<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 7, 2000
REGISTRATION NO. 333-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
DOUBLECLICK INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------------
<TABLE>
<S> <C> <C>
DELAWARE 7319 13-3870996
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
450 WEST 33RD STREET
NEW YORK, NEW YORK 10001
(212) 683-0001
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------
KEVIN P. RYAN
CHIEF EXECUTIVE OFFICER
DOUBLECLICK INC.
450 WEST 33RD STREET
NEW YORK, NEW YORK 10001
(212) 683-0001
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
-------------------
COPIES TO:
<TABLE>
<S> <C>
SCOTT L. KAUFMAN, ESQ. ANDREW J. COSENTINO, ESQ.
BROBECK, PHLEGER & HARRISON LLP PIPER MARBURY RUDNICK & WOLFE LLP
1633 BROADWAY 1251 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10020
TELEPHONE: (212) 581-1600 TELEPHONE: (212) 835-6188
FACSIMILE: (212) 586-7878 FACSIMILE: (212) 835-6001
</TABLE>
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC: At the
effective time of the merger of a wholly owned subsidiary of the Registrant with
and into NetCreations, Inc., which shall occur as soon as practicable after the
effective date of this Registration Statement and the satisfaction or waiver of
all conditions to the closing of such merger.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE(2) REGISTRATION FEE
--------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.001 per share........ 6,520,230 N/A $122,254,313 $32,276
--------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents shares of common stock of the Registrant to be issued in
connection with the merger in exchange for shares of the capital stock of
NetCreations, Inc. and shares of common stock of the Registrant to be issued
upon exercise of in-the-money NetCreations options which are being assumed
by the Registrant.
(2) Pursuant to Rule 457(f), the registration fee has been computed based upon
the market value of the securities to be canceled in the merger, consisting
of approximately 15,903,000 shares of NetCreations common stock at an
average of the high and low prices for such common stock as reported on the
Nasdaq National Market on November 1, 2000, which was $7.6875 per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
________________________________________________________________________________
<PAGE>
[NETCREATIONS LOGO]
, 2000
Dear Shareholder:
I am writing to you today about our proposed merger with DoubleClick Inc.
The merger will combine our strong customer base with DoubleClick's list
services product and infrastructure resources, giving us together the ability to
provide the broadest range of e-mail marketing products in the business.
In the merger, each share of NetCreations common stock will be converted
into the right to receive 0.41 of a share of DoubleClick common stock, par value
$0.001 per share. DoubleClick common stock is traded on the Nasdaq National
Market under the trading symbol 'DCLK,' and closed at $ per share on
, 2000. The merger is described more fully in this proxy
statement/prospectus.
The Board of Directors of NetCreations has called a special meeting of
NetCreations shareholders to be held on , , 2000 at a.m.,
local time, at , , , for the purpose of
considering the transaction. At the special shareholders meeting, you will be
asked to consider and vote upon a proposal to adopt the merger agreement.
Adoption of the proposal requires the affirmative vote, in person or by
proxy, of 66 2/3% of the shares of NetCreations common stock. To adopt the
merger agreement, you MUST vote 'FOR' the proposal by following the instructions
stated on the enclosed proxy card. If you do not vote at all, your non-vote
will, in effect, count as a vote against the merger agreement and the merger.
All shareholders are invited to attend the special shareholders meeting in
person. Whether or not you plan to attend, in order that your shares may be
represented at the special shareholders meeting, please complete, sign and date
the enclosed proxy and return it in the enclosed envelope as soon as possible,
but no later than , 2000. If you attend the special shareholders meeting
in person, you may, if you wish, vote in person on all matters brought before
the special shareholders meeting even if you have previously returned your
proxy.
This proxy statement/prospectus provides detailed information about
DoubleClick, NetCreations and the merger. Please give all of this information
your careful attention. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE
DISCUSSION IN THE SECTION ENTITLED 'RISK FACTORS' BEGINNING ON PAGE 12 OF THIS
PROXY STATEMENT/PROSPECTUS.
We are very excited by the opportunities we envision for the combined
company. The Board of Directors believes that the terms and conditions of the
merger are fair to you and that the merger is in the best interests of
NetCreations and its shareholders and has therefore unanimously adopted the
merger agreement and unanimously recommends that all shareholders vote 'FOR'
adoption of the merger agreement.
Sincerely,
ROSALIND RESNICK
Chairman and Chief Executive Officer
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION OR THE SECURITIES OF
DOUBLECLICK INC. TO BE ISSUED IN THE MERGER, OR DETERMINED IF THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This proxy statement/prospectus is dated [ ] [ ], 2000, and is first
being mailed to NetCreations shareholders on or about [ ] [ ], 2000.
<PAGE>
REFERENCE TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about DoubleClick from documents DoubleClick has filed
with the Securities and Exchange Commission that are not included in or
delivered with this proxy statement/prospectus. If you call or write,
DoubleClick will send you copies of these documents, excluding exhibits, without
charge. You may contact DoubleClick at:
DoubleClick Inc.
Investor Relations
450 West 33rd Street
New York, New York 10001
(212) 683-0001
If you call or write NetCreations, although it is not incorporating any
documents by reference, it will send you copies of the documents which it has
filed with the Securities and Exchange Commission, excluding exhibits, without
charge. You may contact NetCreations at:
NetCreations, Inc.
Investor Relations
379 West Broadway, Suite 202
New York, New York 10012
(212) 625-1370
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY [ ] [ ], 2000
IN ORDER TO RECEIVE THEM BEFORE THE SPECIAL SHAREHOLDERS MEETING.
For more information on the matters incorporated by reference in this proxy
statement/ prospectus, please see 'Where You Can Find More Information' on page
111.
<PAGE>
NETCREATIONS, INC.
379 WEST BROADWAY, SUITE 202
NEW YORK, NEW YORK 10012
(212) 625-1370
--------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AT A.M. ON , 2000
--------------------------
To the Shareholders of NetCreations, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of
NetCreations will be held at , , ,
, at a.m., local time on , 2000 for the following
purposes:
1. The Merger. To consider and vote upon a proposal to adopt the Agreement
and Plan of Merger and Reorganization among DoubleClick Inc., Genesis Merger
Sub, Inc., a wholly-owned subsidiary of DoubleClick, and NetCreations, under
which Genesis Merger Sub will merge with and into NetCreations and NetCreations
will become a wholly-owned subsidiary of DoubleClick. Each outstanding share of
NetCreations common stock, par value $0.01 per share, will be converted into the
right to receive 0.41 of a share of DoubleClick common stock, par value $0.001
per share.
2. Authority to Adjourn. To grant NetCreations' board of directors
discretionary authority to adjourn the special meeting to solicit additional
votes for adoption of the merger agreement; and
3. Other Business. To transact such other business as may properly come
before the special shareholders meeting or any adjournment or postponement.
Only shareholders of record at the close of business on , 2000 are
entitled to receive notice of and to vote at the special shareholders meeting or
any adjournment or postponement thereof. Holders of shares of NetCreations
common stock held of record at the close of business on the record date are
entitled to one vote per share on each matter considered and voted on at the
special meeting. The affirmative vote of the holders of 66 2/3% of the
outstanding shares of common stock entitled to vote at the special shareholders
meeting is required to adopt the merger agreement. A list of shareholders as of
the record date will be open for examination during the special meeting.
THE BOARD OF DIRECTORS OF NETCREATIONS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
'FOR' ADOPTION OF THE MERGER AGREEMENT.
Your vote is important regardless of the number of shares you own. To ensure
that your shares are represented at the special meeting, we urge you to
complete, date and sign the enclosed proxy and mail it promptly in the
postage-paid envelope provided whether or not you plan to attend the special
meeting in person. You may revoke your proxy in the manner described in this
proxy statement/ prospectus at any time before it has been voted at the special
meeting. You may vote in person at the special meeting even if you have returned
a proxy.
By Order of the Board of Directors
BRIAN BURLANT
Secretary
New York, New York
, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... iii
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS................... 1
RISK FACTORS................................................ 12
Risks Related to the Merger............................... 12
Risks Related to DoubleClick.............................. 15
Risks Related to NetCreations............................. 29
Risks Related to @plan.................................... 39
FORWARD-LOOKING STATEMENTS IN THIS PROXY
STATEMENT/PROSPECTUS...................................... 39
THE SPECIAL SHAREHOLDERS MEETING............................ 41
General................................................. 41
Date, Time and Place.................................... 41
Matters to be Considered at the Special Shareholders
Meeting................................................ 41
Record Date............................................. 41
Voting of Proxies....................................... 41
Vote Required........................................... 42
Quorum; Abstentions and Broker Non-Votes................ 42
Solicitation of Proxies and Expenses.................... 42
No Dissenters' Rights................................... 42
THE MERGER.................................................. 43
Background of the Merger................................ 43
DoubleClick's Reasons for the Merger.................... 46
NetCreations' Reasons for the Merger; Unanimous
Recommendation of NetCreations
Board of Directors.................................... 47
Opinion of NetCreations' Financial Advisor.............. 49
Interests of Certain Persons in the Merger.............. 55
Applicable Waiting Periods and Regulatory Approvals..... 56
Federal Income Tax Considerations....................... 56
Accounting Treatment.................................... 58
Delisting and Deregistration of NetCreations' Common
Stock Following the Merger............................. 58
Restrictions on Sale of Shares by Affiliates............ 58
Operations Following the Merger......................... 59
THE MERGER AGREEMENT AND RELATED AGREEMENTS................. 60
The Merger.............................................. 60
Effective Time.......................................... 60
Directors and Officers of NetCreations After the
Merger................................................. 60
Conversion of NetCreations Shares in the Merger......... 60
No Fractional Shares.................................... 60
NetCreations' Stock Option and Employee Stock Purchase
Plans.................................................. 60
The Exchange Agent...................................... 61
Exchange of NetCreations Stock Certificates for
DoubleClick Stock Certificates......................... 61
Distributions with Respect to Unexchanged Shares........ 61
Representations and Warranties.......................... 61
NetCreations' Conduct of Business Before Completion of
the Merger............................................. 62
No Solicitation of Transactions......................... 64
Director and Officer Indemnification and Insurance...... 65
Benefit Plans and Arrangements'......................... 65
Conditions to the Merger................................ 66
Termination of the Merger Agreement..................... 67
Payment of Fees and Expenses............................ 68
Extension, Waiver and Amendment of the Merger
Agreement.............................................. 70
Related Agreements...................................... 70
MATERIAL CONTACTS BETWEEN DOUBLECLICK AND NETCREATIONS...... 73
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS.......... 74
COMPARATIVE PER SHARE MARKET PRICE DATA..................... 79
BUSINESS OF NETCREATIONS.................................... 81
SECURITY OWNERSHIP OF NETCREATIONS MANAGEMENT AND CERTAIN
BENEFICIAL OWNERS......................................... 92
SELECTED FINANCIAL DATA OF NETCREATIONS..................... 93
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF NETCREATIONS................. 95
COMPARISON OF STOCKHOLDERS' RIGHTS.......................... 106
Required Vote for Authorization Of Special Actions...... 106
Number of Directors; Removal of Directors............... 107
Limitation Of Liability; Indemnification................ 107
Annual Meetings Of Stockholders; Special Meetings of
Shareholders........................................... 109
Stockholder Inspection Rights And Stockholder Lists..... 109
Stockholder Action Without A Meeting.................... 109
Stockholder Proposals................................... 110
EXPERTS..................................................... 110
LEGAL MATTERS............................................... 111
WHERE YOU CAN FIND MORE INFORMATION......................... 111
SHAREHOLDER/STOCKHOLDER PROPOSALS........................... 112
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 112
INDEX TO FINANCIAL STATEMENTS OF NETCREATIONS............... F-1
APPENDICES
A -- Agreement and Plan of Merger and Reorganization........ A-1
B -- Form of NetCreations Shareholders' Agreement........... B-1
C -- Opinion of Robertson Stephens, Inc., financial advisor
to NetCreations........................................... C-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHAT WILL NETCREATIONS SHAREHOLDERS RECEIVE IN THE MERGER?
A: If the merger is completed, NetCreations shareholders will receive 0.41 of a
share of DoubleClick common stock for each share of NetCreations common stock.
Q: DOUBLECLICK HAS ALSO ANNOUNCED THAT IT IS ACQUIRING @PLAN.INC. HOW WILL THAT
AFFECT DOUBLECLICK'S PROPOSED TRANSACTION WITH NETCREATIONS?
A: On September 24, 2000, DoubleClick entered into an agreement to acquire
@plan.inc, a leading provider of target market research planning systems that
are used to optimize Internet advertising and merchandising strategies.
Consummation of the @plan merger is NOT a condition to the consummation of
DoubleClick's merger with NetCreations. The proposed merger with @plan is NOT
expected to affect the consummation of the proposed transaction with
NetCreations.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We are working to complete the merger in the fourth quarter of 2000. Because
the merger is subject to satisfaction of a number of conditions, we cannot
predict the exact timing.
Q: HOW DO I VOTE?
A: After you have carefully read this proxy statement/prospectus, mail your
signed proxy card in the enclosed return envelope as soon as possible so that
your shares may be represented at the special shareholders meeting. You may also
attend the meeting in person instead of submitting a proxy. If your shares are
held in 'street name' by your broker, your broker will vote your shares only if
you provide instructions on how to vote. You should follow the directions
provided by your broker regarding how to instruct your broker to vote your
shares.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After we complete the merger, DoubleClick will send instructions to
NetCreations shareholders explaining how to exchange their NetCreations stock
certificates for DoubleClick stock certificates.
Q: WILL THE MERGER BE TAXABLE TO ME?
A: The merger generally will not be taxable to NetCreations shareholders.
Q: CAN I CHANGE MY VOTE AFTER MAILING MY PROXY?
A: Yes. You may change your vote by delivering a signed notice of revocation or
a later-dated, signed proxy card to the corporate secretary of NetCreations
before the special shareholders meeting, or by attending the special
shareholders meeting and voting in person.
Q: WHOM CAN I CALL WITH QUESTIONS?
A: If you have questions about the merger, please call NetCreations Investor
Relations at (212) 625-1370.
iii
<PAGE>
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
The following summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. You should carefully read this entire proxy
statement/prospectus, including the appendices, and the other documents we refer
to for a more complete understanding of the merger. In addition, we incorporate
by reference important business and financial information about DoubleClick into
this proxy statement/prospectus. You may obtain the information incorporated by
reference into this proxy statement/prospectus without charge by following the
instructions in the section entitled 'Where You Can Find More Information' on
page 111.
