<PAGE> 1
As filed with the Securities and Exchange Commission on November 24, 1999.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LYCOS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-3277338
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
400-2 TOTTEN POND ROAD, WALTHAM, MASSACHUSETTS 02451
(781) 370-2700
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
----------
ROBERT J. DAVIS
LYCOS, INC.
400-2 TOTTEN POND ROAD
WALTHAM, MASSACHUSETTS 02451
(781) 370-2700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
KENNETH J. GORDON, ESQ.
TESTA, HURWITZ & THIBEAULT, LLP
125 HIGH STREET
BOSTON, MASSACHUSETTS 02110
(617) 248-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest investment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================
Amount Proposed Maximum Proposed Maximum Amount of
Title of Shares to be Offering Price Aggregate Offering Registration
to be Registered Registered Per Share (1) Price (1) Fee
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
common stock, 166,080 $55.88 $9,280,000 $2,580.00
par value
$.01 per share
====================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee, based
upon the average of the high and low prices of the Lycos' common stock as
reported on the Nasdaq National Market on November 22, 1999 in accordance
with Rule 457 under the Securities Act of 1933.
----------
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, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
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. The 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.
PROSPECTUS SUBJECT TO COMPLETION, DATED NOVEMBER 24, 1999
166,080 SHARES
LYCOS, INC.
COMMON STOCK
This prospectus relates to the public offering, which is not being
underwritten, of up to 166,080 shares of common stock, par value $0.01 per
share, of Lycos, Inc., which may be offered from time to time by stockholders of
Lycos or by donees, transferees or other successors in interest that receive
Lycos' shares as a gift or other non-sale related transfer. Lycos will receive
no part of the proceeds of such sales. The shares of Lycos common stock
described above were originally issued or reserved for issuance by Lycos in
consideration for Lycos' acquisition of Series C Preferred Stock of iCOMS, Inc.
dba Internet Commerce Services Corporation, a Delaware corporation, and the
consummation of an Amended and Restated Service Agreement by and between Lycos
and iCOMS. These shares were issued pursuant to an exemption from the
registration requirements of the Securities Act of 1933, as amended. These
shares are being registered by Lycos in connection with the consummation of the
transactions with iCOMS.
These shares may be offered by stockholders of Lycos from time to time
in one or more transactions as described under the "Plan of Distribution". To
the extent required, the number of shares to be sold, the name of any selling
stockholder(s), the purchase price, the name of any agent or broker-dealer, and
any applicable commissions, discounts or other items constituting compensation
to such agent or broker-dealer with respect to a particular offering will be set
forth in a supplement or supplements to this prospectus. The aggregate proceeds
to any selling stockholder(s) from the sale of the shares offered from time to
time will be the purchase price of the shares sold less commissions, discounts
and other compensation, if any, paid by such selling stockholder(s) to any agent
or broker-dealer. The price at which any of the shares may be sold, and the
commissions, if any paid, in connection with any sale, are unknown and may vary
from transaction to transaction. Lycos will pay all expenses incident to the
offering and sale of the shares to the public other than any commissions and
discounts of underwriters, dealers or agents and any transfer taxes. See
"Selling Stockholder" and "Plan of Distribution."
Lycos' common stock is listed on the Nasdaq National Market under the
symbol "LCOS." On November 22, 1999, the last sale price of Lycos' common stock
was $56.00 per share.
----------
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK.
FOR MORE INFORMATION, SEE "RISK FACTORS" ON PAGE 4.
----------
The Securities and Exchange Commission may take the view that, under
certain circumstances, Lycos' stockholders and any broker-dealers or agents that
participate with such stockholders in the distribution of these registered
shares may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933. Commissions, discounts or concessions received by any such
broker-dealer or agent may be deemed to be underwriting commissions under the
Securities Act of 1933.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THESE
SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this prospectus is November 24, 1999
- 2 -
<PAGE> 3
WHERE YOU CAN FIND MORE INFORMATION
Lycos files annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information Lycos files at the SEC's public reference rooms in Washington, D.C.,
New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. Lycos' SEC filings are
also available to the public from commercial document retrieval services and at
the Website maintained by the SEC at www.sec.gov. Lycos has filed a registration
statement to register with the SEC the Lycos common stock listed in this
prospectus. This prospectus is part of that registration statement. As allowed
by SEC rules, this prospectus does not contain all of the information you can
find in the registration statement or the exhibits to the registration
statement.
Some of the important business and financial information that you may want to
consider is not included in this prospectus, but rather is "incorporated by
reference" to documents that have been filed by Lycos with the SEC. The
information that is incorporated by reference consists of:
* Lycos' Annual Report on Form 10-K , for the fiscal year ended July 31,
1999, as filed on October 29, 1999;
* Lycos' Current Reports on Form 8-K filed on August 6, 1999 (as amended
on October 7, 1999) and September 16, 1999;
* The description of Lycos' common stock contained in its registration
statement on Form 8-A, filed with the SEC on February 23, 1996;
* All documents filed by Lycos under the Securities Exchange Act of 1934
(e.g., Forms 10-Q and 8-K) after the date of this prospectus and prior
to the termination of this offering.
If there is any contrary information in a previously filed document that is
incorporated by reference, then you should rely on the information in this
prospectus.
If you are a stockholder, you can obtain any of the documents incorporated by
reference through Lycos or the SEC. Documents incorporated by reference are
available from Lycos without charge, excluding all exhibits. You may obtain
documents incorporated by reference in this prospectus by requesting them in
writing to the following address or by telephone:
Lycos, Inc.
Attention: Investor Relations
400-2 Totten Pond Road
Waltham, Massachusetts 02451
(718) 370-2700
THE COMPANY
Lycos, "Your Personal Internet Guide," is a "New Generation Online
Service" that offers a network of globally branded media properties and
aggregated content distributed primarily through the World Wide Web. Under the
"Lycos Network" brand, Lycos provides guides to online content, aggregated third
party content, Web search and directory services and community and
personalization features. Lycos seeks to draw a large number of viewers to its
Websites by providing a one-stop destination for identifying, selecting and
accessing resources, services, content and information on the Web.
Lycos is a Delaware corporation incorporated in June 1995. Our principal
executive offices are located at 400-2 Totten Pond Road, Waltham, Massachusetts
02451, and our telephone number is (781) 370-2700.
- 3 -
<PAGE> 4
RISK FACTORS
The following risk factors should be considered in conjunction with the
other information included and incorporated by reference in this prospectus
before purchasing the common stock offered. We have made forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
of Section 21E of the Securities Exchange Act of 1934 in this document.
