.
Wetmore served as Chief Operating Officer and a director of Legent Corporation.
From 1988 to 1992, he served as President, Chief Operating Officer and a
director of Goal Systems International, Inc., a systems software company, and
served as its Chief Executive Officer from 1989 to 1992 and its Chairman from
1991 to 1992. Mr. Wetmore serves as a director of Walker Interactive Systems,
Inc. and Nationwide Investing Foundation.
PARTHO CHOUDHURY has served as Vice President of Marketing of CareerBuilder
since December 1998. From January 1998 to December 1998, he served as Vice
President of Marketing of the Sprint PCS Division of Sprint Corporation, and
from January 1995 to December 1997, he served as the Director of Marketing for
the Sprint PCS Division. From April 1993 to December 1994, he served as the
Director of Marketing for the L'eggs Products Division of Sara Lee Corporation.
Prior to that time, he held marketing positions with Warner-Lambert Company and
Proctor & Gamble Company.
JOSEPH G. MONTEIL has served as Vice President of Client Services of
CareerBuilder since October 1997. From January 1997 to September 1997, he served
as Vice President, Client Services for Best Software, Inc. From June 1995 to
January 1997, he served as a Senior Manager with KPMG LLP. From December 1986 to
June 1995, he served as a Vice President of Client Services for Legent
Corporation.
WILLIAM A. KLANKE has served as Vice President of Business Development of
CareerBuilder since November 1997. From September 1994 to November 1997, he
served as an Associate Publisher with Cahners Publishing Company, a publishing
company.
Following this offering, the Board of Directors of CareerBuilder will be
divided into three classes, each of whose members will serve for a staggered
three-year term. The Board will consist of two Class I Directors (Messrs.
Collins and Weintraut), two Class II Directors (Messrs. Barris and Butler) and
three Class III Directors (Messrs. McGovern, Tholen and Wetmore). At each annual
meeting of stockholders, a class of directors will be elected for a three-year
term to succeed the directors of the same class whose terms are then expiring.
CareerBuilder's Amended and Restated By-laws provide that such directors are
elected by a plurality of all votes cast at such meeting. The terms of the Class
I Directors, Class II Directors and Class III Directors expire upon the election
and qualification of successor directors at the annual meeting of stockholders
held during the calendar years 2000, 2001 and 2002, respectively.
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Each executive officer serves at the discretion of the Board of Directors
and holds office until his or her successor is elected and qualified or until
his or her earlier resignation or removal. There are no family relationships
among any of the directors or executive officers of CareerBuilder.
Holders of shares of each of the Class B convertible preferred stock and
Class C convertible preferred stock were entitled prior to the offering to elect
one representative to the Board of Directors. Mr. Barris was elected as the
representative of the holders of Class B convertible preferred stock and Mr.
Weintraut was elected as the representative of the holders of Class C
convertible preferred stock.
Holders of shares of Class D convertible preferred stock were entitled
prior to the offering to elect two representatives to the Board of Directors.
Mr. Collins and Mr. Butler were elected as the representatives of the holders of
Class D convertible preferred stock.
Holders of shares of each of Class E convertible preferred stock and Class
F convertible preferred stock were entitled prior to the offering to have one
individual present to observe all meetings of the Board of Directors. Mr. Gene
Riechers of FBR Technology Venture Partners, L.P. was designated as the observer
for the holders of Class E convertible preferred stock. Mr. Carlos Monfiglio of
GE Capital Equity Investments, Inc. was designated as the observer for the
holders of the Class F convertible preferred stock.
NOMINATION AND OBSERVER RIGHTS AFTER THE OFFERING
Under the terms of the amendment to the joint marketing and sales
representative agreement, CareerBuilder has committed to nominate one
representative of ADP to stand for election to the Board of Directors at every
third annual meeting commencing in 2001. CareerBuilder's obligation to nominate
an ADP representative ends upon the termination of the joint marketing and sales
representative agreement.
After the offering and subject to certain conditions, each of New
Enterprise Associates VI, Limited Partnership, 21st Century Internet Fund, L.P.,
TTC Ventures, Inc. and ADP has the right pursuant to their respective preferred
stock purchase agreements to have one representative attend each meeting of the
Board of Directors so long as they each own at least 500,000 shares of the
common stock they receive upon the automatic conversion of the Class B
convertible preferred stock, the Class C convertible preferred stock and the
Class D convertible preferred stock, respectively.
After the offering and subject to certain conditions, FBR Technology
Venture Partners, L.P. has the right pursuant to the Class E convertible
preferred stock purchase agreement to have one representative attend each
meeting of the Board of Directors so long as it owns at least 250,000 shares of
the common stock it received upon the automatic conversion of the Class E
convertible preferred stock.
After the offering and subject to certain conditions, each of GE Capital
Equity Investments, Inc. and General Electric Pension Trust have the right
pursuant to the Class F convertible preferred stock agreement to have a
representative attend each meeting of the Board of Directors so long as they
own, individually or in the aggregate, at least 250,000 shares of the common
stock they received upon the automatic conversion of the Class F convertible
preferred stock.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has a Compensation Committee composed of Messrs.
Barris and Butler, which makes recommendations concerning salaries and incentive
compensation for employees of and consultants to CareerBuilder and administers
and grants stock options pursuant to CareerBuilder's stock option plans. The
Board of Directors also has an Audit Committee composed of Messrs. Collins and
Wetmore, which reviews the results and scope of the audit and other services
provided by CareerBuilder's independent public accountants and reviews
CareerBuilder's internal controls.
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DIRECTOR COMPENSATION
Directors do not receive any cash fees for their services on the Board, but
are reimbursed for expenses incurred in connection with their attendance at
Board and committee meetings. On November 24, 1997, CareerBuilder's six
non-employee directors were each granted a non-qualified stock option to
purchase 5,000 shares of common stock at a purchase price of $0.40 per share
pursuant to CareerBuilder's Stock Option Plan. These options vested on December
31, 1998. In addition, non-employee directors of CareerBuilder will be eligible
to receive stock options under CareerBuilder's 1999 Director Stock Option Plan.
See " -- Stock Plans -- 1999 Director Stock Option Plan."
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued for
the year ended December 31, 1998 for CareerBuilder's Chief Executive Officer and
its two other most highly compensated executive officers whose salary and bonus
totaled at least $100,000 for the year ended December 31, 1998 (together, the
"Named Executive Officers"):
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION
----------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(2)
--------------------------- -------- ------ ---------------
Robert J. McGovern.......................................... $145,000 $2,902 $2,125
Chairman of the Board, President and Chief Executive
Officer
Eugene J. Austin............................................ 130,000 5,804 2,809
Senior Vice President of Sales
James A. Winchester......................................... 115,000 -- 2,382
Senior Vice President of Engineering and
Chief Technology Officer
- -------------------------
(1) Represents the number of shares covered by options to purchase shares of
common stock granted during 1998.
(2) Represents premiums paid by CareerBuilder for executive disability
insurance.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning the value of
options exercised by each of the Named Executive Officers as of December 31,
1998 and the number and value of unexercised options held by each of the Named
Executive Officers on December 31, 1998. CareerBuilder granted no stock options
to any Named Executive Officers in 1998.
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1998 OPTION EXERCISES AND YEAR-END OPTION VALUES
NUMBER OF SHARES
UNDERLYING
UNEXERCISED OPTIONS
AT FISCAL YEAR END(3)
SHARES ACQUIRED ---------------------------
NAME ON EXERCISE VALUE REALIZED(2) EXERCISABLE UNEXERCISABLE
---- --------------- ----------------- ----------- -------------
Robert J. McGovern................... -- -- -- --
Eugene J. Austin..................... 125,000(1) $307,500 105,161 126,506
James A. Winchester.................. -- -- -- --
VALUE OF UNEXERCISED
IN-THE-MONEY
OPTIONS AT FISCAL
YEAR-END(2)
---------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
Robert J. McGovern................... -- --
Eugene J. Austin..................... $361,907 $431,860
James A. Winchester.................. -- --
- -------------------------
(1) The indicated shares are subject to a right of repurchase at the fair market
value of the shares in favor of CareerBuilder in the event of the owner's
termination of employment with CareerBuilder or death and the owner shall
not transfer the shares without first offering them to CareerBuilder on the
same terms and conditions as those offered to the proposed transferee.
(2) Represents the difference between (a) the exercise price and (b) the fair
market value of the common stock at the date of exercise, in the case of
value received upon exercise ($2.50 per share), and at fiscal year end, in
the case of value at year end ($3.50 per share). These fair market values
were determined by CareerBuilder's Board of Directors.
(3) Shares purchased upon exercise of the indicated options are subject to a
right of repurchase at the fair market value of the shares in favor of
CareerBuilder in the event of the optionee's termination of employment with
CareerBuilder or death and the optionees shall not transfer the shares
purchased upon exercise of the indicated options without first offering them
to CareerBuilder on the same terms and conditions as those offered to the
proposed transferee.
STOCK PLANS
A total of 3,300,000 shares of common stock have been reserved for issuance
in the aggregate under CareerBuilder's four stock option plans described below.
STOCK OPTION PLAN
CareerBuilder's Stock Option Plan (the "Stock Option Plan") provides for
the grant of incentive stock options intended to qualify under Section 422 of
the Internal Revenue Code and nonstatutory stock options. As of February 28,
1999, options to purchase 1,428,655 shares of common stock were outstanding
under the Stock Option Plan. Following this offering, the Board of Directors has
provided that no additional grants or awards will be made under the Stock Option
Plan.
1999 STOCK INCENTIVE PLAN
Under CareerBuilder's 1999 Stock Incentive Plan (the "1999 Plan"), a
variety of stock-based awards may be granted to officers, employees, directors,
consultants and advisors of CareerBuilder and its subsidiaries. The Board of
Directors has authorized the Compensation Committee to administer the 1999 Plan.
While CareerBuilder currently anticipates that most grants under the 1999 Plan
will consist of incentive stock options or nonstatutory stock options,
CareerBuilder could also grant other stock-based awards, including stock
appreciation rights, which represent the right to receive any excess in value of
the shares of common stock over the exercise price; restricted stock awards,
which entitle recipients to acquire shares of common stock, subject to the right
of CareerBuilder to repurchase all or part of such shares at their purchase
price in the event that the conditions specified in the award are not satisfied;
or unrestricted stock awards, which represent grants of shares to participants
free of any restrictions under the 1999 Plan. Options or other awards that are
granted under the Incentive Plan but expire unexercised are available for future
grants. As of February 28, 1999, no options to purchase common stock or other
awards have been granted under the 1999 Plan.
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1999 DIRECTOR STOCK OPTION PLAN
Under CareerBuilder's 1999 Director Stock Option Plan (the "Director
Plan"), directors of CareerBuilder who are not employees of CareerBuilder are
eligible to receive nonstatutory options to purchase shares of common stock. The
Director Plan provides (i) in the case of an outside director who is serving on
CareerBuilder's Board of Directors on the effective date of this offering and
who continues to serve on the Board of Directors after the closing of this
offering (an "IPO Director"), for the grant to such director on such effective
date of an option to purchase shares of common stock, (ii) that each
IPO Director who is serving on the Board of Directors at the adjournment of
CareerBuilder's annual meeting of stockholders held in the year 2000 or the
adjournment of any subsequent annual meeting shall be granted an option to
purchase shares of common stock on the date of each such adjournment,
up to a maximum of five such grants, (iii) in the case of an outside director
elected to the Board of Directors after this offering (a "Non-IPO Director"),
for the grant to such director on such election date of an option to purchase
shares of common stock, and (iv) that each Non-IPO Director who is
serving on the Board of Directors at the adjournment of any annual meeting of
stockholders held after the date of his or her election shall be granted an
option to purchase shares of common stock on the date of each such
adjournment, up to a maximum of five such grants. All options granted under the
Director Plan will have an exercise price equal to the fair market value of the
common stock on the date of grant as determined pursuant to the terms of the
Director Plan and shall vest on the first anniversary of the date of grant. As
of February 28, 1999, no options to purchase common stock have been granted
under the Director Plan.
