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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 29, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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MESSAGEMEDIA, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 33-0612860
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
6060 SPINE ROAD
BOULDER, COLORADO 80301
(303) 440-7550
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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A. LAURENCE JONES
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MESSAGEMEDIA, INC.
6060 SPINE ROAD
BOULDER, COLORADO 80301
(303) 440-7550
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
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COPIES TO:
MICHAEL PLATT, ESQ.
MICHAEL CYRAN, ESQ.
COOLEY GODWARD LLP
2595 CANYON BLVD., SUITE 250
BOULDER, CO 80302-6737
(303) 546-4000
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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
reinvestment 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. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.001....... 4,095,124 $14 $57,331,736 $15,950
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended,
based upon the average of the high and low prices of the registrant's
common stock on October 26, 1999, as reported on The Nasdaq National
Market.
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 THAT 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 OCTOBER 29, 1999
PROSPECTUS
4,095,124 SHARES
MESSAGEMEDIA, INC.
COMMON STOCK
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The selling security holders identified in this prospectus are selling
4,095,124 shares of our common stock. These shares may be offered from time to
time by the selling security holders through public or private transactions, on
or off The Nasdaq National Market, at prevailing market prices or at privately
negotiated prices. The selling security holders will receive all of the proceeds
from the sale of the shares and will pay all underwriting discounts and selling
commissions, if any, applicable to the sale of the shares. We will pay the
expenses of registration of the sale of the shares.
Our common stock currently is traded on The Nasdaq National Market under the
symbol "MESG." On October 26, 1999, the last reported sale price of a share of
our common stock on The Nasdaq National Market was $13 per share.
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INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 OF THIS PROSPECTUS.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is October ___, 1999.
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THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED WITH THE SEC.
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED IN
THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT OF THE DOCUMENT.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy the documents we file at the
SEC's public reference room in Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the SEC's regional offices located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request
copies of these documents by writing to the SEC and paying a fee for the copying
cost. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings also are available to the public at no
cost from the SEC's website at http://www.sec.gov.
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities and Exchange Act of 1934:
1. Annual Report on Form 10-K for the fiscal year ended December 31, 1998;
2. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
3. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
4. Current Reports on Form 8-K filed with the SEC on December 23, 1998 (as
amended on February 19, 1999), April 5, 1999 and August 24, 1999 (as
amended on September 23, 1999 and October 1, 1999);
5. The description of our common stock set forth in our Registration
Statement on Form 8-A, dated November 19, 1996; and
6. Definitive Proxy Statement dated April 28, 1999 for the 1999 annual
meeting of stockholders held on May 28,1999.
On December 16, 1998 we changed our name from First Virtual Holdings
Incorporated to MessageMedia, Inc. All filings made with the SEC prior to
December 23, 1998 may be located using either "First Virtual Holding
Incorporated" or "First Virtual Holdings Incorporated" as our company name.
You may request a copy of these filings at no cost by writing or calling us,
or you may view a copy by visiting our website, each at the following address
(information contained in our website does not constitute a part of this
prospectus):
MessageMedia, Inc.
6060 Spine Road
Boulder, Colorado 80301
Attn: Investor Relations
(303) 440-7550
http://www.messagemedia.com
MessageMedia, Revnet and our logo are among the trademarks or service marks
owned by us, and First Virtual(R) is among the registered marks owned by us.
This prospectus also makes reference to trademarks of other companies which are
the property of their respective owners.
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THE COMPANY
We are a leading provider of an integrated, comprehensive set of
permission-based e-messaging solutions. E-messaging is our term to describe our
suite of services that utilizes the medium of e-mail to develop and foster
permission-based relationships with our customers. Our e-messaging solutions,
available either on an outsourced-subscription basis or as in-house packaged
software, enable businesses to use e-messaging as a strategic tool to increase
sales, improve customer communication and develop long-term customer loyalty.
Specifically, our suite of services and products, including Internet-based
marketing, customer care, survey and information distribution solutions, allows
businesses to establish and enhance two-way customer dialogue across multiple
functions within the business enterprise, from marketing to sales to customer
service. By leveraging the cost-effective reach, flexibility and widespread
acceptance of e-mail, our solutions enable businesses to create, deliver and
continually refine targeted, permission-based e-messaging campaigns. Our expert
staff of client service professionals assists our clients in building their
businesses through the strategic implementation and use of our suite of service
applications.
The dramatic growth of the Internet and the proliferation of e-mail have
changed the way businesses and customers communicate. Online businesses are
increasingly in need of strategic business applications that foster customer
loyalty and provide personalized, one-to-one communication. Permission-based, or
"opt-in," e-mail is emerging as a highly reliable, cost-effective and timely way
for businesses to create a personal, two-way dialogue with their customers.
Because creating strong and effective e-messaging programs requires a broad
range of technology and industry expertise, we believe that businesses
increasingly are seeking an outsourced solution for their e-messaging
applications. Forrester Research predicts that outsourced e-mail messages will
grow from three billion in 1998 to 250 billion in 2002.
Through our professional staff of client service representatives, we deliver
e-messaging services specifically tailored to each client's business objectives.
After a contract is signed with a client, we appoint an account management team
to act as the client's primary point of contact for all relationship and
campaign management issues. We provide end-to-end e-messaging mailing and
campaign management solutions, including creating a detailed specification of
customer needs, developing the web interfaces, customizing the database,
implementing project plans and campaign roll-out and conducting post-mailing
analysis. Our proprietary technology allows us to track and review current and
past e-messaging campaigns, providing valuable information that allows us to
tailor and fine-tune our clients' e-messaging campaigns to optimize
effectiveness. Our services provide clients with the following benefits:
o a comprehensive set of e-messaging solutions designed to increase
sales, improve customer communication and develop long-term customer
loyalty;
o permission-based e-messaging that facilitates an immediate two-way
dialogue with customers;
o tools to track, review and refine e-messaging campaigns by leveraging
our expertise and proprietary technology;
o rapidly deployable, cost-effective outsourced solutions which eliminate
the need to invest in the technology, hardware and human resources
necessary to implement and manage a comprehensive set of e-messaging
services; and
o a readily scalable solution that manages large volumes of simple or
complex customer communications and easily integrates more advanced
e-messaging applications.
Our clients cover a broad range of industry segments, including
Internet/e-commerce, publishing, computer hardware/software and financial
services. We currently provide e-messaging services to over 200 clients,
including America Online, Inc., Apple Computer, Inc., CMP Group, Inc., E*Trade
Securities, Inc., Microsoft Corporation and PeopleSoft, Inc., and have sold our
e-messaging products to over 4,000 customers.
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OUR STRATEGY
The key elements of our growth strategy include:
o expand our customer base and increase sales to current customers;
o broaden our industry-leading service offerings;
o extend our brand and position MessageMedia as the industry standard in
permission-based e-messaging;
o pursue strategic acquisitions; and
o develop an international presence.
HISTORY AND STRATEGIC RELATIONSHIPS
In June 1998, we were recapitalized by SOFTBANK Corp. and its affiliates, a
leading investor in the Internet sector. We intend to leverage our strategic
relationship with SOFTBANK through introductions to companies within the
SOFTBANK family of investments and capitalize on the expertise and advice of its
partners with respect to building e-businesses. In August 1998, we made a
strategic decision to focus exclusively on e-messaging and related services, and
to phase out our Internet payment system offerings. In furtherance of this
strategic shift, in December 1998 we acquired two e-messaging companies, E-mail
Publishing, Inc., or Epub, and Distributed Bits, LLC, or Dbits, and changed our
name from First Virtual Holdings Incorporated to Message Media, Inc. In March
1999, Pequot Capital Management, Inc. and affiliates bought approximately 2.4
million shares of our common stock, from which we derived net proceeds of
approximately $10 million, and in August 1999 we acquired two additional
e-messaging companies, Revnet Systems and Decisive Technology, to further
broaden our suite of e-messaging solutions and our customer base.
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RISK FACTORS
Except for the historical information contained or incorporated by reference
herein, this prospectus (and the information incorporated herein by reference)
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those discussed here or incorporated
by reference. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the following section, as
well as those discussed elsewhere in this prospectus and in any other documents
incorporated herein by reference.
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones we face. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially and adversely
affected. In that case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
WE HAVE A HISTORY OF OPERATING LOSSES AND FUTURE LOSSES ARE LIKELY.
We have incurred net losses applicable to common shares of approximately
$45.0 million from our inception in March 1994 through December 31, 1998,
approximately $14.0 million for the year ended December 31, 1998 and
approximately $26.9 million for the nine month period ended September 30, 1999.
As of September 30, 1999, our accumulated deficit was approximately $70.6
million. We have not achieved profitability and expect to continue to incur
operating losses at least into 2001. We intend to continue to invest heavily in
acquisitions, infrastructure development and marketing. Accordingly, we expect
to continue to incur significant operating and capital expenditures and, as a
result, we will need to generate significant revenue to achieve and maintain
profitability. Although our revenue has grown in recent quarters, we cannot
assure you that we will achieve sufficient revenue for profitability. Even if we
do achieve profitability, we cannot assure you that we can sustain or increase
profitability on a quarterly or annual basis in the future. If revenue grows
slower 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 BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED OPERATING
HISTORY AND RECENTLY HAVE CHANGED OUR BUSINESS MODEL.
We were incorporated in March 1994 for the purpose of developing an Internet
payment system. In 1998 we changed our business model to focus exclusively on
providing e-messaging solutions and acquired two e-messaging companies, Epub and
Dbits. In August 1999, we acquired two additional e-messaging companies, Revnet
Systems and Decisive Technology. An investor in our common stock must consider
the risks and difficulties frequently encountered by early stage companies in
new and rapidly evolving markets, including the Internet e-messaging market.
These risks include our:
o ability to sustain historical revenue growth rates;
o need to manage our expanding operations;
o need to successfully integrate our recent and any future acquisitions;
o competition;
o ability to attract, retain and motivate qualified personnel;
o ability to maintain our current, and develop new, strategic
relationships;
o ability to anticipate and adapt to the changing Internet market; and
o ability to attract and retain a large number of customers from a
variety of industries.
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We also depend on the growing use of the Internet for marketing,
advertising, commerce and communication. We cannot assure you that our business
strategy will be successful or that we will successfully address these risks.
OUR MARKETS ARE RELATIVELY NEW AND UNPROVEN AND OUR SUCCESS DEPENDS ON MARKET
ACCEPTANCE AND THE EFFECTIVENESS OF OUR E-MESSAGING SERVICES.
Demand and market acceptance for Internet e-messaging solutions is
uncertain. Our future success is highly dependent on an increase in the use of
the Internet as a marketing, advertising and communications medium. The adoption
of Internet e-messaging, particularly by those entities that historically have
relied upon traditional media for marketing and advertising, requires the
acceptance of a new way of conducting business, exchanging information and
marketing products and services. Many of our current or potential e-messaging
customers have little or no experience using the Internet for marketing and
advertising purposes and they have allocated only a limited portion of their
budgets to Internet e-messaging. Moreover, our customers may find Internet
e-messaging to be less effective for promoting their products and services
relative to traditional marketing and advertising media. If our e-messaging
platform fails to meet customers' demands, the use of our e-messaging services
may decline over time and our business would suffer.
WE ADOPTED OUR CURRENT BUSINESS MODEL IN THE FOURTH QUARTER OF 1998 AND ITS
PROFIT POTENTIAL IS UNCERTAIN.
The profit potential for our business model, which is to generate revenue
solely by providing Internet e-messaging solutions to our customers, is
unproven. To be successful, both Internet marketing and our future and current
service offerings, including information distribution, e-mail marketing,
e-customer care, e-commerce messaging and e-surveys, will need to achieve broad
market acceptance. Our ability to generate significant revenue will depend, in
part, on our ability to contract with a sufficient number of customers. The
intense competition among Internet e-messaging companies has led to the creation
of a number of pricing alternatives for Internet e-messaging solutions. These
alternatives make it difficult for us to project future levels of revenue and
applicable gross profit that can be sustained by us or the Internet e-messaging
industry in general.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE EPUB, DBITS, REVNET SYSTEMS AND
DECISIVE TECHNOLOGY OR FUTURE ACQUISITIONS.
We acquired Epub and Dbits in December 1998 and Revnet Systems and Decisive
Technology in August 1999. As a result, companies that previously had operated
independently and with distinct business models must now work together. The
integration will require significant effort from our personnel and the personnel
of the acquired companies who are now our employees. We may not be able to
profitably consolidate these businesses.