Forward-looking statements include information concerning the possible or
assumed future results of our operations as well as statements preceded by,
followed by, or that include words such as "believes," "expects," "anticipates"
or similar expressions. Important factors in addition to those discussed under
the caption "Risk Factors" and elsewhere in this document and in the documents
that we have incorporated by reference, could affect our future results and
could cause those results to differ materially from those expressed in our
forward-looking statements. In addition, we do not have any intention or
obligation to update forward-looking statements after we distribute this
document, even if new information, future events or other circumstances have
made them incorrect or misleading.
WE HAVE A LIMITED OPERATING HISTORY.
We have a limited operating history for you to use in evaluating our
prospects. We generated revenues of $56.1 million for the fiscal year ended July
31, 1998 and revenues of $135.5 million for the fiscal year ended July 31, 1999.
Due to our limited operating history, you should not take the recent revenue
growth as indicative of the rate of growth, if any, that you can expect in the
future. You should consider the risks, expenses and difficulties frequently
encountered by companies in their early stages of development, particularly
companies operating in new and rapidly evolving markets such as ourselves. We
may not successfully address these risks which include:
* the ability to continue to develop and extend the "Lycos" brand;
* the ability to maintain premier positions on high traffic Web access points
through relationships such as our arrangements with Netscape Communications
Corporation and Microsoft Corporation or to enter into additional
distribution relationships and strategic alliances;
* the ability to maintain and increase levels of traffic on our Websites;
* the ability to continue to develop or acquire content, features and
functionality for our services;
* the development of equal or superior services or products by competitors;
* the failure of the market to adopt the Web as an advertising or commercial
medium;
* the reduction in market prices for Web-based advertising as a result of
competition or otherwise;
* the ability to effectively generate commerce-related revenues through
sponsored services and placements in our services; and
* the success in attracting, retaining and motivating qualified personnel.
As a strategic response to a changing competitive environment, we may
choose to make pricing, service or marketing decisions or acquisitions that
would adversely impact our operations and therefore our profitability. Due to
the nascent nature of the Internet industry, we believe that period-to-period
comparisons of our operating results are not meaningful and that you should not
rely upon them as an indication of our future performance.
WE HAVE A HISTORY OF SIGNIFICANT LOSSES.
We have incurred significant losses since our inception and may incur
losses in the future. As of July 31, 1999, we had an accumulated deficit of
$52.0 million. We reported a loss of $0.46 per share for the year ended July 31,
1998 and a loss of $.60 per share for the year ended July 31, 1999. We currently
expect that our operating expenses will continue to increase significantly as
our sales and marketing operations are expanded and as we fund further product
development and acquire complementary products and technologies. Our potential
inability to keep short-term expense levels in line with revenues could
adversely affect our financial results for any given quarter. It is possible
that in some future quarter our operating results may be below the expectations
of analysts and investors which could reduce the price of our common stock.
- 4 -
<PAGE> 5
OUR OPERATING RESULTS CAN BE AFFECTED BY SEASONALITY.
We have experienced, and expect to continue to experience, seasonality
in our business. Historically, users have made a smaller number of visits to our
Websites and the Websites of our partners during the summer and the year-end
vacation and holiday periods when usage of the Web and our services typically
declines.
OUR STOCK PRICE IS VOLATILE AND IS AFFECTED BY FACTORS RELATING TO THE INTERNET
INDUSTRY.
The price of our common stock has been and may continue to be subject to
wide fluctuations in response to any of the following events:
* quarterly variations in results of operations;
* announcements of new technological innovations or new products and media
properties by us or our competitors;
* changes in financial estimates and recommendations by securities analysts;
* the operating and stock price performance of other companies that investors
may deem comparable to us; and
* news relating to trends in our markets.
Also, the stock market in general, and the market prices for Internet-related
companies in particular, have experienced extreme volatility that often has been
unrelated to the operating performance of Internet-related companies. These
broad market and industry fluctuations may adversely affect the price of our
common stock, regardless of our operating performance. Additionally,
fluctuations in the market price of our common stock could result in stockholder
lawsuits, which potentially could impair our business.
WE MAY NOT BE ABLE TO MAINTAIN ADVERTISING REVENUES IF THE INTERNET IS NOT
ADOPTED AS AN ADVERTISING MEDIUM.
We earn a significant portion of our revenues by selling advertisements
on our Web pages. For the fiscal year ended July 31, 1999, advertising revenues
represented approximately 69% of our total revenues. We will not be able to
sustain or increase our advertising revenues if the Internet does not develop
into an attractive and sustainable advertising medium. For example, users may
purchase "filter" software programs that limit or remove advertising from the
Web user's desktop. The widespread adoption of this software by users could
negatively impact the use of advertising on the Web. It is also difficult to
predict which method of pricing will be adopted by the industry or advertisers.
For example, our advertising revenues could decrease if advertising rates are
based on the number of users who access the advertiser's Website from one of our
network Websites or seek additional information about a product or service by
"clicking" on the advertisement, rather than rates being based solely on the
number of times an advertisement is displayed. Our strategy is to continue to
develop advertising and other methods of generating revenues through the use of
our products and services. In order to maintain and increase advertising
revenues, we must develop a large base of users of our products and services
processing demographic characteristics attractive to advertisers. Additionally,
we may be required to expand our advertising sales force.
WE MAY NOT BE ABLE TO DELIVER OR MEASURE THE DELIVERY OF ADVERTISEMENTS
RELIABLY.
The process of reliably delivering and tracking advertising placement
within large, high-traffic Websites such as ours is an increasingly important
and complex task, and currently available software programs and other tracing
methods are rapidly evolving. We license an advertising management system from a
third party. To the extent that we encounter system failures or material
difficulties in the operation of this system, we could be unable to deliver
banner advertisements and sponsorships through our Websites. Any extended
failure of, or other material difficulties with, our advertising management
system may require us to provide free advertising to our customers. In addition,
advertising clients may not advertise on our Websites or may pay less for
advertising if they do not perceive our measurements to be accurate or reliable.
WE MAY INCUR COSTS IN CONNECTION WITH OUR ARRANGEMENTS WITH ADVERTISERS AND
SPONSORS.
We sell advertising space on our Websites and allow third-parties to
provide sponsored services and placements on our Websites under agreements with
advertisers and sponsors which expose us to potentially significant financial
risks. In connection with these arrangements, we provide, and sometimes
guarantee, a minimum number of times that an advertisement is displayed or a
minimum number of user requests for additional information made by clicking on
the advertisement or promotional hyperlink. We may receive sponsorship fees as
well as a portion of transaction revenues received by these third-party sponsors
from users originated through our Websites. These sponsorship arrangements
expose us to potentially significant financial risks, including the risk that we
may fail to deliver the required number of advertisement displays or user
requests for additional information. If we fail to deliver
- 5 -
<PAGE> 6
these minimums, the parties typically either decrease the fees payable to us or
we provide the sponsorship services to the sponsor for free for a limited "make
good" period. Our contracts with advertisers and sponsors typically have short
terms and are terminable on relatively short notice. Third-party sponsors may
not renew the sponsorship agreements upon termination. Some of these
arrangements also require us to integrate sponsors' content with our services.