THE COMPANIES
DOUBLECLICK INC.
450 West 33rd Street
New York, New York 10001
(212) 683-0001
DoubleClick is a leading provider of technology-driven marketing and
advertising solutions to thousands of advertisers, advertising agencies, Web
publishers and e-commerce merchants worldwide. DoubleClick provides a broad
range of media, technology and data products and services. DoubleClick's
products and services for Web publishers are designed to optimize revenues from
the sale of Internet advertising. For its advertising, advertising agency and
e-commerce merchant customers, DoubleClick products and services are designed to
enhance the effectiveness of their ad campaigns and offers on the Internet
through other interactive media and by direct mail. DoubleClick's patented DART
technology is the platform for many of its solutions and enables its customers
to use pre-selected criteria to deliver the right ad to the right person at the
right time. The DART technology is also a sophisticated tracking and reporting
tool that DoubleClick's customers rely on to measure ad performance and provide
dynamic ad space inventory management. DoubleClick currently serves ads for over
2,800 clients, and in September 2000 delivered over 61 billion advertisements to
targeted Internet users. DoubleClick's revenues are derived from three principal
lines of business: DoubleClick Media, DoubleClick TechSolutions and DoubleClick
Data Services.
NETCREATIONS, INC.
379 West Broadway, Suite 202
New York, New York 10012
(212) 625-1370
NetCreations, Inc., the leader in 100% Opt-In'r' e-mail marketing services,
specializes in e-mail address list management, brokerage and delivery. Through
its PostMasterDirect.com service, NetCreations has conducted marketing campaigns
on behalf of over 2,000 direct marketing clients to targeted consumers in its
database of over 15 million 100% Opt-In e-mail addresses. These addresses belong
to Internet users who have requested promotional information related to specific
topics of interest (opt-in) and confirmed their request (double opt-in).
NetCreations manages opt-in e-mail lists for more than 380 third-party Web
sites, such as CNET, Uproar, About.com, Network Solutions, internet.com, CBS
Sportsline, CDROM Guide and LuckySurf.com. NetCreations protects the privacy of
consumers on the Internet by not disclosing e-mail addresses or any other
personally identifiable information to direct marketers.
THE MERGER (SEE PAGE 43)
DoubleClick and NetCreations have entered into a merger agreement that
provides for the merger of NetCreations and a newly-formed subsidiary of
DoubleClick. As a result, NetCreations will become a wholly owned subsidiary of
DoubleClick. Shareholders of NetCreations will become stockholders of
DoubleClick following the merger, and each share of NetCreations common stock
1
<PAGE>
will be exchanged for the right to receive 0.41 of a share of DoubleClick common
stock. We urge you to read the merger agreement, which is included as Appendix
A, carefully and in its entirety.
UNANIMOUS RECOMMENDATION OF NETCREATIONS' BOARD OF DIRECTORS (SEE PAGE 47)
The NetCreations board of directors has adopted the merger agreement and
determined that the terms and conditions of the merger are fair to, and in the
best interests of, NetCreations and its shareholders. The NetCreations board of
directors unanimously recommends that NetCreations shareholders vote 'FOR'
adoption of the merger agreement.
OPINION OF NETCREATIONS' FINANCIAL ADVISOR (SEE PAGE 49)
In deciding to adopt the merger agreement, NetCreations' board of directors
considered the opinion of its financial advisor, Robertson Stephens, Inc.
On October 2, 2000, Robertson Stephens, Inc. delivered its oral opinion to
the board of directors of NetCreations, subsequently confirmed in writing, that,
as of such date, the consideration to be received by the NetCreations
shareholders in the merger was fair to the holders of NetCreations common stock
from a financial point of view. The full text of Robertson Stephens' written
opinion, dated October 2, 2000, is attached to this proxy statement/prospectus
as Appendix C. We encourage you to read this opinion carefully in its entirety
for a description of the procedures followed, assumptions made, matters
considered and limitations on the review undertaken.
VOTE REQUIRED (SEE PAGE 42)
The affirmative vote of 66 2/3% of the outstanding shares of NetCreations
common stock is required to adopt the merger agreement. NetCreations
shareholders are entitled to cast one vote per share of NetCreations common
stock owned at the close of business on [ ,] 2000. On , 2000,
NetCreations directors and executive officers and their affiliates held
shares of NetCreations common stock (excluding shares which may be acquired
upon exercise of options), or approximately % of the outstanding shares
entitled to vote on such date. Pursuant to the NetCreations shareholders
agreement in the form attached as Appendix B, NetCreations shareholders have
agreed to vote 10,097,100 shares of NetCreations common stock, or approximately
65% of NetCreations common stock outstanding as of [ ], 2000, for adoption
of the merger agreement.
On , 2000, DoubleClick directors and executive officers and their
affiliates held shares of NetCreations common stock.
THE SPECIAL SHAREHOLDERS MEETING (SEE PAGE 41)
NetCreations' special shareholders meeting will be held at on
. NetCreations shareholders may vote at this special shareholders meeting
if they owned shares of NetCreations common stock at the close of business on
. In order for us to complete the merger, the affirmative vote of 66 2/3%
of the outstanding shares of NetCreations common stock must vote to adopt the
merger agreement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE 55)
When considering the unanimous recommendation of NetCreations' board of
directors, you should be aware that some directors and executive officers of
NetCreations have interests in the merger that are different from, or in
addition to, yours. In particular, unvested options held by non-employee
directors will automatically vest in connection with the merger, and, as part of
the merger, DoubleClick has entered into employment agreements with certain
officers of NetCreations that will only become effective if the merger is
completed.
2
<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS (SEE PAGE 56)
The merger has been structured so as to qualify as a reorganization for
United States federal income tax purposes. If the merger qualifies as a
reorganization, NetCreations shareholders will not recognize gain or loss for
United States federal income tax purposes in the merger. In the event that
NetCreations shareholders receive cash instead of fractional shares, a
NetCreations shareholder will recognize gain or loss determined as though the
shareholder received the fractional share of DoubleClick common stock and sold
it for the cash received. It is a condition to completion of the merger that
NetCreations receive a legal opinion from its outside counsel that the merger
constitutes a reorganization within the meaning of the Internal Revenue Code.
ABILITY TO SELL DOUBLECLICK STOCK AFTER THE MERGER (SEE PAGE 58)
All shares of DoubleClick common stock that NetCreations shareholders
receive in connection with the merger will be freely transferable unless the
holder is considered an 'affiliate' of either DoubleClick or NetCreations for
purposes of the Securities Act of 1933. Shares of DoubleClick common stock held
by these affiliates may be sold only under a registration statement or exemption
under the Securities Act.
CONDITIONS TO THE MERGER (SEE PAGE 66)
The respective obligations of the parties to complete the merger are subject
to the prior satisfaction or waiver of conditions specified in the merger
agreement. If either of us waives any conditions, we will consider the facts and
circumstances at that time and determine whether completion of the merger
requires a resolicitation of proxies from NetCreations shareholders.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 67)
The merger agreement may be terminated under circumstances that are
described on page 67 under 'The Merger Agreement and Related
Agreements -- Termination of the Merger Agreement.'
TERMINATION FEE AND EXPENSES (SEE PAGE 68)
NetCreations has agreed to pay DoubleClick a termination fee of $8.6
million, plus DoubleClick's expenses, in cash if the merger agreement terminates
under circumstances that are described on page 69 under 'The Merger Agreement
and Related Agreements -- Payment of Fees and Expenses.' DoubleClick has agreed
to pay NetCreations expenses in cash if the merger agreement is terminated under
circumstances that are described on page 69 under 'The Merger Agreement and
Related Agreements -- Payment of Fees and Expenses.'
RESTRICTIONS ON ALTERNATE TRANSACTIONS (SEE PAGE 64)
The merger agreement prohibits NetCreations from soliciting or participating
in discussions with third parties about transactions alternative to the merger,
except as discussed on page 64 under 'The Merger Agreement and Related
Agreements -- No Solicitation of Transactions.'
APPLICABLE WAITING PERIODS AND REGULATORY APPROVALS (SEE PAGE 56)
The merger is subject to United States antitrust laws. We have made the
required filings with the Department of Justice and Federal Trade Commission. We
are not, however, permitted to complete the merger until the applicable waiting
period has expired or terminated. We expect the applicable waiting period to
expire at 11:59 p.m. (EST) on November 18, 2000. The Department of Justice and
the Federal Trade Commission, as well as a state antitrust authority or a
private person, may challenge the merger at any time before or after it is
completed. We are not aware of
3
<PAGE>
any other significant regulatory approvals required for the merger other than
compliance with applicable corporate law of New York.
ACCOUNTING TREATMENT (SEE PAGE 58)
DoubleClick will account for the merger under the purchase method of
accounting, which means that DoubleClick will allocate the purchase price to the
fair value of net tangible assets acquired, and any excess of cost over that
amount will be recorded as goodwill and will be amortized in accordance with
generally accepted accounting principles.
NO DISSENTERS' RIGHTS (SEE PAGE 42)
Under New York law, shareholders of NetCreations are not entitled to
dissenters' or appraisal rights in the merger.
TRADEMARKS
This document contains trademarks of DoubleClick and NetCreations and may
contain trademarks of others.
RECENT DEVELOPMENT
AGREEMENT WITH @PLAN.INC
On September 24, 2000, DoubleClick entered into an agreement to acquire
@plan.inc for a combination of cash and shares of DoubleClick common stock. The
following sets forth pertinent information relating to the proposed transaction.
Business of @plan. @plan is a leading provider of target market research
planning systems that are used to help optimize Internet advertising and
merchandising strategies. @plan's systems are specifically designed for Internet
advertisers, advertising agencies, Web publishers, online retailers and consumer
brand marketers. These systems enable its clients to harness the power of the
Internet effectively as an advertising, marketing and retailing medium. @plan's
internally developed systems, which its clients access through its Web site,
combine its databases of consumer lifestyle, product preference and demographic
data with powerful technology that enables its clients to perform queries and
searches to plan campaigns and strategies. @plan's syndicated Internet consumer
research data is collected by The Gallup Organization on an exclusive basis.
Terms of the @plan Merger. Under the terms of the merger agreement with
@plan, if the merger is completed, so long as the average closing price for
DoubleClick common stock on the ten trading days ending four business days
before the @plan special shareholders meeting, or the closing date if the
special shareholders meeting does not occur on the closing date, is equal to or
above $23.87 and the average of the the high and low subs prices of DoubleClick
common stock on the closing date is greater than or equal to this ten-day
average, @plan shareholders will receive $1.85 in cash and $7.40 in DoubleClick
common stock (valued at the ten-day average) for each share of @plan common
stock. If this ten-day average is less than $23.87, DoubleClick will have the
option to either offer @plan shareholders the same $1.85 in cash and $7.40 in
DoubleClick common stock for each share of @plan common stock or lock in the
exchange ratio for the shares of DoubleClick common stock issuable in the merger
at 0.310 of a share of DoubleClick common stock for each share of @plan common
stock. If DoubleClick makes this election, @plan may terminate the merger
agreement and the merger. If @plan does not terminate the merger agreement and
the merger, then DoubleClick will exchange 0.310 of a share of DoubleClick
common stock, and a cash amount equal to the lower of $1.85 and the amount of
cash as required for the merger to qualify as a tax-free transaction as
described below for each share of @plan common stock.
4
<PAGE>
In order for the @plan merger to qualify as a tax-free reorganization under
the federal tax code, the total consideration received by an @plan shareholder
may not include more than 20% cash. In the event that the average of the high
and low subs price of DoubleClick common stock on the closing date is less than
the ten-day average described above, the cash that @plan shareholders would
receive would be decreased and the amount of DoubleClick common stock would be
increased in order to achieve the proper 20% cash / 80% stock mix. In the event
that this adjustment would result in an @plan shareholder receiving more than
0.310 of a share of DoubleClick common stock for each share of @plan common
stock, DoubleClick would have a right to lock in the exchange ratio at 0.310. In
these circumstances, @plan may terminate the merger agreement and the merger. If
@plan did not do so, the cash portion of the merger consideration would be
decreased below $1.85 per @plan share and the 0.310 of a share of DoubleClick
common stock may have a value of less than $7.40. Accordingly, the overall
merger consideration may have a value of less than $9.25 per share.
Following the merger, @plan will become a wholly-owned subsidiary of
DoubleClick. DoubleClick will account for the @plan merger under the purchase
method of accounting. The merger is subject to a number of conditions, including
regulatory approval and adoption by @plan shareholders.
Effect of @plan Merger Upon NetCreations Shareholders. The primary effects
of DoubleClick's merger with @plan on NetCreations shareholders will be dilution
to their share ownership of DoubleClick and the costs of integrating @plan into
DoubleClick on a prospective basis. The proposed acquisition of @plan will
result in dilution to DoubleClick stockholders, including NetCreations
shareholders who will become DoubleClick stockholders as a result of the merger.
Immediately after the acquisition of NetCreations, assuming the @plan merger has
not yet been completed, and further assuming the exercise of all outstanding
DoubleClick and NetCreations options, NetCreations shareholders would own
approximately 4.6% of DoubleClick. After the acquisition of NetCreations, and
assuming the @plan merger has been completed, and further assuming the exercise
of all vested outstanding DoubleClick, NetCreations and @plan options,
NetCreations shareholders will own approximately 4.4% of DoubleClick.
DoubleClick expects that the combined company's operating expenses will increase
following the @plan acquisition. This increase will result from the integration
of @plan into DoubleClick. In addition, DoubleClick intends to expand its sales
and marketing operations, fund greater levels of product development and acquire
complementary businesses, all of which will increase operating expenses. If
these expenses are not more than offset by increased revenues over time, there
may be an adverse impact on DoubleClick's financial results.