The following risks are common to the integration of different companies,
and may be associated with recent or future acquisitions, including our recent
acquisitions of Revnet Systems and Decisive Technology:
o the difficulty of incorporating new operations, technology and
personnel into one company;
o the potential effects on operating results from increases in goodwill
amortization, acquired in-process technology, stock compensation
expense and increased compensation expense resulting from newly hired
employees;
o the diversion of management attention from other aspects of our
business;
o the potential disruption of our ongoing business;
o the potential reduction of the value of our e-messaging solutions or
reputation if an acquired company turns out to be a poor performer;
o the maintenance of uniform standards, controls, procedures and
policies;
o the potential of disputes with the sellers of one or more acquired
entities;
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o the possible failure to retain key acquired personnel;
o the assumption of most or all of the liabilities of the acquired
companies, some of which may be hidden, significant or not reflected in
the final acquisition price; and
o the impairment of relationships with employees and customers.
As part of our business strategy, we intend to focus on acquiring, or making
significant investments in, additional companies, products and technologies that
complement our business. The successful implementation of this strategy depends
on our ability to identify suitable acquisition candidates, acquire those
companies on acceptable terms and integrate their operations successfully with
our business. If we make additional acquisitions, we could have difficulty in
assimilating the acquired products, services or technologies into our
operations. These difficulties could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our results
of operations. Furthermore, we may incur debt or issue equity securities to pay
for any future acquisitions. The issuance of equity securities could be dilutive
to our existing stockholders.
OUR FAILURE TO ENHANCE OUR EXISTING PRODUCTS AND INTRODUCE NEW PRODUCTS ON A
TIMELY BASIS COULD CAUSE OUR REVENUE TO FALL.
We continually are developing significant enhancements for our e-messaging
services and products. Any delay or difficulty associated with the introduction
of these enhancements could significantly harm our business, results of
operations and financial condition. We also may not be able to develop the
underlying core technologies necessary to create new products or enhancements,
or to license those products from third parties.
WE NEED TO ATTRACT AND RETAIN QUALIFIED PERSONNEL AND MAY NOT BE ABLE TO DO SO.
Our success depends on the continued service of our key senior management
personnel, in particular, A. Laurence Jones, our Chief Executive Officer. The
loss of any member of our senior management team could have a material adverse
effect on our future operating results. Our future success also depends on our
continuing ability to attract, retain and motivate highly skilled employees. We
face significant competition for individuals with the skills and experience
required to perform in required roles and may not be able to attract or retain
such individuals in the future. Our management team is new and may not be able
to function effectively.
OUR MANAGEMENT TEAM HAS WORKED TOGETHER ONLY FOR A SHORT PERIOD OF TIME AND MAY
NOT WORK WELL TOGETHER.
Virtually all of our executive officers, including our Chief Executive
Officer, Chief Financial Officer, Vice President of Sales and Marketing and Vice
President of Corporate Development, have joined our company in 1999. Due to the
fact that many of our executive officers are new to our company and never have
worked together, our management may not be able to function effectively,
individually or as a team.
WE ANTICIPATE FLUCTUATIONS IN OUR FUTURE OPERATING RESULTS.
We expect that our future operating results will fluctuate significantly.
These fluctuations may be due to a number of factors, many of which are beyond
our control. Some of the factors that may cause fluctuations include the
following:
o Market response to our e-messaging services;
o Difficulties in the development or deployment of new e-messaging
products or services;
o The timing and rate at which we increase our expenses to support
projected growth;
o Fluctuating market demand for our products and services;
o The degree of acceptance of the Internet as a medium for communicating
with customers;
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o Product introductions and service offerings by our competitors;
o The mix of the products and services provided by us; and
o The cost of compliance with applicable government regulations,
including anti-SPAM, also known as unsolicited commercial e-mail,
legislation.
Our revenue for the foreseeable future will remain dependent on e-messaging
activity, the fees that we charge for our services and license fees for software
products. These future revenues are difficult to forecast. In addition, we plan
to significantly increase our operating expenses to increase our sales and
marketing operations, to upgrade and enhance our e-messaging solutions and to
market and support our solutions. We may be unable to adjust spending quickly
enough to offset any unexpected revenue shortfall. If we have a shortfall in
revenue in relation to our expenses, or if our expenses precede increased
revenue, then our business, results of operations and financial condition would
be materially and adversely affected. This would likely affect the market price
of our common stock in a manner which may be unrelated to our long-term
operating performance.
We believe that marketing and advertising sales in traditional media, such
as television and radio, generally are lower in the first calendar quarter of
each year. Seasonal or cyclical patterns may develop in our industry if our
market makes the transition from an emerging to a more developed medium. Our
revenue may also be affected by seasonal and cyclical patterns in Internet
e-messaging spending if they emerge.
We believe that period-to-period comparisons of our operating results are
not meaningful and should not be relied upon as an indication of our future
performance. Due to the factors we have listed above and other factors, it is
likely that our future operating results will at times not meet the expectations
of market analysts or investors. If our operating results fail to meet
expectations, the price of our common stock could fall.
WE NEED TO EFFECTIVELY MANAGE OUR GROWTH.
An effective planning and management process is required to successfully
implement our business plan in the rapidly evolving market for Internet
e-messaging. We continue to increase the scope of our operations, and we have
grown our workforce substantially. As of January 1, 1995, we had 5 employees
and, as of October 22, 1999, we had 244 employees. In addition, we plan to
continue to expand our sales and marketing and service offerings. This growth
has placed, and our anticipated future growth in our operations will continue to
place, a significant strain on our management systems and resources. We expect
that we will need to continue to improve our financial and managerial controls
and reporting systems and procedures, and will need to continue to expand, train
and manage our workforce. Our future performance also may depend on the
effective integration of acquired businesses. Such integration, even if
successful, may require a significant period of time and expense, and may place
a significant strain on our resources. We recently relocated a computer
processing center from San Diego, California to a facility in Colorado. Our
business, results of operations and financial condition will be materially and
adversely affected if we are unable to effectively manage our expanding
operations or the relocation of our computer processing center.
WE DEPEND ON THIRD-PARTY PROVIDERS OVER WHOM WE HAVE NO CONTROL TO OPERATE OUR
MESSAGING PLATFORM.
We depend heavily on several third-party providers of Internet and related
telecommunication services, including hosting and co-location companies, in
operating our e-messaging platform. These companies may not continue to provide
services to us without disruptions in service, at the current cost, or at all.
Although we believe that we could obtain these services from other sources if
need be, the costs associated with any transition to a new service provider
would be substantial, requiring us to reengineer our computer systems and
telecommunications infrastructure to accommodate a new service provider. This
process would be both expensive and time-consuming.
In addition, failure of our Internet and related telecommunications
providers to provide the data communications capacity in the time frame required
by us could cause interruptions in the services we provide. Despite precautions
taken by us, unanticipated problems affecting our computer and
telecommunications systems in the future could cause interruptions in the
delivery of our e-messaging services, causing a loss of revenue and potential
loss of customers.
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WE RELY ON A FEW CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR REVENUE.
A significant portion of our revenues are generated by a limited number of
customers. We expect that we will continue to depend on large contracts with a
small number of significant customers. This situation can cause our revenue and
earnings to fluctuate between quarters based on the timing of contracts. None of
our customers has any obligation to purchase additional products or services
from us. Consequently, if we fail to develop relationships with significant new
customers, our business and financial condition will suffer.
COMPETITION IN OUR INDUSTRY IS INTENSE.
We believe none of our competitors offer the full range of solutions
provided by us. However, the market for our products and services is intensely
competitive. There are no substantial barriers to entry into our business, and
we expect that established and new entities will enter the market for
e-messaging services and interactive Internet communications in the near future.
Our principal competitors in the e-messaging services arena include 24x7,
Inc., Axciom, Inc., Cyber Data Systems, Inc., DoubleClick, Inc., eGain
Communications Corporation, EmailChannel, Inc., Exactis.com, Inc., Experian,
Inc., Kana Communications, Inc., MarketHome, Inc., MatchLogic, Inc., Mustang
Software, Inc., NetCreations, Inc., PostX Corporation and ReplyNet, Inc. We also
compete with BroadVision, Inc., Digital Impact, E-Care Group and Mypoints.com,
Inc. for one-to-one marketing.
We may experience additional competition from Internet service providers, or
ISPs, and other large established businesses that enter the market for
e-messaging services. Companies such as ADVO Inc., America Online, Inc., AT&T,
IBM Corporation, Harte-Hanks, Inc., Hewlett-Packard Company, Integrion Financial
Network LLC, The Interpublic Group of Companies, Inc., Microsoft Corporation,
Netscape Communications and Foote Cone & Belding, some of whom are current
clients of ours, which possess large, existing customer bases, substantial
financial resources and established distribution channels, could develop, market
or resell a number of messaging services.
The Internet, in general, and our e-messaging solutions, in particular, also
must compete for a share of advertisers' total advertising budgets with
traditional advertising media such as television, radio, cable and print.
Consequently, we compete with advertising and direct marketing agencies. To the
extent that e-messaging is perceived to be a limited or ineffective advertising
medium, companies may be reluctant to devote a significant portion of their
advertising budget to our e-messaging solutions, which could limit the growth of
e-messaging and negatively effect our business.
We also expect that competition may increase as a result of industry
consolidation. Potential competitors may choose to enter the market for
e-messaging services by acquiring one or more of our existing competitors or by
forming strategic alliances with such competitors. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products or services to address the needs of our potential e-messaging
customers. Accordingly, it is possible that new competitors or alliances may
emerge and rapidly acquire significant market share. Increased competition is
likely to result in price reductions, reduced gross margins and loss of market
share, any of which would have a material adverse effect on our business,
results of operations and financial condition. We also may experience
competition from internal information systems and development groups of our
current and prospective clients that have better access to senior management.
Many of our current and potential competitors have longer operating
histories, greater name recognition, larger customer bases, more diversified
lines of products and services and significantly greater resources than we do.
These competitors may be able to undertake more extensive marketing campaigns,
adopt more aggressive pricing policies and make more attractive offers to
potential customers. In addition, many of our current or potential competitors
have broad distribution channels that may be used to bundle competing products
or services directly to end-users or purchasers. If these competitors bundle
competing products or services for their customers, the demand for our products
and services could substantially decline. As a result of the above factors, we
cannot assure
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<PAGE> 11
you that we will compete effectively with current or future competitors or that
competitive pressures will not have a material adverse effect on our business,
financial condition and results of operations.
THE MARKETS FOR OUR PRODUCTS ARE UNDEVELOPED AND RAPIDLY CHANGING, WHICH MAKES
AN INVESTMENT IN OUR COMPANY RISKY.
The Internet and Internet e-messaging markets are characterized by rapidly
changing technologies, evolving industry standards, frequent new product and
service introductions, changing customer demands and increasing numbers of
service providers. Our products and services are designed around current
technical standards and our revenue depends on continued industry acceptance of
these standards. While we intend to provide compatibility with the most popular
industry standards, widespread adoption of a proprietary or closed standard
could prevent us from doing so. The standards on which our products and services
are or will be based may not be accepted by the industry.
New market entrants have introduced or are developing products and services
for use on the Internet and the World Wide Web that compete with our products.
The products, services or technologies developed by others may render our
products and services noncompetitive or obsolete. Accordingly, our future
success will depend on our ability to adapt to rapidly changing technologies and
to enhance existing solutions and develop and introduce a variety of new
solutions to address new industry standards and our customers' changing demands.
We may experience difficulties that could delay or prevent the successful
design, development, introduction or marketing of our solutions. In addition,
our new solutions or enhancements must meet the requirements of our current and
prospective customers and must achieve significant market acceptance. Material
delays in introducing new solutions and enhancements may cause customers to
forego purchases of our solutions and purchase those of our competitors.
The degree to which our e-messaging platform is accepted and used in the
marketplace will depend on continued growth in the use of e-mail as a primary
means of communications by businesses and consumers. An increase in the use of
e-messaging also will depend on market acceptance of e-mail as a method for
targeted marketing of products and services. Our ability to successfully
differentiate our services from random mass e-mailing products and services
which have encountered substantial resistance from consumers also will be
important. Businesses that already have invested substantial resources in
traditional or other methods of conducting business may be reluctant to adopt
new commercial methods or strategies that may limit or compete with their
existing businesses. Individuals with established patterns of purchasing goods
and services may be reluctant to alter those patterns.
WE FACE RISKS OF DEFECTS AND DEVELOPMENT DELAYS IN OUR PRODUCTS AND SERVICES.
Products and services based on sophisticated software and computing systems
often encounter development delays. Our underlying software may contain hidden
errors and failures when introduced or when usage increases. It is possible that
we may experience delays in the development of the software and computing
systems underlying our services. Despite testing that our clients and we
conduct, we may not locate errors if they occur. Also, we may experience
development delays. These occurrences could harm our reputation and revenue
growth.