We must dedicate resources and significant programming and design efforts to
accomplish this integration. We may not be able to attract additional sponsors
or renew existing sponsorship agreements when they terminate. In addition, we
have granted exclusivity provisions to some of our sponsors, and may in the
future grant additional exclusivity provisions. These exclusivity provisions may
prevent us for the duration of these exclusivity agreements from accepting
advertising or sponsorship agreements within a particular subject matter in our
Websites or across our entire service network.
WE DEPEND ON THIRD-PARTY RELATIONSHIPS FOR DISTRIBUTION AND CONTENT OF OUR
WEBSITES.
We depend on a number of third-party relationships to attract users to
our Websites and consequently to generate revenues. We require those
third-parties to provide users with access to our products and services. If we
are unable to attract users to our Websites, advertising revenues could be
impaired, advertisers and sponsors may terminate their agreements with us,
advertisers may not be willing to pay as much as they currently pay to appear on
our network and we may be required to supply our services under agreements with
advertisers for free.
Browser services provided by Netscape.
We depend on arrangements relating to the positioning of our products
and services on Web browsers, such as those offered by Netscape, to create
traffic on our Websites and consequently to generate revenues. If a Web browser
grants an exclusive arrangement for positioning on its Web browser to our
competitors, then our business may be impaired.
Although our agreements with Netscape may be terminated only under
particular circumstances, if we are unable to continue as a premier provider for
Netscape, our Websites could lose a material portion of our users, the level of
use on competing services could substantially increase and our Websites could
otherwise become less attractive to advertisers, resulting in harm to our
revenues.
Other third-party relationships.
We depend on Website operators that provide links to our Websites or
otherwise use our services to create traffic on these Websites. We license some
technology and related databases from third parties, including telephone
directories, e-mail, chat, street mapping and other similar services. We believe
that many of our third party relationships are important to our ability to
attract traffic and advertisers. Any errors, failures or delays experienced in
connection with these third party technologies and information services could
alienate our users and adversely affect our brand and our business. Although we
view these relationships as important, most of our arrangements do not include
minimum commitments to use our services or to provide access or links to Lycos'
products or services in the future, are not exclusive and generally have a term
of only one to three years. In addition, our partners may not regard their
relationship with us to be as important to their own respective businesses and
operations. Our partners may reassess their commitment to our products or
services at any time in the future, or may develop their own competitive
products or services. Our existing relationships may not result in sustained
business partnerships, successful product or service offerings or the generation
of significant revenues for us. The failure of one or more of our partnering
relationships to achieve or maintain market acceptance or commercial success, or
the termination of one or more successful partnering relationships, could have a
material adverse effect on our business.
Content.
We rely on content developed by third parties. We license various
technologies, databases and services, including chat, street mapping, stock
quotes and similar services, from third parties in connection with the operation
of our Websites. We believe that third party content is an important element in
attracting users to our Websites. Failure of these third party content providers
to develop and maintain high quality products and services could impair our
ability to attract users and advertisers.
WE FACE RISKS RELATING TO OUR CUSTOMERS' LIQUIDITY.
The Internet as a commercial endeavor has been in existence for a
relatively short period of time. The costs of establishing a Website are low,
and new online service providers, content providers and advertisers are launched
regularly. Many of our advertisers and electronic commerce sponsors were funded
with venture capital and other forms of financing before they proved to be
successful. Those companies that are unable to prove themselves successful
before they have spent their initial funding may find it difficult or
- 6 -
<PAGE> 7
impossible to secure additional funding and, therefore, difficult to pay amounts
due to us. Our profitability could be decreased if any of our advertisers or
electronic commerce sponsors fail to pay amounts due on a timely basis.
WE COMPETE WITH A VARIETY OF COMPETITORS BOTH TO ATTRACT INTERNET USERS TO VISIT
OUR WEBSITES AND TO ATTRACT ADVERTISERS AND SPONSORS TO PLACE CONTENT ON OUR
WEBSITES.
The market for Internet products and services, including those which we
offer to Internet users, is highly competitive. We compete with our providers
both to attract Internet users and to attract advertisers and sponsors. A number
of companies offer competitive products in our target markets. For example, we
compete with search program services that allow a user to search the databases
maintained by us and our competitors simultaneously. We also compete indirectly
with database vendors that offer information search and retrieval capabilities
with their core database products. Our community-based Websites, Tripod and
Angelfire.com, compete with other community-based Websites, including Yahoo!'s
Geocities.com.
Additional competition may come from a variety of companies that have
announced their intention to offer services similar to those currently offered
by us. For example, many large media companies have developed or acquired
Internet navigation services and are attempting to become "gateway" or "portal"
sites through which users may enter the Web, similar to the sites maintained by
us and our competitors. If these companies develop these "portal" sites, we
could lose a substantial portion of our users. These competitors could take
actions that make it more difficult for viewers to find and use our products and
services. Additionally, companies may acquire our competitors, as in America
Online's acquisition of Netscape, or may enter into joint ventures and/or
licensing arrangements involving our competitors.
A number of companies offering Internet products and services, including
our direct competitors, recently have begun to integrate multiple features
within their products and services, including search and retrieval features. For
example, the web browsers offered by Netscape and Microsoft, which are the two
most widely-used browsers and substantial sources of users for us, may
incorporate and promote information search and retrieval capabilities in future
releases or upgrades. This integration of search and retrieval capabilities
could make it more difficult for Internet viewers to find and to use our
products and services.
We also compete with traditional off-line media, including print and
television, for a share of advertising budgets.
If our competitors become more successful than us in attracting users,
then our attractiveness to advertisers will be diminished. We believe that the
principal competitive factors in attracting users include:
* name recognition;
* distribution arrangements;
* performance;
* ease of use;
* a variety of value-added services;
* the ability to continually improve and upgrade products and services; and
* quality of support.
We receive a majority of our revenue from selling advertising space on
our Websites and allowing third parties to provide sponsored services and
placements on our Websites under sponsorship agreements with us. There is
intense competition based on price in the sale of advertising on the Internet
which makes it difficult to project future advertising revenues.
We may not be able to compete successfully against our current or future
competitors. Although we believe that the Internet market will provide
opportunities for more than one supplier of products and services similar to
ours, it is possible that a single supplier may dominate one or more market
segments.
WE ARE UNCERTAIN WHETHER OUR PRODUCTS AND SERVICES WILL BE ACCEPTED BY THE
MARKET.