1999 EMPLOYEE STOCK PURCHASE PLAN
Under CareerBuilder's 1999 Employee Stock Purchase Plan (the "Purchase
Plan"), employees of CareerBuilder (including directors of CareerBuilder who are
employees and all employees of designated subsidiaries of CareerBuilder) who
meet certain eligibility requirements are able to participate in quarterly plan
offerings in which payroll deductions may be used to purchase shares of common
stock. The purchase price of shares purchased under the Purchase Plan is 85% of
the closing price of the common stock on the first business day of the
applicable plan offering period or the last business day of the applicable plan
offering period, whichever is less. The first offering period under the Purchase
Plan will not commence until after the completion of this offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Barris and Wetmore served during the year ended December 31, 1998
as members of the Compensation Committee of the Board of Directors. No executive
officer of CareerBuilder has served as a director of or member of the
compensation committee (or other committee serving an equivalent function) of
any other entity, any of whose executive officers serve as a director of or
member of the Compensation Committee of the Board of Directors.
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CERTAIN TRANSACTIONS
TRANSACTIONS WITH ADP
In January 1998, CareerBuilder entered into the ADP joint marketing and
sales representative agreement with ADP, which was amended in March 1999. Under
the terms of this agreement, ADP agreed to market CareerBuilder's services to
ADP's current and prospective clients using, at a minimum, ADP's major accounts
division direct sales force. This sales force is currently comprised of
approximately 470 salespeople and is generally responsible for selling to
companies with between 100 and 1,000 employees. Under the terms of the
agreement, ADP has the right, but not the obligation, to market CareerBuilder
online recruitment offerings on a worldwide basis. The agreement provides for
ADP to market CareerBuilder's online recruitment offerings using a co-branding
strategy, which allows ADP to sell CareerBuilder's online recruitment offerings
using materials incorporating ADP's name and logo. As its commission for sales
made to ADP clients and prospects through orders procured by ADP, ADP is
entitled to retain a percentage of total monthly revenue to CareerBuilder for
job advertisements on CareerBuilder.com purchased through such ADP orders and a
percentage of total monthly revenue to CareerBuilder for job advertisements on
the other sites on the CareerBuilder Network purchased through such ADP orders.
ADP is also entitled to receive a percentage of CareerBuilder's revenue from
TeamBuilder Software sales to ADP customers and prospects whose orders were
procured by ADP and a percentage of CareerBuilder's revenue from sales of
online, radio and banner advertising to ADP customers and prospects whose orders
were procured by ADP, as well as certain other fees associated with account
installation and support. The agreement also generally prohibits ADP's Employer
Services Division, during the term of the agreement, from entering into any new
joint marketing, reseller, distribution or other arrangement with any other
provider of Internet recruitment offerings that offers products or services
similar to TeamBuilder Online in the United States or Canada. However, under the
terms of this agreement, it is possible that ADP could, under certain limited
circumstances, seek to market alternative online recruitment services, including
those of CareerBuilder's competitors, during the term of the agreement. The
agreement generally provides that, during the term of the agreement,
CareerBuilder will not enter into any new reseller, distribution or similar
agreement with any provider of human resources information systems offering
payroll software or payroll processing services similar to those offered by ADP
to sell CareerBuilder's online recruitment offerings in the United States or
Canada, or with another payroll or benefits administration provider. The ADP
agreement continues until January 23, 2002, and thereafter continues
automatically unless terminated by either of the parties. ADP can terminate the
agreement at any time after January 23, 2002 by giving CareerBuilder at least
120 days written notice. CareerBuilder can terminate the agreement at any time
after January 23, 2002, after giving written notice to ADP ranging from one to
three years depending upon the total revenue generated from ADP customers and
prospects whose orders were procured by ADP, provided such revenue does not meet
certain targets. Notwithstanding termination of the ADP agreement for any
reason, ADP will be entitled to continue to receive on an ongoing basis its
allocated share of recurring revenue to CareerBuilder derived from an ADP-
acquired customer for as long as such customer continues to receive any of
CareerBuilder's online recruitment offerings for which orders were procured by
ADP.
In connection with the execution of the joint marketing and sales
representative agreement and its amendment and the sale of shares of capital
stock to ADP, CareerBuilder issued a warrant to ADP, which vests in three
installments. The first installment of 380,000 shares vested at the signing of
the amendment. The exercise price of the first installment is $12.00 per share.
Warrants for the second and third installments of up to 457,026 shares of common
stock each will vest based on net revenue received by CareerBuilder from ADP
pursuant to the joint marketing and sales representative agreement. The exercise
price for the second and third installment is $5.00 per share. If CareerBuilder
issues additional equity securities primarily for financing purposes, and not
including the shares of common stock sold in this offering, the number of shares
of common stock issuable upon exercise of the warrant will increase up to a
maximum of 502,729 shares for each of the second and third installments. The
first, second and third installments are each exercisable, to the extent vested,
during the five year period following March 4, 1999, March 31, 2001 and March
31, 2002, respectively.
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As the ADP warrant vests, CareerBuilder may be required to record
significant expenses. See Note 14 of Notes to Financial Statements.
STOCK PURCHASES BY AFFILIATES
In November 1995, in connection with the founding of CareerBuilder,
CareerBuilder issued to Robert J. McGovern for an aggregate price of $80,000,
and James A. Winchester for an aggregate price of $20,000, 3,431,250 and 693,750
shares of Class A common stock, respectively, and issued 80 shares of Class B
non-voting liquidating preferred stock to Mr. McGovern and 20 shares of Class B
non-voting liquidating preferred stock. Messrs. McGovern and Winchester
currently serve as officers of CareerBuilder and Mr. McGovern currently serves
as the Chairman of the Board.
In December 1995, CareerBuilder issued to David C. Wetmore 468,750 shares
of Class A common stock, and 150 shares of Class B non-voting liquidating
preferred stock at an aggregate purchase price of $150,000. Mr. Wetmore
currently serves as a director of CareerBuilder.
In July 1996, CareerBuilder converted the 3,431,250 shares of Class A
common stock and the 80 shares of Class B non-voting liquidating preferred
issued to Mr. McGovern into 250,000 shares of Class A convertible preferred
stock and 3,181,250 shares of common stock, converted the 693,750 shares of
Class A common stock issued to Mr. Winchester into 693,750 shares of common
stock, and converted the 468,750 shares of Class A common stock and the 150
shares of Class B non-voting liquidating preferred issued to Mr. Wetmore into
468,750 shares of Class A convertible preferred stock. Upon completion of this
offering, each share of Class A convertible preferred stock will automatically
convert into one share of common stock.
In July 1996, CareerBuilder issued shares of Class B convertible preferred
stock to David C. Wetmore and to certain stockholders of CareerBuilder at a
purchase price of $0.76 per share. The number of shares of Class B convertible
preferred stock issued to each individual and entity is set forth below. Upon
completion of this offering, each share of Class B convertible preferred stock
will automatically convert into one share of common stock.
NUMBER OF SHARES OF CLASS B
NAME OF INVESTOR CONVERTIBLE PREFERRED STOCK
---------------- ----------------------------
David C. Wetmore........................................ 135,730
New Enterprise Associates VI, Limited Partnership....... 1,710,527
NEA President's Fund, L.P............................... 78,947
In January 1997, CareerBuilder issued shares of Class C convertible
preferred stock to certain stockholders of CareerBuilder at a purchase price of
$1.44 per share. The number of shares of Class C convertible preferred stock
issued to each entity is set forth below. Upon completion of this offering, each
share of Class C convertible preferred stock will automatically convert into one
share of common stock.
NUMBER OF SHARES OF CLASS C
NAME OF INVESTOR CONVERTIBLE PREFERRED STOCK
---------------- ----------------------------
21st Century Internet Fund, L.P......................... 1,800,000
New Enterprise Associates VI, Limited Partnership....... 1,388,889
In September 1997 and January 1998, CareerBuilder issued shares of Class D
convertible preferred stock to certain entities affiliated with directors of
CareerBuilder and certain stockholders of CareerBuilder at a purchase price of
$3.57 per share. The number of shares of Class D convertible preferred stock
issued to each entity is set
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forth below. Upon completion of this offering, each share of Class D convertible
preferred stock will automatically convert into one share of common stock.
NUMBER OF SHARES OF CLASS D
NAME OF INVESTOR CONVERTIBLE PREFERRED STOCK
---------------- ----------------------------
21st Century Internet Fund, L.P......................... 327,557
New Enterprise Associates VI, Limited Partnership....... 317,667
ADP..................................................... 840,337
In July 1998, CareerBuilder issued shares of Class E convertible preferred
stock to certain entities affiliated with directors of CareerBuilder and certain
stockholders of CareerBuilder at a purchase price of $4.93 share. The number of
shares of Class E convertible preferred stock issued to each entity is set forth
below. Upon completion of this offering, each share of Class E convertible
preferred stock will automatically convert into one share of common stock.
NUMBER OF SHARES OF CLASS E
NAME OF INVESTOR CONVERTIBLE PREFERRED STOCK
---------------- ---------------------------
21st Century Internet Venture Partners, LLC............. 143,068
New Enterprise Associates VI, Limited Partnership....... 235,091
In January 1999, CareerBuilder issued shares of Class F convertible
preferred stock to certain entities affiliated with directors of CareerBuilder
and certain stockholders of CareerBuilder at a purchase price of $5.45 per
share. The number of shares of Class F convertible preferred stock issued to
each entity is set forth below. Upon completion of this offering, each share of
Class F convertible preferred stock will automatically convert into one share of
common stock.
NUMBER OF SHARES OF CLASS F
NAME OF INVESTOR CONVERTIBLE PREFERRED STOCK
---------------- ---------------------------
GE Capital Equity Investments, Inc....................... 917,431
21st Century Internet Venture Partners, LLC.............. 171,389
New Enterprise Associates VI, Limited Partnership........ 279,792
ADP...................................................... 63,232
OTHER TRANSACTIONS WITH AFFILIATES
Pursuant to the Certificate of Incorporation, CareerBuilder's board of
directors currently consists of one director designated by the holders of Class
A convertible preferred stock, one director designated by the holders of Class B
convertible preferred stock, one director designated by the holders of Class C
convertible preferred stock, two directors designated by the holders of common
stock, one director designated by Thomson U.S. Inc. on behalf of the holders of
Class D convertible preferred stock and one director designated by ADP also on
behalf of the holders of Class D convertible preferred stock. This arrangement
will terminate upon the completion of the offering.
CareerBuilder has adopted a policy providing that all material transactions
between CareerBuilder and its officers, directors and other affiliates must:
- be approved by a majority of the members of CareerBuilder's Board of
Directors and by a majority of the disinterested members of the Board of
Directors; and
- be on terms no less favorable to CareerBuilder than could be obtained
from unaffiliated third parties.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the common stock of CareerBuilder as of February 28, 1999 by each
person or entity known to CareerBuilder to own beneficially more than 5% of the
common stock, each of the directors of CareerBuilder, each of the Named
Executive Officers, each of the selling stockholders and all directors and
executive officers as a group. Unless otherwise indicated, each person or entity
named in the table has sole voting power and investment power (or shares such
power with his or her spouse) with respect to all shares of capital stock listed
as owned by such person or entity.