5
<PAGE>
DOUBLECLICK SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial information should
be read in conjunction with DoubleClick's consolidated financial statements and
related notes and DoubleClick's 'Management's Discussion and Analysis of
Financial Condition and Results of Operations,' which we incorporate by
reference in this proxy statement/prospectus. The consolidated statement of
operations information for each of the five years ended December 31, 1999, and
the consolidated balance sheet data as at December 31, 1995, 1996, 1997, 1998
and 1999, are derived from the consolidated financial statements of DoubleClick
which have been audited by PricewaterhouseCoopers LLP, independent accountants,
and are incorporated by reference in this proxy statement/prospectus. The
selected financial data for the six month periods ended June 30, 1999 and 2000
and as of June 30, 2000 have been derived from DoubleClick's unaudited financial
statements, and in the opinion of DoubleClick's management, include all
adjustments (consisting only of normal recurring adjustments) which are
necessary to present fairly the results of operations and financial position of
DoubleClick for those periods in accordance with generally accepted accounting
principles. Historical results are not necessarily indicative of the results to
be expected in the future.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues................ $ 9,331 $25,985 $67,926 $138,724 $258,294 $ 89,268 $238,143
Income (loss) from
operations............ 2,983 (1,419) (3,828) (14,970) (58,715) (15,719) (61,677)
Income (loss) before
income taxes.......... 2,781 (1,565) (3,432) (10,973) (47,234) (10,847) (38,874)
Net income (loss)....... 2,231 (3,954) (7,741) (18,039) (55,821) (13,811) (40,506)
Basic and diluted net
income (loss) per
share................. $ 0.11 $ (0.07) $ (0.16) $ (0.21) $ (0.51) $ (0.13) $ (0.34)
------- ------- ------- -------- -------- -------- --------
------- ------- ------- -------- -------- -------- --------
Weighted average shares
used in basic net
income (loss) per
share calculation..... 19,630 56,516 49,048 86,248 109,756 108,317 119,552
------- ------- ------- -------- -------- -------- --------
------- ------- ------- -------- -------- -------- --------
Weighted average shares
used in diluted net
income (loss) per
share calculation..... 19,716 56,516 49,048 86,248 109,756 108,317 119,552
------- ------- ------- -------- -------- -------- --------
------- ------- ------- -------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------ JUNE 30,
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Working capital......... $2,355 $ 4,959 $25,861 $184,408 $309,833 $ 485,215
Total assets............ 5,536 19,749 53,641 260,361 729,407 1,368,265
Convertible subordinated
notes and other....... -- 711 742 2,067 255,348 258,196
Total stockholders
equity................ 1,178 7,256 31,428 206,771 361,662 936,226
</TABLE>
6
<PAGE>
NETCREATIONS SELECTED HISTORICAL FINANCIAL DATA
This section presents selected historical financial data of NetCreations.
The data set forth below should be read in conjunction with NetCreations'
financial statements and the related notes and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations of NetCreations'
included elsewhere in this proxy statement/prospectus.
NetCreations derived the statement of operations data for the years ended
December 31, 1997, 1998 and 1999, and balance sheet data as of December 31, 1998
and 1999, from the audited financial statements in this proxy
statement/prospectus. Those financial statements were audited by Grant Thornton
LLP, independent certified public accountants. NetCreations derived the balance
sheet data as of December 31, 1996 and 1997, and the statement of operations
data for the year ended December 31, 1996, from audited financial statements
that are not included in this proxy statement/prospectus. NetCreations derived
the statement of operations data for the period from NetCreations' inception to
December 31, 1995 and the balance sheet data as of December 31, 1995 from
unaudited financial statements prepared by NetCreations' management. In the
opinion of NetCreations' management, this information has been prepared on the
same basis as the audited financial statements included elsewhere in this proxy
statement/prospectus. NetCreations derived the statement of operations data for
the six months ended June 30, 1999 and 2000 and balance sheet data as of
June 30, 2000 from the unaudited financial statements included in this proxy
statement/prospectus. NetCreations' management believes that the unaudited
historical financial statements contain all adjustments needed to present fairly
the information included in those statements, and that the adjustments made
consist only of normal recurring adjustments. Historical results are not
necessarily indicative of the results to be expected in the future. The results
of operations for the six months ended June 30, 2000 are not necessarily
indicative of the results to be expected for the entire year.
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
INCEPTION TO YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------------------------------ ------------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS
DATA:
Net revenues............... $101,652 $476,190 $1,100,781 $3,446,539 $20,658,223 $5,272,594 $30,642,483
Cost of revenues........... 8,213 43,090 173,124 1,509,776 10,464,359 2,577,967 17,224,098
-------- -------- ---------- ---------- ----------- ---------- -----------
Gross profit................ 93,439 433,100 927,657 1,936,763 10,193,864 2,694,627 13,418,385
-------- -------- ---------- ---------- ----------- ---------- -----------
Operating expenses:
Selling and marketing.... 29,482 195,451 289,904 492,004 2,088,100 601,960 2,942,380
Technology, support and
development............. 28,275 177,923 193,554 373,746 694,311 191,805 831,921
General and
administrative.......... 12,893 60,734 151,221 365,343 1,914,608 364,889 2,877,718
Depreciation and
amortization............ -- 554 9,515 23,414 195,362 45,151 606,906
-------- -------- ---------- ---------- ----------- ---------- -----------
Total operating
expenses............ 70,650 434,662 644,194 1,254,507 4,892,381 1,203,805 7,258,925
-------- -------- ---------- ---------- ----------- ---------- -----------
Income (loss) from
operations............... 22,789 (1,562) 283,463 682,256 5,301,483 1,490,822 6,159,460
-------- -------- ---------- ---------- ----------- ---------- -----------
Interest income............ -- -- -- -- 209,182 0 1,094,004
Interest expense........... -- -- (86) (4,165) (33,157) (7,615) (7,418)
-------- -------- ---------- ---------- ----------- ---------- -----------
Interest income
(expense)................ -- -- (86) (4,165) 176,025 (7,615) 1,086,586
-------- -------- ---------- ---------- ----------- ---------- -----------
Income (loss) before
income................... 22,789 (1,562) 283,377 678,091 5,477,508 1,483,207 7,246,046
-------- -------- ---------- ---------- ----------- ---------- -----------
Income tax provision....... -- 7,434 23,028 72,228 946,000 158,000 3,361,275
-------- -------- ---------- ---------- ----------- ---------- -----------
Net income (loss).......... $ 22,789 $ (8,996) $ 260,349 $ 605,863 $ 4,531,508 $1,325,207 $ 3,884,771
-------- -------- ---------- ---------- ----------- ---------- -----------
Net income (loss) per share
basic and diluted........ $ 0.00 $ (0.00) $ 0.02 $ 0.05 0.37 0.11 0.25
-------- -------- ---------- ---------- ----------- ---------- -----------
-------- -------- ---------- ---------- ----------- ---------- -----------
Weighted average shares
used in per share
computation:
For basic................ 11,700,000 11,700,000 11,700,000 11,700,000 12,187,315 11,700,000 15,495,000
For diluted.............. 11,700,000 11,700,000 11,700,000 11,700,000 12,351,642 11,700,000 15,825,363
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
INCEPTION TO YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ------------------------------------------------------- -------------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA DATA(1)
Historical income
(loss) before
income tax
provision......... $ 22,789 $ (1,562) $ 283,377 $ 678,091 $ 5,477,508 $ 1,483,207 $ 7,246,046
Pro forma income tax
provision
(benefit)......... 3,500 (1,000) 129,000 316,000 2,537,000 677,000 3,361,275
----------- ----------- ------------ ------------ ----------- ----------- -----------
Pro forma net income
(loss)............ $ 19,289 $ (562) $ 154,377 $ 362,091 $ 2,940,508 $ 806,207 $ 3,884,771
----------- ----------- ------------ ------------ ----------- ----------- -----------
----------- ----------- ------------ ------------ ----------- ----------- -----------
Pro forma basic and
diluted net income
(loss) per
share............. $ 0.00 $ (.00) $ 0.01 $ 0.03 $ 0.24 $ 0.07 $ 0.25
----------- ----------- ------------ ------------ ----------- ----------- -----------
----------- ----------- ------------ ------------ ----------- ----------- -----------
Shares used in
per share
computation:
For basic......... 11,700,000 11,700,000 11,700,000 11,700,000 12,187,315 11,700,000 15,495,000
For diluted....... 11,700,000 11,700,000 11,700,000 11,700,000 12,351,642 11,700,000 15,825,363
</TABLE>
---------
(1) Prior to November 15, 1999, NetCreations had elected to be taxed as an S
corporation for federal and state income tax purposes. Accordingly, no
provision has been made for federal and certain state income taxes during
these periods. On November 15, 1999, NetCreations terminated the
S corporation election and became a C corporation which is fully subject to
federal, state and local income taxes. The financial statements subsequent
to November 15, 1999 reflect all Federal, State and local taxes. Pro forma
net income has been computed as if NetCreations had been fully subject to
Federal, state and local income taxes.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------- JUNE 30,
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 32,981 $ 54,002 $ 96,855 $41,305,824 $38,332,991
Working capital (deficiency)............................ (16,593) 68,698 339,981 43,047,007 45,693,172
Total assets............................................ 59,372 233,489 943,804 52,391,415 60,707,019
Long-term debt (less current portion)................... -- -- 30,180 101,225 58,967
Total stockholders' equity (deficiency)................. (5,459) 121,129 476,992 45,262,021 49,508,356
</TABLE>
8
<PAGE>
SELECTED UNAUDITED PRO FORMA
CONDENSED FINANCIAL DATA
The following selected unaudited pro forma condensed financial information
of DoubleClick has been prepared to illustrate the estimated effects of the
assumed acquisition by DoubleClick of all the shares of NetCreations in exchange
for 6,368,940 shares of DoubleClick common stock and the issuance by DoubleClick
of options to acquire approximately 482,000 shares of DoubleClick common stock
in connection with this transaction.
Pro forma amounts have been derived by applying pro forma adjustments to the
historical consolidated financial information of DoubleClick and NetCreations.
AGREEMENT WITH @PLAN
On September 24, 2000 DoubleClick entered into an agreement to acquire
@plan.inc for a combination of cash and shares of DoubleClick common stock.
DoubleClick does not believe that this anticipated acquisition would have a
significant impact on its pro forma financial position and results of operations
for the periods reported.
THE ACQUISITION OF NETCREATIONS
The purchase price of NetCreations has been estimated based on the average
market price of DoubleClick common stock, as quoted on the Nasdaq national
market, for the day immediately prior to, the day of, and the day immediately
after, the announcement of the transaction, plus the fair value of options,
which was estimated using the Black-Scholes option pricing model. The estimated
purchase price does not include the effect of direct acquisition costs. The
final cost of the acquisition will be a different amount. The excess of the
estimated purchase price over the recorded amount of net assets has been
preliminarily allocated to goodwill and amortized over three years. The ultimate
allocation of the purchase price will depend on the results of fair value
appraisals. DoubleClick believes that the effect of the ultimate allocation will
not differ materially from that assumed in the following unaudited pro forma
financial data.
The unaudited pro forma condensed statements of operations for the year
ended December 31, 1999 and the six month period ended June 30, 2000 have been
prepared as if the NetCreations acquisition had occurred on January 1, 1999. The
unaudited pro forma condensed balance sheet as of June 30, 2000 has been
prepared as if the acquisition occurred on June 30, 2000. The pro forma
adjustments are described in the notes appearing elsewhere in this proxy
statement/prospectus.
Certain assets, liabilities and shareholders' equity balances in the
consolidated balance sheets of DoubleClick and NetCreations have been
reclassified to conform to the line item presentation in the pro forma balance
sheet. Certain costs and other deductions in the consolidated statements of
operations of DoubleClick and NetCreations have been reclassified to conform
to the line item presentation in the pro forma statement of operations.
See footnote 3 to 'Unaudited Pro Forma Consolidated Financial Statements.'
The unaudited pro forma financial information should not be considered
indicative of actual results that would have been achieved had the NetCreations
acquisition been consummated on the date indicated and does not purport to
indicate balance sheet data or results of operations as of any future date or
any future period. The unaudited pro forma financial information should be read
in conjunction with the historical financial statements of DoubleClick and
NetCreations, and the related notes incorporated by reference herein or included
elsewhere in this proxy statement/prospectus.
9
<PAGE>
UNAUDITED PRO FORMA SUMMARY STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
DOUBLECLICK NETCREATIONS ADJUSTMENTS COMBINED
----------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenues....................................... $258,294 $20,659 $ -- $ 278,953
Cost of revenues............................... 107,156 10,465 -- 117,621
Income (loss) from operations.................. (58,715) 5,302 (47,022) (100,435)
Net income (loss).............................. $(55,821) $ 4,532 $(46,076) $ (97,365)
Weighted-average number of shares used in
calculation of basic and diluted EPS:........ 109,756 116,125
Basic and diluted EPS:......................... $ (0.51) $ (0.84)
</TABLE>
UNAUDITED PRO FORMA SUMMARY STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
DOUBLECLICK NETCREATIONS ADJUSTMENTS COMBINED
----------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenues........................................ $238,143 $30,642 $ -- $268,785
Cost of revenues................................ 112,016 17,224 -- 129,240
Income (loss) from operations................... (61,677) 6,159 (21,508) (77,026)
Net income (loss)............................... $(40,506) $ 3,885 $(18,147) $(54,768)
Weighted-average number of shares used in
calculation of basic and diluted EPS:......... 119,552 125,921
Basic and diluted EPS:.......................... $ (0.34) $ (0.43)
</TABLE>
UNAUDITED PRO FORMA SUMMARY BALANCE SHEET AS OF JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
DOUBLECLICK NETCREATIONS ADJUSTMENTS COMBINED
----------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Cash, cash equivalents and short-term
investments................................. $ 482,883 $38,333 $ -- $ 521,216
Total assets.................................. 1,368,265 60,707 129,045 1,558,017
Total stockholders equity..................... 936,226 49,508 129,045 1,114,779
</TABLE>
10
<PAGE>
COMPARATIVE PER SHARE DATA
The following tables reflect (a) the historical net loss and book value per
share of DoubleClick common stock and the historical net loss and book value per
share of NetCreations common stock in comparison with the unaudited pro forma
net loss and book value per share after giving effect to the proposed merger of
DoubleClick with NetCreations and (b) the equivalent historical net loss and
book value per shares attributable to 0.41 of a share of DoubleClick common
stock that will be received for each share of NetCreations common stock in the
merger, based on an assumed price of $27.31 per share of DoubleClick common
stock. Neither DoubleClick nor NetCreations has declared or paid any cash
dividends on its common stock, and DoubleClick does not anticipate doing so in
the foreseeable future.