IF CURRENT GROWTH RATES CONTINUE, THE CAPACITY OF OUR SOFTWARE OR HARDWARE COULD
BE STRAINED, LEADING TO SLOWER RESPONSE TIMES OR SYSTEM FAILURES.
If the volume of messages that our systems process significantly increases,
the capacity of our software or hardware could be strained. This could lead to
slower response time or system failures. We have made and intend to continue to
make substantial investments to increase our server capacity by adding new
servers and upgrading our software as necessary. However, our products and
services may not be able to meet the growing demand as the number of World Wide
Web and Internet users increases. We also depend, as do our customers, on Web
browsers, e-mail clients and Internet and online service providers for access to
our services. Some users of our services have experienced difficulties due to
system failures unrelated to our system, products or services. If we cannot
effectively address these capacity constraints, our business and financial
condition could be materially and adversely affected.
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<PAGE> 12
THE SUCCESS OF OUR E-MESSAGING PLATFORM DEPENDS ON INCREASED USAGE AND THE
STABILITY OF THE INTERNET.
Our success will depend, in large part, upon the maintenance of the Internet
infrastructure, such 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 and
improved content. We cannot assure you that the Internet infrastructure will
continue to effectively support the demands placed on it as the Internet
continues to experience increased numbers of users, frequency of use or
increased bandwidth requirements of users. Even if the necessary infrastructure
or technologies are developed, we may have to spend a considerable amount of
time and money to adapt our solutions accordingly. Furthermore, the Internet has
experienced a variety of outages and other delays due to damage to portions of
its infrastructure. Any future outages or delays could impact the Internet sites
of customers using our solutions.
We believe that the future of the Internet as a center for commerce will
depend in significant part on the following factors:
o Continued rapid growth in the number of households and commercial,
educational and government institutions with access to the Internet;
o The level of usage by individuals;
o The number and quality of products and services designed for use on the
Internet; and
o Expansion of the Internet infrastructure.
The degree to which e-mail will become a common method of communication
depends on the extent that users increasingly prefer e-mail over traditional
means of communication. The growth of e-mail also depends on widespread access
to reliable and affordable e-mail services by individuals, businesses and other
organizations. Because usage of the Internet as a medium for on-line exchange of
information, advertising, merchandising and entertainment is a recent
phenomenon, it is difficult to predict whether the number of users drawn to the
Internet will continue to increase and whether any significant market for our
e-messaging platform, or any substantial commercial use of the Internet, will
develop. We cannot assure you that Internet usage patterns, and reliance on
e-mail communication in particular, will continue to grow and will not decline
as the newness of this method of communication wears off. It also is uncertain
whether the cost of Internet access will decrease. If either the Internet or
e-mail communication fails to achieve increased acceptance and does not become
accessible to a broad audience at moderate costs, the market for our products
and services will be jeopardized. The success of our business also depends on a
significant expansion of the Internet infrastructure to provide adequate
Internet access and proper management of Internet traffic.
ANY SYSTEM FAILURE MAY HARM OUR BUSINESS OR REPUTATION.
The continuing and uninterrupted performance of our computer systems and our
customers' computer systems is critical to our ability to provide outsourced
services. Sustained or repeated system failures would reduce the attractiveness
of our solutions to our customers and could harm our business reputation. Slower
response time or system failures may also result from straining the capacity of
our deployed software or hardware due to an increase in the volume of e-messages
delivered through our servers. To the extent that we do not effectively address
any capacity constraints or system failures, our business, results of operations
and financial condition would be materially and adversely affected.
Our operations are dependent on our ability to protect our computer systems
against damage from fire, power loss, water damage, telecommunications failures,
vandalism, infection by computer viruses, other malicious acts and similar
unexpected adverse events. In addition, interruptions in our solutions could
result from the failure of our Internet and related telecommunications providers
to provide the necessary data communications capacity in the time frame we
require. Despite precautions we have taken, unanticipated problems affecting our
systems have from time to time in the past caused, and in the future could
cause, interruptions in the delivery of our solutions. Most of our back-end
systems for disaster recovery presently are redundant and we expect all of our
back-end systems to be
10
<PAGE> 13
fully redundant by February 1, 2000. Our business, results of operations and
financial condition could be materially and adversely affected by any damage or
failure that interrupts or delays our operations.
WE FACE SECURITY RISKS AND POTENTIAL LIABILITY ASSOCIATED WITH MISAPPROPRIATION
OF CONFIDENTIAL INFORMATION.
We currently retain highly confidential customer information in a secure
database server. We cannot assure you, however, that we will be able to prevent
unauthorized individuals from gaining access to this database server. Any
unauthorized access to our servers could result in the theft of confidential
customer information such as e-mail addresses. It also is possible that one of
our employees could attempt to misuse confidential customer information,
exposing us to liability. We use disclaimers and limitation of warranty
provisions in our client agreements in an attempt to limit our liability to
clients, including liability arising out of systems failure. However, such
provisions may not be enforceable or effective in limiting our exposure to
damage claims.
OUR INSURANCE COVERAGE MAY NOT BE ADEQUATE TO COMPENSATE US FOR ALL POTENTIAL
LOSSES.
Although we carry insurance, which we believe to be adequate, the coverage
it provides may not be adequate to compensate us for all losses that may occur.
We are in the process of taking precautions to protect both our company and our
customers from events that could interrupt delivery of our products and services
or that could result in a loss of transaction or customer data. However, these
measures will not eliminate a significant risk to our operations from a natural
disaster or systems failure. We cannot guarantee that these measures would
protect the company from an organized effort to inundate our servers with
massive quantities of e-mail or other Internet message traffic which could
overload our systems and result in a significant interruption of service. Our
business interruption insurance would not fully compensate us for lost revenue,
income, additional costs or increased costs that we would experience during the
occurrence of any disruption of our computer systems. We cannot guarantee that
we will be able to obtain sufficient insurance coverage on reasonable terms or
at all in the future.
OUR MEANS OF PROTECTING OUR PROPRIETARY RIGHTS MAY BE INADEQUATE AND OUR
COMPETITORS MAY DEVELOP SIMILAR TECHNOLOGY.
We rely on a combination of trade secret, copyright and trademark laws,
nondisclosure agreements, and other contractual provisions and technical
measures to protect our proprietary rights. We believe that, due to the rapid
pace of technological innovation for Internet products, our ability to establish
and maintain a position of technology leadership in the industry depends more on
the skills of our development personnel than upon the legal protections afforded
our existing technology. Trade secret, copyright and trademark protections may
not be adequate to safeguard the proprietary software underlying our products
and services. We may not have adequate remedies for any breach and our trade
secrets may otherwise become known. Moreover, notwithstanding our efforts to
protect our intellectual property, competitors may be able to develop
functionally equivalent e-messaging technologies without infringing any of our
intellectual property rights. Despite our efforts to protect our proprietary
rights, unauthorized parties may attempt to copy or otherwise obtain and use
products or technology that we consider proprietary, and third parties may
attempt to develop similar technology independently. In addition, effective
protection of intellectual property rights may be unavailable or limited in
certain countries. Accordingly, our means of protecting our proprietary rights
may not be adequate and our competitors may independently develop similar
technology.
We generally enter into confidentiality or license agreements with our
employees, consultants and corporate partners, and generally control access to
and distribution of our technologies, documentation and other proprietary
information. Despite our efforts to protect our proprietary rights from
unauthorized use or disclosure, parties may attempt to disclose, obtain or use
our solutions or technologies. We cannot assure you that the steps we have taken
will prevent misappropriation of our solutions or technologies, particularly in
foreign countries where laws or law enforcement practices may not protect our
proprietary rights as fully as in the United States.
We have licensed, and we may license in the future, elements of our
trademarks, trade dress and similar proprietary rights to third parties. While
we attempt to ensure that the quality of our brand is maintained by these
business partners, such partners may take actions that could materially and
adversely affect the value of our proprietary rights or our reputation. In
addition, we currently license certain software and communication systems
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<PAGE> 14
from third parties. Our failure to maintain these licenses, or to find
replacements for such technology in a timely and cost-effective manner, could
have a material adverse effect on our business, results of operations and
financial condition.
WE HAVE IN THE PAST AND MAY IN THE FUTURE BECOME INVOLVED IN PATENT INFRINGEMENT
CLAIMS WHICH RESULT IN A SIGNIFICANT DRAIN ON OUR RESOURCES AND PREVENT OUR
MANAGEMENT TEAM FROM FOCUSING ON MORE PROFITABLE TASKS.
As the volume of Internet commerce increases, and the number of products and
service providers that support Internet commerce increases, we believe that
Internet commerce technology providers may become increasingly subject to
infringement claims. We have been subject to claims of alleged infringement of
intellectual property rights in the past, and may become involved in additional
claims in the future. Any such claims, with or without merit, could be time
consuming, result in costly litigation, disrupt or delay the enhancement or
shipment of our products and services or require us to enter into royalty or
licensing agreements. Such royalty or licensing agreements, if required, may not
be available on terms acceptable or favorable to us, which could have a material
adverse effect on our business, financial condition and results of operations.
In addition, we may initiate claims or litigation against third parties for
infringement of our proprietary rights or to establish the validity of our
proprietary rights. Litigation to determine the validity of any claims could
result in significant expense to us and divert the efforts of our technical and
management personnel from productive tasks, whether or not such litigation is
determined in our favor. In addition, patent litigation such as the Exactis.com,
Inc. lawsuit often gives rise to counterclaims by the defendants, which could
include challenges to the validity of patents held by us. In the event of an
adverse ruling in any such litigation, we may be required to pay substantial
damages, discontinue the use and sale of infringing products, expend significant
resources to develop non-infringing technology or obtain licenses to infringing
technology. Our failure to develop or license a substitute technology could have
a material adverse effect on our business.
IN THE FUTURE, WE MAY BE SUBJECT TO INCREASED GOVERNMENT REGULATION.
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent. We believe that we are not
currently subject to direct regulation by any government agency in the United
States, other than regulations that generally are applicable to all businesses
and newly enacted laws prohibiting spam and laws intended to protect minors. A
number of legislative and regulatory proposals are under consideration by
federal and state lawmakers and regulatory bodies and may be adopted with
respect to the Internet. Some of the issues that such laws or regulations may
cover include user privacy, obscenity, fraud, pricing and characteristics and
quality of products and services. The adoption of any such laws or regulations
may decrease the growth of the Internet, which could in turn decrease the
projected demand for our products and services or increase our cost of doing
business. Moreover, the applicability to the Internet of existing U.S. and
international laws governing issues such as property ownership, copyright, trade
secret, libel, taxation and personal privacy is uncertain and developing. Any
new legislation or regulation, or application or interpretation of existing
laws, could have a material adverse effect on our business.
OUR STOCK PRICE HAS BEEN VOLATILE IN THE PAST AND MAY BE VOLATILE IN THE FUTURE,
REGARDLESS OF OUR ACTUAL OPERATING PERFORMANCE.
The stock market in general, and Internet companies in particular, including
our company, have experienced extreme price and volume fluctuations that often
have been unrelated or disproportionate to operating performance. The trading
prices of many Internet companies' stocks are at or near historical highs and
these trading prices and price to earnings multiples are substantially above
historical levels. These trading prices and multiples may not be sustained.
Broad market and industry factors may reduce our stock price, regardless of our
actual operating performance. In addition, the trading price of our common stock
could fluctuate in response to factors such as:
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<PAGE> 15
o quarterly fluctuations in our revenue and financial results both in
absolute terms and relative to analyst and investor expectations;
o changes in recommendations of securities analysts;
o announcements of technological innovations or new services or products;
o publicity regarding actual or potential results with respect to
technologies, services or products under development;
o disputes or other developments concerning proprietary rights, including
copyright and litigation matters; and
o other events or factors, many of which are beyond our control.
In the past, companies that have experienced volatility in the market price
of their stock have been the object of securities class action litigation. If we
were the object of securities class action litigation, it could result in
substantial costs and a diversion of management's attention and resources.
POTENTIAL YEAR 2000 PROBLEMS WITH OUR INTERNAL OPERATING SYSTEMS COULD HARM OUR
BUSINESS.
Many computer systems and software products are coded to accept only
two-digit entries in date code fields. Beginning in the year 2000, these date
code fields will need to accept four-digit entries to distinguish 21st century
dates from 20th century dates. As a result, in less than three months, computer
systems and/or software used by many companies may need to be upgraded to comply
with "year 2000" requirements. Since we just recently developed the software for
our e-messaging platform and are adding new enhancements and functionality
regularly, we believe that our e-messaging platform is year 2000 compliant.
Coding errors or other defects may be discovered in the future as more testing
is completed or new functionality added.