SHARES BENEFICIALLY SHARES TO BE
OWNED NUMBER OF BENEFICIALLY OWNED
PRIOR TO OFFERING(1) SHARES AFTER OFFERING(1)
----------------------- OFFERED ----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE FOR SALE NUMBER PERCENTAGE
------------------------ ---------- ---------- --------- --------- ----------
New Enterprise Associates (2)............... 4,022,551 23.9% -- 4,022,551 %
1119 St. Paul Street
Baltimore, MD 21202
21st Century Internet Venture Partners, LLC
(3)....................................... 2,449,097 14.5 -- 2,449,097
Two South Park
San Francisco, CA 94107
ADP, Inc. (5)............................... 1,283,569 7.6 -- 1,283,569
1 ADP Boulevard
Roseland, NJ 07068
GE Capital Equity Investments, Inc.......... 917,431 5.4 -- 917,431
120 Long Ridge Road
Stamford, CT 06927
Robert J. McGovern (6)...................... 3,350,540 2.0 -- 3,350,540
Eugene J. Austin (7)........................ 327,386 1.9 -- 327,386
James A. Tholen (8)......................... 22,500 * -- 22,500
James A. Winchester......................... 693,750 4.1 -- 693,750
Peter J. Barris (9)......................... 4,037,551 24.0 -- 4,307,551
Gary C. Butler (10)......................... 1,288,569 7.7 -- 1,288,569
D. Jarrett Collins (11)..................... 649,891 3.9 -- 649,891
J. Neil Weintraut (12)...................... 2,454,097 14.6 -- 2,454,097
David C. Wetmore (13)....................... 586,980 3.5
John F. Burton (14)......................... 431,052 2.6
Bernard Goldsmith (15)...................... 544,480 3.2
All executive officers and directors as a
group (9 persons) (16).................... 13,411,264 79.2
- -------------------------
* Less than 1%
(1) Assumes no exercise of the underwriters' over-allotment option. The number
of shares of common stock outstanding prior to this offering includes
16,837,615 shares of common stock outstanding as of February 28, 1999 and,
with respect to each person, the shares issuable by CareerBuilder pursuant
to options held by such persons which may be exercised within 60 days
following February 28, 1999 ("Presently
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Exercisable Options"). The number of shares beneficially owned by each
stockholder is determined under rules promulgated by the Securities and
Exchange Commission, and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual or entity has sole
or shared voting power or investment power and any shares as to which the
individual or entity has the right to acquire beneficial ownership within
60 days after February 28, 1999 through the exercise of any stock option,
warrant or other right. The inclusion herein of such shares, however, does
not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares.
(2) Consists of 3,930,446 shares of common stock held of record by New
Enterprise Associates VI, Limited Partnership, 78,947 shares of common
stock held of record by NEA President's Fund, L.P. and 13,158 shares of
common stock held of record by NEA Ventures 1996, L.P.
(3) Includes 2,127,557 shares of common stock held of record by 21st Century
Internet Fund, L.P.
(4) Includes 380,000 shares of common stock issuable upon exercise of the
warrant issued to ADP in January 1998.
(5) Includes 250,000 shares of common stock held of record by the Robert
McGovern Bypass Trust. Mr. McGovern disclaims beneficial ownership of
shares held of record by such trust.
(6) Includes 44,053 shares subject to Presently Exercisable Options.
(7) Includes 7,500 shares subject to Presently Exercisable Options.
(8) Includes 3,930,446 shares of common stock held of record by New Enterprise
Associates VI, Limited Partnership, 78,947 shares of common stock held of
record by NEA President's Fund, L.P. and 13,158 shares of common stock held
of record by NEA Ventures 1996, L.P. Mr. Barris disclaims beneficial
ownership of all such shares of common stock. Also includes 15,000 shares
subject to Presently Exercisable Options.
(9) Consists of 903,569 shares of common stock held of record by ADP and 380,000
shares of common stock issuable upon exercise of the warrant issued to ADP
in January 1998. Mr. Butler disclaims beneficial ownership of all such
shares of common stock. Also includes 5,000 shares subject to Presently
Exercisable Options.
(10) Includes 644,891 shares of common stock held of record by Thomson U.S. Inc.
Mr. Collins disclaims beneficial ownership of all such shares of common
stock. Also includes 5,000 shares subject to Presently Exercisable Options.
(11) Includes 321,540 shares of common stock held of record by 21st Century
Internet Venture Partners, LLC and 2,127,557 shares of common stock held of
record by 21st Century Internet Fund, L.P. Mr. Weintraut disclaims
beneficial ownership of all such shares of common stock. Also includes
5,000 shares subject to Presently Exercisable Options.
(12) Includes 7,500 shares subject to Presently Exercisable Options. Excludes
40,000 shares of common stock held of record by adult children of Mr.
Wetmore.
(13) Includes 10,000 shares of common stock held of record by Camden D. Burton,
10,000 shares of common stock held of record by Casey L. Burton and 10,000
shares of common stock held of record by Haley F. Burton. Mr. Burton
disclaims beneficial ownership of all such shares of common stock.
(14) Includes 20,000 shares of common stock held of record by the Goldsmith
Family Irrevocable Life Insurance Trust. Mr. Goldsmith disclaims beneficial
ownership of all such shares of common stock. Excludes 20,000 shares of
common stock held of record by Daphne Kennedy, 20,000 shares of common
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stock held of record by David Goldsmith and 20,000 shares of common stock
held of record by Sarah Goldsmith.
(15) See footnotes (5) through (14) above.
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DESCRIPTION OF CAPITAL STOCK
Following this offering, the authorized capital stock of CareerBuilder will
consist of 50,000,000 shares of common stock and 10,000,000 shares of preferred
stock, $.001 par value per share. As of February 28, 1999, assuming conversion
of all shares of convertible preferred stock into common stock, there would have
been 16,837,615 shares of Common Stock outstanding held by 81 stockholders.
The following summary of certain provisions of CareerBuilder's common
stock, preferred stock, Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and Amended and Restated By-laws (the "By-laws")
is not intended to be complete and is qualified by reference to the provisions
of applicable law and to CareerBuilder's Certificate of Incorporation, By-laws
and other agreements included as exhibits to the Registration Statement of which
this prospectus is a part. See "Additional Information."
COMMON STOCK
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Holders of common stock are entitled to receive ratably such dividends,
if any, as may be declared by the Board of Directors out of funds legally
available therefor, subject to any preferential dividend rights of outstanding
preferred stock. Upon the dissolution or liquidation of CareerBuilder, subject
to the prior rights of any outstanding preferred stock, the holders of common
stock are entitled to receive ratably the net assets of CareerBuilder available
after the payment of all debts and other liabilities. Holders of common stock
have no preemptive, subscription or redemption rights. The outstanding shares of
common stock are, and the shares of common stock offered by CareerBuilder in
this offering will be, when issued and paid for, fully paid and nonassessable.
The rights, preferences and privileges of holders of common stock are subject
to, and may be adversely affected by, the rights of the holders of shares of any
series of preferred stock which CareerBuilder may designate and issue in the
future. Certain holders of common stock have the right to require CareerBuilder
to effect the registration of their shares of common stock in certain
circumstances. See "Shares Eligible for Future Sale -- Registration Rights."
At present, there is no established trading market for the common stock. We
will apply to list the shares of the common stock on The Nasdaq Stock Market's
National Market under the symbol "CBDR".
PREFERRED STOCK
Under the terms of the Certificate of Incorporation, the Board of Directors
is authorized, subject to any limitations prescribed by law, without stockholder
approval, to issue up to 10,000,000 shares of preferred stock in one or more
series. Each such series of preferred stock shall have such rights, preferences,
privileges and restrictions, including voting rights, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be determined by the Board of Directors.
The purpose of authorizing the Board of Directors to issue preferred stock
and determine its rights and preferences is to eliminate delays associated with
a stockholder vote on specific issuances. The issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of CareerBuilder. CareerBuilder has no
present plans to issue any shares of preferred stock.
WARRANTS
In January 1998, CareerBuilder issued to ADP a warrant, which was amended
in March 1999, which currently represents the right to purchase up to 1,294,052
shares of common stock vesting in three installments. The first installment for
380,000 shares of common stock at an exercise price of $12.00 per share vested
at the time of the amendment in March 1999. The remaining two installments have
an exercise price of $5.00 per share and vest subject to ADP achieving certain
revenue targets. See "Certain Transactions -- Transactions with ADP."
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In December 1998, CareerBuilder issued to PNC a warrant to purchase up to
40,568 shares of common stock at a purchase price of $4.93 per share. This
warrant expires on December 29, 2008. PNC also has the right to require
CareerBuilder, in certain circumstances, to effect the registration of the
shares of common stock issuable upon exercise of this warrant. See "Shares
Eligible for Future Sale -- Registration Rights."
In March 1999, CareerBuilder issued to NBC a warrant to purchase up to
93,750 shares of common stock at a purchase price of $8.00 per share and a
warrant to purchase up to 53,571 shares of common stock at a purchase price of
$14.00 per share. Both warrants vest in two installments and expire on March 5,
2004.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
CareerBuilder is subject to the provisions of Section 203 of the Delaware
General Corporation Law statute. Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A "business combination"
includes mergers, assets sales and other transactions resulting in a financial
benefit to the interested stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of the
corporation's voting stock.
The Certificate of Incorporation and By-laws provide for the division of
the Board of Directors into three classes as nearly equal in size as possible
with staggered three-year terms. See "Management." In addition, the Certificate
of Incorporation provides that directors may be removed only for cause by the
affirmative vote of the holders of 75% of the shares of capital stock entitled
to vote. Under the Certificate of Incorporation and By-laws, any vacancy on the
Board of Directors, including a vacancy resulting from an enlargement of the
Board of Directors, may only be filled by vote of a majority of the directors
then in office. The classification of the Board of Directors and the limitation
on removal of directors and filling of vacancies could make it more difficult
for a third party to acquire, or discourage a third party from acquiring,
control of CareerBuilder.
The Certificate of Incorporation and By-laws also provide that after this
offering, any action required or permitted to be taken by the stockholders of
CareerBuilder at an annual meeting or special meeting of stockholders may only
be taken if it is properly brought before such meeting and may not be taken by
written action in lieu of a meeting. The Certificate of Incorporation and
By-laws further provide that special meetings of the stockholders may only be
called by the Chairman of the Board, the President or the Board of Directors.
In order for any matter to be considered "properly brought" before an
annual meeting, a stockholder must comply with advance notice and information
disclosure requirements. The stockholder must deliver written notice of the
matter to the Secretary of CareerBuilder, to be received not less than 60 days
nor more than 90 days prior to the meeting. However, if less than 70 days'
notice or prior public disclosure of the date of the meeting is given to
stockholders, the notice would have to be received by the Secretary not later
than the close of business on the 10th day following the date on which the
notice of the meeting was mailed or such public disclosure was made, whichever
occurs first. If the matter relates to the election of directors of
CareerBuilder, the notice must set forth specific information regarding each
nominee and the nominating stockholder. For any other matter, the notice must
set forth a brief description of the business desired to be brought and the
reasons for conducting such business at the annual meeting and certain
information regarding the proponent stockholder. These provisions could have the
effect of delaying until the next annual stockholders meeting stockholder
actions which are favored by the holders of a majority of the outstanding voting
securities of CareerBuilder. These provisions could also discourage a third
party from making a tender offer for the common stock, because even if it
acquired a majority of the outstanding voting securities of CareerBuilder, the
third party would be able to take action as a stockholder (such as electing new
directors or approving a merger) only at a duly called annual stockholders'
meeting, and not by written consent.