The information presented in the following tables should be read in
conjunction with the unaudited pro forma condensed financial statements included
in this proxy statement/prospectus and the historical consolidated financial
statements and related notes of DoubleClick which are incorporated by reference
in this proxy statement/prospectus and the historical financial statements and
related notes of NetCreations which are included elsewhere in this proxy
statement/prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1999 JUNE 30, 2000
----------------- -------------
<S> <C> <C>
DOUBLECLICK HISTORICAL PER COMMON SHARE:
Net loss per common share -- basic and diluted.......... (0.51) (0.34)
Book value per share.................................... -- 7.83
NETCREATIONS HISTORICAL PER COMMON SHARE
Net income per common share -- basic and diluted........ 0.37 0.25
Book value per share.................................... -- 3.20
DOUBLECLICK AND NETCREATIONS PRO FORM COMBINED PER COMMON
SHARE:
Net loss per DoubleClick share -- basic and diluted..... (0.84) (0.43)
Net loss per equivalent NetCreations share -- basic and
diluted............................................... (0.34) (0.18)
Book value per DoubleClick share........................ -- 8.85
Book value per equivalent NetCreations share............ -- 3.63
</TABLE>
COMPARATIVE MARKET DATA
Both DoubleClick and NetCreations common stock currently trade on the Nasdaq
National Market. DoubleClick trades under the symbol 'DCLK' and NetCreations
trades under the symbol 'NTCR.' The following table presents trading information
for DoubleClick common stock and NetCreations common stock on October 2, 2000
and , 2000. The table also presents the equivalent per share price of
NetCreations common stock, determined by multiplying the applicable price of
DoubleClick common stock by the 0.41 exchange ratio. October 2, 2000 was the
last trading day before our announcement of the signing of the merger agreement.
, 2000 was the last trading day before the date of this proxy
statement/prospectus.
<TABLE>
<CAPTION>
DOUBLECLICK NETCREATIONS DOUBLECLICK COMMON
COMMON STOCK COMMON STOCK STOCK EQUIVALENT (0.41:1)
------------------------- ------------------------- -------------------------
HIGH LOW CLOSING HIGH LOW CLOSING HIGH LOW CLOSING
---- --- ------- ---- --- ------- ---- --- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
October 2, 2000............................... $33.75 $29.00 $29.63 $11.63 $10.66 $11.38 $13.84 $11.89 $12.15
, 2000................................. $ $ $ $ $ $ $ $ $
</TABLE>
While the exchange ratio is fixed, the market prices of shares of
DoubleClick common stock and NetCreations common stock will fluctuate before the
merger. As a result, you should obtain current market quotations.
11
<PAGE>
RISK FACTORS
By voting in favor of adoption of the merger agreement, NetCreations
shareholders will be choosing to invest in DoubleClick common stock. An
investment in DoubleClick common stock involves a high degree of risk. In
addition to the other information contained in or incorporated by reference into
this proxy statement/prospectus, you should carefully consider the following
risk factors in deciding whether to vote for the merger. If any of the following
risks actually occurs, the business and prospects of NetCreations or DoubleClick
may be seriously harmed. In such case, the trading price of DoubleClick common
stock could decline, and you may lose all or part of your investment.
RISKS RELATED TO THE MERGER
NETCREATIONS SHAREHOLDERS WILL RECEIVE 0.41 OF A SHARE OF DOUBLECLICK COMMON
STOCK, DESPITE CHANGES IN THE MARKET VALUE OF NETCREATIONS OR DOUBLECLICK COMMON
STOCK BETWEEN NOW AND THE MERGER.
Upon completion of the merger, each share of NetCreations common stock will
be exchanged for 0.41 of a share of DoubleClick common stock. This exchange
ratio will not be adjusted for changes in the market price of either DoubleClick
or NetCreations common stock, and neither company is permitted to terminate the
merger agreement solely because of changes in the market price of either
company's common stock. Consequently, the specific dollar value of DoubleClick
common stock to be received by NetCreations shareholders will depend on the
market value of DoubleClick common stock at the time of completion of the merger
and may decrease from the date that NetCreations shareholders submit their
proxies. NetCreations shareholders are urged to obtain recent market quotations
for DoubleClick common stock and NetCreations common stock. DoubleClick common
stock has historically experienced significant volatility, and we cannot predict
or give any assurances as to the market price of DoubleClick common stock at any
time before or after the merger.
THE MERGER MAY GO FORWARD EVEN THOUGH THERE IS A DECREASE IN THE TRADING
PRICE OF DOUBLECLICK OR NETCREATIONS COMMON STOCK OR LITIGATION RELATING
THERETO.
In general, either party can refuse to complete the merger if there is a
material adverse change affecting the other party between now and the closing.
However, certain of such changes, including, a change in general economic
conditions or changes affecting the industry generally in which DoubleClick and
NetCreations operates will not prevent the merger from going forward, even if
they would have a material adverse effect on DoubleClick or NetCreations.
If adverse changes occur and DoubleClick and NetCreations are still required
to complete the merger, DoubleClick's stock price may suffer. This in turn may
reduce the value of the merger to DoubleClick stockholders and NetCreations
shareholders.
DOUBLECLICK AND NETCREATIONS MAY NOT ACHIEVE THE BENEFITS THEY EXPECT FROM THE
MERGER.
We entered into the merger agreement with the expectation that the merger
will result in significant benefits. Achieving the benefits of the merger
depends on the timely, efficient and successful execution of a number of
post-merger events. Key events include:
integrating the operations and personnel of the two companies;
offering the existing products and services of each company to the other
company's customers; and
developing new products and services that utilize the assets of both
companies.
We will need to overcome significant issues, however, to realize any
benefits or synergies from the merger. The successful execution of these
post-merger events will involve considerable risk and may not be successful.
Operations and personnel. DoubleClick's and NetCreations' respective
principal offices are located in separate facilities in New York, New York.
After the merger is completed, the parties expect that NetCreations' operations
and personnel will relocate to DoubleClick's principal offices. Although
DoubleClick currently plans to operate NetCreations as a separate business unit,
in order
12
<PAGE>
for the merger to be successful, NetCreations' operations and personnel must be
successfully integrated with DoubleClick's operations and personnel.
DoubleClick's failure to complete the integration successfully could result in
the loss of key personnel and customers.
Products and services. Each company initially intends to offer its
respective products and services to the customers of the other company. There
can be no assurance that either company's customers will have any interest in
the other company's products and services. The failure of such cross-marketing
efforts would diminish the synergies expected to be realized by the merger.
In addition, after the merger DoubleClick intends to develop new products
and services that combine the assets of both the DoubleClick and NetCreations
businesses. To date, the companies have not thoroughly investigated the
technological, market-driven or other obstacles in developing and marketing
these new products and services in a timely and efficient way. There can be no
assurance that DoubleClick will be able to overcome these obstacles in
developing new products and services, or that there will be a market for the new
products or services developed by DoubleClick after the merger.
In general, we cannot offer any assurances that we can successfully
integrate or realize the anticipated benefits of the merger. Our failure to do
so could have a material adverse effect on the combined company's business,
financial condition and operating results or could result in the loss of key
personnel. In addition, the attention and effort devoted to the integration of
the two companies will significantly divert management's attention from other
important issues, and could seriously harm the combined company.
THE MERGER COULD ADVERSELY AFFECT COMBINED FINANCIAL RESULTS.
If the benefits of the merger do not exceed the costs associated with the
merger, including any dilution to DoubleClick's stockholders resulting from the
issuance of shares in connection with the merger, DoubleClick's financial
results, including earnings per share, could be adversely affected.
THE MARKET PRICE OF DOUBLECLICK COMMON STOCK MAY DECLINE AS A RESULT OF THE
MERGER.
The market price of DoubleClick common stock may decline as a result of the
merger if:
the integration of DoubleClick and NetCreations is unsuccessful;
DoubleClick does not achieve the perceived benefits of the merger as
rapidly as, or to the extent, financial or industry analysts anticipate; or
the effect of the merger on DoubleClick's financial results is not
consistent with the expectations of financial or industry analysts.
DOUBLECLICK MUST MANAGE THE INTEGRATION OF ACQUIRED COMPANIES SUCCESSFULLY IN
ORDER TO ACHIEVE DESIRED RESULTS.
As a part of its business strategy, DoubleClick expects to enter into
additional business combinations and acquisitions, including the recently
proposed acquisition of @plan. Acquisition transactions are accompanied by a
number of risks, including:
the difficulty of assimilating the operations and personnel of the acquired
companies;
the potential disruption of the ongoing businesses and distraction of
management of DoubleClick and the acquired companies;
the difficulty of incorporating acquired technology and rights into
DoubleClick's products and services;
unanticipated expenses related to technology integration;
difficulties in maintaining uniform standards, controls, procedures and
policies;
the impairment of relationships with employees and customers as a result of
any integration of new management personnel; and
potential unknown liabilities associated with acquired businesses.
The combined company may not succeed in addressing these risks or any other
problems encountered in connection with such business combinations and
acquisitions.
13
<PAGE>
DIRECTORS AND OFFICERS OF NETCREATIONS HAVE POTENTIAL CONFLICTS OF INTEREST THAT
MAY INFLUENCE THEM IN SUPPORTING OR RECOMMENDING THAT NETCREATIONS SHAREHOLDERS
VOTE IN FAVOR OF ADOPTION OF THE MERGER AGREEMENT.
Some of the directors and officers of NetCreations who supported adoption of
the merger agreement and recommended that NetCreations shareholders vote in
favor of adoption of the merger agreement have employment or other benefit
arrangements that provide them with interests in the merger that differ from
yours. These arrangements include the following:
The non-employee directors of NetCreations own stock options to purchase an
aggregate of 300,000 shares of NetCreations common stock. If the merger is
completed, any options that are unvested will automatically become vested.
On October 2, 2000, the non-employee director stock options were amended to
permit them to be exerciseable until October 8, 2004, the original term of
such option grants, notwithstanding their termination as directors upon the
closing of the merger.
Rosalind Resnick, Chairman and Chief Executive Officer of NetCreations,
Ryan Scott Druckenmiller, the Chief Technology Officer and a director of
NetCreations, Robert Mattes, Chief Financial Officer of NetCreations, Scott
Wolf, Senior Vice President of Sales and Business Development of
NetCreations and Michael Mayor, Vice President of Sales of NetCreations,
have entered into employment agreements with DoubleClick which become
effective when the merger is completed and entitles each officer to
specified severance arrangements, among other things.
Because the number of shares of DoubleClick common stock outstanding is
larger than the number of shares of NetCreations common stock outstanding,
certain officers, directors and affiliates of NetCreations who receive
shares of DoubleClick common stock in the merger may be allowed to sell or
transfer a greater number of shares in a single transaction than would be
possible prior to the merger pursuant to the volume restrictions of
Rule 144 of the Securities Act, subject, however, to limitations imposed by
lock-up agreements entered into in connection with the merger.
DoubleClick has agreed to indemnify and to cause the surviving corporation
in the merger to indemnify their present and former NetCreations officers
and directors against liabilities arising out of their services as officers
or directors. In addition, DoubleClick will cause NetCreations, as the
surviving corporation, to maintain officers' and directors' liability
insurance to cover any such liabilities for the next six years.
The receipt of compensation or other benefits in the merger, and the
continuation of indemnification arrangements for current directors and officers
of NetCreations following completion of the merger, may have influenced these
directors and officers in supporting adoption of the merger agreement and making
their recommendation that NetCreations shareholders vote in favor of adoption of
the merger agreement.
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT NETCREATIONS' STOCK PRICE
AND FUTURE BUSINESS AND OPERATIONS.
If the merger is not completed for any reason, NetCreations may be subject
to a number of material risks, including the following:
NetCreations may be required to pay DoubleClick a termination fee of
$8.6 million plus reimburse DoubleClick's expenses;
the price of NetCreations common stock may decline to the extent that the
current market price of NetCreations common stock reflects a market
assumption that the merger will be completed; and
NetCreations must pay its own costs related to the merger, such as legal,
accounting and financial advisor fees, even if the merger is not completed.
In addition, NetCreations' mailing customers and list owners may, in
response to the announcement of the merger, delay or defer decisions concerning
NetCreations. Any delay or deferral in those decisions by NetCreations'
customers or list owners could have a material adverse
14
<PAGE>
effect on NetCreations, regardless of whether the merger is ultimately
completed. Similarly, current and prospective NetCreations employees may
experience uncertainty about their future roles with DoubleClick until
DoubleClick's strategies with regard to NetCreations are announced or executed.
This may adversely affect NetCreations' ability to attract and retain key
management, sales, marketing and technical personnel.
Further, if the merger is terminated and NetCreations' board of directors
determines to seek another merger or business combination, there can be no
assurance that it will be able to find a partner willing to pay an equivalent or
more attractive price than the price to be paid in the merger. In addition,
while the merger agreement is in effect, NetCreations is prohibited from
soliciting, initiating or encouraging or entering into extraordinary
transactions, such as a merger, sale of assets or other business combination,
with any party other than DoubleClick.
RISKS RELATED TO DOUBLECLICK
In addition to the risks relating to the merger, as discussed above,
DoubleClick is subject to its own specific risks relating to its business model,
strategy, and the legal, regulatory and business environment, including those
set forth below.
RISKS RELATING TO DOUBLECLICK AND ITS BUSINESS
DOUBLECLICK'S LIMITED OPERATING HISTORY MAKES EVALUATING ITS BUSINESS DIFFICULT.
DoubleClick was incorporated in January 1996 and has a limited operating
history. An investor in DoubleClick's common stock must consider the risks and
difficulties frequently encountered by early stage companies in new and rapidly
evolving industries, including the Internet advertising industry. DoubleClick's
risks include:
ability to sustain historical revenue growth rates;
relying on the DoubleClick networks;
managing its expanding operations;
competition;
attracting, retaining and motivating qualified personnel;
maintaining its current, and developing new, strategic relationships with
Web publishers;
ability to anticipate and adapt to the changing Internet industry; and
attracting and retaining a large number of advertisers from a variety of
industries.
DoubleClick also depends on the growing use of the Internet for advertising,
commerce and communication, and on general economic conditions. DoubleClick
cannot assure you that its business strategy will be successful or that it will
successfully address these risks.
DOUBLECLICK HAS A HISTORY OF LOSSES AND MAY EXPERIENCE CONTINUED LOSSES.