We rely on a number of software and communications systems provided by third
parties to operate our e-messaging platform. Any of these could contain coding
which is not year 2000 compliant. These systems include server software used to
operate the network servers, software controlling routers, switches and other
components of the data network, disk management software used to control the
data disk arrays, firewall, security, monitoring and back-up software used by
us, as well as desktop PC applications software. In each case, we employ widely
available software applications from leading third party vendors, and expect
that such vendors will provide any required upgrades or modifications in a
timely fashion. However, if any third party software or communication systems
suppliers fail to provide year 2000 compliant versions of the software or system
components we rely upon, our operations, including our e-messaging platform,
could be disrupted. We have contacted and monitor each of our key suppliers to
validate their efforts to ensure that their software products and communication
systems are year 2000 compliant and will continue to do so throughout the course
of this process.
Year 2000 compliance problems also could undermine the general
infrastructure necessary to support our operations. For instance, we depend on
third-party ISPs to provide connections to the Internet and to customer
information systems. Any interruption of service from ISPs could result in a
temporary interruption of our e-messaging and other services. We have attempted
to address this risk by obtaining the same service capacity from multiple ISPs.
In addition, we rely on two third-party data centers to house some servers and
communications systems. Any interruption in the security, access, monitoring or
power systems at the third-party data centers could result in an interruption of
services. Moreover, it is difficult to predict what effects year 2000 compliance
problems will have on the integrity and stability of the Internet. If businesses
and consumers are not able to reliably access the Internet, or if the ISPs on
which we rely fail to provide us with uninterrupted service, our reputation
could be harmed and the demand for our services could decline, resulting in an
adverse impact to our business, financial condition and results of operations.
With respect to any particular customer, our ability to provide services to
that customer could be adversely affected if that customer fails to ensure that
its software systems are year 2000 compliant. Disruptions in the
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<PAGE> 16
information systems of significant customers could temporarily prevent such
customers from accessing or using the messaging platform, which could materially
affect our operating results. Our e-messaging platform is designed to interface
with customer databases and communications systems to retrieve relevant
information from customers' electronic commerce systems or customer databases
and to allow customers to independently control certain features of the service,
including the content of transmitted messages. We cannot assess or control the
degree of year 2000 compliance in our customers' information systems. To address
the risk of disruptions in customer information systems, we designed our
e-messaging platform to include redundant manual control features which can be
used by such customers. Nevertheless, certain customers may elect to discontinue
use of the e-messaging services until their internal information technology
problems have been alleviated, which would adversely affect our business,
financial condition and results of operations. The spending patterns of current
or potential customers may be affected by year 2000 issues as companies expend
significant resources to correct or update their systems for year 2000
compliance. Because of these expenditures, our customers may have less money
available to pay for services, which could have a material adverse affect on our
business, financial condition and results of operations.
SUBSTANTIAL SALES OF OUR COMMON STOCK BY OUR LARGE STOCKHOLDERS COULD CAUSE OUR
STOCK PRICE TO FALL.
We have a limited number of stockholders that hold a large portion of our
common stock. To the extent our large stockholders sell substantial amounts of
our common stock in the public market, the market price of our common stock
could fall.
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL OF OUR COMPANY AND MAY REDUCE THE MARKET PRICE OF OUR COMMON
STOCK.
Provisions in our charter documents may delay, defer or prevent a change in
control of our company that a stockholder may consider favorable, may discourage
bids for our common stock at a premium over the market price of our common stock
and may adversely affect the market price of our common stock and the voting and
other rights of the holders of our common stock. These provisions include:
o authorizing the issuance of preferred stock without stockholder
approval;
o providing for a classified board of directors with staggered,
three-year terms;
o prohibiting cumulative voting in the election of directors;
o requiring super-majority voting to effect certain amendments to our
certificate of incorporation and bylaws;
o limiting the persons who may call special meetings of stockholders; and
o prohibiting stockholder actions by written consent.
Other provisions of Delaware law also may discourage, delay or prevent
someone from acquiring or merging with us.
OUR OFFICERS AND DIRECTORS AND THEIR AFFILIATES EXERCISE SIGNIFICANT CONTROL
OVER OUR COMPANY.
Our directors and executive officers, and certain of their affiliates,
individually and as a group, effectively control us and direct our affairs and
business, including any determination with respect to the acquisition or
disposition of assets by us, future issuances of common stock or other
securities by us, declaration of dividends on our common stock and the election
of directors. This concentration of ownership also may have the effect of
delaying, deferring or preventing a change in control of our company.
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN.
This prospectus contains certain forward-looking statements that involve
risks and uncertainties. We use words such as "anticipate", "believe", "expect",
"future", "intend", "plan" and similar expressions to identify forward-
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<PAGE> 17
looking statements. These statements only are predictions. Although we believe
that the expectations reflected in these forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this amendment. Our actual
results could differ materially from those anticipated in these forward-looking
statements for many reasons, including the risks faced by us and described on
the preceding pages and elsewhere herein.
We believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to predict
accurately or over which we have no control. The risk factors listed above, as
well as any cautionary language in this prospectus, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. Before you
invest in our common stock, you should be aware that the occurrence of the
events described in these risk factors and elsewhere herein could have a
material adverse effect on our business, operating results, financial condition
and stock price.
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<PAGE> 18
SELLING SECURITY HOLDERS
We are registering for resale certain shares of our common stock. The
following table sets forth (i) the name of the selling security holders, (ii)
the number and percent of shares our common stock that the selling security
holders beneficially owned prior to the offering for resale of any of the shares
of our common stock being registered hereby, (iii) the number of shares of our
common stock that may be offered for resale for the account of the selling
security holders pursuant to this prospectus (the "resale shares") and (iv) the
number and percent of shares of our common stock to be held by the selling
security holders after the offering of the resale shares (assuming all of the
resale shares are sold by the selling security holders). The term "selling
security holder" includes the security holders listed below.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED PRIOR SHARES BENEFICIALLY OWNED
TO OFFERING (2) NUMBER OF AFTER OFFERING (2) (4)
---------------------------------- SHARES BEING -------------------------------
SELLING SECURITY HOLDERS (1) NUMBER PERCENT (3) OFFERED NUMBER PERCENT (3)
- ---------------------------- ----------------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
SOFTBANK America Inc. 10,819,678(5) 20.0 243,903 10,575,775(5) 19.5
300 Delaware Avenue
Suite 909
Wilmington, DE 19801
SOFTBANK Technology 10,616,268(6) 19.6 239,318 10,376,950(6) 19.2
Ventures IV, LP
200 West Evelyn Avenue
Suite 200
Mountain View, CA 94041
Pequot Private Equity Fund, LP 2,521,497(7) 4.7 432,984 2,088,513(7) 3.9
c/o Pequot Capital Management,
Inc.
500 Nyala Farm Road
Westport, CT 06880
Van Wagoner Capital 1,500,000 2.8 1,500,000 0 0
Management
345 California Street, Suite 2450
San Francisco, CA 94104
The Raptor Global Portfolio Ltd. 353,669 * 353,669 0 0
c/o Tudor Investment Corp.
40 Rowes Wharf, 2nd Floor
Boston, MA 02110
Pequot Offshore Private Equity 319,250(8) * 54,821 264,429(8) *
Fund, Inc.
c/o Pequot Capital Management,
Inc.
500 Nyala Farm Road
Westport, CT 06880
Permal Media & Communications 228,683 * 228,683 0 0
Fund, LP
c/o Essex Investment
Management Company
125 High Street
Boston, MA 02110
</TABLE>
16
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C> <C>
SOFTBANK Technology 203,410(9) * 4,585 198,825(9) *
Advisors Fund, LP
200 West Evelyn Avenue
Suite 200
Mountain View, CA 94041
Dimensional Partners, Ltd. 160,000 * 160,000 0 0
c/o JDS Capital Management,
Inc
780 Third Avenue, 45th Floor
New York, NY 10017
Kingdon Associates 133,000 * 133,000 0 0
152 West 57th Street, 50th Floor
New York City, NY 10019
Tudor BVI Futures, Ltd. 132,868 * 132,868 0 0
c/o Tudor Investment Corp.
40 Rowes Wharf, 2nd Floor
Boston, MA 02110
Essex High Technology Fund, LP 129,707 * 129,707 0 0
c/o Essex Investment
Management Company
125 High Street
Boston, MA 02110
Kingdon Partners 110,903 * 110,903 0 0
152 West 57th Street, 50th Floor
New York City, NY 10019
Admirals, L.P. 100,000 * 100,000 0 0
135 East 57th Street, 16th Floor
New York, NY 10022
Pogue Capital International Ltd. 100,000 * 100,000 0 0
NCSS New York Windows
55 Water Street
Mezzanine, 3rd Floor
New York, NY 10041
Essex High Technology 81,756 * 81,756 0 0
(Bermuda) Fund, LP
c/o Essex Investment
Management Company
125 High Street
Boston, MA 02110
Essex High Technology Fund II 47,659 * 47,659 0 0
Ltd
c/o Essex Investment
Management Company
125 High Street
Boston, MA 02110
</TABLE>
17
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C> <C>
Dimensional Partners, L.P. 40,000 * 40,000 0 0
c/o JDS Capital Management,
Inc
780 Third Avenue, 45th Floor
New York, NY 10017
Altar Rock Fund L.P. 1,268 * 1,268 0 0
c/o Tudor Investment Corp.
40 Rowes Wharf, 2nd Floor
Boston, MA 02110
TOTAL 27,599,616 4,095,124 23,504,492
</TABLE>
- --------------------------
* less than 1%
(1) Based upon information supplied to us by the selling security
holders.
(2) Based upon information supplied to us by the selling security
holders, upon public filings with the SEC and upon information
supplied to us by our transfer agent and registrar. Beneficial
ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to
securities. Shares of common stock subject to warrants or options
currently exercisable or exercisable within 60 days of October 26,
1999 are deemed outstanding for computing the percentage of the
person or entity holding such securities, but are not deemed
outstanding for computing the percentage of any other person or
entity. Except as indicated by footnote, and subject to community
property laws where applicable, the persons named in the table
above have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them.
(3) Applicable percentage of ownership is based on 54,140,186 of our
common stock issued and outstanding as of October 26, 1999,
adjusted as required by rules promulgated by the SEC.
(4) Assumes the sale of all of the resale shares.
(5) SOFTBANK America Inc. is a wholly-owned subsidiary of SOFTBANK
Holdings, Inc., which in turn is a wholly-owned subsidiary of
SOFTBANK Corp. Excludes 10,376,950 shares (assumes the sale of the
resale shares) held of record by SOFTBANK Technology Ventures IV
LP, an affiliate of SOFTBANK Corp., 879,488 shares held of record
by Softven No. 2 Investment Enterprise Partnership, an affiliate
of SOFTBANK Corp., 254,036 shares held by SOFTBANK Ventures, Inc.,
which is wholly-owned by SOFTBANK Corp., and 198,825 shares
(assumes the sale of the resale shares) held of record by SOFTBANK
Technology Advisors Fund LP, an affiliate of SOFTBANK Corp. Also
excludes 481,308 shares held of record by Mr. Feld and 7,500,
7,500 and 7,500 shares subject to options exercisable within 60
days of October 26, 1999 held by Messrs. Feld, Rieschel and
Fisher, respectively. SOFTBANK Corp. disclaims beneficial
ownership of the shares of our common stock held by its
affiliates. Does not include shares over which SOFTBANK Corp. and
SOFTBANK Technology Ventures IV LP share voting power with Mr. Lee
H. Stein, Mrs. June Stein, Paymentech Merchant Services, Inc. and
First USA Financial, Inc. pursuant to a Voting Agreement dated as
of June 2, 1998. See Statement on Schedule 13D filed on September
1, 1999 by SOFTBANK Corp. and its affiliates. Messrs. Feld,
Rieschel and Fisher are three of our directors who are deemed
affiliates of SOFTBANK Corp. and its affiliates, and they disclaim
beneficial ownership of the shares of our common stock held by
SOFTBANK Corp. and its affiliates.
(6) Excludes 10,575,775 shares (assumes the sale of the resale shares)
held of record by SOFTBANK America Inc., a wholly-owned subsidiary
of SOFTBANK Holdings, Inc., which in turn is a wholly-owned
subsidiary of SOFTBANK Corp., 879,488 shares held of record by
Softven No. 2 Investment Enterprise Partnership, an affiliate of
SOFTBANK Corp., 254,036 shares held by SOFTBANK Ventures, Inc.,
which is wholly-owned by SOFTBANK Corp., and 198,825 shares
(assumes the sale of the resale shares) held of record by SOFTBANK
Technology Advisors Fund LP, an affiliate of SOFTBANK Corp. Also
excludes 481,308 shares held of record by Mr. Feld and 7,500,
7,500 and 7,500 shares subject to options exercisable within 60
days of October 26, 1999 held by Messrs. Feld, Rieschel and
Fisher, respectively. SOFTBANK Corp. disclaims beneficial
ownership of the shares of our common stock held by its
affiliates. Does not include shares over which SOFTBANK Technology
Ventures IV LP and SOFTBANK Corp. share voting power with Mr. Lee
H. Stein, Mrs. June Stein, Paymentech Merchant Services, Inc. and
First USA Financial, Inc. pursuant to a Voting Agreement dated as
of June 2, 1998. See Statement on Schedule 13D filed on September
1, 1999 by SOFTBANK Corp. and its affiliates. Messrs. Feld,
Rieschel and Fisher are three of our directors who are deemed
affiliates of SOFTBANK Corp. and its
18
<PAGE> 21
affiliates, and they disclaim beneficial ownership of the shares
of our common stock held by SOFTBANK Corp. and its affiliates.