The market for our products and services has only recently begun to
develop and is rapidly evolving. An increasing number of market entrants have
introduced or developed products and services for use on the Internet. Our
market depends on the increased use of the Internet for information publication
and distribution and for commerce. Additionally, this market depends on the
development of the Internet as an advertising medium. Our future operating
results will depend upon:
- 7 -
<PAGE> 8
* the growth of Internet advertising and commerce markets;
* the successful implementation of our advertising program; and
* Our ability to establish electronic commerce and licensing relationships and
other strategic alliances.
We cannot assure you that:
* the Internet advertising or commerce market will develop as an attractive
and sustainable medium;
* we will achieve or sustain market acceptance of our products and services;
or
* we will be able to execute our business plan successfully.
As is typical in the case of a new and rapidly evolving industry, demand and
market acceptance for recently introduced products and services are very
uncertain. The industry is young and has few proven products. Moreover, critical
issues concerning the commercial use of the Internet (including security,
reliability, cost, ease of use and access, quality of service and acceptance of
advertising and electronic commerce) remain unresolved. These critical issues
may impact the growth of the Internet, the placement of advertisements on the
Internet or the growth of the Internet as a means of electronic commerce. Our
business would likely be impaired if:
* commercial use of the Internet does not grow;
* the Internet does not develop as an attractive medium for advertising;
* electronic commerce does not develop; or
* the Internet infrastructure does not effectively support growth that may
occur.
Because the market for our products and services is new and evolving, it is
difficult to predict the size of this market and its growth rate, if any. We
cannot assure you that the market for our products and services will develop or
that there will be a demand for our products or services. Our business may not
be profitable if:
* the market fails to develop;
* the market develops more slowly than expected;
* the market becomes saturated with competitors; or
* our products and services do not achieve or sustain market acceptance.
OUR PERFORMANCE WILL DEPEND ON THE GROWTH AND COMMERCIAL ACCEPTANCE OF THE
INTERNET.
Our future success will depend substantially upon the widespread
adoption of the Internet as a primary medium for commerce and business
applications. If the Internet does not become a viable and substantial
commercial medium, our business, operating results and financial condition will
be materially adversely affected. The Internet has experienced, and is expected
to continue to experience, significant user and traffic growth, which has, at
times, caused user frustration with slow access and download times. The Internet
infrastructure may not be able to support the demands placed on it by continued
growth. Critical issues concerning the commercial use of the Internet, like
security, reliability, cost, accessibility and quality of service, remain
unresolved and may negatively affect the growth of Internet use or the
attractiveness of commerce and business communication on the Internet. In
addition, the Internet could lose its viability if there are delays in the
development or adoption of new standards and protocols to handle increased
activity or if there is increased government regulation and taxation of Internet
commerce.
OUR SYSTEMS MAY FAIL TO FUNCTION OR MAY NOT HAVE ADEQUATE CAPACITY WHICH COULD
IMPAIR OUR ABILITY TO ATTRACT ADVERTISERS AND USERS.
The satisfactory performance, reliability and availability of our
services and our network infrastructure are critical to attracting Internet
users and maintaining relationships with business customers and consumers.
System interruptions that result in the unavailability of sites or slower
response times for consumers would reduce the number of business Websites and
advertisements purchased and reduce the attractiveness of our online services to
business customers and consumers. Any increase in system interruptions or slower
response times could have a material and adverse effect on our business,
financial condition and results of operations. We have experienced system
interruptions in the past. These interruptions are expected to occur from time
to time in the future.
- 8 -
<PAGE> 9
Any substantial increase in traffic on the Lycos Network or on any of
our Websites will require us to expand and adapt our network infrastructure. Our
inability to add additional software and hardware to accommodate increased
traffic on the Lycos Network or on any of our Websites may cause unanticipated
system disruptions and result in slower response times. In addition, we
currently depend on a limited number of suppliers for certain key technologies
used to roll out and manage the Lycos Network. We may not be able to expand our
network infrastructure on a timely basis to meet increased demand and key
technology suppliers may not continue to provide us with products and services
that meet our requirements.
OUR SOFTWARE AND HARDWARE MAY FACE CAPACITY CONSTRAINTS OR SYSTEMS FAILURES.
A key element of our strategy is to generate a high volume of traffic to
our products and services. We make our products and services available free of
charge to users of the Internet. Accordingly, the performance of our products
and services is critical to our reputation, our ability to attract advertisers
to our Websites and market acceptance of these products and services. Any system
failure that causes interruptions in the availability, or increases response
time, of our products and services could result in less traffic to our Websites.
If interruptions or increases in response time continue or are repeated, they
could reduce the attractiveness of our products and services to advertisers and
partners. An increase in the volume of searches conducted through our products
and services could strain the capacity of the software or hardware we use or the
capacity of our network infrastructure. This strain could lead to slower
response time or system failures. Any failure to expand the capacity of our
hardware or network infrastructure on a timely basis or on commercially
reasonable terms could diminish our business. In addition, as the number of Web
pages and users increases, our products and services may not be able to increase
proportionately.
We are dependent upon Web browsers and Internet and online service
providers for access to our products and services. Users have experienced
difficulties due to browser and provider system failures unrelated to our
systems, products and services. We are also dependent on hardware suppliers for
prompt delivery, installation and service of servers and other equipment and
services used to provide our products and services. Substantially all of our
hardware operations are located at our computer facility in Pittsburgh,
Pennsylvania and the Santa Clara, California and Waltham, Massachusetts sites of
Exodus Communications. We also outsource a portion of our hardware operations to
third parties. A system failure at any of these locations may harm the
performance of our products and services. This system is vulnerable to damage
from fire, floods, earthquakes, power loss, telecommunications failures,
break-ins and similar events. Despite the implementation of network security
measures, our servers are also vulnerable to computer viruses, break-ins and
similar disruptive problems. Computer viruses, break-ins or other problems
caused by third parties could lead to interruptions, delays or halts in service
to users of our products and services. The occurrence of any of these risks
could harm our business.
WE MUST BE ABLE TO ADAPT TO TECHNOLOGICAL CHANGE AND TO DEVELOP NEW PRODUCTS TO
REMAIN COMPETITIVE.
The market for Internet products and services is characterized by
rapidly changing technology, evolving industry standards and customer demands,
and frequent new product introductions and enhancements. These market
characteristics are exacerbated by the emerging nature of this market and the
fact that many companies are expected to introduce new competitive Internet
products in the near future. To be successful, we must continually improve the
performance, features and reliability of our search and navigation services. In
addition, a key element of our business strategy is the development,
introduction and integration of new products that capitalize on the increasing
use of the Internet. We cannot assure you that we will be successful in
developing or integrating these products or services or that they will meet with
market acceptance. In addition, our new product releases may contain undetected
errors that require significant design modifications, resulting in a loss of
customer confidence in our products and services and, consequently, viewer
support, which will diminish the use of our products and services.
WE FACE RISKS ASSOCIATED WITH BRAND DEVELOPMENT.