DoubleClick incurred net losses of $4.0 million for the year ended
December 31, 1996, $7.7 million for the year ended December 31, 1997,
$18.0 million for the year ended December 31, 1998, and $55.8 million for the
year ended December 31, 1999. For the six months ended June 30, 2000,
DoubleClick incurred net loss of $40.5 million and, as of June 30, 2000, its
accumulated deficit was $150.3 million. DoubleClick has not achieved
profitability and may continue to incur operating losses in the future.
DoubleClick expects to continue to incur significant operating and capital
expenditures and, as a result, it will need to generate significant revenue to
achieve and maintain profitability. Although its revenue has grown in recent
quarters, DoubleClick cannot assure you that it will achieve sufficient revenue
to achieve or sustain profitability. Even if it does achieve profitability,
DoubleClick cannot assure you that it can sustain or increase profitability on a
quarterly or annual basis in the future. If revenue grows slower than
DoubleClick anticipates, or
15
<PAGE>
if operating expenses exceed its expectations or cannot be adjusted accordingly,
DoubleClick's business, results of operations and financial condition will be
materially and adversely affected.
DOUBLECLICK DERIVES A SUBSTANTIAL PORTION OF ITS REVENUE FROM WEB SITES OF A
LIMITED NUMBER OF WEB PUBLISHERS AND THE LOSS OF THESE WEB PUBLISHERS AS
CUSTOMERS COULD HARM ITS BUSINESS.
DoubleClick derives a substantial portion of its DoubleClick Media revenue
from ad impressions it delivers on the Web sites of a limited number of Web
publishers. For the six months ended June 30, 2000, approximately 19% of
DoubleClick's revenue resulted from ads delivered on the Web sites of the top
five Web publishers on its DoubleClick networks. DoubleClick's business, results
of operations and financial condition could be materially and adversely affected
by the loss of one or more of the Web publishers that account for a significant
portion of the revenue from its DoubleClick networks or any significant
reduction in traffic on these Web publisher's Web sites.
The loss of these Web publishers could also cause advertisers or other Web
publishers to leave DoubleClick's networks, which could materially and adversely
affect its business, results of operations and financial condition. Typically
DoubleClick enters into short-term contracts with Web publishers for inclusion
of their Web sites in DoubleClick's networks. Since these contracts are
short-term, DoubleClick will have to negotiate new contracts or renewals in the
future, which may have terms that are not as favorable to it as the terms of the
existing contracts. DoubleClick's business, results of operations and financial
condition could be materially and adversely affected by such new contracts or
renewals.
DOUBLECLICK RELIES ON ITS RELATIONSHIP WITH ALTAVISTA AND CHANGES IN THIS
RELATIONSHIP COULD HARM ITS BUSINESS.
DoubleClick's revenues have, in the past, significantly relied on revenues
generated from advertisements delivered on or through the AltaVista Web site. On
August 7, 2000, DoubleClick announced the restructuring of its Advertising
Services Agreement with AltaVista. CMGI, Inc. currently owns approximately 82%
of AltaVista. CMGI also owns several Internet advertising and marketing
companies either directly or indirectly through its majority owned subsidiary
Engage. These companies, including AdForce, AdKnowledge, Flycast Communications,
Adsmart and Engage, compete with DoubleClick's Internet advertising solutions.
Under the restructured agreement, AltaVista has extended its agreement to use
DoubleClick's DART for Publishers ad serving solution through 2004. In addition,
AltaVista will accelerate taking lead advertising sales responsibility for its
worldwide network of Web sites in the United Kingdom, France, Germany, Italy,
Sweden, and the Netherlands by January 1, 2001. The majority of advertising
served on AltaVista will use DART through 2002. In 2003, at least half of all of
AltaVista's ads will be served through DART. AltaVista will assume majority
responsibility for ad serving thereafter. In addition, DoubleClick's DART for
Advertisers solution will run the majority of AltaVista's online advertising
campaigns through 2004. The unexpected loss of AltaVista as a customer or any
significant reduction in traffic on or through the AltaVista Web site could
materially and adversely affect DoubleClick's business, results of operations
and financial condition.
DOUBLECLICK'S BUSINESS MAY BE MATERIALLY ADVERSELY AFFECTED BY LAWSUITS RELATED
TO PRIVACY AND DOUBLECLICK'S BUSINESS PRACTICES.
DoubleClick is a defendant in several pending class action lawsuits
alleging, among other things, that DoubleClick unlawfully obtains and uses
Internet users' personal information. DoubleClick is also the subject of a
Federal Trade Commission inquiry concerning its collection and maintenance of
information concerning Internet users, and inquiries involving the attorneys
general of several states relating to its collection, maintenance and sharing of
information concerning, and its disclosure of those practices to, Internet
users. DoubleClick may receive additional regulatory inquiries and intends to
cooperate fully. Class action litigation and regulatory inquiries of these types
are often expensive and time-consuming and their outcome is uncertain.
16
<PAGE>
DoubleClick cannot quantify the amount of monetary or human resources that it
will be required to use to defend itself in these proceedings. DoubleClick may
need to spend significant amounts on its legal defense, senior management may be
required to divert their attention from other portions of its business, new
product launches may be deferred or canceled as a result of these proceedings,
and DoubleClick may be required to make changes to its present and planned
products or services, any of which could materially and adversely affect its
business, financial condition and results of operations. If, as a result of any
of these proceedings, a judgment is rendered or a decree is entered against
DoubleClick, it may materially and adversely affect its business, financial
condition and results of operations.
DOUBLECLICK DERIVES A SUBSTANTIAL PORTION OF ITS REVENUE FROM ADVERTISEMENTS IT
DELIVERS TO WEB SITES ON DOUBLECLICK NETWORKS, AND A DECREASE IN TRAFFIC LEVELS
COULD HARM ITS BUSINESS.
DoubleClick derives a large portion of its revenue from advertisements it
delivers to Web sites on its DoubleClick networks. DoubleClick expects that its
DoubleClick networks will continue to account for a substantial portion of its
revenue for the foreseeable future. DoubleClick's networks consist of Web sites
of Web publishers with which it has short-term contracts. DoubleClick cannot
assure you that these Web publishers will remain associated with DoubleClick's
networks, that any DoubleClick network Web site will maintain consistent or
increasing levels of traffic over time, or that DoubleClick will be able to
replace in a timely or effective manner any existing DoubleClick network Web
site with other Web sites with comparable traffic patterns and user
demographics. DoubleClick's failure to successfully market its DoubleClick
networks, the loss of one or more of the Web publishers that account for a
significant portion of its revenue from its DoubleClick networks, or the failure
of the Web sites on its DoubleClick networks to maintain consistent or
increasing levels of traffic would materially and adversely affect DoubleClick's
business, results of operations and financial condition.
DOUBLECLICK'S ADVERTISING CUSTOMERS AND THE COMPANIES WITH WHICH IT HAS
STRATEGIC BUSINESS RELATIONSHIPS MAY EXPERIENCE ADVERSE BUSINESS CONDITIONS THAT
COULD ADVERSELY AFFECT ITS BUSINESS.
As a result of unfavorable conditions in the public equity markets, some of
DoubleClick's customers may have difficulty raising sufficient capital to
support their long-term operations. As a result, these customers may reduce
their spending on Internet advertising, which could materially and adversely
affect DoubleClick's business, financial condition and results of operations. In
addition, from time to time, DoubleClick has entered into strategic business
relationships with other companies, the nature of which varies, but generally in
the context of customer relationships. These companies may experience adverse
business conditions that may render them unable to meet DoubleClick's
expectations for the strategic business relationship or to fulfill their
contractual obligations to DoubleClick. Such an event could have a material
adverse impact on DoubleClick's business, financial condition and results of
operations.
DOUBLECLICK'S QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT
FLUCTUATIONS AND YOU SHOULD NOT RELY ON THEM AS AN INDICATION OF FUTURE
OPERATING PERFORMANCE.
DoubleClick's revenue and results of operations may fluctuate significantly
in the future as a result of a variety of factors, many of which are beyond
DoubleClick's control. These factors include:
advertiser, Web publisher and direct marketer demand for DoubleClick's
solutions;
Internet user traffic levels;
changes in fees paid by advertisers;
changes in service fees payable by DoubleClick to Web publishers in its
networks;
the introduction of new Internet advertising services by DoubleClick or its
competitors;
variations in the levels of capital or operating expenditures and other
costs relating to the expansion of DoubleClick's operations; and
17
<PAGE>
general economic conditions.
For the foreseeable future, DoubleClick's revenue from DoubleClick
TechSolutions and DoubleClick Media will also remain dependent on advertising
activity on DoubleClick's networks. This future revenue is difficult to
forecast. In addition, DoubleClick plans to significantly increase its operating
expenses so that it can increase its sales and marketing operations, continue
its international expansion, upgrade and enhance its DART technology and expand
its product and service offerings, and market and support its solutions.
DoubleClick may be unable to adjust spending quickly enough to offset any
unexpected revenue shortfall. If DoubleClick has a shortfall in revenue in
relation to its expenses, or if its expenses exceed increased revenue, then
DoubleClick's business, results of operations and financial condition could be
materially and adversely affected. These results would likely affect the market
price of DoubleClick's common stock in a manner which may be unrelated to its
long term operating performance.
As a result, DoubleClick believes that period-to-period comparisons of its
results of operations may not be meaningful. You should not rely on past periods
as indicators of future performance.
RAPID GROWTH IN DOUBLECLICK'S BUSINESS COULD STRAIN ITS MANAGERIAL, OPERATIONAL,
FINANCIAL AND INFORMATION SYSTEM RESOURCES.
In recent years, DoubleClick has experienced significant growth, both
internally and through acquisitions, that has placed considerable demands on its
managerial, operational and financial resources. To continue to successfully
implement DoubleClick's business plan in its rapidly evolving industry requires
an effective planning and management process. DoubleClick continues to increase
the scope of its operations both domestically and internationally, and it has
grown its workforce substantially. As of September 30, 1999, DoubleClick had a
total of 1,162 employees and, as of September 30, 2000, it had a total of 2,104
employees. In addition, DoubleClick plans to continue to expand its sales and
marketing and customer support organizations both domestically and
internationally. The anticipated future growth in its operations will continue
to place a significant strain on its management systems and resources.
DoubleClick expects that it will need to continue to improve its financial and
managerial controls and reporting systems and procedures, and will need to
continue to expand, train and manage its workforce. DoubleClick cannot assure
you that if it continues to grow, management will be effective in attracting and
retaining additional qualified personnel, expanding its physical facilities,
integrating acquired businesses or otherwise managing growth. DoubleClick also
cannot assure you that its information systems, procedures or controls will be
adequate to support its operations or that its management will be able to
achieve the rapid execution necessary to successfully offer its services and
implement its business plan. DoubleClick's future performance may also depend on
its effective integration of acquired businesses. Even if successful, this
integration may take a significant period of time and expense, and may place a
significant strain on DoubleClick's resources. DoubleClick's inability to
effectively manage its growth could materially and adversely affect its
business, financial condition and results of operations.
DOUBLECLICK'S BUSINESS MAY SUFFER IF IT IS UNABLE TO SUCCESSFULLY IMPLEMENT ITS
BUSINESS MODEL.
A significant part of DoubleClick's business model is to generate revenue by
providing interactive marketing solutions to advertisers, ad agencies and Web
publishers. The profit potential for this business model is unproven. To be
successful, both Internet advertising and DoubleClick's solutions will need to
achieve broad market acceptance by advertisers, ad agencies and Web publishers.
DoubleClick's ability to generate significant revenue from advertisers will
depend, in part, on its ability to contract with Web publishers that have Web
sites with adequate available ad space inventory. Further, these Web sites must
generate sufficient user traffic with demographic characteristics attractive to
DoubleClick's advertisers. The intense competition among Internet advertising
sellers has led to the creation of a number of pricing alternatives for Internet
advertising. These alternatives make it difficult for DoubleClick to project
future levels of advertising revenue and applicable gross margin that can be
sustained by DoubleClick or the Internet advertising industry in general.
18
<PAGE>
Intensive marketing and sales efforts may be necessary to educate
prospective advertisers regarding the uses and benefits of, and to generate
demand for, DoubleClick's products and services, including its new products and
services such as the Sonar Network, Abacus Online Alliance and the DARTmail
Services. Enterprises may be reluctant or slow to adopt a new approach that may
replace, limit or compete with their existing direct marketing systems. In
addition, since online direct marketing is emerging as a new and distinct
business apart from online advertising, potential adopters of online direct
marketing services will increasingly demand functionality tailored to their
specific requirements. DoubleClick may be unable to meet the demands of these
clients.
Acceptance of DoubleClick's new solutions will depend on the continued
emergence of Internet commerce, communication and advertising, and demand for
its solutions. DoubleClick cannot assure you that demand for its new solutions
will emerge or become sustainable.
DISRUPTION OF DOUBLECLICK'S SERVICES DUE TO UNANTICIPATED PROBLEMS OR FAILURES
COULD HARM ITS BUSINESS.
DoubleClick's DART technology resides on a computer system located in
DoubleClick's New York City offices and in its data centers in New Jersey and
California and in Europe, Asia and Latin America. This system's continuing and
uninterrupted performance is critical to DoubleClick's success. Customers may
become dissatisfied by any system failure that interrupts DoubleClick's ability
to provide its services to them, including failures affecting DoubleClick's
ability to deliver advertisements without significant delay to the viewer.
Sustained or repeated system failures would reduce the attractiveness of
DoubleClick's solutions to advertisers, ad agencies and Web publishers and
result in contract terminations, fee rebates and makegoods, thereby reducing
revenue. Slower response time or system failures may also result from straining
the capacity of DoubleClick's deployed software or hardware due to an increase
in the volume of advertising delivered through its servers. To the extent that
DoubleClick does not effectively address any capacity constraints or system
failures, DoubleClick's business, results of operations and financial condition
could be materially and adversely affected.
DoubleClick's operations are dependent on its ability to protect its
computer systems against damage from fire, power loss, water damage,
telecommunications failures, vandalism and other malicious acts, and similar
unexpected adverse events. In addition, interruptions in DoubleClick's solutions
could result from the failure of its telecommunications providers to provide the
necessary data communications capacity in the time frame it requires. Despite
precautions DoubleClick has taken, unanticipated problems affecting its systems
have from time to time in the past caused, and in the future could cause,
interruptions in the delivery of DoubleClick's solutions. DoubleClick's
business, results of operations and financial condition could be materially and
adversely affected by any damage or failure that interrupts or delays its
operations.