(7) Excludes 264,429 shares held of record by Pequot Offshore Private
Equity Fund, Inc. See footnote 8 below. Gerald A. Poch, one of our
directors, is a principal in Pequot Capital Management, which is
an affiliate of Pequot Private Equity Fund, LP and Pequot Offshore
Private Equity Fund, Inc., and disclaims beneficial ownership of
the shares held by Pequot Private Equity Fund, LP and Pequot
Offshore Private Equity Fund, Inc.
(8) Excludes 2,521,497 shares held of record by Pequot Private Equity
Fund, LP. See footnote 7 above.
(9) Excludes 10,575,775 shares (assumes the sale of the resale shares)
held of record by SOFTBANK America Inc., a wholly-owned subsidiary
of SOFTBANK Holdings, Inc., which in turn is a wholly-owned
subsidiary of SOFTBANK Corp., 10,376,950 shares (assumes the sale
of the resale shares) held of record by SOFTBANK Technology
Ventures IV LP, an affiliate of SOFTBANK Corp., 879,488 shares
held of record by Softven No. 2 Investment Enterprise Partnership,
an affiliate of SOFTBANK Corp. and 254,036 shares held by SOFTBANK
Ventures, Inc., which is wholly-owned by SOFTBANK Corp. Also
excludes 481,308 shares held of record by Mr. Feld and 7,500,
7,500 and 7,500 shares subject to options exercisable within 60
days of October 26, 1999 held by Messrs. Feld, Rieschel and
Fisher, respectively. SOFTBANK Corp. disclaims beneficial
ownership of the shares of our common stock held by its
affiliates. Does not include shares over which SOFTBANK Corp. and
SOFTBANK Technology Ventures IV LP share voting power with Mr. Lee
H. Stein, Mrs. June Stein, Paymentech Merchant Services, Inc. and
First USA Financial, Inc. pursuant to a Voting Agreement dated as
of June 2, 1998. See Statement on Schedule 13D filed on September
1, 1999 by SOFTBANK Corp. and its affiliates. Messrs. Feld,
Rieschel and Fisher are three of our directors who are deemed
affiliates of SOFTBANK Corp. and its affiliates, and they disclaim
beneficial ownership of the shares of our common stock held by
SOFTBANK Corp. and its affiliates.
19
<PAGE> 22
PLAN OF DISTRIBUTION
The resale shares may be sold from time to time by the selling security
holders in one or more transactions at fixed prices, at market prices at the
time of sale, at varying prices determined at the time of sale or at negotiated
prices. The selling security holders may offer their resale shares in one or
more of the following transactions:
o on any national securities exchange or quotation service on which our
common stock may be listed or quoted at the time of sale, including The
Nasdaq National Market;
o in the over-the-counter market;
o in private transactions;
o through options;
o by pledge to secure debts or other obligations; or
o through a combination of any of the above transactions.
The selling security holders may effect such transactions by selling to or
through one or more broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the selling security holders. The selling security holders and any
broker-dealers that participate in the distribution may, under certain
circumstances, be deemed to be "underwriters" within the meaning of the
Securities Act, and any commissions received by such broker-dealers and any
profits realized on any resale of the resale shares by them might be deemed to
be underwriting discounts and commissions under the Securities Act.
Under applicable rules and regulations under the Securities Exchange Act,
any person engaged in the distribution of the resale shares may not
simultaneously engage in market making activities with respect to our common
stock for a period of two business days prior to the commencement of such
distribution. In addition and without limiting the foregoing, the selling
security holders and any other person participating in a distribution will be
subject to applicable provisions of the Securities Exchange Act and the rules
and regulations thereunder, including, without limitation, Regulation M under
the Securities Exchange Act, which may limit the timing of purchases and sales
of shares of our common stock by the selling security holders or any such other
person.
We will make copies of this prospectus available to the selling security
holders and have informed the selling security holders of the need for delivery
of a copy of this prospectus to each purchaser of the resale shares prior to or
at the time of any sale of the resale shares.
The selling security holders will pay all underwriting discounts,
commissions, transfer taxes and other expenses associated with the sale of the
resale shares by them. We will pay all costs and expenses associated with the
registration of the resale shares. We estimate that our expenses in connection
with this offering will be approximately $107,950.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of any of the resale
shares by the selling security holders. All proceeds from the sale of the resale
shares will be for the accounts of the selling security holders.
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for us by Cooley Godward LLP, Boulder, Colorado.
20
<PAGE> 23
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 1998, as set forth in their report, which is
incorporated by reference and included in this prospectus and elsewhere in the
registration statement. Our financial statements and schedule are incorporated
by reference and our financial statements are included in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
The audited financial statements of Revnet Systems, Inc. incorporated in
this prospectus by reference to our Form 8-K/A dated October 1, 1999 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
The audited financial statements of Decisive Technology Corporation
incorporated in this prospectus by reference to our Form 8-K/A dated October 1,
1999 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The audited financial statements of Email Publishing, Inc., incorporated in
this prospectus by reference to our Form 8-K/A dated February 19, 1999 have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
21
<PAGE> 24
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the registrant in
connection with the sale of the common stock being registered. All the amounts
shown are estimates except for the registration fee.
<TABLE>
<S> <C>
Registration fee............................. $ 15,950
Legal fees and expenses...................... $ 50,000
Accounting fees and expenses................. $ 5,000
Printing expenses............................ $ 37,000
------------
Total........................................ $ 107,950
============
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Under Section 145 of the Delaware General Corporation Law, the registrant
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act. The registrant's bylaws also provide that the registrant will indemnify its
directors and executive officers and may indemnify its other officers, employees
and agents to the fullest extent not prohibited by Delaware law.
The registrant's certificate of incorporation provides for the elimination
of liability for monetary damages for breach of the directors' fiduciary duty of
care to the registrant and its stockholders. These provisions do not eliminate
the directors' duty of care and, in appropriate circumstances, equitable
remedies such an injunctive or other forms of non-monetary relief remain
available under Delaware law. In addition, each director will continue to be
subject to liability for breach of the director's duty of loyalty to the
registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for any transaction from which the
director derived an improper personal benefit and for payment of dividends or
approval of stock repurchases or redemptions that are unlawful under Delaware
law. These provisions also do not affect a director's responsibilities under any
other law, such as the federal securities laws or state or federal environmental
laws.
The registrant has entered into agreements with its directors and executive
officers that require the registrant to indemnify such persons against expenses,
judgments, fines, settlements and other amounts actually and reasonably
incurred, including expenses of a derivative action, in connection with any
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a director or officer of
the registrant or any of its affiliated enterprises, provided such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the registrant and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreements also set forth certain procedures that
will apply in the event of a claim for indemnification thereunder.
II-1
<PAGE> 25
ITEM 16. EXHIBITS.
a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
4.1* Specimen stock certificate representing shares of the
registrant's common stock
4.2 Form of Stock Purchase Agreement between the registrant and the
selling security holders
5.1 Opinion of Cooley Godward LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of PricewaterhouseCoopers LLP
23.4 Consent of PricewaterhouseCoopers LLP
23.5 Consent of Cooley Godward LLP (reference is made to Exhibit 5.1)
24.1 Power of Attorney (reference is made to page II-4)
</TABLE>
- ------------
* Filed as an exhibit to our Registration Statement on Form S-1
(No.333-14573) and incorporated herein by reference, as amended through
the date hereof.
ITEM 17. UNDERTAKINGS.
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 provisions described in Item 15, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by the registrant is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement.
(iii) 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.
II-2
<PAGE> 26
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment
by these paragraphs is contained in periodic reports filed by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, 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.
(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 the offering.
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 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.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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 Boulder, State of Colorado, on the 29th day of
October, 1999.
MESSAGEMEDIA, INC.
By: /s/ A. Laurence Jones
--------------------------------
A. Laurence Jones
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints A. Laurence Jones and Martin T. Johnson
his or her true and lawful attorneys-in-fact each acting alone, with full power
of substitution and resubstitution, for him or her and in his or her name, place
and stead in any and all capacities to sign any or all amendments (including
post-effective amendments) to this registration statement, and any registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as
amended, in connection with the registration under the Securities Act of 1933,
as amended, of equity securities of MessageMedia, Inc. and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact, or their substitutes, each
acting alone, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons on behalf of the
registrant in the capacities indicated on this 29th day of October 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Bradley A. Feld
- ------------------------------- Co-Chairman of the Board of Directors
Bradley A. Feld
/s/ Gerald A. Poch
- ------------------------------- Co-Chairman of the Board of Directors
Gerald A. Poch
/s/ A. Laurence Jones
- ------------------------------- President, Chief Executive Officer and
A. Laurence Jones Director (Principal Executive Officer)
/s/ Martin T. Johnson
- ------------------------------- Vice President and Chief Financial
Martin T. Johnson Officer (Principal Financial Officer)
/s/ Dennis J. Cagan
- ------------------------------- Director
Dennis J. Cagan
/s/ Terry Duryea
- ------------------------------- Director
Terry Duryea
*
- ------------------------------- Director
Ronald D. Fisher
/s/ Pamela H. Patsley
- ------------------------------- Director
Pamela H. Patsley
*
- ------------------------------- Director
Gary E. Rieschel
</TABLE>
II-4
<PAGE> 28
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
4.1* Specimen stock certificate representing shares of common stock
of the registrant
4.2 Form of Stock Purchase Agreement between the registrant and
the selling security holders
5.1 Opinion of Cooley Godward LLP
23.1 Consent of Ernst & Young LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of PricewaterhouseCoopers LLP
23.4 Consent of PricewaterhouseCoopers LLP
23.5 Consent of Cooley Godward LLP (reference is made to Exhibit
5.1)
24.1 Power of Attorney (reference is made to page II-4)
</TABLE>
- ------------
* Filed as an exhibit to our Registration Statement on Form S-1
(No. 333-14573) and incorporated herein by reference, as amended through
the date hereof.
<PAGE> 1
EXHIBIT 4.2
FORM OF STOCK PURCHASE AGREEMENT
<PAGE> 2
STOCK PURCHASE AGREEMENT
MessageMedia, Inc.
6060 Spine Road
Boulder, Colorado 80301
Ladies & Gentlemen:
The undersigned, (the "Investor"), hereby confirms its agreement
with you as follows:
1. This Stock Purchase Agreement (the "Agreement") is made as of
, 1999 between MessageMedia, Inc., a Delaware corporation (the
"Company"), and the Investor.
2. The Company has authorized the sale and issuance of up to shares
(the "Shares") of common stock of the Company, $.001 par value per share (the
"Common Stock"), subject to adjustment by the Company's Board of Directors, to
certain investors in a private placement (the "Offering").
3. The Company and the Investor agree that the Investor will purchase from
the Company and the Company will issue and sell to the Investor shares, for
a purchase price of $ per share, or an aggregate purchase price of
$ , pursuant to the Terms and Conditions for Purchase of Shares
attached hereto as Annex I and incorporated herein by reference as if fully set
forth herein. Unless otherwise requested by the Investor, certificates
representing the shares purchased by the Investor will be registered in the
Investor's name and address as set forth below.
4. The Investor represents that, except as set forth below, (a) it has had
no position, office or other material relationship within the past three years
with the Company or its affiliates, (b) neither it, nor any group of which it is
a member or to which it is related, beneficially owns (including the right to
acquire or vote) any securities of the Company and (c) it has no direct or
indirect affiliation or association with any NASD member. Exceptions:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If no exceptions, write "none." If left blank, response will be deemed to be
"none.")
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose.
------------------------------------
"INVESTOR"
By:
--------------------------------
Print Name:
------------------------
Title:
-----------------------------
Address:
---------------------------
Tax ID No.:
------------------------
Contact Name:
----------------------
Telephone:
-------------------------
Name in which shares should be
registered (if different):
---------
AGREED AND ACCEPTED:
MESSAGEMEDIA, INC.
By:
---------------------------------
Title:
------------------------------
1
<PAGE> 3
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF SHARES
1. Authorization and Sale of the Shares. Subject to the terms and conditions of
this Agreement, the Company has authorized the sale of the Shares.