We believe that establishing and maintaining the "Lycos Network" brand
is crucial to the continued expansion and attraction of our Internet audience.
We believe that the importance of brand recognition will increase in the future
due to the growing number of Internet sites. Promotion and enhancement of the
"Lycos Network" brand will depend largely on our ability to provide consistently
high-quality products and services. The "Lycos Network" brand could be impaired
if:
* we do not provide consistently high-quality products and services;
* consumers do not believe that our products and services are of high quality;
* consumers do not use new products and services which we introduce; or
* our new business ventures are not favorably received by consumers.
- 9 -
<PAGE> 10
THE ACQUISITIONS AND INVESTMENTS THAT WE HAVE MADE AND MAY MAKE IN THE FUTURE
MAY NOT BE SUCCESSFUL AND MAY CREATE UNANTICIPATED PROBLEMS FOR US.
We have completed acquisitions of companies, technologies and assets
that complement our business. We may not be able to identify additional suitable
acquisition candidates available for sale at reasonable prices or to complete
any desired acquisitions. In addition, we may not be able to successfully
integrate any or all of the businesses we have recently acquired into our
operations. In connection with future acquisitions, we may have to:
* issue equity securities, which would decrease the ownership interest of all
our stockholders; or
* incur additional debt;
Acquisitions involve numerous additional risks, including difficulties
in the assimilation of the operations, services, products and personnel of the
acquired company. Our systems, procedures or controls may not be able to support
increased operations resulting from acquisitions. Acquisitions also divert
management's attention from other business concerns. We also encounter risks by
entering markets in which we have little or no experience. Problems with an
acquired business could impair our performance. We have, in general, made
investments in companies involved in the development of technologies or services
that are complementary or related to our operations (including our investment in
iCOMS). We may make investments of this type in the future. We have invested in
companies that are in an early stage of development and may be expected to incur
substantial losses. We cannot assure you that any investments in these companies
will result in any return, nor can there be any assurance as to the timing of
any return.
WE FACE RISKS ASSOCIATED WITH LITIGATION.
We are subject to several purported class action lawsuits. The
complaints allege, among other claims, violations of the United States federal
securities law through alleged misrepresentations relating to our agreement to
enter into an announced transaction with USA Networks, Inc. and certain
affiliated companies. Each complaint seeks an unspecified award of damages. For
a more detailed description of these suits, we recommend you review Lycos'
annual report on Form 10-K for the year ended July 31, 1999.
WE FACE RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION.
International sales, primarily from licensing our products and services,
accounted for less than 10% of our revenues for the fiscal year ended July 31,
1999. As part of our business strategy, we have entered into joint ventures in
Europe (with Bertelsmann AG, in May 1997), Japan (with Sumitomo Corporation and
Internet Initiative Japan, in March 1998), Korea (with Mirae Corporation, in
March 1999), and Asia (with Singapore Telecom, in September 1999). We recently
announced that we launched localized, company-owned and -operated sites in six
South and Central American countries. We currently offer localized versions of
the Lycos service in Argentina, Belgium, Brazil, Chile, Denmark, France,
Germany, Italy, Japan, Korea, Luxembourg, the Netherlands, Norway, Mexico, Peru,
Spain, Sweden, Switzerland, the United Kingdom and Venezuela.
We believe this expansion is important to our ability to continue to
grow and to market our products and services. In marketing our products and
services internationally, however, we will face new competitors. In addition,
our ability to enter international markets will be dependent upon our ability to
create localized versions of our products and services. We cannot assure that we
will be successful in creating localized versions of our products and services,
marketing or distributing our products abroad, or that, if we are successful,
our international revenues will be adequate to offset the expense of
establishing and maintaining international operations. To date, we have limited
experience in marketing and distributing our products internationally.
In addition to the uncertainty as to our ability to establish an
international presence, there are difficulties and risks inherent in doing
business on an international level, such as compliance with regulatory
requirements and changes in those requirements, trade barriers, protection of
intellectual property rights, difficulties in staffing and managing
international operations, longer payment cycles, problems in collecting accounts
receivable, political instability, fluctuations in currency exchange and
potentially adverse tax consequences. We cannot assure that one or more of these
factors will not have a material adverse effect on any international operations
established by us and consequently on our business, results of operations and
financial condition.
WE ARE DEPENDENT ON INTELLECTUAL PROPERTY AND OUR METHODS OF PROTECTING OUR
INTELLECTUAL PROPERTY MAY NOT BE ADEQUATE.
Our success depends significantly upon our proprietary technology. We
currently rely on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our proprietary
rights. We generally enter into confidentiality agreements with our employees,
consultants and partners. We have registered and applied for registration of
certain
- 10 -
<PAGE> 11
service marks and trademarks, and will continue to evaluate the registration of
additional service marks and trademarks, as appropriate. In addition, Carnegie
Mellon University has licensed a patent issued in the United States relating to
our search and indexing technology to us on a perpetual basis. Other parties may
challenge this patent. If challenges are brought, the patent may be invalidated.
Also, we cannot assure you that we will develop proprietary products or
technologies that are patentable, that any issued patent will provide us with
any competitive advantages or will not be challenged by third parties, or that
the patents of others will not have a material adverse effect on our ability to
do business. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to copy aspects of our products or services or to obtain and
use information that we regard as proprietary. The laws of some foreign
countries do not protect proprietary rights to as great an extent as do the laws
of the United States. We do not currently have any patents or patent
applications pending in any foreign country. Our means of protecting our
proprietary rights may not be adequate. Additionally, our competitors may
independently develop similar technology, duplicate our products or design
around our intellectual property rights.
WE MAY BECOME INVOLVED IN INTELLECTUAL PROPERTY LITIGATION WHICH COULD IMPAIR
OUR ABILITY TO CONDUCT OUR BUSINESS.
There has been substantial litigation in the computer industry regarding
intellectual property rights. We may become involved in claims and counterclaims
with third parties regarding infringement with respect to current or future
products or trademarks or other proprietary rights. Any infringement or other
claims or counterclaims could impair our business because they could:
* be time-consuming;
* result in costly litigation;
* divert management's attention;
* cause product release delays; or
* require us to redesign our products or require us to enter into royalty or
licensing agreements which may not be available on terms acceptable to us,
or at all.
INTERNET SECURITY CONCERNS COULD HINDER COMMERCIAL TRANSACTIONS CONDUCTED OVER
THE INTERNET.
The need to securely transmit confidential information over the Internet
has been a significant barrier to commercial transactions conducted over the
Internet and communications over the Web. Any well-publicized compromise of
security could deter more people from using the Web or from using it to conduct
transactions that involve transmitting confidential information, like stock
trades or purchases of goods or services. Because much of our business involves
use of the Web to purchase goods or services, our business could be adversely
affected by security violations of us or our commerce partners' Websites.