The Delaware General Corporation Law provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
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unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. The By-laws require the affirmative vote of
holders of at least 75% of the votes which all the stockholders would be
entitled to cast to amend or repeal any of the provisions described in the prior
three paragraphs.
The Certificate of Incorporation contains certain provisions permitted
under the Delaware General Corporation Law relating to the liability of
directors. The provisions eliminate a director's liability for monetary damages
for a breach of fiduciary duty, except in certain circumstances involving
wrongful acts, such as the breach of a director's duty of loyalty or acts or
omissions which involve intentional misconduct or a knowing violation of law.
Further, the Certificate of Incorporation contains provisions to indemnify
CareerBuilder's directors and officers to the fullest extent permitted by the
Delaware General Corporation Law. CareerBuilder believes that these provisions
will assist CareerBuilder in attracting and retaining qualified individuals to
serve as directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock will be .
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for the common
stock of CareerBuilder. Future sales of substantial amounts of common stock in
the public market could adversely affect prevailing market prices from time to
time. Furthermore, since only a limited number of shares will be available for
sale shortly after the offering because of certain contractual and legal
restrictions on resale described below, sales of substantial amounts of common
stock in the public market after the restrictions lapse could adversely affect
the prevailing market price and the ability of CareerBuilder to raise equity
capital in the future.
Upon completion of the offering, CareerBuilder will have
shares of common stock outstanding, assuming no exercise of currently
outstanding options. Of these shares, the shares sold in this
offering (plus any additional shares sold upon exercise of the underwriters'
over-allotment option) will be freely transferable without restriction under the
Securities Act, unless they are purchased by an existing "affiliate" of
CareerBuilder as that term is used under the Securities Act and the regulations
promulgated thereunder. The remaining 16,837,615 shares of common stock held by
existing stockholders are "restricted securities" as that term is defined in
Rule 144 of the Securities Act (the "Restricted Shares"). Restricted Shares may
be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 or Rule 701 under the Securities Act.
In general, under Rule 144 as currently in effect, beginning 90 days after
the effective date of the offering, an affiliate of CareerBuilder, or a person
(or persons whose shares are aggregated) who has beneficially owned Restricted
Shares for at least one year is entitled to sell within any three-month period a
number of shares that does not exceed the greater of (i) one percent of the then
outstanding shares of common stock or (ii) the average weekly trading volume of
common stock in the Nasdaq National Market during the four calendar weeks
immediately preceding the date on which notice of the sale is filed with the
Commission. Sales pursuant to Rule 144 are subject to certain requirements
relating to the manner of sale, notice, and the availability of current public
information about CareerBuilder. A person (or persons whose shares are
aggregated) who was not an affiliate of CareerBuilder at any time during the 90
days immediately preceding the sale and who has beneficially owned restricted
shares for at least two years is entitled to sell such shares under Rule 144(k)
without regard to the limitations described above.
An employee, officer or director of or consultant to CareerBuilder who
purchased or was awarded shares or options to purchase shares pursuant to a
written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701 under the Securities Act, which permits affiliates and
non-affiliates to sell their Rule 701 shares without having to comply with Rule
144's holding period restrictions, in each case commencing 90 days after the
date of this prospectus. In addition, non-affiliates may sell Rule 701 shares
without complying with the public information, volume and notice provisions of
Rule 144.
As a result of contractual restrictions and the provisions of Rules 144 and
701, additional shares will be available for sale in the public market as
follows:
- no Restricted Shares will be eligible for immediate sale on the date
of this prospectus;
- approximately 33,625 Restricted Shares will be eligible for sale
beginning 90 days after the date of this prospectus, subject in some
cases to compliance with Rule 144;
- approximately 14,721,765 additional Restricted Shares will be
eligible for sale beginning 180 days after the effective date of
this offering upon expiration of lock-up agreements, subject in some
cases to compliance with Rule 144; and
- the remainder of the Restricted Shares will be eligible for sale
from time to time thereafter, subject in some cases to compliance
with Rule 144.
In addition, CareerBuilder expects to file a registration statement on Form
S-8 registering up to 3,300,000 shares of common stock subject to outstanding
stock options or reserved for issuance under
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CareerBuilder's equity incentive plans. Shares registered under such
registration statement will, subject to Rule 144 volume limitations applicable
to affiliates, be available for sale in the open market, unless such shares are
subject to vesting restrictions with CareerBuilder or the lock-up agreements
described above.
REGISTRATION RIGHTS
Pursuant to a registration rights agreement with CareerBuilder, certain
current stockholders will be entitled following this offering to certain rights
to register under the Securities Act a total of approximately 15,888,795 shares
of common stock.
Subject to certain restrictions, the registration rights agreement
generally provides that stockholders with registration rights may require
CareerBuilder to prepare and file a registration statement under the Securities
Act for their shares at any time beginning July 12, 1999, provided that the
reasonably anticipated aggregate price to the public is at least $5.0 million,
with certain exceptions. CareerBuilder is generally not required to effect more
than two demand registration requests for any stockholder with registration
rights or file a registration statement within 120 days after the effective date
of any other registration statement filed by CareerBuilder. In addition, this
agreement provides that, at such time as CareerBuilder is entitled to file a
registration statement on Form S-3, subject to certain restrictions,
stockholders with registration rights may require CareerBuilder to prepare and
file a registration statement on Form S-3, provided that the reasonably
anticipated aggregate price to the public is at least $1.0 million. Stockholders
with registration rights are entitled to an unlimited number of demand
registration requests on Form S-3.
The registration rights agreement generally provides that if CareerBuilder
proposes to register any of its securities under the Securities Act,
stockholders with registration rights will be entitled to include shares in such
offering. The managing underwriter of any underwritten public offering would,
however, have the right, for marketing reasons, to limit the number of shares
that such stockholders could include in such registration, except that in no
event may less than one-third of the shares of common stock to be sold in the
offering be made available for certain of the shares subject to this agreement,
on a pro rata basis.
CareerBuilder's obligations to register shares under the registration
rights agreement terminate in July 2011.
Pursuant to an agreement with PNC, if CareerBuilder proposes to register
any of its common stock under the Securities Act, including a registration made
at the request of a stockholder exercising demand registration rights, PNC is
entitled to include in such offering shares of common stock issuable upon
exercise of the warrant held by PNC. The managing underwriter of any
underwritten public offering would, however, have the right, for marketing
reasons, to limit the number of shares that such PNC could include in such
registration, except that in no event may less than one-third of the shares of
common stock to be sold in the offering be made available for PNC if any shares
are to be included in the registration for the account of CareerBuilder or
certain stockholders with registration rights.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 1999, we and the selling stockholders have
agreed to sell to the underwriters named below, for whom Credit Suisse First
Boston Corporation, BancBoston Robertson Stephens Inc., Hambrecht & Quist LLC
and Friedman, Billings, Ramsey & Co., Inc., are acting as representatives, the
following respective numbers of shares of common stock:
NUMBER OF
UNDERWRITER SHARES
----------- ---------
Credit Suisse First Boston Corporation......................
BancBoston Robertson Stephens Inc. .........................
Hambrecht & Quist LLC.......................................
Friedman, Billings, Ramsey & Co., Inc. .....................
--------
Total.............................................
========
The underwriting agreement provides that the underwriters are obligated to
purchase all of the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/ dealers. After the initial public offering, the public
offering price and concession and discount to dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses we
and the selling stockholders will pay.
TOTAL
-------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
Underwriting discounts and commissions paid by us...... $ $ $
Expenses payable by us................................. $ $ $
Underwriting discounts and commissions paid by the
selling stockholders................................. $ $ $
Expenses payable by the selling stockholders........... $ $ $
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We, our directors and officers, and substantially all of our stockholders
and optionholders have agreed that we and they will not offer, sell, contract to
sell, pledge or otherwise dispose of, directly or indirectly, or, in our case
file with the Securities and Exchange Commission a registration statement under
the Securities Act relating to, any additional shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of our
common stock or publicly disclose the intention to make any such offer, sale,
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pledge or disposal without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the initial public offering of
the common stock.
The underwriters have reserved for sale, at the initial public offering
price, up to shares of common stock for employees, directors and
certain other persons associated with us who have expressed an interest in
purchasing common stock in the offering. The number of shares available for sale
to the general public in the offering will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the other
shares.
We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities under the Securities Act, or contribute to payments
which the underwriters may be required to make in respect thereof.
We will apply to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol "CBDR".
FBR Technology Venture Partners, L.P., an affiliate of Friedman, Billings,
Ramsey and Company, Inc., owns preferred stock, which will automatically convert
into 465,810 shares of common stock upon closing of the offering. FBR eComm,
L.P., an affiliate of Friedman, Billings, Ramsey and Company, Inc., owns
preferred stock, which will automatically convert into 220,890 shares of common
stock upon closing of the offering.
Prior to the offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the representatives. The principal factors to be considered in
determining the public offering price include:
- the information set forth in this prospectus and otherwise available to
the underwriters;
- our history and prospects and the history and prospects of the industry
in which we compete;
- an assessment of our management;
- the prospects for, and the timing of, our future earnings;
- the present state of our development and our current financial condition;
- the general condition of the securities markets at the time of the
offering;
- the recent market prices of, and the demand for, publicly-traded common
stock of companies in businesses similar to ours;
- market conditions for initial public offerings; and
- other relevant factors.
There can be no assurance that an active trading market will develop for the
common stock or that the common stock will trade in the market subsequent to the
offering at or above the initial public offering price.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions, and penalty bids in accordance with Regulation
M under the Securities Exchange Act. Over-allotment involves syndicate sales in
excess of the offering size, which creates a syndicate short position.
Stabilizing transactions permit bids to purchase the underlying security so long
as the stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Penalty bids permit the representatives to reclaim a selling concession from a
syndicate member when the common stock originally sold by such syndicate member
are purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.
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NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that CareerBuilder prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of common stock are effected. Accordingly, any resale of
the common stock in Canada must be made in accordance with applicable securities
laws which will vary depending on the relevant jurisdiction, and which may
require resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the common stock.
REPRESENTATIONS OF PURCHASERS
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to CareerBuilder and the dealer from
whom such purchase confirmation is received that (i) such purchaser is entitled
under applicable provincial securities laws to purchase such common stock
without the benefit of a prospectus qualified under such securities laws, (ii)
where required by law, such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be readily available,
including common law rights of action for damages or recision or rights of
action under the civil liability provisions of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from CareerBuilder. Only one
such report must be filed in respect of common stock acquired on the same date
and under the same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
Legislation.
60
62
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for CareerBuilder by Hale and Dorr LLP, Washington, D.C., and for the
underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The financial statements and schedule of CareerBuilder, Inc. as of December
31, 1997 and 1998 and for each of the years in the three-year period ended
December 31, 1998 have been included herein and in the registration statement in
reliance upon the report of KPMG LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
We have filed a Registration Statement on Form S-1 with the Securities and
Exchange Commission. This prospectus, which is a part of the Registration
Statement, does not contain all of the information included in the Registration
Statement. Certain information is omitted and you should refer to the
Registration Statement and its exhibits. With respect to references made in this
prospectus to any contract, agreement or other document of CareerBuilder, such
references are not necessarily complete and you should refer to the exhibits
attached to the Registration Statement for copies of the actual contract,
agreement or other document. You may review a copy of the Registration
Statement, including exhibits, at the Commission's public reference room at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 or Seven World
Trade Center, 13th Floor, New York, New York 10048 or Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the Commission
at 1-800-SEC-0330 for further information on the operation of the public
reference rooms.