COMPETITION IN INTERNET ADVERTISING AND RELATED PRODUCTS AND SERVICES IS INTENSE
AND LIKELY TO INCREASE IN THE FUTURE, AND DOUBLECLICK MAY NOT BE ABLE TO COMPETE
SUCCESSFULLY.
The business of Internet advertising and related products and services is
intensely competitive. DoubleClick expects competition to continue to increase
because this business has no substantial barriers to entry. Competition may also
increase as a result of industry consolidation. DoubleClick believes that its
ability to compete depends upon many factors both within and beyond its control,
including the following:
the timing and acceptance of new solutions and enhancements to existing
solutions developed either by DoubleClick or its competitors;
customer service and support efforts;
sales and marketing efforts; and
the ease of use, performance, price and reliability of solutions developed
either by DoubleClick or its competitors.
19
<PAGE>
DoubleClick competes for Internet advertising revenue with large Web publishers
and Web portals, such as America Online, Excite@Home, Microsoft, GO.com and
Yahoo!. Further, its DoubleClick networks compete with a variety of Internet
advertising networks, including 24/7 Media. In marketing its DoubleClick
networks and DART Service to Web publishers, DoubleClick also competes with
providers of ad servers and related services. CMGI also now owns several
Internet advertising and marketing companies either directly or indirectly
through its majority owned subsidiary Engage. These companies, including
AdForce, AdKnowledge, Flycast Communications, Adsmart and Engage, compete with
DoubleClick's Internet advertising solutions. DoubleClick also encounters
competition from a number of other sources, including content aggregation
companies, companies engaged in advertising sales networks, advertising
agencies, and other companies that facilitate Internet advertising.
Many of DoubleClick's existing competitors, as well as a number of potential
new competitors, have longer operating histories, greater name recognition,
larger customer bases and significantly greater financial, technical and
marketing resources than DoubleClick. These factors may allow them to respond
more quickly than DoubleClick can to new or emerging technologies and changes in
customer requirements. It may also allow them to devote greater resources than
DoubleClick can to the development, promotion and sale of their products and
services. These competitors may also engage in more extensive research and
development, undertake more far-reaching marketing campaigns, adopt more
aggressive pricing policies and make more attractive offers to existing and
potential employees, strategic partners, advertisers and Web publishers.
DoubleClick cannot assure you that its competitors will not develop products or
services that are equal or superior to its solutions or that achieve greater
acceptance than its solutions. 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 DoubleClick's prospective advertising, ad agency and Web
publisher customers. As a result, it is possible that new competitors 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.
DoubleClick cannot assure you that it will be able to compete successfully or
that competitive pressures will not materially and adversely affect its
business, results of operations or financial condition.
DOUBLECLICK MAY NOT COMPETE SUCCESSFULLY WITH TRADITIONAL ADVERTISING MEDIA FOR
ADVERTISING DOLLARS.
Companies doing business on the Internet, including DoubleClick, must also
compete with television, radio, cable and print (traditional advertising media)
for a share of advertisers' total advertising budgets. Advertisers may be
reluctant to devote a significant portion of their advertising budget to
Internet advertising if they perceive the Internet to be a limited or
ineffective advertising medium.
DOUBLECLICK'S REVENUE IS SUBJECT TO SEASONAL AND CYCLICAL FLUCTUATIONS.
DoubleClick believes that its business is subject to seasonal fluctuations.
Advertisers generally place fewer advertisements during the first and third
calendar quarters of each year, which directly affects DoubleClick's DoubleClick
Media and DoubleClick TechSolutions businesses, and the direct marketing
industry generally mails substantially more marketing materials in the third
calendar quarter, which directly affects DoubleClick's DoubleClick Data Services
business. Further, Internet user traffic typically drops during the summer
months, which reduces the amount of advertising to sell and deliver.
Expenditures by advertisers and direct marketers tend to vary in cycles that
reflect overall economic conditions as well as budgeting and buying patterns.
DoubleClick's revenue could be materially reduced by a decline in the economic
prospects of advertisers and direct marketers or in the economy in general,
which could alter current or prospective advertisers' and direct marketers'
spending priorities or budget cycles or extend DoubleClick's sales cycle.
Due to the risks discussed in this section, you should not rely on
quarter-to-quarter comparisons of DoubleClick's results of operations as an
indication of future performance. It is
20
<PAGE>
possible that in some future periods DoubleClick's results of operations may be
below the expectations of public market analysts and investors. In this event,
the price of DoubleClick's common stock may fall.
DOUBLECLICK MAY NOT BE ABLE SUCCESSFULLY TO MAKE ACQUISITIONS OF OR INVESTMENTS
IN OTHER COMPANIES.
DoubleClick may acquire or make investments in other complementary
businesses, products, services or technologies. From time to time DoubleClick
has had discussions with other companies regarding its acquiring, or investing
in, their businesses, products, services or technologies. DoubleClick cannot
assure you that it will be able to identify other suitable acquisition or
investment candidates. Even if DoubleClick does identify suitable candidates,
DoubleClick cannot assure you that it will be able to make other acquisitions or
investments on commercially acceptable terms. If DoubleClick buys a company,
DoubleClick could have difficulty in integrating that company's personnel and
operations. In addition, the key personnel of the acquired company may decide
not to work for DoubleClick. If DoubleClick acquires different types of
businesses, it could have difficulty in integrating the acquired products,
services or technologies into its operations. These difficulties could disrupt
its ongoing business, distract its management and employees, increase its
expenses and adversely affect its results of operations due to accounting
requirements such as amortization of goodwill. Furthermore, DoubleClick may
incur debt or issue equity securities to pay for any future acquisitions. The
issuance of equity securities could be dilutive to DoubleClick's existing
stockholders.
DOUBLECLICK IS DEPENDENT ON KEY PERSONNEL AND ON EMPLOYEE RETENTION AND
RECRUITING FOR ITS FUTURE SUCCESS.
DoubleClick's future success depends to a significant extent on the
continued service of its key technical, sales and senior management personnel.
DoubleClick does not have employment agreements with most of these executives.
The loss of the services of one or more of DoubleClick's key employees would
likely materially and adversely affect its business, results of operations and
financial condition. DoubleClick's future success also depends on its continuing
to attract, retain and motivate highly skilled employees. Competition for
employees in its industry is intense. DoubleClick may be unable to retain its
key employees or attract, assimilate or retain other highly qualified employees
in the future. DoubleClick has from time to time in the past experienced, and it
expects to continue to experience in the future, difficulty in hiring and
retaining highly skilled employees with appropriate qualifications.
IF DOUBLECLICK FAILS TO ADEQUATELY PROTECT ITS INTELLECTUAL PROPERTY OR FACES A
CLAIM OF INTELLECTUAL PROPERTY INFRINGEMENT BY A THIRD PARTY, IT COULD LOSE ITS
INTELLECTUAL PROPERTY RIGHTS OR BE LIABLE FOR DAMAGES.
DoubleClick's success and ability to effectively compete are substantially
dependent on the protection of its internally developed technologies and its
trademarks, which it protects through a combination of patent, copyright, trade
secret, unfair competition and trademark law as well as contractual agreements.
In September 1999, the U.S. Patent Office issued to DoubleClick a patent that
covers the DART technology. DoubleClick has also filed patent applications for
some of its other technology.
DoubleClick also has rights in the trademarks that it uses to market its
solutions. These trademarks include DOUBLECLICK, DART and ABACUS. DoubleClick
has applied to register its trademarks in the United States and internationally.
DoubleClick has received registrations for the marks DOUBLECLICK, DART and
ABACUS, among others. DoubleClick cannot assure you that any of its current or
future patent applications or trademark applications will be approved. Even if
they are approved, these patents or trademarks may be successfully challenged by
others or invalidated. If DoubleClick's trademark registrations are not approved
because third parties own these trademarks, DoubleClick's use of these
trademarks will be restricted unless it enters into
21
<PAGE>
arrangements with these parties which may be unavailable on commercially
reasonable terms, if at all. In addition, DoubleClick has licensed, and may
license in the future, DoubleClick's trademarks, trade dress and similar
proprietary rights to third parties. While it endeavors to ensure that the
quality of its brands are maintained by its licensees, its licensees may take
actions that could materially and adversely affect the value of its proprietary
rights and reputation.
In order to secure and protect its proprietary rights, DoubleClick generally
enters into confidentiality, proprietary rights and license agreements, as
appropriate, with its employees, consultants and business partners, and
generally controls access to and distribution of its technologies, documentation
and other proprietary information. Despite these efforts, DoubleClick cannot be
certain that the steps it takes to prevent unauthorized use of its proprietary
rights are sufficient to prevent misappropriation of its solutions or
technologies, particularly in foreign countries where laws or law enforcement
practices may not protect its proprietary rights as fully as in the United
States. In addition, DoubleClick cannot assure you that the courts will
adequately enforce contractual arrangements which it has entered into to protect
its proprietary technologies.
DoubleClick cannot assure you that any of its proprietary rights will be
viable or of value in the future since the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related industries are
uncertain and still evolving. Furthermore, third parties may assert infringement
claims against it. From time to time DoubleClick has been, and it expects to
continue to be, subject to claims in the ordinary course of its business,
including claims of alleged infringement of the trademarks and other
intellectual property rights of third parties by it or the Web publishers with
Web sites in its DoubleClick networks. Such claims and any resultant litigation,
should it occur, could subject DoubleClick to significant liability for damages,
and it could be restricted from using its ad delivery technology or other
intellectual property. Any claims or litigation from third parties may also
result in limitations on its ability to use the intellectual property, including
its ad delivery technology, which are the subject of such claims or litigation
unless it enters into arrangements with the third parties responsible for such
claims or litigation which may be unavailable on commercially reasonable terms,
if at all. In addition, even if DoubleClick prevails, such litigation could be
time-consuming and expensive to defend, and could result in the diversion of
DoubleClick's time and attention, any of which could materially and adversely
affect its business, results of operations and financial condition.
DoubleClick has filed a patent infringement suit against each of Sabela
Media, Inc. and L90, Inc. in order to enforce its patent that covers the DART
technology. 24/7 Media has acquired Sabela Media. In May 2000, 24/7 Media filed
a patent infringement litigation suit against DoubleClick which alleged that
DoubleClick infringes, and is inducing and contributing to the infringement of a
patent owned by 24/7 Media. 24/7 Media sought damages in an unspecified amount,
an injunction against infringement of the patent, and its attorneys fees and
costs. In October 2000, DoubleClick, 24/7 Media and Sabela Media settled the
patent litigation 24/7 Media initiated against DoubleClick and the patent
litigation previously initiated against Sabela Media by DoubleClick.
Consequently, both of these lawsuits will be dismissed with prejudice. As part
of the settlement, 24/7 Media and DoubleClick granted each other certain rights
in certain of their respective patents. Under the settlement agreement, no other
terms of the settlement are permitted to be disclosed. Separately, L90 and
DoubleClick have entered into an agreement pursuant to which the parties will
enter into definitive documents to settle the patent infringement lawsuit,
including L90's related counterclaims, pending in federal district court in
Manhattan. Under the definitive documents, the parties will dismiss the pending
lawsuit with prejudice, and grant each other certain rights in certain of their
respective patents. No other terms of the settlement were disclosed.
DOUBLECLICK'S RIGHT TO KEEP AND USE INFORMATION COLLECTED IN ITS DATABASES MAY
BE CHALLENGED IN THE FUTURE, WHICH COULD ADVERSELY AFFECT DOUBLECLICK'S BUSINESS
AND RESULTS OF OPERATIONS.
DoubleClick collects and compiles information in databases for the product
offerings of all its businesses. Individuals have claimed, and may claim in the
future, that DoubleClick's collection of this information is illegal. Although
DoubleClick believes that it has the right to use and compile the information in
these databases, it cannot assure you that its ability to do so will remain
lawful, that any trade secret, copyright or other intellectual property
protection will be available for its databases, or that statutory protection
that is or becomes available for databases will enhance its rights. In addition,
others may claim rights to the information in DoubleClick's databases. Further,
pursuant to its contracts with Web publishers using its solutions, DoubleClick
is obligated to keep
22
<PAGE>
certain information regarding each Web publisher confidential and, therefore,
may be restricted from further using that information in its businesses.
DOUBLECLICK MUST ADAPT TO TECHNOLOGY TRENDS AND EVOLVING INDUSTRY STANDARDS OR
IT WILL NOT BE COMPETITIVE.
The Internet and Internet advertising businesses are characterized by
rapidly changing technologies, evolving industry standards, frequent new product
and service introductions, and changing customer demands. DoubleClick's future
success will depend on its ability to adapt to rapidly changing technologies and
to enhance existing solutions and develop and introduce a variety of new
solutions and services to address its customers' changing demands. DoubleClick
may experience difficulties that could delay or prevent the successful design,
development, introduction or marketing of its solutions and services. In
addition, DoubleClick's new solutions or enhancements must meet the requirements
of its current and prospective customers and must achieve significant
acceptance. Material delays in introducing new solutions and enhancements may
cause customers to forego purchases of DoubleClick's solutions and purchase
those of its competitors. DoubleClick's failure to successfully design, develop,
test and introduce new services, or the failure of its recently introduced
services to achieve acceptance, could prevent DoubleClick from maintaining
existing client relationships, gaining new clients or expanding its business and
could materially and adversely affect its business, financial condition and
results of operations.
DOUBLECLICK'S BUSINESS COULD BE ADVERSELY AFFECTED IF IT FAILS SUCCESSFULLY TO
EXPAND ITS INTERNATIONAL OPERATIONS AND SALES AND MARKETING EFFORTS.
DoubleClick has operations in a number of countries. It intends to continue
to expand its international operations and international sales and marketing
efforts. To date, DoubleClick has limited experience in developing localized
versions of its solutions and in marketing, selling and distributing its
solutions internationally. DoubleClick has established its DoubleClick networks
in Argentina, Australia, Brazil, Canada, France, Germany, Benelux (Belgium, the
Netherlands and Luxembourg), Scandinavia (Sweden, Norway, Finland, and Denmark),
Spain, the United Kingdom and Italy. In Asia (Taiwan, Singapore, Hong Kong and
China), and under separate agreements in Japan and Korea, DoubleClick is working
with its business partners to conduct operations, establish local networks,
aggregate Web publishers and coordinate sales and marketing efforts. Its success
in these markets is directly dependent on the success of its business partners
and their dedication of sufficient resources to DoubleClick's relationship.