We may also incur significant costs to protect against the threat of
security violations or to alleviate problems caused by these violations. These
violations could expose us to a risk of loss or litigation and possible
liability. In addition, we may suffer losses as a result of orders placed with
fraudulent credit card data, even though the consumer's payment for these orders
has been authorized by the associated financial institution.
WE ARE SUBJECT TO CONCERNS REGARDING PRIVACY OF PERSONAL INFORMATION ABOUT USERS
OF OUR PRODUCTS AND SERVICES.
We maintain a privacy policy which is displayed on each of our Websites.
Our policy is not to disclose willfully any individually identifiable
information about any user of our products or services to a third party without
the user's consent. This policy and user choices regarding the dissemination of
personal information collected on our Websites, which may include personal
identification information, demographic profile data, user preferences and
Website behavioral data, are accessible to users of our personalized services
when they initially register. Despite this policy, however, if third persons
were able to penetrate our network security or otherwise misappropriate users'
personal information, we could be subject to liability claims. These could
include claims for unauthorized purchases, impersonation or other similar fraud
claims, as well as claims for other misuses of personal information, for example
for unauthorized marketing purposes. These claims could result in litigation. In
addition, the Federal Trade Commission and several states have been
investigating some Internet companies regarding their use of personal
information. We could incur additional expenses if new regulations regarding the
use of personal information are introduced or if our privacy practices are
investigated.
- 11 -
<PAGE> 12
WE MAY FACE POTENTIAL GOVERNMENT REGULATIONS AND LEGAL UNCERTAINTIES WHICH MAY
IMPAIR OUR BUSINESS.
We are not currently subject to direct regulation by any government
agency, other than regulations applicable to businesses generally. There are
currently few laws or regulations directly applicable to access to, or commerce
on, the Web. However, due to the increasing popularity and use of the Web, it is
possible that a number of laws and regulations may be adopted with respect to
issues such as the protection of databases, user privacy, pricing and
characteristics and quality of products and services. The adoption of laws or
regulations may decrease the growth of the Web. This decrease could in turn
decrease the demand for our services and products or increase Lycos' cost of
doing business.
Due to the global nature of the Web, it is possible that, although
transmission of our services originates from our operations centers in New
Jersey, Pennsylvania, California and Massachusetts, the governments of other
states and foreign countries may attempt to regulate our transmissions or to
prosecute us for violations of their laws. Violations of local laws may be
alleged or charged by state or foreign governments. We may unintentionally
violate these laws and these laws may be modified, or new laws enacted, in the
future. It is also possible that states or foreign countries may seek to impose
sales taxes on out of state companies that engage in commerce over the Internet.
In the event that states or foreign countries succeed in imposing sales or other
taxes on Internet commerce, the growth of the use of the Internet for commerce
could slow substantially.
WE MAY BE LIABLE FOR INFORMATION RETRIEVED FROM THE INTERNET.
Because material may be downloaded by the online or Internet services
operated or facilitated by us or the Internet access providers with which we
have relationships, and be subsequently distributed to others, it is possible
that claims will be made against us on the basis of defamation, negligence,
copyright or trademark infringement or other theories based on the nature and
content of such materials. These claims could be based on us providing access to
obscene, lascivious or indecent information. Although we carry general liability
insurance, our insurance may not cover potential claims of this type, or may not
be adequate to indemnify us for all types of liability that may be imposed. Any
imposition of liability that is not covered by insurance or is in excess of
insurance coverage could impair our business.
WE MAY BE SUBJECT TO RISKS ASSOCIATED WITH ELECTRONIC COMMERCE.
We believe that the portion of our business dedicated to electronic
commerce will play a significant role in our future financial growth and
development. In order to support our electronic commerce initiative, we must
rely on the efficiencies and proper business practices of our third party
suppliers. The failure of our third party suppliers to provide quality service
to users of our Websites, to timely deliver to our users the products purchased
by users on our Websites, or to deliver superior products may result in user
dissatisfaction, which may, in turn, cause users to stop visiting our Websites
or using our services. In addition, to the extent that we are an intermediary in
electronic commerce transactions, there is the potential that users may involve
us in claims associated with the sale of goods, including, without limitation,
claims relating to product liability and consumer protection.
WE MAY NOT BE ABLE TO MANAGE EFFECTIVELY THE POTENTIAL GROWTH OF OUR BUSINESSES.
Our businesses have grown rapidly in recent periods. The growth of these
businesses has resulted, and, for us, is expected in the future to result in the
growth in the number of its employees, in the establishment of offices in
disparate regions of the country and in increased responsibility for both
existing and new management personnel. In addition, this growth has and will put
additional pressure on existing operational, financial and management
information systems. We may not sustain our current rate of growth. To the
extent we continue to grow and do not manage this expansion successfully, our
ability to retain key personnel and our business, operating results and
financial condition could be materially and adversely affected.
WE ARE DEPENDENT UPON KEY SENIOR MANAGEMENT.
Our success depends to a significant degree upon the contributions of
our executive management team. The loss of the services of members of our
executive management team could have a material and adverse effect on our
business, financial condition and results of operations.
WE MUST HIRE AND RETAIN SKILLED PERSONNEL TO BE SUCCESSFUL.
Our success depends upon our ability to attract and retain highly
qualified management, technical and sales and marketing personnel. The process
of locating and hiring personnel with the combination of skills and attributes
required to carry out our strategy is often lengthy and intensely competitive.
- 12 -
<PAGE> 13
The loss of the services of key personnel or the inability to attract
additional qualified personnel could have a material and adverse effect on our
business, financial condition and results of operations.
OUR SYSTEMS MAY EXPERIENCE DIFFICULTIES RELATED TO YEAR 2000 COMPUTER PROBLEMS.
The codes of many currently installed computer systems and software
products accept only two-digit entries in the date code field and cannot
distinguish 21st century dates from 20th century dates. Many companies' software
and computer systems, including ours and the companies we depend on, may need to
be upgraded or replaced so that they will be able to distinguish 21st century
dates from 20th century dates in order to comply with year 2000 requirements and
therefore be year 2000 compliant.
OUR STATE OF YEAR 2000 READINESS.
We are currently evaluating the year 2000 readiness of the hardware and
software products we sell, the information technology systems we use and our
non-information technology systems, like building security, voice mail and other
systems. This evaluation includes the following phases:
- identification of all hardware and software products we sell and
information technology systems and non-information technology
systems we use;
- assessment of repair or replacement requirements;
- repair or replacement;
- testing;
- implementation; and
- creation of contingency plans in the event of year 2000
failures.
We have completed our assessment of all current versions of these
hardware and software products and believe that they are year 2000 compliant. We
have also completed substantially all of our testing of these technology
information systems. We have identified areas of these systems that are not
currently year 2000 compliant; however, we expect to make these systems year
2000 compliant prior to the end of 1999. There can be no assurance, however,
that our assessments and remediation efforts will be successful.