We will also file annual, quarterly and current reports, proxy statements
and other information with the Commission. You may read and copy any reports,
statements or other information on file at the public reference rooms. You can
also request copies of these documents, for a copying fee, by writing to the
Commission.
Our Commission filings and the Registration Statement can also be reviewed
by accessing the Commission's Internet site at http://www.sec.gov, which
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
61
63
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditor's Report................................ F-2
Balance Sheets as of December 31, 1997 and 1998............. F-3
Statements of Operations for the years ended December 31,
1996, 1997 and 1998....................................... F-4
Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1996, 1997 and 1998.................... F-5
Statements of Cash Flows for the years ended December 31,
1996, 1997 and 1998....................................... F-6
Notes to Financial Statements............................... F-7
F-1
64
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
CareerBuilder, Inc.:
We have audited the accompanying balance sheets of CareerBuilder, Inc. (the
"Company") as of December 31, 1997 and 1998, and the related statements of
operations, stockholders' equity (deficit), and cash flows for each of the years
in the three-year period ended December 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CareerBuilder, Inc. as of
December 31, 1997 and 1998, and the results of its operations and its cash flows
for the each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
McLean, VA
February 12, 1999, except for note 14
which is as of March 5, 1999
F-2
65
CAREERBUILDER, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1997 1998
------- --------
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 1,909 $ 2,709
Accounts receivable, net of allowance of $38 and $135,
respectively.......................................... 585 1,581
Other.................................................. 16 442
------- --------
Total current assets.............................. 2,510 4,732
Property and equipment, net of accumulated depreciation and
amortization of $383 and $1,254, respectively............. 1,000 1,213
Other....................................................... 79 97
------- --------
Total assets...................................... $ 3,589 $ 6,042
======= ========
LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable....................................... $ 1,039 $ 1,514
Accrued expenses....................................... 531 1,474
Lines of credit........................................ 676 3,450
Deferred revenue....................................... 395 2,193
------- --------
Total current liabilities......................... 2,641 8,631
------- --------
Total liabilities............................ 2,641 8,631
------- --------
Convertible redeemable preferred stock...................... 10,700 18,931
------- --------
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $.001 par value, 17,500 shares
authorized, 4,371 and 4,855 shares issued and
outstanding, respectively............................. 4 5
Additional paid-in capital............................. 26 244
Accumulated deficit.................................... (9,782) (21,769)
------- --------
Total stockholders' equity (deficit).............. (9,752) (21,520)
------- --------
$ 3,589 $ 6,042
======= ========
See accompanying notes to financial statements.
F-3
66
CAREERBUILDER, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1996 1997 1998
-------- -------- --------
Revenue:
Service fees........................................... $ 94 $ 1,263 $ 6,648
Software license fees.................................. 44 662 358
------- ------- --------
Total revenue..................................... 138 1,925 7,006
------- ------- --------
Cost of revenue:
Service fees........................................... 30 197 1,629
Software license fees.................................. 6 120 62
------- ------- --------
Total cost of revenue............................. 36 317 1,691
------- ------- --------
Gross profit................................................ 102 1,608 5,315
------- ------- --------
Operating expenses:
Product development.................................... 521 1,310 2,293
General and administrative............................. 663 1,267 2,305
Sales and marketing.................................... 1,330 6,452 12,735
------- ------- --------
Total operating expenses.......................... 2,514 9,029 17,333
------- ------- --------
Income (loss) from operations............................... (2,412) (7,421) (12,018)
------- ------- --------
Net interest income (expense)............................... (4) 107 31
------- ------- --------
Income (loss) before income taxes........................... (2,416) (7,314) (11,987)
Income taxes................................................ -- -- --
------- ------- --------
Net income (loss)........................................... (2,416) (7,314) (11,987)
------- ------- --------
Preferred stock dividend requirements....................... (71) (549) (1,128)
Net income (loss) available to common stockholders.......... $(2,487) $(7,863) $(13,115)
======= ======= ========
Basic and diluted net income (loss) available per share..... $ (0.48) $ (1.80) $ (2.92)
Shares used to compute basic and diluted net income (loss)
available per share....................................... 5,133 4,366 4,494
Unaudited pro forma basic and diluted net income (loss) per
share..................................................... $ (0.87)
Shares used to compute unaudited pro forma basic and diluted
net income (loss) per share............................... 13,850
See accompanying notes to financial statements.
F-4
67
CAREERBUILDER, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
CLASS B
NON-VOTING
LIQUIDATING
PREFERRED
STOCK COMMON STOCK ADDITIONAL TOTAL
--------------- --------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
------ ------ ------ ------ ---------- ----------- ----------------
Balances at December 31, 1995... 1 $ -- 5,876 $ 6 $ 522 $ (52) $ 476
Recapitalization of the
Company.................. (1) -- (1,563) (2) (498) -- (500)
Net income (loss).......... -- -- -- -- -- (2,416) (2,416)
--- ---- ------ --- ----- -------- --------
Balances at December 31, 1996... -- -- 4,313 4 24 (2,468) (2,440)
Exercise of stock
options.................. -- -- 58 -- 2 -- 2
Net income (loss).......... -- -- -- -- -- (7,314) (7,314)
--- ---- ------ --- ----- -------- --------
Balances at December 31, 1997... -- -- 4,371 4 26 (9,782) (9,752)
Conversion of Class A
convertible redeemable
preferred stock.......... -- -- 55 -- 18 -- 18
Conversion of Class B
convertible redeemable
preferred stock.......... -- -- 80 -- 61 -- 61
Exercise of stock
options.................. -- -- 349 1 30 -- 31
Issuance of warrants....... -- -- -- -- 109 -- 109
Net income (loss).......... -- -- -- -- -- (11,987) (11,987)
--- ---- ------ --- ----- -------- --------
Balances at December 31, 1998... -- $ -- 4,855 $ 5 $ 244 $(21,769) $(21,520)
=== ==== ====== === ===== ======== ========
See accompanying notes to financial statements.
F-5
68
CAREERBUILDER, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
(IN THOUSANDS)
1996 1997 1998
---- ---- ----
Cash flows used by operating activities:
Net income (loss)......................................... $(2,416) $(7,314) $(11,987)
Adjustments to reconcile net income (loss) to net cash
provided:
Noncash items included in net income (loss):
Depreciation and amortization........................ 49 334 871
Allowance for doubtful accounts and returns.......... 18 225 653
(Increase) decrease in assets:
Accounts receivable.................................. (89) (739) (1,649)
Other operating assets............................... (5) (12) (317)
Increase (decrease) in liabilities:
Accounts payable..................................... 169 871 475
Accrued expenses..................................... 109 421 943
Deferred revenue..................................... -- 395 1,798
------- ------- --------
Net cash used by operating activities............. (2,165) (5,819) (9,213)
------- ------- --------
Cash flows used by investing activities:
Purchases of property and equipment....................... (232) (1,128) (1,084)
Increase in other assets.................................. (10) (69) (18)
------- ------- --------
Net cash used in investing activities............. (242) (1,197) (1,102)
------- ------- --------
Cash flows from financing activities:
Issuance of Class B convertible redeemable preferred
stock.................................................. 1,635 -- --
Issuance of Class C convertible redeemable preferred
stock.................................................. -- 4,566 --
Issuance of Class D convertible redeemable preferred
stock.................................................. -- 3,999 3,280
Issuance of Class E convertible redeemable preferred
stock.................................................. -- -- 5,030
Exercise of stock options................................. -- 2 31
Advances on line of credit, net........................... 400 276 2,774
------- ------- --------
Net cash provided by financing activities......... 2,035 8,843 11,115
------- ------- --------
Net change in cash and cash equivalents..................... (372) 1,827 800
Cash and cash equivalents, beginning of year................ 454 82 1,909
------- ------- --------
Cash and cash equivalents, end of year...................... $ 82 $ 1,909 $ 2,709
======= ======= ========
Supplemental disclosures of cash flow information:
Cash paid during the year:
Interest............................................... $ 4 $ 37 $ 98
Income taxes........................................... -- -- --
See accompanying notes to financial statements.
F-6
69
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION
CareerBuilder, Inc. ("CareerBuilder" or the "Company") was established as
NetStart, Inc. on November 6, 1995, through incorporation in the State of
Delaware. In March 1998, the Company amended its articles of incorporation to
change its name to CareerBuilder, Inc. The Company is a provider of
comprehensive online recruitment offerings for employers and job seekers. The
Company's revenue is derived principally from service fees and, to a lesser
extent, license fees for TeamBuilder Software. Service fees include subscription
fees which allow customers to post up to a specific number of job advertisements
per month on the career sites that constitute the CareerBuilder Network banner
and other employment advertising fees and fees for recruiting services provided
by the Company. Software license fees are generated from sales of TeamBuilder
Software. The Company earns revenue through the sale of software to its
customers, and through monthly service fees for posting employment positions to
a network of Company-owned and third party internet sites ("affiliates").
The Company operates in a highly competitive environment and inherent in
the Company's business are various risks and uncertainties including its limited
operating history and unproven business model. The Company's success may depend
in part upon the emergence of the Internet as a communications medium,
prospective product and service development efforts, and the acceptance of the
Company's offerings by the marketplace. The Company expects to expand its
operations through continued capital investment. The Company is not currently
generating sufficient cash flows from operations to support its current
operating and capital requirements and is dependent on additional financing to
fund these requirements.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) REVENUE RECOGNITION
Service revenue consists of the sale of classified employment advertising
on Company-owned and affiliate websites and is recognized ratably over the
subscription period. Revenue from the sale of software is recorded upon shipment
of the product to the buyer, net of estimated returns.
Deferred revenue represents amounts billed or payments received in advance
of the subscription period and is recognized as revenue ratably over the
subscription period.
(b) COST OF REVENUE
Cost of revenue includes both cost of service and cost of software license
fees. Cost of service fees includes costs associated with hosting the network,
including depreciation expense and commissions and fees paid to ADP, Inc.
("ADP") and affiliates. Amounts incurred for affiliates and ADP commissions were
approximately $644,000 in 1998. No such amounts were incurred in 1996 and 1997.
Cost of software license fees consist of royalties paid to third parties for an
embedded database included in the software license.
(c) CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. The carrying amounts
reported in balance sheets for cash and cash equivalents approximate their fair
value.
(d) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Company's financial instruments, which include
cash equivalents, accounts receivable, accounts payable, accrued expenses and
convertible redeemable preferred stock, approximate their fair values as of
December 31, 1998.
F-7
70
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
(e) CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of accounts receivable. The Company extends
credit to its customers on an unsecured basis in the normal course of business.
(f) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the assets which
range from two to five years. The costs of leasehold improvements are
capitalized and amortized using the straight-line method over the shorter of
their useful lives or the terms of the respective leases.
(g) PRODUCT DEVELOPMENT COSTS
Product development costs include expenses incurred by the Company for
research, design and development of the Company's proprietary technology
incorporated in the TeamBuilder offerings and the CareerBuilder Network. Product
development costs are expensed as incurred. Software development costs are
required to be capitalized when a product's technological feasibility has been
established by completion of a working model of the product and ending when a
product is available for general release to customers. To date, completion of a
working model of the Company's products and general release have substantially
coincided. As a result, the Company has not capitalized any software
developments costs because such costs have not been significant.