DoubleClick's international operations are subject to other inherent risks,
including:
the impact of recessions in economies outside the United States;
changes in regulatory requirements;
more restrictive privacy regulation;
reduced protection for intellectual property rights in some countries;
potentially adverse tax consequences;
difficulties and costs of staffing and managing foreign operations;
political and economic instability;
fluctuations in currency exchange rates; and
seasonal fluctuations in Internet usage.
These risks may materially and adversely affect DoubleClick's business,
results of operations or financial condition.
DOUBLECLICK HAS INCURRED SIGNIFICANT DEBT OBLIGATIONS WHICH COULD HARM ITS
BUSINESS.
DoubleClick incurred $250 million of indebtedness in March 1999 from the
sale of its 4.75% Convertible Subordinated Notes due 2006. DoubleClick's ratio
of long-term debt to total equity
23
<PAGE>
was approximately 27.8% as of June 30, 2000. As a result of the sale of the
notes, DoubleClick has substantially increased its principal and interest
obligations. The degree to which DoubleClick is leveraged could materially and
adversely affect its ability to obtain additional financing and could make it
more vulnerable to industry downturns and competitive pressures. DoubleClick's
ability to meet its debt service obligations will depend on its future
performance, which will be subject to financial, business, and other factors
affecting its operations, many of which are beyond its control.
IF DOUBLECLICK DOES NOT SUCCESSFULLY INTEGRATE ABACUS AND NETGRAVITY OR THE
MERGERS' BENEFITS DO NOT MEET THE EXPECTATIONS OF FINANCIAL OR INDUSTRY
ANALYSTS, THE MARKET PRICE FOR DOUBLECLICK'S COMMON STOCK MAY DECLINE.
Last year, DoubleClick consummated mergers with Abacus and NetGravity with
the expectations that these mergers would result in significant benefits. Prior
to these acquisitions, DoubleClick had virtually no experience in Abacus'
business and little direct experience with NetGravity's primary business model.
Furthermore, Abacus' principal offices are located in Broomfield, Colorado while
DoubleClick's principal offices are located in New York, New York; managing the
business in a coordinated fashion, therefore, has required additional management
resources. DoubleClick will need to continue to overcome these significant
issues in order to realize any benefits or synergies from the mergers.
DoubleClick's successful execution of these events involves considerable risk
and may not be successful. The market price of DoubleClick common stock may be
negatively impacted, and it may lose key personnel and customers as a result of
its mergers if:
DoubleClick does not successfully integrate operations and personnel of the
businesses;
DoubleClick does not achieve the perceived benefits of the mergers as
rapidly or to the extent anticipated by financial or industry analysts; or
the effect of the mergers on DoubleClick's financial results is not
consistent with the expectations of financial or industry analysts.
IF DOUBLECLICK FAILS TO SUCCESSFULLY CROSS-MARKET THE PRODUCTS OF DOUBLECLICK
MEDIA, DOUBLECLICK TECHSOLUTIONS AND DOUBLECLICK DATA SERVICES OR TO DEVELOP NEW
PRODUCTS, DOUBLECLICK MAY NOT INCREASE OR MAINTAIN ITS CUSTOMER BASE OR ITS
REVENUE.
DoubleClick offers the respective products and services historically offered
by DoubleClick, Abacus and NetGravity to its collective customers. DoubleClick
cannot assure you that any company's customers will have any interest in the
other companies' products and services. The failure of DoubleClick's
cross-marketing efforts may diminish the benefits it realizes from these
mergers. In addition, DoubleClick intends to develop new products and services
that combine the knowledge and resources of DoubleClick Media, DoubleClick
TechSolutions and DoubleClick Data Services. DoubleClick cannot assure you that
these products or services will be developed or, if developed, will be
successful or that it can successfully integrate or realize the anticipated
benefits of these mergers. As a result, DoubleClick may not be able to increase
or maintain its customer base. It cannot assure you that the transactions or
other data in Abacus' database will be predictive or useful in other sales
channels, including Internet advertising. DoubleClick cannot assure you that it
will be able to overcome the obstacles in developing new products and services,
or that there will be a demand for the new products or services developed by it
after the mergers. An inability to overcome such obstacles or a failure of such
demand to develop could materially and adversely affect DoubleClick's business,
financial condition and results of operations or could result in loss of key
personnel. In addition, the attention and effort devoted to the integration of
the acquired companies will significantly divert management's attention from
other important issues, and could seriously harm it's business, financial
condition and results of operations.
24
<PAGE>
EFFECTS OF ANTI-TAKEOVER PROVISIONS COULD INHIBIT THE ACQUISITION OF
DOUBLECLICK.
Some of the provisions of DoubleClick's certificate of incorporation, its
bylaws and Delaware law could, together or separately:
discourage potential acquisition proposals;
delay or prevent a change in control;
impede the ability of DoubleClick stockholders to change the composition of
DoubleClick's board of directors in any one year; and
limit the price that investors might be willing to pay in the future for
shares of DoubleClick common stock.
DOUBLECLICK'S STOCK PRICE MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS.
The market price of DoubleClick's common stock has fluctuated in the past
and is likely to continue to be highly volatile and could be subject to wide
fluctuations. In addition, the stock market has experienced extreme price and
volume fluctuations. The market prices of the securities of Internet-related
companies have been especially volatile. Investors may be unable to resell their
shares of DoubleClick common stock at or above the purchase price.
IF DOUBLECLICK'S STOCK PRICE IS VOLATILE, DOUBLECLICK MAY BECOME SUBJECT TO
SECURITIES LITIGATION WHICH IS EXPENSIVE AND COULD RESULT IN A DIVERSION OF
RESOURCES.
In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation has often
been brought against that company. Many companies in DoubleClick's industry have
been subject to this type of litigation in the past. DoubleClick may also become
involved in this type of litigation. Litigation is often expensive and diverts
management's attention and resources, which could materially and adversely
affect DoubleClick's business, financial condition and results of operations.
FUTURE SALES OF DOUBLECLICK COMMON STOCK MAY AFFECT THE MARKET PRICE OF ITS
COMMON STOCK.
As of September 30, 2000, DoubleClick had 122,866,435 shares of common stock
outstanding, excluding 24,038,717 shares subject to options outstanding as of
such date under its stock option plans that are exercisable at prices ranging
from $0.03 to $184.35 per share. Additionally, certain holders of DoubleClick's
common stock have registration rights with respect to their shares. DoubleClick
intends to file one or more registration statements in compliance with these
registration rights. DoubleClick cannot predict the effect, if any, that future
sales of common stock or the availability of shares of common stock for future
sale, will have on the market price of its common stock prevailing from time to
time. Sales of substantial amounts of common stock (including shares included in
such registration statements, issued upon the exercise of stock options or
issued upon the conversion of DoubleClick's convertible subordinated notes), or
the perception that such sales could occur, may materially and adversely affect
prevailing market prices for its common stock.
RISKS RELATED TO DOUBLECLICK'S INDUSTRY
DOUBLECLICK'S BUSINESS MAY BE ADVERSELY AFFECTED IF DEMAND FOR INTERNET
ADVERTISING FAILS TO GROW AS PREDICTED OR DIMINISHES.
DoubleClick's future success is highly dependent on an increase in the use
of the Internet as an advertising medium. The Internet advertising industry is
new and rapidly evolving, and it cannot yet be compared with traditional
advertising media to gauge its effectiveness. As a result, demand and market
acceptance for Internet advertising solutions is uncertain. Most of
DoubleClick's current or potential advertising customers have little or no
experience using the Internet for advertising purposes and they have allocated
only a limited portion of their advertising
25
<PAGE>
budgets to Internet advertising. The adoption of Internet advertising,
particularly by those entities that have historically relied upon traditional
media for advertising, requires the acceptance of a new way of conducting
business, exchanging information and advertising products and services. These
customers may find Internet advertising to be less effective for promoting their
products and services relative to traditional advertising media. In addition,
most of DoubleClick's current and potential Web publisher customers have little
experience in generating revenue from the sale of advertising space on their Web
sites. DoubleClick cannot assure you that current or potential advertising
customers will continue to allocate a portion of their advertising budget to
Internet advertising or that the demand for Internet advertising will continue
to develop to sufficiently support Internet advertising as a significant
advertising medium. If the demand for Internet advertising develops more slowly
than we expect, then DoubleClick's business, results of operations and financial
condition could be materially and adversely affected.
There are currently no standards for the measurement of the effectiveness of
Internet advertising, and standard measurements may need to be developed to
support and promote Internet advertising as a significant advertising medium.
DoubleClick's advertising customers may challenge or refuse to accept its or
third-party measurements of advertisement delivery results, and its customers
may not accept any errors in such measurements. In addition, the accuracy of
database information used to target advertisements is essential to the
effectiveness of Internet advertising that may be developed in the future. The
information in DoubleClick's database, like any database, may contain
inaccuracies which its customers may not accept.
A significant portion of DoubleClick's revenue is derived from the delivery
of advertisements placed on Web sites which are designed to contain the features
and measuring capabilities requested by advertisers. If advertisers determine
that those ads are ineffective or unattractive as an advertising medium or if
DoubleClick is unable to deliver the features or measuring capabilities
requested by advertisers, the long-term growth of its online advertising
business could be limited and its revenue levels could decline. Also, there are
'filter' software programs that limit or prevent advertising from being
delivered to a user's computer. The commercial viability of Internet
advertising, and DoubleClick's business, results of operations and financial
condition, would be materially and adversely affected by Web users' widespread
adoption of this software.
CHANGES IN GOVERNMENT REGULATION COULD DECREASE DOUBLECLICK'S REVENUE AND
INCREASE ITS COSTS.
Laws and regulations directly applicable to Internet communications,
commerce and advertising are becoming more prevalent, and new laws and
regulations are under consideration by the United States Congress and state
legislatures. Any legislation enacted or restrictions arising from current or
future government investigations or policy could dampen the growth in use of the
Internet generally and decrease the acceptance of the Internet as a
communications, commercial and advertising medium. State governments or
governments of foreign countries might attempt to regulate DoubleClick's
transmissions or levy sales or other taxes relating to DoubleClick's activities.
The European Union has enacted its own privacy regulations that may result in
limits on the collection and use of certain user information by DoubleClick. The
laws governing the Internet, however, remain largely unsettled, even in areas
where there has been some legislative action. It may take years to determine
whether and how existing laws such as those governing intellectual property,
privacy, libel and taxation apply to the Internet and Internet advertising. In
addition, the growth and development of Internet commerce may prompt calls for
more stringent consumer protection laws, both in the United States and abroad,
that may impose additional burdens on companies conducting business over the
Internet. DoubleClick's business, results of operations and financial condition
could be materially and adversely affected by the adoption or modification of
laws or regulations relating to the Internet.
CHANGES IN LAWS RELATING TO DATA COLLECTION AND USE PRACTICES AND THE PRIVACY OF
INTERNET USERS AND OTHER INDIVIDUALS COULD HARM DOUBLECLICK'S BUSINESS.
The U.S. federal and various state governments have recently proposed
limitations on the collection and use of information regarding Internet users.
In October 1998, the European Union
26
<PAGE>
adopted a directive that may limit DoubleClick's collection and use of
information regarding Internet users in Europe. At this stage, Double Click's
DART technology targets advertising to users through the use of 'cookies' and
other non-personally-identifying information, with the exception of advertising
delivered to Web sites in Germany where DoubleClick does not currently set
cookies. DoubleClick is developing new capabilities that would permit its DART
technology to target users using anonymous online preference marketing
techniques. The effectiveness of DoubleClick's DART technology could be limited
by any regulation limiting the collection or use of information regarding
Internet users. Since many of the proposed laws or regulations are just being
developed, DoubleClick cannot yet determine the impact these regulations may
have on its business.
In addition, growing public concern about privacy and the collection,
distribution and use of information about individuals has led to self-regulation
of these practices by the Internet advertising and direct marketing industry and
to increased federal and state regulation. The Network Advertising Initiative,
or NAI, of which DoubleClick is a member along with other Internet advertising
companies, has developed self-regulatory principles for online preference
marketing. These principles were recently endorsed by the Federal Trade
Commission and the Clinton Administration, and are in the process of being
adopted by the NAI companies. The Direct Marketing Association, or DMA, the
leading trade association of direct marketers, has adopted guidelines regarding
the fair use of this information which it recommends participants, such as
DoubleClick, through DoubleClick Data Services, in the direct marketing industry
follow. DoubleClick is also subject to various federal and state regulations
concerning the collection, distribution and use of information regarding
individuals. These laws include the Federal Drivers Privacy Protection Act of
1994 and state laws which limit or preclude the use of voter registration and
driver's license information, as well as laws which govern the collection and
release of consumer credit information. Although DoubleClick's compliance with
the DMA's guidelines and applicable federal and state laws and regulations has
not had a material adverse effect on it, DoubleClick cannot assure you that the
DMA will not adopt additional, more burdensome guidelines or that additional,
more burdensome federal or state laws or regulations, including antitrust and
consumer privacy laws, will not be enacted or applied to it or its clients,
which could materially and adversely affect the business, financial condition
and results of operations of DoubleClick Data Services.
CHANGING REQUIREMENTS FOR FAIR INFORMATION COLLECTION PRACTICES AND HEIGHTENED
SCRUTINY OF DOUBLECLICK'S PRODUCTS OR SERVICES COULD REQUIRE OR CAUSE CHANGES IN
THE WAY IT CONDUCTS OR PLANS TO CONDUCT ITS BUSINESS.
There has been public debate about how fair information collection practices
should be formulated for the online and offline collection, distribution and use
of information about a consumer. Some of the discussion has focused on the fair
information collection practices that should apply when information about an
individual that is collected in the offline environment is associated with
information that is collected over the Internet about that individual. Following
DoubleClick's announcement of the Abacus merger, DoubleClick has seen a
heightened public discussion and speculation about the information collection
practices that will be employed in the industry generally, and specifically by
it.
DoubleClick is working with industry groups, such as the NAI and the Online
Privacy Alliance, to establish such standards with the U.S. government.