Whether a complete system or device that uses hardware or software used
by us will process 21st century dates depends on other components that are
supplied by parties other than us. The suppliers of our critical information
systems have informed us that this software is year 2000 compliant. We rely,
both domestically and internationally, upon various service providers that are
outside of our control including:
- various vendors;
- governmental agencies;
- utility companies;
- telecommunications service companies;
- delivery service companies; and
- other service providers.
These third parties may suffer a year 2000 business disruption caused by
the inability of various systems to process 21st century dates that could hinder
our ability to conduct our business.
To the extent that we fail to identify and remedy any non-compliant
internal or external Year 2000 problems, or the Year 2000 phenomenon creates a
systemic failure beyond our control, like a prolonged telecommunications or
electrical failure or a prolonged failure of third-party software on which we
rely, we could be prevented from operating our business and permitting users
access to our Websites.
COSTS OF YEAR 2000 COMPLIANCE TO US.
To date, we have not incurred any material expenditures in connection
with identifying or evaluating year 2000 compliance issues. Most of our expenses
thus far relate to retaining third party consultants to assist us in our
compliance efforts and to the opportunity cost of time spent by our employees
evaluating our software, the current versions of the hardware and software sold
by us and year 2000 compliance matters generally.
- 13 -
<PAGE> 14
STATUS OF OUR CONTINGENCY PLAN.
We have not yet developed a year 2000-specific contingency plan. If we
discover year 2000 compliance issues, then we will evaluate the need for
contingency plans relating to these issues.
- 14 -
<PAGE> 15
USE OF PROCEEDS
Lycos will not receive any of the proceeds from the sale of these shares
of common stock. All proceeds from the sale of these shares of common stock will
be for the account of the Selling Stockholder, as described below. See "Selling
Stockholder" and "Plan of Distribution" described below.
SELLING STOCKHOLDER
The following table sets forth, as of the date of this prospectus, the
name of the Selling Stockholder, the number of shares that the Selling
Stockholder owns as of such date, the number of shares owned by the Selling
Stockholder that may be offered for sale from time to time by this prospectus,
and the number of shares to be held by the Selling Stockholder assuming the sale
of all of the shares offered hereby. The Selling Stockholder named below
performs services for Lycos pursuant to an Amended and Restated Service
Agreement and Lycos owns a portion of the Selling Stockholder's Series C
Preferred Stock. Lycos may amend or supplement this prospectus from time to time
to update the disclosure set forth herein.
<TABLE>
<CAPTION>
SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED (1)(2) SHARES WHICH OWNED AFTER
PRIOR TO OFFERING MAY BE SOLD OFFERING (1)(2)(3)
----------------- PURSUANT TO ------------------
SELLING STOCKHOLDER NUMBER PERCENT THIS PROSPECTUS NUMBER PERCENT
- ------------------- ------ ------- --------------- ------ -------
<S> <C> <C> <C> <C> <C>
iCOMS, Inc. dba Internet 166,080 * 166,080 0 *
Commerce Services
Corporation
</TABLE>
* Less than 1.0%.
(1) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities and Exchange Act of 1934,
and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under Rule 13d-3, beneficial ownership
includes any shares as to which the individual has sole or shared voting
power or investment power and also any shares which the individual has
the right to acquire within 60 days of the date of this prospectus
through the exercise of any stock option or other right.
(2) Includes an aggregate of 55,360 shares of common stock beneficially
owned by the Selling Stockholder that have been deposited in an escrow
account pursuant to the Service Agreement and an Escrow Agreement dated
November 23, 1999 to secure the service obligations to Lycos of the
Selling Stockholder. These escrowed shares will be fully released from
escrow on November 23, 2001 only to the extent that no claims have been
made by Lycos against the escrowed shares. The escrowed shares may be
sold by the escrow agent for the account of the Selling Stockholder
prior to November 23, 2001 and the proceeds of the sale placed in
escrow.
(3) Assumes that the Selling Stockholder will sell all of the shares set
forth above under "Shares Which May Be Sold Pursuant to This
Prospectus." There can be no assurance that the Selling Stockholder will
sell all or any of the shares offered hereunder.
PLAN OF DISTRIBUTION
The shares of common stock covered by this prospectus may be offered and
sold from time to time by the Selling Stockholder, including donees,
transferees, pledgees or other successors in interest that receive such shares
as a gift or other non-sale related transfer. The Selling Stockholder will act
independently of Lycos in making decisions with respect to the timing, manner
and size of any sale. The Selling Stockholder may sell the shares on the Nasdaq
National Market, or otherwise, at prices and under terms then prevailing or at
prices related to the then current market price or at negotiated prices. The
shares may be sold by one or more of the following means of distribution: (a) a
block trade in which the broker-dealer so engaged will attempt to sell shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction; (b) purchases by a broker-dealer as principal and
resale by the broker-dealer for its own account pursuant to this prospectus; (c)
an over-the-counter distribution in accordance with the rules of the Nasdaq
National Market; (d) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (e) in privately negotiated transactions. To
the extent required, this prospectus may be amended and supplemented from time
to time to describe a specific plan of distribution. In connection with
distributions of the shares or otherwise, the Selling Stockholder may enter into
hedging transactions with broker-dealers or other financial institutions. In
connection with these transactions, broker-dealers or other financial
institutions may engage in short sales of Lycos common stock in the course of
hedging the positions they assume with the Selling Stockholder. The Selling
Stockholder may also sell Lycos common stock short and redeliver the shares to
close out such short positions. The Selling Stockholder also may enter into
option or other transactions with broker-dealers or other financial institutions
which require the delivery to the broker-dealer or other financial institution
of shares offered hereby, which shares the broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction). The Selling Stockholder also may pledge shares to
a broker-dealer or other financial institution, and, upon a default, the
broker-dealer or other financial institution, may
- 15 -
<PAGE> 16
effect sales of the pledged shares pursuant to this prospectus (as supplemented
or amended to reflect such transaction). In addition, any shares that qualify
for sale pursuant to Rule 144 may be sold under Rule 144 rather than pursuant to
this prospectus.
In effecting sales, brokers, dealers or agents engaged by the Selling
Stockholder may arrange for other brokers or dealers to participate. Brokers,
dealers or agents may receive commissions, discounts or concessions from the
Selling Stockholder in amounts to be negotiated prior to the sale. These brokers
or dealers and any other participating brokers or dealers may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933 in connection
with these sales, and any commissions, discounts or concessions may be deemed to
be underwriting discounts or commissions under the Securities Act of 1933. Lycos
will pay all expenses incident to the offering and sale of the shares to the
public other than any commissions and discounts of underwriters, dealers or
agents and any transfer taxes.