(h) STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation arrangements in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and complies with the
disclosure provisions of Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation." Under APB No. 25,
compensation expense is based upon the difference, if any, on the date of grant,
between the fair value of the Company's stock and the exercise price.
(i) INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
(j) NET INCOME (LOSS) PER SHARE
The Company computes net income (loss) available per share in accordance
with SFAS No. 128, "Earnings Per Share" and SEC Staff Accounting Bulletin No. 98
("SAB 98"). Under the provisions of SFAS No. 128 and SAB 98, basic net income
(loss) available per share is computed by dividing the net income (loss)
available to common stockholders for the period by the weighted average number
of common shares outstanding during the period. Diluted net income (loss)
available per share is computed by dividing the net income (loss) for the period
by the weighted average number of common and dilutive common equivalent shares
outstanding
F-8
71
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
during the period. The Company has presented historical basic and diluted net
income (loss) available per share in accordance with SFAS No. 128. As the
Company had a net loss in each of the periods presented, basic and diluted net
income (loss) available per share is the same. Pro forma basic and diluted net
income (loss) per share has been calculated assuming the conversion of all
shares of preferred stock outstanding at December 31, 1998 into common stock, as
if the shares had converted immediately upon their issuance.
(K) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.
(L) COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. To date, the Company has not had any
transactions that are required to be reported as other comprehensive income.
(M) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." This
statement establishes standards for the way companies report information about
operating segments in annual financial statements. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The Company has determined that it does not have any separately
reportable business segments as of December 31, 1998.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") No. 98-1, "Software for Internal Use,"
which provides guidance on accounting for the cost of computer software
developed or obtained for internal use. SOP 98-1 is effective for financial
statements for fiscal years beginning after December 15, 1998. The Company does
not expect that the adoption of SOP 98-1 will have a material impact on its
financial statements.
F-9
72
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3 -- PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
DECEMBER 31,
---------------
1997 1998
------ ------
(IN THOUSANDS)
Computer equipment.......................................... $ 978 $1,774
Furniture and equipment..................................... 294 533
Leasehold improvements...................................... 111 160
------ ------
1,383 2,467
Less: accumulated depreciation and amortization............. 383 1,254
------ ------
$1,000 $1,213
====== ======
NOTE 4 -- LINES OF CREDIT
The Company had several lines of credit for up to $1,997,500 with a
commercial bank throughout 1997 and 1998. The lines of credit bore interest at a
rate of prime plus one to prime plus two percent. The lines of credit had
expiration dates through June 5, 2001 and contained certain financial covenants
which were required to be maintained by the Company. Substantially all of the
Company's assets served as collateral for the lines of credit. As of December
31, 1997, the Company had outstanding balances of approximately $676,000 on
these lines of credit at interest rates of 9.25 percent to 9.75 percent.
On December 29, 1998, the Company obtained two lines of credit from another
commercial bank and canceled and repaid the outstanding balances on the existing
lines of credit. The new lines of credit are collateralized by substantially all
of the Company's assets. The new lines of credit contain certain financial
covenants which are required to be maintained by the Company.
The first line of credit is for up to $2,000,000, bears interest at a rate
of prime plus one-half percent and matures on December 28, 1999. Borrowings are
available on this line of credit based upon the Company's accounts receivable
and property and equipment balances. At December 31, 1998, the available
borrowings were approximately $1,518,000. The Company had a balance of
approximately $1,450,000 outstanding under this line of credit at December 31,
1998 at an interest rate of 8.25 percent.
The second line of credit is for up to $4,000,000 and matures June 30, 1999
or earlier in the event of certain equity contributions. This line of credit
bears interest at a rate of prime plus four percent for the first ninety days of
the term and then increases to prime plus five percent thereafter. Borrowings
are available under this line as follows: $2,000,000 upon closing on the line of
credit and an additional $1,000,000 at the end of each of the two months
thereafter. The Company had a balance of approximately $2,000,000 under this
line of credit as of December 31, 1998 at an interest rate of 11.75 percent.
In connection with the new lines of credits, the Company incurred a
commitment fee of $60,000 which is included in other assets. Additionally, the
Company granted warrants to purchase 40,568 shares of Common Stock at a purchase
price of $4.93 per share on the date of the grant as consideration for obtaining
the lines of credit. The estimated value of the warrants at the grant date of
$109,000 is also included in other assets. Both the commitment fee and the costs
of the warrants will be amortized into interest expense over the term of the
line of credit using the interest method.
F-10
73
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- STOCKHOLDERS' EQUITY (DEFICIT)
The Company's Certificate of Incorporation, as amended, authorizes the
Company to issue 17,500,000 shares of common stock (see note 14).
As of December 31, 1998, the Company had reserved shares of common stock
for future issuance as follows:
(IN THOUSANDS)
Conversion of Class A convertible redeemable preferred
stock..................................................... 1,508
Conversion of Class B convertible redeemable preferred
stock..................................................... 2,071
Conversion of Class C convertible redeemable preferred
stock..................................................... 3,189
Conversion of Class D convertible redeemable preferred
stock..................................................... 2,046
Conversion of Class E convertible redeemable preferred
stock..................................................... 1,024
Exercise of stock options under stock option plan........... 1,484
Exercise of warrants........................................ 1,181
------
12,503
======
On July 12, 1996, the Company was recapitalized through the exchange of
1,250,000 shares of Class A common stock and 400 shares of Class B non-voting
liquidating preferred stock purchased on December 1, 1995 for 1,250,000 shares
of Class A convertible redeemable preferred stock and the exchange of the
4,625,000 shares of Class A common stock and 100 shares of Class B non-voting
liquidating preferred stock, both purchased on November 6, 1995, for 312,500
shares of Class A convertible redeemable preferred stock and 4,312,500 shares of
new common stock.
During 1998, several existing common stockholders exercised their rights to
convert a portion of their shares of Class A convertible redeemable preferred
stock into 55,000 shares of common stock and a portion of their shares of Class
B convertible redeemable preferred stock into 80,000 shares of common stock.
NOTE 6 -- CONVERTIBLE REDEEMABLE PREFERRED STOCK
Convertible redeemable preferred stock as of December 31, 1998 consisted of
the following:
SHARES LIQUIDATION REDEMPTION
AUTHORIZED OUTSTANDING AMOUNT AMOUNT
---------- ----------- ----------- ----------
(IN THOUSANDS)
Class A....................................... 1,563 1,508 $ 565 $ 481
Class B....................................... 2,151 2,071 1,847 1,574
Class C....................................... 3,189 3,189 5,202 4,567
Class D....................................... 2,046 2,046 7,862 7,279
Class E....................................... 1,024 1,024 5,203 5,030
The holders of the preferred stock have various rights and preferences as
follows:
(A) VOTING RIGHTS AND PROTECTIVE PROVISIONS
The Class A, B, C, D, and E stockholders may vote with the common stock as
a single class on all actions to be taken by the stockholders. The Class A
stockholders are entitled to separately elect one member of the
F-11
74
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 6 -- CONVERTIBLE REDEEMABLE PREFERRED STOCK -- (CONTINUED)
Board of Directors, provided the Class A stock represents at least 10 percent of
the outstanding common stock assuming the conversion of all outstanding
preferred stock. The Class B and C stockholders each are entitled to separately
elect one member of the Board of Directors, provided each of the Class B and C
stock represents at least 5 percent of the outstanding common stock assuming the
conversion of all outstanding preferred stock. The holders of the preferred
stock also have a right of first refusal to match the purchase price for any
subsequent issuance of stock to retain their voting interest in the Company.
Furthermore, consent of the holders of at least a majority of Class B, C and D
stock and at least 40 percent of holders of Class E stock, voting as a separate
class is required for: (i) the sale by the Company of substantially all of its
assets; (ii) merger, liquidation or winding up of the Company; and (iii) the
payment of dividends.
(b) DIVIDENDS
Class A, B, C, D, and E stock accrues cumulative dividends at a rate of
$0.0224, $0.0532, $0.1008, $0.2499, and $0.3451 per share per annum,
respectively, whether or not the dividends are declared by the Board of
Directors. Unpaid and undeclared dividends on the Class A, B, C, D, and E stock
was approximately $620,000 and $1,748,000 as of December 31, 1997 and 1998,
respectively.
(c) LIQUIDATION
Class B, C, D, and E stock, each with a par value of $.001 is senior to the
Class A stock and all other issuances of stock in liquidation. Class A stock,
par value, $.001 has a liquidation preference over the common stock or any other
issuances of stock, except for the Class B, C, D, and E stock. In the event of
liquidation as defined in the Preferred Stock Purchase Agreements, the Class A,
B, C, D, and E stockholders are entitled to receive an amount equal to the
original share price paid plus any unpaid cumulative dividends, whether or not
declared.
(d) REDEMPTION
Class B, C, D, and E stock contain mandatory redemption requirements. The
Company must redeem Class B, C, D, and E Stock as follows:
September 11, 2002 33 1/3% of all Class B, C, D, and E outstanding as of that
date
September 11, 2003 50% of all Class B, C, D, and E outstanding as of that date
September 11, 2004 100% of all Class B, C, D, and E outstanding as of that date
Class A, B, C, D, and E stock have a redemption value of $0.32, $0.76,
$1.44, $3.57, and $4.93 per share, plus declared but unpaid dividends thereon,
respectively.
(e) CONVERSION
The Class A, B, C, D, and E stock is convertible on a one-for-one basis
into shares of common stock at the option of the holder. The Class A, B, C, D,
and E stock is automatically converted into common stock in the event of an
initial public offering of shares of common stock, in which the price paid by
the public is at least $4.32 per share and the aggregate proceeds is at least
$15,000,000 (note 14). The Class A, B, C, D, and E stock is automatically
converted into common stock upon a merger or sale of the Company as defined in
the Preferred Stock Purchase Agreements, in which the holders of the Class A, B,
C, D, and E stock will receive, on an as-converted basis, at least $1.28, $3.04,
$5.76, $6.03 and $6.03 per share, respectively.
F-12
75
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7 -- RELATED PARTY TRANSACTION
In January 1998, the Company entered into a sales agent agreement with ADP.
ADP is related to the Company through its ownership of 840,337 shares of Class D
Convertible Redeemable Preferred Stock. ADP also has the right to appoint and
nominate one member of the Board of Directors, as long as ADP beneficially owns
at least 2 percent of the outstanding common stock, assuming conversion of all
outstanding preferred stock. The agreement expires in January 2000.
Per the agreement, ADP sells the Company's software products and classified
employment advertising services on a commission basis. Under the agreement, ADP
performs all billing and collections on behalf of the Company and remits amounts
due to the Company, net of its commissions. In connection with the agreement,
ADP made a prepayment of expected sales to the Company of $1,500,000. This
amount has been included in deferred revenue and has been reduced by amounts
earned of $405,000 as of December 31, 1998. The agreement expires in January
2000, unless extended at the option of the parties. In 1998, commission expense
under the ADP agreement was approximately $328,000. See note 14.
NOTE 8 -- STOCK COMPENSATION
(A) STOCK OPTIONS
The Company has a stock option plan which provides for the granting of
options to directors and employees of the Company to purchase shares of its
common stock within prescribed periods. Options are granted at an exercise price
equal to the estimated fair value on the grant date, as determined by the Board
of Directors. The options generally vest over four years, one-fourth of the
shares on each of the first through fourth anniversaries of the date of grant.