2. Agreement to Sell and Purchase the Shares; Subscription Date.
2.1 At the Closing (as defined in Section 3), the Company will sell to the
Investor, and the Investor will purchase from the Company, upon the terms and
conditions hereinafter set forth, the number of Shares set forth on the
signature page hereto at the purchase price set forth on such signature page.
2.2 The Company proposes to enter into this same form of Stock Purchase
Agreement with certain other investors (the "Other Investors") and expects to
complete sales of Shares to them. (The Investor and the Other Investors are
hereinafter sometimes collectively referred to as the "Investors," and this
Agreement and the Stock Purchase Agreements executed by the Other Investors are
hereinafter sometimes collectively referred to as the "Agreements.") The Company
will accept executed Agreements from Investors for the purchase of Shares
commencing upon the date on which the Company provides the Investors with the
proposed purchase price per Share and concluding upon the date (the
"Subscription Date") on which the Company has (i) executed Agreements with
Investors each for the purchase of Shares in the amount of at least $1,000,000
and (ii) notified BancBoston Robertson Stephens Inc. (in its capacity as
Placement Agent for the Shares, the "Placement Agent") in writing that it is no
longer accepting Agreements from Investors for the purchase of Shares.
2.3 Investor acknowledges that the Company intends to pay the Placement
Agent a fee in respect of the sale of Shares to the Investor.
3. Delivery of the Shares at Closing. The completion of the purchase and sale of
the Shares (the "Closing") shall occur at a place and time (the "Closing Date")
to be specified by the Company and the Placement Agent, and of which the
Investors will be notified in advance by the Placement Agent. At the Closing,
the Company shall deliver to the Investor one or more stock certificates
representing the number of Shares set forth on the signature page hereto, each
such certificate to be registered in the name of the Investor or, if so
indicated on the signature page hereto, in the name of a nominee designated by
the Investor.
The Company's obligation to issue the Shares to the Investor shall be
subject to the following conditions, any one or more of which may be waived by
the Company: (a) receipt by the Company of the purchase price for the Shares
being purchased hereunder as set forth on the signature page hereto; (b)
completion of the purchases and sales under the Agreements with the Other
Investors; and (c) the accuracy of the representations and warranties made by
the Investors and the fulfillment of those undertakings of the Investors to be
fulfilled prior to the Closing.
The Investor's obligation to purchase the Shares shall be subject to the
following conditions, any one or more of which may be waived by the Investor:
(a) Investors shall have executed Agreements each for the purchase of Shares in
the amount of at least $1,000,000; and (b) the satisfaction of all of the
conditions set forth in Section 6 of the Placement Agency Agreement between the
Company and the Placement Agent. Subject to clause (a) above, the Investor's
obligations are expressly not conditioned on the purchase by any or all of the
other Investors of the Shares that they have agreed to purchase from the
Company.
4. Representations, Warranties and Covenants of the Company. Except as otherwise
described in the confidential offering memorandum, dated September 23, 1999,
distributed in connection with the sale of the Shares (including the documents
incorporated by reference therein, the "Placement Memorandum"), which qualifies
the following representations and warranties in their entirety, the Company
hereby represents and warrants to, and covenants with, the Investor, as follows:
4.1 Organization. The Company is duly incorporated and validly existing in
good standing under the laws of the jurisdiction of its organization. Each of
the Company and its Subsidiaries (as defined in Rule 405 under the Securities
Act of 1933, as amended (the "Securities Act")) has full power and authority to
own,
2
<PAGE> 4
operate and occupy its properties and to conduct its business as presently
conducted and as described in the Placement Memorandum and is registered or
qualified to do business and in good standing in each jurisdiction in which it
owns or leases property or transacts business and where the failure to be so
qualified would have a material adverse effect upon the business, financial
condition, properties or operations of the Company and its Subsidiaries,
considered as one enterprise ("Material Adverse Effect"), and no proceeding has
been instituted in any such jurisdiction revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or qualification.
4.2 Due Authorization. The Company has all requisite power and authority
to execute, deliver and perform its obligations under the Agreements, and the
Agreements have been duly authorized and validly executed and delivered by the
Company and constitute legal, valid and binding agreements of the Company
enforceable against the Company in accordance with their terms, except as rights
to indemnity and contribution may be limited by state or federal securities laws
or the public policy underlying such laws, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.3 Non-Contravention. The execution and delivery of the Agreements, the
issuance and sale of the Shares to be sold by the Company under the Agreements,
the fulfillment of the terms of the Agreements and the consummation of the
transactions contemplated thereby will not (A) conflict with or constitute a
violation of, or default (with the passage of time or otherwise) under, (i) any
material bond, debenture, note or other evidence of indebtedness, or any
material lease, contract, indenture, mortgage, deed of trust, loan agreement,
joint venture or other agreement or instrument to which the Company or any
Subsidiary is a party or by which it or any of its Subsidiaries or their
respective properties are bound, where such conflict, violation or default is
likely to result in a Material Adverse Effect, (ii) the charter, by-laws or
other organizational documents of the Company or any Subsidiary, or (iii) any
law, administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority binding upon the Company or any
Subsidiary or their respective properties, where such conflict, violation or
default is likely to result in a Material Adverse Effect, or (B) result in the
creation or imposition of any lien, encumbrance, claim, security interest or
restriction whatsoever upon any of the material properties or assets of the
Company or any Subsidiary or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any material bond, debenture,
note or any other evidence of indebtedness or any material indenture, mortgage,
deed of trust or any other agreement or instrument to which the Company or any
Subsidiary is a party or by which any of them is bound or to which any of the
property or assets of the Company or any Subsidiary is subject. No consent,
approval, authorization or other order of, or registration, qualification or
filing with, any regulatory body, administrative agency, or other governmental
body in the United States is required for the execution and delivery of the
Agreements and the valid issuance and sale of the Shares to be sold pursuant to
the Agreements, other than such as have been made or obtained, and except for
any securities filings required to be made under federal or state securities
laws.
4.4 Capitalization. The capitalization of the Company as of August 17,
1999 is as set forth in the Placement Memorandum (excluding unvested options and
treasury shares). The Company has not issued any capital stock since that date
other than pursuant to (i) employee benefit plans disclosed in the Placement
Memorandum or (ii) outstanding warrants disclosed in the Placement Memorandum.
The Shares to be sold pursuant to the Agreements have been duly authorized, and
when issued and paid for in accordance with the terms of the Agreements, will be
duly and validly issued, fully paid and nonassessable. Except for any actions
required to be taken by the Company in connection with the settlement of claims
described in the Placement Memorandum, the outstanding shares of capital stock
of the Company have been duly and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, and were not issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities. Except as set forth in
or contemplated by the Placement Memorandum, there are no outstanding rights
(including, without limitation, preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any unissued
shares of capital stock or other equity interest in the Company or any
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Subsidiary, or any contract, commitment, agreement, understanding or arrangement
of any kind to which the Company is a party and relating to the issuance or sale
of any capital stock of the Company or any Subsidiary, any such convertible or
exchangeable securities or any such rights, warrants or options. Without
limiting the foregoing, no preemptive right, co-sale right, registration right,
right of first refusal or other similar right exists with respect to the
issuance and sale of the Shares. The Company owns the entire equity interest in
each of its Subsidiaries, free and clear of any pledge, lien, security interest,
encumbrance or claim, other than as described in the Placement Memorandum.
Except as disclosed in the Placement Memorandum, there are no stockholders
agreements, voting agreements or other similar agreements with respect to the
Common Stock to which the Company is a party.
4.5 Legal Proceedings. There is no material legal or governmental
proceeding pending to which the Company or any Subsidiary is a party or of which
the business or property of the Company or any Subsidiary is subject that is not
disclosed in the Placement Memorandum.
4.6 No Violations. Neither the Company or any Subsidiary is in violation of
its charter, bylaws or other organizational document, or in violation of any
law, administrative regulation, ordinance or order of any court or governmental
agency, arbitration panel or authority applicable to the Company or any
Subsidiary, which violation, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect, or is in default (and there
exists no condition which, with the passage of time or otherwise, would
constitute a default) in the performance of any material bond, debenture, note
or any other evidence of indebtedness in any indenture, mortgage, deed of trust
or any other material agreement or instrument to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary is bound or by
which the properties of the Company or any Subsidiary are bound, which would be
reasonably likely to have a Material Adverse Effect.
4.7 Governmental Permits, Etc. With the exception of the matters which are
dealt with separately in Sections 4.1, 4.13, and 4.14, each of the Company and
its Subsidiaries has all necessary franchises, licenses, certificates and other
authorizations from any foreign, federal, state or local government or
governmental agency, department or body that are currently necessary for the
operation of the business of the Company and its Subsidiaries as currently
conducted and as described in the Placement Memorandum except where the failure
to currently possess could not reasonably be expected to have a Material Adverse
Effect.
4.8 Intellectual Property.
(a) The Company has ownership or license or legal right to use all patent,
copyright, trade secret, trademark, customer lists, designs, manufacturing or
other processes, computer software, systems, data compilation, research results
or other proprietary rights used in the business of the Company and material to
the Company (collectively, "Intellectual Property") other than Intellectual
Property generally available on commercial terms from other sources. All of such
patents, trademarks and registered copyrights have been duly registered in,
filed in or issued by the United States Patent and Trademark Office, the United
States Register of Copyrights or the corresponding offices of other
jurisdictions and have been maintained and renewed in accordance with all
applicable provisions of law and administrative regulations in the United States
and all such jurisdictions.
(b) All material licenses or other material agreements under which (i) the
Company is granted rights in Intellectual Property, other than Intellectual
Property generally available on commercial terms from other sources, and (ii)
the Company has granted rights to others in Intellectual Property owned or
licensed by the Company, are in full force and effect and, to the knowledge of
the Company, there is no material default by the Company thereto.
(c) The Company believes it has taken all steps required in accordance
with sound business practice and business judgment to establish and preserve its
ownership of all material copyright, trade secret and other proprietary rights
with respect to its products and technology.
(d) To the knowledge of the Company, the present business, activities and
products of the Company do not infringe any intellectual property of any other
person, except where such infringement would not have a Material Adverse Effect
on the Company. No proceeding charging the Company with infringement of any
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<PAGE> 6
adversely held Intellectual Property has been filed. To the Company's knowledge,
there exists no unexpired patent or patent application which includes claims
that would be infringed by or otherwise have a Material Adverse Effect on the
Company. To the knowledge of the Company, the Company is not making unauthorized
use of any confidential information or trade secrets of any person. Neither the
Company nor, to the knowledge of the Company, any of its employees have any
agreements or arrangements with any persons other than the Company related to
confidential information or trade secrets of such persons or restricting any
such employee's engagement in business activities of any nature. To the
Company's knowledge, the activities of the Company or any of its employees on
behalf of the Company do not violate any such agreements or arrangements known
to the Company which any such employees have with other persons, if any.
4.9 Financial Statements. The financial statements of the Company and the
related notes contained in the Placement Memorandum present fairly, in
accordance with generally accepted accounting principles, the financial position
of the Company and its Subsidiaries as of the dates indicated, and the results
of its operations and cash flows for the periods therein specified. Such
financial statements (including the related notes) have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods therein specified, except as disclosed in the
Placement Memorandum. The other financial information contained in the Placement
Memorandum has been prepared on a basis consistent with the financial statements
of the Company.
4.10 No Material Adverse Change. Except as disclosed in the Placement
Memorandum, since June 30, 1999, there has not been any Material Adverse Effect,
(ii) any obligation, direct or contingent, that is material to the Company and
its Subsidiaries considered as one enterprise, incurred by the Company, except
obligations incurred in the ordinary course of business, (iii) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or any of its Subsidiaries, or (iv) any loss or damage (whether or not
insured) to the physical property of the Company or any of its Subsidiaries
which has been sustained which has a Material Adverse Effect.
4.11 Disclosure. The information contained in the Placement Memorandum as
of the date of such information did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.12 NASDAQ Compliance. The Company's Common Stock is registered pursuant
to Section 12(g) of the Exchange Act and is listed on The Nasdaq National Market
(the "Nasdaq Stock Market"), and the Company has taken no action designed to, or
likely to have the effect of, terminating the registration of the Common Stock
under the Exchange Act or de-listing the Common Stock from the Nasdaq Stock
Market.
4.13 Reporting Status. The Company has filed in a timely manner all
documents that the Company was required to file under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), during the 12 months preceding the
date of this Agreement. The following documents complied in all material
respects with the SEC's requirements as of their respective filing dates, and
the information contained therein as of the date thereof did not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein in light of the
circumstances under where they were made not misleading:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1998 (the "10-K");
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999;
(c) The Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999;
(d) The Company's Current Report on Form 8-K/A, filed with the SEC on
September 23, 1999; and
(e) All other documents, if any, filed by the Company with the SEC
since December 31,1998 pursuant to the reporting requirements of the
Exchange Act.