In order to comply with the securities laws of certain states, if
applicable, the shares must be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirements is available and is complied with.
Lycos has advised the Selling Stockholder that the anti-manipulation
rules of Regulation M under the Securities and Exchange Act of 1934 may apply to
sales of shares in the market and to the activities of the Selling Stockholder
and its affiliates. In addition, Lycos will make copies of this prospectus
available to the Selling Stockholder and has informed it of the need for
delivery of copies of this prospectus to purchasers at or prior to the time of
any sale of the shares. The Selling Stockholder may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities Act.
At the time a particular offer of shares is made, if required, a
prospectus supplement will be distributed that will set forth the number of
shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public. We cannot assure you that the Selling
Stockholder will sell all or any of the shares.
Lycos has agreed with the Selling Stockholder to keep the registration
statement of which this prospectus constitutes a part effective until May 24,
2000. Lycos intends to de-register any of the shares not sold by the Selling
Stockholder by May 24, 2000.
LEGAL MATTERS
The validity of the shares offered will be passed upon by Testa, Hurwitz
& Thibeault, LLP, Boston, Massachusetts, counsel to Lycos.
EXPERTS
The consolidated financial statements of Lycos at July 31, 1999, 1998
and 1997 and for each of the years in the three-year period ended July 31, 1999,
incorporated in this prospectus by reference to Lycos' Annual Report on Form
10-K for the year ended July 31, 1999 have been audited by KPMG LLP, independent
auditors, as set forth in their report thereon included therein, and are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
- 16 -
<PAGE> 17
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Lycos will pay all expenses incident to the offering and sale to the
public of the shares being registered other than any commissions and discounts
of underwriters, dealers or agents and any transfer taxes. Such expenses are set
forth in the following table. All of the amounts shown are estimates except the
Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
SEC registration fee ............................... $ 2,580.00
NASDAQ National Market listing fee.................. 3,321.60
Legal fees and expenses ............................ 10,000.00
Printing expenses .................................. 250.00
Miscellaneous expenses ............................. 250.00
Total .............................................. $16,401.60
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law,
Lycos' Amended and Restated Certificate of Incorporation, as amended, includes a
provision that eliminates the personal liability of its directors for monetary
damages for breach or alleged breach of their duty of care. In addition, the
Delaware General Corporation Law and Lycos' Amended and Restated By-laws provide
for indemnification of Lycos' directors and officers for liabilities and
expenses that they may incur in such capacities. In general, directors and
officers are indemnified with respect to actions taken in good faith in a manner
reasonably believed to be in, or not opposed to, the best interests of Lycos,
and with respect to any criminal action or proceeding, actions that the
indemnitee has no reasonable choice to believe were unlawful.
Lycos has purchased insurance with respect to, among other things, the
liabilities that may arise under the provisions referred to above. The directors
and officers of Lycos also are insured against certain liabilities, including
certain liabilities arising under the Securities Act of 1933, as amended, which
might be incurred by them in such capacities and against which they are not
indemnified by Lycos.
Lycos has entered into separate indemnification agreements with its
directors and officers. The indemnification agreements create certain
indemnification obligations of Lycos in favor of the directors and officers and,
as permitted by applicable law, will clarify and expand the circumstances under
which a director or officer will be indemnified.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP.
23.1 Consent of KPMG LLP, Independent Accountants.
23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
ITEM 17. UNDERTAKINGS
A. UNDERTAKING PURSUANT TO RULE 415
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this
registration statement to include any material
information with respect to the plan of distribution not
previously disclosed in the registration statement or
any material change to such information in the
registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof;
and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which
remain unsold at the termination of this offering.
<PAGE> 18
B. UNDERTAKING REGARDING FILINGS INCORPORATING SUBSEQUENT EXCHANGE
ACT DOCUMENTS BY REFERENCE
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities and Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement 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.
C. UNDERTAKING IN RESPECT OF INCORPORATED ANNUAL AND QUARTERLY
REPORTS
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. UNDERTAKING IN RESPECT OF INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the 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.
E. UNDERTAKING PURSUANT TO RULE 430a
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the
form of prospectus filed as part of this registration
statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or Rule 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 purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment
that contains a form of prospectus shall be deemed to be
a new registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Waltham, Commonwealth of Massachusetts, on this 24th
day of November, 1999.
LYCOS, INC.
By: /s/ Robert J. Davis
---------------------------------------
Robert J. Davis
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS THAT each person whose signature appears
below constitutes and appoints Robert J. Davis and Edward M. Philip and each of
them, with the power to act without the other, as attorneys-in-fact, each with
the power of substitution, for him or her in any and all capacities, to sign any
amendment or post-effective amendment to this registration statement and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting to said attorneys-in-fact,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in connection therewith, as fully
to all intents and purposes as he might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Robert J. Davis President, Chief Executive November 24, 1999
- ------------------------ Officer and Director
Robert J. Davis (Principal Executive Officer)
/s/ Edward M. Philip Chief Operating Officer and November 24, 1999
- ------------------------ Chief Financial Officer
Edward M. Philip (Principal Financial And
Accounting Officer)
/s/John M. Connors, Jr. Director November 24, 1999
- ------------------------
John M. Connors, Jr.
/s/ Richard S. Sabot Director November 24, 1999
- ------------------------
Richard S. Sabot
/s/ Daniel J. Nova Director November 24, 1999
- ------------------------
Daniel J. Nova
/s/ Peter Lund Director November 24, 1999
- ------------------------
Peter Lund
</TABLE>
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP.
23.1 Consent of KPMG LLP, Independent Accountants.
23.2 Consent of Testa, Hurwitz & Thibeault, LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included on signature page).
</TABLE>
<PAGE> 1
EXHIBIT 5.1
NOVEMBER 24, 1999
LYCOS, INC.
400-2 Totten Pond Road
Waltham, MA 02451
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
This opinion relates to an aggregate of 166,080 shares of common
stock, par value $.01 per share (the "Common Stock"), of Lycos, Inc. (the
"Company"), which are the subject matter of a Registration Statement on Form S-3
filed with the Securities and Exchange Commission (the "Commission") on November
24, 1999 (the "Registration Statement").
Based upon such investigation as we have deemed necessary, we are of
the opinion that the 166,080 shares of common stock to be sold by the
stockholders of the Company pursuant to the prospectus of which the Registration
Statement is a part have been validly issued and are fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm in the Prospectus under
the caption "Legal Matters."
Very truly yours,
/s/ Testa, Hurwitz & Thibeault, LLP
-----------------------------------
TESTA, HURWITZ & THIBEAULT, LLP
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANT
The Board of Directors
Lycos, Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the Prospectus.
/s/ KPMG LLP
Boston, Massachusetts
November 24, 1999