As of December 31, 1998, the Company has reserved 1,950,000 shares of common
stock for issuance under the plan (see note 14).
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock options rather than the alternative fair value
accounting method allowed by SFAS No. 123. APB 25 provides that compensation
expense relative to the Company's employee stock options is measured based upon
the intrinsic value of the stock option. SFAS No. 123 requires companies that
continue to follow APB 25 to provide a pro forma disclosure of the impact of
applying the fair value method of SFAS No. 123.
Under APB 25, because the exercise price of the Company's employee stock
options equaled the fair value of the underlying stock on the date of grant, no
compensation expense has been recognized. Had compensation expense for the
Company's stock option plan been determined based upon the fair value
methodology under SFAS No. 123, the Company's net loss would have increased to
these pro forma amounts:
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1997 1998
-------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net income (loss) available to common stockholders:
As reported............................................ $(2,487) $(7,863) $(13,115)
Pro forma.............................................. (2,488) (7,869) (13,140)
Basic and diluted net income (loss) available per share:
As reported............................................ $ (0.48) $ (1.80) $ (2.92)
Pro forma.............................................. (0.48) (1.80) (2.92)
F-13
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CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- STOCK COMPENSATION -- (CONTINUED)
The fair value of these options was estimated at the date of grant using
the Black-Scholes option pricing model on the date of grant using the following
assumptions:
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
---- ---- ----
Risk-free interest rates.................................... 6.0% 6.0% 5.5%
Expected lives (in years)................................... 5.0 5.0 4.0
Dividend yield.............................................. -- -- --
Expected volatility......................................... -- -- --
The weighted-average fair value of stock options granted during 1996, 1997,
and 1998 was $0.01, $0.07 and $0.22, respectively.
A summary of the Company's stock option activity is as follows:
SHARES WEIGHTED AVERAGE
UNDER OPTION EXERCISE PRICE
------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Balance, December 31, 1995............................... 20 $0.04
Granted.................................................. 755 0.06
Exercised................................................ -- --
Canceled................................................. -- --
-----
Balance, December 31, 1996............................... 775 0.06
Granted.................................................. 585 0.30
Exercised................................................ 58 0.04
Canceled................................................. 14 0.27
-----
Balance, December 31, 1997............................... 1,288 0.17
Granted.................................................. 632 1.26
Exercised................................................ 349 0.09
Canceled................................................. 87 0.40
-----
Balance, December 31, 1998............................... 1,484 0.64
=====
F-14
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CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 8 -- STOCK COMPENSATION -- (CONTINUED)
The following table summarizes information concerning currently outstanding
and exercisable options at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
NUMBER WEIGHTED-AVERAGE WEIGHTED- NUMBER WEIGHTED-
RANGE OF OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES AT 12/31/98 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/98 EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
(IN THOUSANDS, EXCEPT YEARS AND PER SHARE DATA)
$0.04 - $0.16............... 576 7.8 years $0.09 174 $0.09
$0.35 - $0.40............... 411 9.0 years 0.38 103 0.38
$1.25 - $3.50............... 497 9.8 years 1.48 -- --
----- ---
1,484 8.8 years 0.64 277 0.20
===== ===
(B) WARRANTS
In connection with the ADP agreement (note 7), the Company granted warrants
to purchase up to 1,140,000 shares of the Company's common stock at an exercise
price of $5.00 per share. The warrants vest up to 380,000 shares per year on
March 31, 1999, 2000 and 2001, based upon sales levels obtained by ADP during
the one-year periods ending on the respective vesting dates. The warrants
contain anti-dilution provisions, which increase the number of shares ratably in
connection with certain additional equity issuances by the Company. In
connection with the issuance of Class E convertible redeemable preferred stock
in July 1998, warrants in December 1998 and Class F convertible redeemable
preferred stock in January 1999, the number of shares purchasable under the
warrants was increased to 1,294,052 (see note 14).
The Company begins to record expense for such warrants when it is probable
that ADP will obtain the necessary sales levels to vest in the warrants. The
expense is measured based upon the fair value of the warrants at the vesting
date. As of December 31, 1998, the Company believes it is not yet probable that
ADP will achieve the necessary sales level to earn the warrants vesting on March
31, 1999, or any other date, and accordingly, no expense has been recorded.
In December 1998, the Company granted warrants to purchase 40,568 shares of
common stock at an exercise price of $4.93 per share as consideration for
obtaining a line of credit (note 4). The warrants expire in ten years.
F-15
78
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- LEASES
The Company is obligated under several noncancelable operating leases for
office space. The future minimum lease obligations under these noncancelable
operating leases as of December 31, 1998 are approximately as follows:
YEAR ENDING DECEMBER 31,
------------------------ (IN THOUSANDS)
1999........................................................ $389
2000........................................................ 284
2001........................................................ 219
2002........................................................ 48
----
$940
====
Rent expense under noncancelable operating leases was approximately
$47,000, $279,000 and $422,000 for years ended December 31, 1996, 1997 and 1998,
respectively.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
(a) RETIREMENT AND HEALTH PLANS
The Company sponsors a defined contribution plan available to substantially
all employees. The Company's contributions under the Plan are discretionary.
There were no Company contributions made to the Plan during any of the periods
presented.
The Company is self-insured for group health below certain specified
limits.
(b) AFFILIATE PAYMENTS
The Company has a commitment to purchase approximately $2,030,000 in
Internet advertising from one of its affiliates during 1999. The Company can
reduce such commitment through the payment of commissions to the affiliate from
the sale of classified employment advertising on the affiliate's websites.
In September 1998, the Company entered into an affiliate agreement which
required a payment of $400,000 at inception for marketing and development
activities. Such amount has been included in other assets and is being amortized
into sales and marketing expense over the term of the agreement. Additionally,
the agreement requires the Company to purchase approximately $600,000 in
Internet advertising during 1999. These amounts will be expensed in the period
incurred.
NOTE 11 -- INCOME TAXES
No provision for federal or state income taxes has been recorded as the
Company incurred net operating losses for all periods presented. As of December
31, 1998, the Company had net operating loss carryforwards available to offset
future taxable income of approximately $19,692,000, $6,944,000 of which expire
in 2018, with the remainder expiring in 2011 and 2012. Further, as a result of
certain capital transactions, an annual limitation on the future utilization of
the net operating loss carryforward may have occurred. The actual income tax
benefit differed from the income tax benefit which would be computed based upon
the statutory federal tax rates as a result of recording of a valuation
allowance. The valuation allowance was recorded as it is not more likely than
not that the deferred tax assets will be recoverable.
F-16
79
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 -- INCOME TAXES -- (CONTINUED)
Temporary differences that give rise to deferred tax assets and liabilities
at December 31, 1997 and 1998 are as follows:
1997 1998
------- -------
(IN THOUSANDS)
Deferred tax assets:
Net operating loss carryforwards.......................... $ 3,730 $ 7,877
Accounts receivable....................................... 15 54
Property and equipment.................................... 27 155
Accrued expenses.......................................... 104 219
Deferred revenue.......................................... -- 438
------- -------
Total gross deferred tax assets................... 3,876 8,743
Less: valuation allowance................................... (3,876) (8,743)
------- -------
Net deferred tax assets........................... $ -- $ --
======= =======
The valuation allowance for deferred tax assets as of January 1, 1997 and
1998 was $986,000 and $3,876,000 respectively. The net change in the valuation
allowance for the years ended December 31, 1997 and 1998, was an increase of
$2,890,000 and $4,867,000, respectively.
NOTE 12 -- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION --
NONCASH INVESTING AND FINANCING ACTIVITIES
In 1998, several existing common stockholders exercised their rights to
convert 55,000 shares of Class A convertible redeemable preferred stock and
80,000 shares of Class B convertible redeemable preferred stock into 135,000
shares of common stock. In connection with the transactions, approximately
$79,000 of convertible redeemable preferred stock was reclassified to additional
paid-in capital.
In 1998, the Company issued warrants to purchase 40,568 shares of common
stock as consideration in obtaining a line of credit. As a result, the estimated
value of the warrants of approximately $109,000 was recorded as an other asset
with the offsetting amount recorded as additional paid-in capital.
In 1996, in connection with the recapitalization of the Company,
approximately $500,000 was reclassified from additional paid-in capital to
convertible redeemable preferred stock.
NOTE 13 -- BASIC AND DILUTED NET LOSS PER SHARE
The Company computes net income (loss) per share in accordance SFAS No.128,
"Earnings Per Share", which requires certain disclosures relating to the
calculation of earnings per common share. The following is a
F-17
80
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13 -- BASIC AND DILUTED NET LOSS PER SHARE -- (CONTINUED)
reconciliation of the numerators and denominators of the basic and diluted
earnings per common share computations for net income (loss).
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1997 1998
-------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net income (loss)....................................... $(2,416) $(7,314) $(11,987)
Preferred stock dividend requirements................... (71) (549) (1,128)
------- ------- --------
Net income (loss) available to common stockholders...... $(2,487) $(7,863) $(13,115)
======= ======= ========
Weighted average shares of common stock outstanding..... 5,133 4,366 4,494
======= ======= ========
Basic and diluted net income (loss) available per common
share................................................. $ (0.48) $ (1.80) $ (2.92)
======= ======= ========
NOTE 14 -- SUBSEQUENT EVENTS
On January 26, 1999, the Company issued 2,018,350 shares of newly
authorized Class F convertible redeemable preferred stock to new and existing
investors for approximately $11,000,000. The Class F preferred stock is
convertible on a one-for-one basis into shares of common stock at the option of
the holder. The Class F preferred stock is automatically converted into common
stock in the event of an initial public offering of shares of common stock in
which the price paid per share by the public is at least $7.00 per share and the
aggregate proceeds is at least $30,000,000. The Class A, B, C, D, and E
preferred stock conversion features were amended to conform to the Class F
preferred stock as a result of the issuance of Class F preferred stock. In
connection with the issuance of Class F preferred stock, the Company amended its
Certificate of Incorporation to increase authorized shares of common stock to
21,000,000 and increased the number of shares of common stock authorized for
issuance under the Company's stock option plan to 2,100,000.
On March 5, 1999, the Company entered into an agreement with NBC
Multimedia. Under this agreement, the Company will host the NBC Interactive
career sites for participating NBC affiliates and NBC.com. Under this agreement,
Careerbuilder granted warrants to purchase 93,750 shares of common stock at an
exercise price of $8.00 per share and 53,571 shares at an exercise price of
$14.00 per share. The warrants become exercisable in various amounts on the
first, second, and third anniversary of the agreement and expire five years from
the date of grant. In addition, the Company is required to make certain
mandatory payments to NBC Interactive in 1999 and 2000.
On March 5, 1999, the Company and ADP amended their joint marketing and
sales representative agreement, extending the initial term of the agreement
through January 2002. The Company amended and restated the warrant granted in
January 1998, and the first installment exercisable for 380,000 shares of common
stock, at an exercise price of $12.00 per share, was vested at that time. The
remaining 914,052 shares of common stock underlying the warrant vest in equal
amounts of 457,026 shares of common stock on each of March 31, 2001 and 2002, at
an exercise price of $5.00 per share, based upon sales levels attained by ADP
during the one-year period ending on the respective vesting date. If the Company
issues additional equity securities primarily for financing purposes, and not
including the shares of common stock sold in an underwritten public offering,
the number of shares of common stock issuable upon exercise of the warrant will
increase for each of the second and third installments.