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4.14 Listing. The Company shall comply with all requirements of the
National Association of Securities Dealers, Inc. with respect to the issuance of
the Shares and the listing thereof on the Nasdaq Stock Market.
4.15 Year 2000 Compliance. The information set forth in the Company's
Current Report on Form 8-K/A, filed with the SEC on September 23, 1999, with
respect to the Company's efforts regarding year 2000 matters (i) conforms in all
material respects to the guidelines set forth in SEC Release No. 33-7558 and
(ii) accurately describes the status of the Company's efforts regarding year
2000 matters. To the Company's knowledge, the costs associated with ensuring
that the Company is year 2000 compliant will not result in a Material Adverse
Effect.
4.16 Foreign Corrupt Practices. Neither the Company nor any of its
Subsidiaries, nor, to the knowledge of the Company or any Subsidiary, any agent
or other person acting on behalf of the Company or any of its Subsidiaries, have
(i) directly or indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds, (iii) failed to disclose fully any contribution
made by the Company or made by any person acting on its behalf and of which the
Company is aware in violation of law or (iv) violated in any material respect
any provision of the Foreign Corrupt Practices Act of 1977, as amended.
4.17 No Manipulation of Stock. The Company has not taken and will not, in
violation of applicable law, take, any action designed to or that might
reasonably be expected to cause or result in manipulation of the price of the
Common Stock to facilitate the sale or resale of the Shares.
5. Representations, Warranties and Covenants of the Investor.
5.1 The Investor represents and warrants to, and covenants with, the
Company that: (i) the Investor is an "accredited investor" as defined in
Regulation D under the Securities Act and the Investor is also knowledgeable,
sophisticated and experienced in making, and is qualified to make decisions with
respect to, investments in shares presenting an investment decision like that
involved in the purchase of the Shares, including investments in securities
issued by the Company and investments in comparable companies, and has
requested, received, reviewed and considered all information it deemed relevant
in making an informed decision to purchase the Shares; (ii) the Investor is
acquiring the number of Shares set forth on the signature page hereto in the
ordinary course of its business and for its own account for investment only and
with no present intention of distributing any of such Shares or any arrangement
or understanding with any other persons regarding the distribution of such
Shares; (iii) the Investor will not, directly or indirectly, offer, sell,
pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of) any of the Shares except in compliance
with the Securities Act, applicable state securities laws and the respective
rules and regulations promulgated thereunder; (iv) the Investor has answered all
questions on the signature page hereto for use in preparation of the
Registration Statement and the answers thereto are true and correct as of the
date hereof and will be true and correct as of the Closing Date; (v) the
Investor will notify the Company immediately of any change in any of such
information until such time as the Investor has sold all of its Shares or until
the Company is no longer required to keep the Registration Statement effective;
and (vi) the Investor has, in connection with its decision to purchase the
number of Shares set forth on the signature page hereto, relied only upon the
Placement Memorandum and the representations and warranties of the Company
contained herein. Investor understands that its acquisition of the Shares has
not been registered under the Securities Act or registered or qualified under
any state securities law in reliance on specific exemptions therefrom, which
exemptions may depend upon, among other things, the bona fide nature of the
Investor's investment intent as expressed herein. Investor has completed or
caused to be completed and delivered to the Company the Investor Questionnaire
contained in Exhibit D to the Placement Memorandum, which questionnaire is true
and correct in all material respects.
5.2 The Investor acknowledges, represents and agrees that no action has
been or will be taken in any jurisdiction outside the United States by the
Company or the Placement Agent that would permit an offering of the Shares, or
possession or distribution of offering materials in connection with the issue of
the Shares, in
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any jurisdiction outside the United States where action for that purpose is
required. Each Investor outside the United States will comply with all
applicable laws and regulations in each foreign jurisdiction in which it
purchases, offers, sells or delivers Shares or has in its possession or
distributes any offering material, in all cases at its own expense. The
Placement Agent is not authorized to make any representation or use any
information in connection with the issue, placement, purchase and sale of the
Shares other than as contained in the Placement Memorandum.
5.3 The Investor hereby covenants with the Company not to make any sale of
the Shares without complying with the provisions of this Agreement, including
Section 7.2 hereof, and without effectively causing the prospectus delivery
requirement under the Securities Act to be satisfied, and the Investor
acknowledges that the certificates evidencing the Shares will be imprinted with
a legend that prohibits their transfer except in accordance therewith. The
Investor acknowledges that there may occasionally be times when the Company,
based on the advice of its counsel, determines that it must suspend the use of
the Prospectus forming a part of the Registration Statement until such time as
an amendment to the Registration Statement has been filed by the Company and
declared effective by the SEC or until the Company has amended or supplemented
such Prospectus.
5.4 The Investor further represents and warrants to, and covenants with,
the Company that (i) the Investor has full right, power, authority and capacity
to enter into this Agreement and to consummate the transactions contemplated
hereby and has taken all necessary action to authorize the execution, delivery
and performance of this Agreement, and (ii) this Agreement constitutes a valid
and binding obligation of the Investor enforceable against the Investor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' and contracting parties' rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and except as the indemnification agreements of the Investors herein may be
legally unenforceable.
5.5 Investor will not, prior to the effectiveness of the Registration
Statement, sell, offer to sell, solicit offers to buy, dispose of, loan, pledge
or grant any right with respect to (collectively, a "Disposition"), the Common
Stock of the Company, nor will Investor engage in any hedging or other
transaction which is designed to or could reasonably be expected to lead to or
result in a Disposition of Common Stock of the Company by the Investor or any
other person or entity. Such prohibited hedging or other transactions would
include, without limitation, effecting any short sale or having in effect any
short position (whether or not such sale or position is against the box and
regardless of when such position was entered into) or any purchase, sale or
grant of any right (including, without limitation, any put or call option) with
respect to the Common Stock of the Company or with respect to any security
(other than a broad-based market basket or index) that includes, relates to or
derives any significant part of its value from the Common Stock of the Company.
5.6 The Investor agrees that if the Company engages in an underwritten
public offering for the sale by the Company of shares of Common Stock, during
the one-year period following the Closing Date and thereafter so long as the
Investor owns more than one percent (1%) of the Common Stock, the Investor will,
if so requested by the managing underwriter for such offering, execute and
deliver to such managing underwriter a "lock-up" letter with customary terms and
conditions. The obligations of and restrictions on the Investor under such
letter shall be in effect for a maximum of 180 days as specified by the managing
underwriter.
5.7 The Investor understands that nothing in the Placement Memorandum,
this Agreement or any other materials presented to the Investor in connection
with the purchase and sale of the Shares constitutes legal, tax or investment
advice. The Investor has consulted such legal, tax and investment advisors as
it, in its sole discretion, has deemed necessary or appropriate in connection
with its purchase of Shares.
6. Survival of Representations, Warranties and Agreements. Notwithstanding any
investigation made by any party to this Agreement or by the Placement Agent, all
covenants, agreements, representations and warranties made by the Company and
the Investor herein shall survive the execution of this Agreement, the delivery
to the Investor of the Shares being purchased and the payment therefor.
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7. Registration of the Shares; Compliance with the Securities Act.
7.1 Registration Procedures and Expenses. The Company shall:
(a) subject to receipt of necessary information from the Investors,
prepare and file with the SEC, within ten (10) days after the Closing Date,
a registration statement on Form S-3 (the "Registration Statement") to
enable the resale of the Shares by the Investors from time to time through
the automated quotation system of the Nasdaq Stock Market or in
privately-negotiated transactions;
(b) use its reasonable efforts, subject to receipt of necessary
information from the Investors, to cause the Registration Statement to
become effective as soon as practicable, but in no event later than ninety
(90) days after the Registration Statement is filed by the Company.
(c) use its reasonable efforts to prepare and file with the SEC such
amendments and supplements to the Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement current and effective for a period not exceeding, with respect to
each Investor's Shares purchased hereunder, the earlier of (i) the second
anniversary of the Closing Date, (ii) the date on which the Investor may
sell all Shares then held by the Investor without restriction by the volume
limitations of Rule 144(e) of the Securities Act or (iii) such time as all
Shares purchased by such Investor in this Offering have been sold pursuant
to a registration statement.
(d) furnish to the Placement Agent and to the Investor with respect to
the Shares registered under the Registration Statement such number of
copies of the Registration Statement, Prospectuses and Preliminary
Prospectuses in conformity with the requirements of the Securities Act and
such other documents as the Investor may reasonably request, in order to
facilitate the public sale or other disposition of all or any of the Shares
by the Investor, provided, however, that the obligation of the Company to
deliver copies of Prospectuses or Preliminary Prospectuses to the Investor
shall be subject to the receipt by the Company of reasonable assurances
from the Investor that the Investor will comply with the applicable
provisions of the Securities Act and of such other securities or blue sky
laws as may be applicable in connection with any use of such Prospectuses
or Preliminary Prospectuses;
(e) file documents required of the Company for normal blue sky
clearance in states specified in writing by the Investor, provided,
however, that the Company shall not be required to qualify to do business
or consent to service of process in any jurisdiction in which it is not now
so qualified or has not so consented;
(f) bear all expenses in connection with the procedures in paragraph
(a) through (e) of this Section 7.1 and the registration of the Shares
pursuant to the Registration Statement; and
(g) advise the Investors, promptly after it shall receive notice or
obtain knowledge of the issuance of any stop order by the SEC delaying or
suspending the effectiveness of the Registration Statement or of the
initiation of any proceeding for that purpose; and it will promptly use its
commercially reasonable efforts to prevent the issuance of any stop order
or to obtain its withdrawal at the earliest possible moment if such stop
order should be issued.
The Company understands that the Investor disclaims being an underwriter,
but the Investor being deemed an underwriter by the SEC shall not relieve the
Company of any obligations it has hereunder, provided, however, that if the
Company receives notification from the SEC that the Investor is deemed an
underwriter, then the period by which the Company is obligated to submit an
acceleration request to the SEC shall be extended to the earlier of (i) the 90th
day after such SEC notification, or (ii) 120 days after the initial filing of
the Registration Statement with the SEC.
7.2 Transfer of Shares After Registration; Suspension.
(a) The Investor agrees that it will not effect any Disposition of the
Shares or its right to purchase the Shares that would constitute a sale
within the meaning of the Securities Act except as contemplated in the
Registration Statement referred to in Section 7.1 and as described below,
and that it will promptly
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notify the Company of any changes in the information set forth in the
Registration Statement regarding the Investor or its plan of distribution.
(b) Except in the event that paragraph (c) below applies, the Company
shall: (i) if deemed necessary by the Company, prepare and file from time
to time with the SEC a post-effective amendment to the Registration
Statement or a supplement to the related Prospectus or a supplement or
amendment to any document incorporated therein by reference or file any
other required document so that such Registration Statement will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and so that, as thereafter delivered to purchasers
of the Shares being sold thereunder, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
(ii) provide the Investor copies of any documents filed pursuant to Section
7.2(b)(i); and (iii) inform each Investor that the Company has complied
with its obligations in Section 7.2(b)(i) (or that, if the Company has
filed a post-effective amendment to the Registration Statement which has
not yet been declared effective, the Company will notify the Investor to
that effect, will use its reasonable efforts to secure the effectiveness of
such post-effective amendment as promptly as possible and will promptly
notify the Investor pursuant to Section 7.2(b)(i) hereof when the amendment
has become effective).
(c) Subject to paragraph (d) below, in the event: (i) of any request
by the SEC or any other federal or state governmental authority during the
period of effectiveness of the Registration Statement for amendments or
supplements to a Registration Statement or related Prospectus or for
additional information; (ii) of the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose; (iii) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose; or (iv)
of any event or circumstance which necessitates the making of any changes
in the Registration Statement or Prospectus, or any document incorporated
or deemed to be incorporated therein by reference, so that, in the case of
the Registration Statement, it will not contain any untrue statement of a
material fact or any omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or any omission to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading; then the Company shall deliver a certificate in writing to the
Investor (the "Suspension Notice") to the effect of the foregoing and, upon
receipt of such Suspension Notice, the Investor will refrain from selling
any Shares pursuant to the Registration Statement (a "Suspension") until
the Investor's receipt of copies of a supplemented or amended Prospectus
prepared and filed by the Company, or until it is advised in writing by the
Company that the current Prospectus may be used, and has received copies of
any additional or supplemental filings that are incorporated or deemed
incorporated by reference in any such Prospectus. In the event of any
Suspension, the Company will use its reasonable efforts to cause the use of
the Prospectus so suspended to be resumed as soon as reasonably practicable
within 20 business days after delivery of a Suspension Notice to the
Investors. In addition to and without limiting any other remedies
(including, without limitation, at law or at equity) available to the
Investor, the Investor shall be entitled to specific performance in the
event that the Company fails to comply with the provisions of this Section
7.2(c).