F-18
81
CAREERBUILDER, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14 -- SUBSEQUENT EVENTS -- (CONTINUED)
If and when it becomes probable that the net revenue the Company will
receive from ADP will reach the necessary level for either installment of the
warrant to vest, the Company would begin to record an expense reflecting the
fair value of the warrant, which will be determined in part based on the market
price of the common stock. The Company would begin to recognize this expense on
the determination of probability that the revenue targets would be achieved,
continuing through the actual vesting date. The Company would initially estimate
the amount of the expense at the time of the determination that achievement is
probable, based in part on the market price of the common stock at that time. At
the time of actual vesting, the fair value of the warrant would be remeasured
and, if different from the value used in initially estimating the expense, the
difference would be reflected as an additional charge or credit at that time.
F-19
82
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses, all of which will be
borne by the Registrant, in connection with the sale and distribution of the
securities being registered, other than the underwriting discounts and
commissions. All amounts shown are estimates except for the Securities and
Exchange Commission registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.
SEC registration fee........................................ $14,387
NASD filing fee............................................. 5,675
Nasdaq National Market listing fee.......................... *
Blue Sky fees and expenses.................................. *
Transfer Agent and Registrar fees........................... *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Printing and mailing expenses............................... *
Miscellaneous............................................... *
-------
$ *
=======
- -------------------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Eighth of the Registrant's Amended and Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") provides that no
director of the Registrant shall be personally liable for any monetary damages
for any breach of fiduciary duty as a director, except to the extent that the
Delaware General Corporation Law prohibits the elimination or limitation of
liability of directors for breach of fiduciary duty.
Article Ninth of the Registrant's Restated Certificate of Incorporation
provides that a director or officer of the Registrant (a) shall be indemnified
by the Registrant against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred in connection with any litigation
or other legal proceeding (other than an action by or in the right of the
Registrant) brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Registrant, except that no indemnification shall be made with respect to any
matter as to which such person shall have been adjudged to be liable to the
Registrant, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount advanced
if it is ultimately determined that he is not entitled to indemnification for
such expenses.
II-1
83
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent to
the right of indemnification, the director or officer must give the Registrant
notice of the action for which indemnity is sought and the Registrant has the
right to participate in such action or assume the defense thereof.
Article Ninth of the Registrant's Restated Certificate of Incorporation
further provides that the indemnification provided therein is not exclusive, and
provides that in the event that the Delaware General Corporation Law is amended
to expand the indemnification permitted to directors or officers, then the
Registrant must indemnify those persons to the fullest extent permitted by such
law as so amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
Under Section 7 of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the Registrant against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). Reference is made to
the form of Underwriting Agreement filed as Exhibit 1 hereto.
The Registrant intends to purchase an insurance policy insuring the
officers and directors of the Registrant against certain liabilities incurred by
them in the discharge of their functions as such officers and directors,
including liabilities under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below is information regarding shares of capital stock issued,
warrants issued and options granted by the Registrant since January 1, 1996.
(a) Issuances of Capital Stock and Warrants
In July 1996, the Registrant sold 2,151,420 shares of Class B convertible
preferred stock to a group of private investors for an aggregate sale price of
$1,635,079.
In January 1997, the Registrant sold 3,188,889 shares of Class C
convertible preferred stock to a group of private investors for an aggregate
sale price of $4,592,000.
In September 1997, the Registrant sold 1,120,448 shares of Class D
convertible preferred stock to a group of private investors for an aggregate
sale price of $3,999,999. In January 1998, the Registrant sold an additional
925,337 shares of Class D convertible preferred stock to a group of private
investors for an aggregate sale price of $3,303,453. In January 1998, in
connection with the execution of the ADP Joint Marketing and Sales
Representative Agreement and the issuance of Class D convertible preferred stock
to ADP, Inc. ("ADP"), the Registrant issued to ADP a warrant to purchase up to
1,294,052 shares of common stock.
In July 1998, the Registrant sold 1,024,351 shares of Class E convertible
preferred stock to a group of private investors for an aggregate sale price of
$5,050,050.
II-2
84
In December 1998, in connection with the execution of a Loan Agreement with
PNC Bank, N.A. ("PNC"), the Registrant issued to PNC a warrant to purchase up to
40,568 shares of common stock.
In January 1999, the Registrant sold 2,018,350 shares of Class F
convertible preferred stock to a group of investors for an aggregate sale price
of $11,000,008.
In March 1999, in connection with an agreement with NBC, the Registrant
issued a warrant to purchase 93,750 shares of common stock at an exercise price
of $8.00 per share and a warrant to purchase 53,571 shares of common stock at
$14.00 per share.
(b) Grants and Exercises of Stock Options
The Registrant's Stock Option Plan (the "Stock Plan") was adopted by the
Board of Directors and approved by the stockholders of the Registrant in March
1996. As of February 28, 1999, options to purchase 1,428,655 shares of Common
Stock were outstanding under the Stock Plan, and the Registrant had issued
533,820 shares of Common Stock upon the exercise of options granted under such
plan. The Registrant's 1999 Stock Incentive Plan (the "Incentive Plan") and 1999
Director Stock Option Plan (the "Director Plan") were adopted by the Board of
Directors and approved by the stockholders of the Registrant in March 1999. As
of February 28, 1999, no options had been granted under either the Incentive
Plan or the Director Plan. The Registrant's 1999 Employee Stock Purchase Plan
(the "Purchase Plan") was adopted by the Board of Directors and approved by the
stockholders in March 1999. The Purchase Plan will not become effective until
the closing of the offering.
The Registrant has reserved an aggregate of 3,300,000 shares of Common
Stock for issuance in the aggregate under the Stock Plan, Incentive Plan,
Director Plan and Purchase Plan.
The securities issued in the foregoing transactions were either (i) offered
and sold in reliance upon exemptions from Securities Act registration set forth
in Sections 3(b) and 4(2) of the Securities Act, or any regulations promulgated
thereunder, relating to sales by an issuer not involving any public offering,
(ii) in the case of certain options to purchase shares of Common Stock and
shares of Common Stock issued upon the exercise of such options, such offers and
sales were made in reliance upon an exemption from registration under Rule 701
of the Securities Act. No underwriters were involved in the foregoing sales of
securities.
II-3
85
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
EXHIBIT
NO. DESCRIPTION
- ------- -----------
1.1 Form of Underwriting Agreement.
3.1 Certificate of Incorporation of the Registrant.
3.2 Form of Amended and Restated Certificate of Incorporation of
the Registrant (to be effective upon the closing of the
offering).
3.3 By-Laws of the Registrant.
3.4 Form of Amended and Restated By-Laws of the Registrant (to
be effective upon the closing of the offering).
4.1* Specimen certificate for shares of Common Stock.
5* Opinion of Hale and Dorr LLP.
10.1 Stock Option Plan.
10.2* 1999 Stock Incentive Plan.
10.3* 1999 Director Stock Option Plan.
10.4* 1999 Employee Stock Purchase Plan.
10.5 Third Amended and Restated Registration Rights Agreement,
dated as of January 26, 1999, by and among the Registrant
and certain stockholders.
10.6 Amended and Restated Stock Restriction Agreement, dated as
of January 26, 1999, by and among the Registrant and certain
stockholders.
+10.7* Amendment Agreement, dated March 5, 1999, between the
Registrant and ADP, Inc.
10.8 Class D Convertible Preferred Stock Purchase Agreement,
dated as of September 11, 1997, by and among the Registrant
and certain stockholders.
10.9 Amendment Agreement to the Class D Convertible Preferred
Stock Purchase Agreement, dated as of January 23, 1998, by
and among the Registrant and certain stockholders.
10.10 Class E Convertible Preferred Stock Purchase Agreement,
dated as of July 6, 1998, by and among the Registrant and
certain stockholders.
10.11 Class F Convertible Preferred Stock Purchase Agreement,
dated as of January 26, 1999, between the Registrant and
certain stockholders.
+10.12* ADP Joint Marketing/Sales Representative Agreement, dated as
of January 23, 1998, between the Registrant and ADP, Inc.
+10.13* Common Stock Purchase Warrant, dated as of January 23, 1998,
issued to ADP, Inc.
10.14 Loan Agreement, dated as of December 29, 1998, between the
Registrant and PNC Bank, N.A.
10.15 Revolving Credit Note, dated as of December 29, 1998, issued
to PNC Bank, N.A.
10.16 Bridge Loan Note, dated as of December 29, 1998, issued to
PNC Bank, N.A.
10.17 Security Agreement, dated as of December 29, 1998, between
the Registrant and PNC Bank, N.A.
10.18 Warrant Agreement, dated as of December 29, 1998, between
the Registrant and PNC Bank, N.A.
10.19 Lease, dated September 11, 1997, as amended, for Reston, VA.
10.20 Sublease, dated August 14, 1998, for Reston, VA.
11 Computation of earnings per common share.
23.1 Consent of Hale and Dorr LLP (included in Exhibit 5).
II-4
86
EXHIBIT
NO. DESCRIPTION
- ------- -----------
23.2 Consent of KPMG LLP.
24 Power of Attorney (included on page II-5).
27 Financial Data Schedule.
- -------------------------
* To be filed by amendment.
+ Application has been filed for confidential treatment.
(b) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts
All other schedules have been omitted because they are not required or
because the required information is given in the Registrant's Financial
Statements or Notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Certificate of
Incorporation of the Registrant and the laws of the State of Delaware, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-5
87
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Reston, Virginia on this 5th day of
March, 1999.
CAREERBUILDER, INC.
By: /s/ ROBERT J. MCGOVERN
------------------------------------------
Robert J. McGovern
Chairman of the Board, President and Chief
Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of CareerBuilder, Inc., hereby
severally constitute and appoint Robert J. McGovern, James A. Tholen and David
Sylvester, and each of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-1 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement, and any subsequent Registration Statement for the same
offering which may be filed under Rule 462(b), and generally to do all such
things in our names and on our behalf in our capacities as officers and
directors to enable CareerBuilder, Inc. to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission, hereby ratifying and confirming our signatures as they may
be signed by our said attorneys, or any of them, to said Registration Statement
and any and all amendments thereto or to any subsequent Registration Statement
for the same offering which may be filed under Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ROBERT J. MCGOVERN Chairman of the Board, President and Chief March 5,1999
- --------------------------------------------- Executive Officer (Principal Executive
Robert J. McGovern Officer)
/s/ JAMES A. THOLEN Director (Principal Financial and Accounting March 5, 1999
- --------------------------------------------- Officer)
James A. Tholen
/s/ PETER BARRIS Director March 5, 1999
- ---------------------------------------------
Peter Barris
/s/ GARY C. BUTLER Director March 5, 1999
- ---------------------------------------------
Gary C. Butler
/s/ D. JARRETT COLLINS Director March 5, 1999
- ---------------------------------------------
D. Jarrett Collins
II-6
88
SIGNATURE TITLE DATE
--------- ----- ----
/s/ J. NEIL WEINTRAUT Director March 5, 1999
- ---------------------------------------------
J. Neil Weintraut
/s/ DAVID C. WETMORE Director March 5, 1999
- ---------------------------------------------
David C. Wetmore
II-7
89
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
CLASSIFICATION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
-------------- ---------- ---------- ---------- ---------- ----------
1996
Allowances for doubtful accounts and
sales returns.......................... $-- $ 4 $ 14 $ -- $ 18
1997
Allowances for doubtful accounts and
sales returns.......................... 18 88 137 (205) 38
1998
Allowances for doubtful accounts and
sales returns.......................... 38 591 62 (556) 135
S-1