(d) Notwithstanding the foregoing paragraphs of this Section 7.2, the
Investor shall not be prohibited from selling Shares under the Registration
Statement as a result of Suspensions on more than three occasions of not
more than 30 days each in any twelve month period, unless, in the good
faith judgment of the Company's Board of Directors, upon advice of counsel,
the sale of Shares under the Registration Statement in reliance on this
paragraph 7.2(d) would be reasonably likely to cause a violation of the
Securities Act or the Exchange Act and result in potential liability to the
Company.
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(e) Provided that a Suspension is not then in effect the Investor may
sell Shares under the Registration Statement, provided that it arranges for
delivery of a current Prospectus to the transferee of such Shares. Upon
receipt of a request therefor, the Company has agreed to provide an
adequate number of current Prospectuses to the Investor and to supply
copies to any other parties requiring such Prospectuses.
(f) In the event of a sale of Shares by the Investor, the Investor
must also deliver to the Company's transfer agent, with a copy to the
Company, a Certificate of Subsequent Sale substantially in the form
attached hereto as Exhibit A, so that the shares may be properly
transferred.
7.3 Indemnification. For the purpose of this Section 7.3:
(i) the term "Selling Stockholder" shall include the Investor and any
affiliate of such Investor;
(ii) the term "Registration Statement" shall include any final
Prospectus, exhibit, supplement or amendment included in or relating to the
Registration Statement referred to in Section 7.1; and
(iii) the term "untrue statement" shall include any untrue statement
or alleged untrue statement, or any omission or alleged omission to state
in the Registration Statement a material fact required to be stated therein
or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(a) The Company agrees to indemnify and hold harmless each Selling
Stockholder from and against any losses, claims, damages or liabilities
to which such Selling Stockholder may become subject (under the
Securities Act or otherwise) insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of,
or are based upon (i) any untrue statement of a material fact contained
in the Registration Statement, or (ii) any failure by the Company to
fulfill any undertaking included in the Registration Statement, and the
Company will reimburse such Selling Stockholder for any reasonable legal
or other expenses reasonably incurred in investigating, defending or
preparing to defend any such action, proceeding or claim, provided,
however, that the Company shall not be liable in any such case to the
extent that such loss, claim, damage or liability arises out of, or is
based upon, an untrue statement made in such Registration Statement in
reliance upon and in conformity with written information furnished to
the Company by or on behalf of such Selling Stockholder specifically for
use in preparation of the Registration Statement or the failure of such
Selling Stockholder to comply with its covenants and agreements
contained in Sections 5.1, 5.2, 5.3 or 7.2 hereof or any statement or
omission in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to the Investor prior to the pertinent
sale or sales by the Investor.
(b) The Investor agrees to indemnify and hold harmless the Company
(and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, each officer of the Company who signs
the Registration Statement and each director of the Company) from and
against any losses, claims, damages or liabilities to which the Company
(or any such officer, director or controlling person) may become subject
(under the Securities Act or otherwise), insofar as such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof)
arise out of, or are based upon, (i) any failure to comply with the
covenants and agreements contained in Section 5.1, 5.2, 5.3 or 7.2
hereof, or (ii) any untrue statement of a material fact contained in the
Registration Statement if such untrue statement was made in reliance
upon and in conformity with written information furnished by or on
behalf of the Investor specifically for use in preparation of the
Registration Statement, and the Investor will reimburse the Company (or
such officer, director or controlling person), as the case may be, for
any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim.
(c) Promptly after receipt by any indemnified person of a notice of
a claim or the beginning of any action in respect of which indemnity is
to be sought against an indemnifying person pursuant to this Section
7.3, such indemnified person shall notify the indemnifying person in
writing of such
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claim or of the commencement of such action, but the omission to so
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party under this Section 7.3
(except to the extent that such omission materially and adversely
affects the indemnifying party's ability to defend such action) or from
any liability otherwise than under this Section 7.3. Subject to the
provisions hereinafter stated, in case any such action shall be brought
against an indemnified person, the indemnifying person shall be entitled
to participate therein, and, to the extent that it shall elect by
written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, shall be
entitled to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume
the defense thereof, such indemnifying person shall not be liable to
such indemnified person for any legal expenses subsequently incurred by
such indemnified person in connection with the defense thereof,
provided, however, that if there exists or shall exist a conflict of
interest that would make it inappropriate, in the reasonable opinion of
counsel to the indemnified person, for the same counsel to represent
both the indemnified person and such indemnifying person or any
affiliate or associate thereof, the indemnified person shall be entitled
to retain its own counsel at the expense of such indemnifying person;
provided, however, that no indemnifying person shall be responsible for
the fees and expenses of more than one separate counsel (together with
appropriate local counsel) for all indemnified parties. In no event
shall any indemnifying person be liable in respect of any amounts paid
in settlement of any action unless the indemnifying person shall have
approved the terms of such settlement; provided that such consent shall
not be unreasonably withheld. No indemnifying person shall, without the
prior written consent of the indemnified person, effect any settlement
of any pending or threatened proceeding in respect of which any
indemnified person is or could have been a party and indemnification
could have been sought hereunder by such indemnified person, unless such
settlement includes an unconditional release of such indemnified person
from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in this Section 7.3 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof)
referred to therein, then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and the Investors on the other in connection
with the statements or omissions or other matters which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, in the
case of an untrue statement, whether the untrue statement relates to
information supplied by the Company on the one hand or an Investor on
the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement.
The Company and the Investors agree that it would not be just and
equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Investors were treated as
one entity for such purpose) or by any other method of allocation which
does not take into account the equitable considerations referred to
above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Investor shall be required to
contribute any amount in excess of the amount by which the gross amount
received by the Investor from the sale of the Shares to which such loss
relates exceeds the amount of any damages which such Investor has
otherwise been required to pay by reason of such untrue statement. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not
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guilty of such fraudulent misrepresentation. The Investors' obligations
in this subsection to contribute are several in proportion to their
sales of Shares to which such loss relates and not joint.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during
the negotiations regarding the provisions hereof including, without
limitation, the provisions of this Section 7.3, and are fully informed
regarding said provisions. They further acknowledge that the provisions
of this Section 7.3 fairly allocate the risks in light of the ability of
the parties to investigate the Company and its business in order to
assure that adequate disclosure is made in the Registration Statement as
required by the Act and the Exchange Act. The parties are advised that
federal or state public policy as interpreted by the courts in certain
jurisdictions may be contrary to certain of the provisions of this
Section 7.3, and the parties hereto hereby expressly waive and
relinquish any right or ability to assert such public policy as a
defense to a claim under this Section 7.3 and further agree not to
attempt to assert any such defense.
7.4 Termination of Conditions and Obligations. The conditions precedent
imposed by Section 5 or this Section 7 upon the transferability of the Shares
shall cease and terminate as to any particular number of the Shares when such
Shares shall have been effectively registered under the Securities Act and sold
or otherwise disposed of in accordance with the intended method of disposition
set forth in the Registration Statement covering such Shares or at such time as
an opinion of counsel satisfactory to the Company shall have been rendered to
the effect that such conditions are not necessary in order to comply with the
Securities Act.
7.5 Information Available. So long as the Registration Statement is
effective covering the resale of Shares owned by the Investor, the Company will
furnish to the Investor:
(a) as soon as practicable after it is available, one copy of (i) its
Annual Report to Stockholders (which Annual Report shall contain financial
statements audited in accordance with generally accepted accounting
principles by a national firm of certified public accountants) and (ii) if
not included in substance in the Annual Report to Stockholders, its Annual
Report on Form 10-K (the foregoing, in each case, excluding exhibits);
(b) upon the reasonable request of the Investor, all exhibits excluded
by the parenthetical to subparagraph (a)(ii) of this Section 7.5 as filed
with the SEC and all other information that is made available to
shareholders; and
(c) upon the reasonable request of the Investor, an adequate number of
copies of the Prospectuses to supply to any other party requiring such
Prospectuses; and the Company, upon the reasonable request of the Investor,
will meet with the Investor or a representative thereof at the Company's
headquarters to discuss all information relevant for disclosure in the
Registration Statement covering the Shares and will otherwise cooperate
with any Investor conducting an investigation for the purpose of reducing
or eliminating such Investor's exposure to liability under the Securities
Act, including the reasonable production of information at the Company's
headquarters; provided, that the Company shall not be required to disclose
any confidential information to or meet at its headquarters with any
Investor until and unless the Investor shall have entered into a
confidentiality agreement in form and substance reasonably satisfactory to
the Company with the Company with respect thereto.
8. Notices. All notices, requests, consents and other communications hereunder
shall be in writing, shall be mailed (A) if within domestic United States by
first-class registered or certified airmail, or nationally recognized overnight
express courier, postage prepaid, or by facsimile, or (B) if delivered from
outside the United States, by International Federal Express or facsimile, and
shall be deemed given (i) if delivered by first-class registered or certified
mail domestic, three business days after so mailed, (ii) if delivered by
nationally recognized overnight carrier, one business day after so mailed, (iii)
if delivered by International
12
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Federal Express, two business days after so mailed, (iv) if delivered by
facsimile, upon electric confirmation of receipt and shall be delivered as
addressed as follows:
(a) if to the Company, to:
MessageMedia, Inc.
6060 Spine Road
Boulder, Colorado 80301
Attn: Mary Beth Loesch
Phone: (303) 381-7513
Telecopy: (303) 440-0303
(b) with a copy mailed to:
Cooley Godward LLP
2595 Canyon Blvd., Suite 250
Boulder, CO 80302-6737
Attn: Michael L. Platt
Phone: (303) 546-4012
Telecopy: (303) 546-4099
(c) if to the Investor, at its address on the signature page hereto,
or at such other address or addresses as may have been furnished to the
Company in writing.
9. Changes. This Agreement may not be modified or amended except pursuant to an
instrument in writing signed by the Company and the Investor.
10. Headings. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
11. Severability. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
12. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of Colorado, without giving
effect to the principles of conflicts of law.
13. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument, and shall become effective when
one or more counterparts have been signed by each party hereto and delivered to
the other parties.
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EXHIBIT 5.1
[COOLEY GODWARD LLP LETTERHEAD]
October 29, 1999
MessageMedia, Inc.
6060 Spine Road
Boulder, CO 80301
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by MessageMedia, Inc., a Delaware corporation (the "Company"),
of a Registration Statement on Form S-3 (the "Registration Statement"),
including a related prospectus filed with the Registration Statement (the
"Prospectus"), covering the registration of up to 4,095,124 shares of the Common
Stock, $.001 par value, of the Company (the "Securities") on behalf of certain
selling stockholders.
In connection with this opinion, we have examined the Registration Statement and
related Prospectus, the Company's Amended and Restated Certificate of
Incorporation and Bylaws, as amended, and such other records, documents,
certificates, memoranda and other instruments as we deem necessary as a basis
for this opinion. We have assumed the genuineness and authenticity of all
documents submitted to us as originals, the conformity to originals of all
documents submitted to us as copies thereof and the due execution and delivery
of all documents where due execution and delivery are a prerequisite to the
effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Securities are validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in the
Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
Cooley Godward LLP
/s/ James H. Carroll
James H. Carroll
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of MessageMedia, Inc.
for the registration of 4,095,124 shares of its common stock and the
incorporation by reference therein of our report dated February 2, 1999 except
for Note 12, for which the date is March 26, 1999, with respect to the
consolidated financial statements and schedules of MessageMedia, Inc. included
in its Annual Report (Form 10-K) for the year ended December 31, 1998, filed
with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
---------------------------------
Ernst & Young LLP
Denver, Colorado
October 29, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated August 13, 1998 relating to the
financial statements of Email Publishing, Inc., which appears in the Current
Report on the MessageMedia, Inc. Form 8-K/A dated February 19, 1999. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
PricewaterhouseCoopers LLP
Broomfield, Colorado
October 29, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated June 15, 1999, except for Note 12, as
to which the date is August 9, 1999 relating to the financial statements of
Revent Systems, Inc., which appears in the Current Report on the MessageMedia,
Inc. Form 8-K/A dated October 1, 1999. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.
PRICEWATERHOUSECOOPERS LLP
Birmingham, Alabama
October 29, 1999
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated August 16, 1999 relating to the
financial statements of Decisive Technology Corporation, which appears in the
Current Report on the MessageMedia, Inc. Form 8-K/A dated October 1, 1999. We
also consent to the reference to us under the heading "Experts" in such
Registration Statement.
PricewaterhouseCoopers LLP
San Jose, California
October 29, 1999