Nonetheless, DoubleClick cannot assure you that it will be successful in
establishing industry standards acceptable to the U.S. government or the various
state governments, or that the standards it establishes will not require
material changes to its business plans. DoubleClick also cannot assure you that
its business plans, or any U.S. industry standards that are established, will
either be acceptable to any non-U.S. government or conform to foreign legal and
business practices. As a consequence of governmental legislation or regulation
or enforcement efforts or evolving standards of fair information collection
practices, DoubleClick may be required to make changes to its products or
services in ways that could diminish the effectiveness of the product or service
or its attractiveness to potential
27
<PAGE>
customers. In addition, given the heightened public discussion about consumer
online privacy, DoubleClick cannot assure you that its products and business
practices will gain market acceptance, even if they do conform to industry
standards. Separately, computer users may also use software designed to filter
or prevent the delivery of advertising to their computers. DoubleClick cannot
assure you that the number of computer users who employ filtering software will
not increase. In the case that one or more of these scenarios occur,
DoubleClick's business, financial condition and results of operations could be
materially and adversely affected.
DOUBLECLICK'S BUSINESS MAY SUFFER IF THE WEB INFRASTRUCTURE IS UNABLE TO
EFFECTIVELY SUPPORT THE GROWTH IN DEMAND PLACED ON IT.
DoubleClick's success will depend, in large part, upon the maintenance of
the Web 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 Web access and services and
improved content. DoubleClick cannot assure you that the Web infrastructure will
continue to effectively support the demands placed on it as the Web 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, DoubleClick may have to spend considerable amounts to adapt its
solutions accordingly. Furthermore, the Web has experienced a variety of outages
and other delays due to damage to portions of its infrastructure. These outages
and delays could impact the Web sites of Web publishers using our solutions and
the level of user traffic on Web sites on its DoubleClick networks.
DOUBLECLICK DATA SERVICES IS DEPENDENT ON THE SUCCESS OF THE DIRECT MARKETING
INDUSTRY FOR ITS FUTURE SUCCESS.
The future success of DoubleClick Data Services is dependent in large part
on the continued demand for its services from the direct marketing industry,
including the catalog industry, as well as the continued willingness of catalog
operators to contribute their data to DoubleClick. Most of its Data Services
clients are large consumer merchandise catalogs operators in the United States.
A significant downturn in the direct marketing industry generally, including the
catalog industry, or withdrawal by a substantial number of catalog operators
from the Abacus Alliance, would have a material adverse effect on DoubleClick's
business, financial condition and results of operations. Many industry experts
predict that electronic commerce, including the purchase of merchandise and the
exchange of information via the Internet or other media, will increase
significantly in the future. To the extent this increase occurs, companies which
now rely on catalogs or other direct marketing avenues to market their products
may reallocate resources toward these new direct marketing channels and away
from catalog-related marketing or other direct marketing avenues, which could
adversely affect demand for DoubleClick's Data Services. In addition, the
effectiveness of direct mail as a marketing tool may decrease as a result of
consumer saturation and increased consumer resistance to direct mail in general.
INCREASES IN POSTAL RATES AND PAPER PRICES COULD HARM DOUBLECLICK DATA SERVICES.
The direct marketing activities of DoubleClick's Abacus Alliance clients are
adversely affected by postal rate increases, especially increases that are
imposed without sufficient advance notice to allow adjustments to be made to
marketing budgets. Higher postal rates may result in fewer mailings of direct
marketing materials, with a corresponding decline in the need for some of the
direct marketing services offered by DoubleClick. Increased postal rates can
also lead to pressure from DoubleClick's clients to reduce its prices for its
services in order to offset any postal rate increase. Higher paper prices may
also cause catalog companies to conduct fewer or smaller mailings which could
cause a corresponding decline in the need for DoubleClick's services.
DoubleClick's clients may aggressively seek price reductions for its services to
offset any increased materials cost. Any of these occurrences could materially
and adversely affect the business, financial condition and results of operations
of DoubleClick's Abacus business.
28
<PAGE>
RISKS RELATED TO NETCREATIONS
In addition to the risks relating to the merger and DoubleClick discussed
above, NetCreations is subject to its own specific risks relating to it business
model, strategy and the legal, regulatory and business environment, including
those set forth below.
NETCREATIONS DEPENDS ON CONTINUED GROWTH IN USE OF THE INTERNET FOR E-MAIL
DIRECT MARKETING AND E-COMMERCE.
The business of e-mail direct marketing and e-commerce is new and rapidly
evolving. NetCreations' business would be adversely affected if Internet usage
for the exchange of information and for commerce does not continue to grow
because advertisers might feel less compelled to use NetCreations' services as
opposed to more traditional advertising services. Internet usage may be
inhibited for a number of reasons, such as:
inadequate network infrastructure;
security concerns;
inconsistent quality of service; and
lack of availability of cost-effective, high-speed service.
THE ACCEPTANCE AND EFFECTIVENESS OF INTERNET OPT-IN E-MAIL DIRECT MARKETING IS
RELATIVELY UNPROVEN.
NetCreations' future success will depend on an increase in the use of the
Internet as an opt-in marketing medium or for opt-in e-mail generally. The
opt-in e-mail direct marketing industry is new and rapidly evolving.
Consequently, current indications of its effectiveness compared to traditional
postal direct marketing may not be supported as the industry matures. As a
result, there generally is significant uncertainty about the demand and market
acceptance for opt-in e-mail marketing solutions or Internet advertising
solutions.
Many of NetCreations' current or potential customers may have little or no
experience using the Internet for direct marketing purposes. The adoption of
Internet direct marketing, particularly by those entities that have historically
relied upon traditional media and mailings for marketing, requires the
acceptance of a new way of conducting business. These companies may find e-mail
direct marketing to be less effective for promoting their products and services
as compared to traditional mass media and postal marketing.
NetCreations cannot assure you that the business for e-mail direct marketing
will continue to emerge, or will become sustainable.
INTERNET, SOFTWARE OR HARDWARE FAILURES OR SHORTCOMINGS COULD ADVERSELY AFFECT
NETCREATIONS' BUSINESS IN DIVERSE WAYS.
NetCreations depends on software, hardware and the Internet to collect,
store, retrieve and process e-mail addresses and other data and to send e-mail
for its direct marketing customers. The third-party Web sites which NetCreations
relies upon to collect e-mail addresses are less likely to collect additional
e-mail addresses for it if their operations are disrupted or slowed by Internet,
software or hardware failures or shortcomings or if such occurrences discourage
potential visitors from using the Internet or visiting their sites. Direct
marketers are less likely to utilize NetCreations' services if potential
customers are prevented or discouraged from using the Internet and receiving
promotional messages due to Internet, software, or hardware failures or
shortcomings.
Many of the Internet service providers and Web site operators on whom
NetCreations depends have experienced significant service slowdowns,
malfunctions, outages and capacity limitations. NetCreations also depends upon
the reliability, speed, data capacity, ease of use, accessibility and security
of the Internet as well as its continued development and acceptance for
commercial use generally.
29
<PAGE>
The Internet infrastructure may not be able to support the increasing
demands placed on it at acceptable service levels as Internet usage grows. An
individual's satisfactory Internet experience may also depend on the proper
functioning and the continued development of equipment such as high speed modems
and personal computers. Not all software and equipment protocols and standards
are compatible. Users may experience difficulties due to computer-related,
telecommunications, or other equipment, software, or system failures or
shortcomings unrelated to NetCreations' services.
In addition, some of NetCreations systems' infrastructure is not yet
supported by redundant servers. Any failure in NetCreations' system that is not
backed up by redundant servers could cause significant delays in its business
operations.
If NetCreations experiences a temporary or permanent business interruption,
whether due to casualty, an operating malfunction, a power outage or otherwise,
NetCreations may have to reconfigure its software, hardware and Internet
infrastructure to address its customers' needs and orders. NetCreations may be
unable to do so effectively or rapidly enough to avoid loss of business or
damage to its reputation. Any interruption of service would be potentially
harmful to NetCreations' business and reputation because even a short
interruption in the midst of performing a time-sensitive project for a customer
could be very damaging to its relationship with that customer. In certain
instances, such as power outages or Internet service provider outages,
NetCreations may be unable to do anything other than wait for the restoration of
service and suffer the consequences of business interruption.
YOU MAY HAVE DIFFICULTY EVALUATING NETCREATIONS' BUSINESS AND PROSPECTS OR
PROJECTING NETCREATIONS' FUTURE OPERATING RESULTS BECAUSE NETCREATIONS HAS A
RELATIVELY LIMITED OPERATING HISTORY AND NETCREATIONS WILL ENCOUNTER RISKS AND
DIFFICULTIES AS AN EARLY-STAGE COMPANY IN A NEW AND RAPIDLY EVOLVING INDUSTRY.
NetCreations has been in the business of providing Internet marketing
services since NetCreations commenced operations in 1995. During 1996,
NetCreations' principal service offerings transitioned from that of Web site
design and promotion to opt-in e-mail marketing services. It is unlikely that
the growth rates NetCreations has experienced are sustainable as the business
for opt-in e-mail marketing services mature and more competitors enter the
field. NetCreations will encounter risks and difficulties frequently experienced
by early-stage companies in new and rapidly evolving businesses, including its
ability to:
anticipate and adapt to the evolving business;
implement sales and marketing initiatives;
develop and introduce new products and services;
enhance NetCreations' brands;
attract, retain and motivate qualified personnel;
respond to actions taken by its competitors;
effectively manage its growth by building a solid base of management,
operations and technology; and
integrate acquired businesses, technologies and services.
NetCreations may not successfully address any of these risks.
NETCREATIONS' FUTURE REVENUES ARE UNPREDICTABLE, AND ITS FINANCIAL RESULTS MAY
FLUCTUATE.
NetCreations' historical financial data is not reliable as a basis upon
which to predict its future revenues or operating expenses for a number of
reasons, including its limited operating history, the emerging nature of
NetCreations' industry category, and its growth strategy. Furthermore, there is
no guarantee that the seasonal fluctuations that NetCreations' has experienced
in its operating results to date will continue as before as its business and the
industry evolve and grow.
30
<PAGE>
NetCreations' financial results may fluctuate significantly because of
several factors, such as the following, many of which are beyond its control:
Revenues in any quarter are substantially dependent on orders booked and
delivered in that quarter;
Demand by direct marketers for use of opt-in e-mail addresses in
NetCreations' database may fluctuate due to seasonal and cyclical marketing
campaigns;
The industry in which NetCreations competes is relatively new and rapidly
evolving and has recently experienced slower growth than in the past,
which, if this trend were to continue, could materially and adversely
affect NetCreations' business;
NetCreations' expectations to increase its expense levels in the near
future in an attempt to grow its database and its market share more
rapidly. As a result, any delay in generating or recognizing revenues could
cause significant variations in NetCreations' operating results from
quarter to quarter and could result in operating losses;
The relatively new industry in which NetCreations is engaged has not been
tested in a recessionary economic environment where budget constraints and
contraction in income available for discretionary purchases could reduce
the use of its services;
Competition is increasing in NetCreations' industry, and it anticipates
that this could result in changes in its sales, pricing policies (such as a
shift toward a 'cost-per-click' and/or 'cost-per-action' pricing model) or
expenses or those of NetCreations' competitors; and
General economic conditions and economic conditions specific to the
Internet and the online direct marketing industry may vary.
HISTORICALLY, NETCREATIONS' QUARTERLY OPERATING RESULTS HAVE FLUCTUATED
SEASONALLY SO THE RESULTS OF ONE QUARTER WERE NOT NECESSARILY INDICATIVE OF
RESULTS IN THE SUCCEEDING QUARTER AND THE PRICE OF ITS SECURITIES HAS FLUCTUATED
IN RESPONSE TO THOSE FLUCTUATIONS.
Historically, NetCreations' operating results have coincided with the
traditional postal direct marketing industry trend toward higher revenues in the
fourth quarter of the year, when direct marketers send out holiday promotions,
and somewhat lower revenues during the summer, when direct marketing activity is
reduced overall. NetCreations' future revenues are unpredictable, and its
financial results may fluctuate independent of historical seasonal patterns.
THERE IS NO ASSURANCE THAT NETCREATIONS WILL CONTINUE TO BE PROFITABLE, AND IT
MAY INCUR LOSSES IN THE FUTURE.
For the years ended 1997, 1998 and 1999 and six month periods ended
June 30, 1999 and 2000, NetCreations had net income of $260,349, $605,863,
$4,531,508, $1,325,207 and $3,884,771. NetCreations was an S corporation through
November 15, 1999. On a pro forma basis, to adjust net income as if it had been
fully subject to Federal, state and local taxes as a C corporation, rather than
an S corporation, NetCreations would have had net income for the years ended
1997, 1998 and 1999 and the six month periods ended June 30, 1999 and 2000 of
$154,377, $362,091, $2,940,508, $806,207 and $3,884,771. As of June 30, 2000,
NetCreations had retained earnings of $4,792,637 and shareholder's equity of
$49,508,356. NetCreations may not be able to sustain its current levels of
profitability and may incur losses in the future.
NetCreations expects to increase its expenditures on sales and marketing,
research and development, and general and administrative expenses in order to
expand its business. If NetCreations acquires other businesses in connection
with its planned expansion, it may have to write off goodwill and/or other
intangibles associated with any such acquisition. Intangible assets would be
amortized over their estimated useful lives, while in process research and
development would be written off at the date of acquisition. Increased
competition in NetCreations' industry may also adversely affect its
profitability as may other conditions which may be beyond its control.
31
<PAGE>
In addition, many of NetCreations' direct marketing customers are not profitable
and may not have resources available in the future to rent its lists or pay for
NetCreations' services.
CHANGES IN NETCREATIONS' COMMISSION POLICIES MAY RESULT IN REDUCED MARGINS OR
NEGATIVE IMPACTS ON ITS CASH FLOW.
In a certain number of cases, primarily involving Web sites that
NetCreations believes are well-known to both customers and direct marketing
customers, NetCreations has agreed to pay advance fees to the Web site. In some
of those cases, NetCreations has the right to offset against those payments any
payment of the percentage of fees that may become payable to the Web site in the
future if an e-mail address it owns is used for a particular e-mail marketing
campaign. In other cases, NetCreations pays third-party Web sites flat fees for
the collection of e-mail addresses for inclusion in NetCreations' database in
addition to paying a percentage of the fee from direct marketing customers to
those Web sites. Advance payments burden NetCreations' cash flow and might
prevent it from making other expenditures that might generate revenues or growth
for NetCreations. NetCreations' net income would be negatively affected if a
list management arrangement is not profitable enough for NetCreations to earn
amounts sufficient to offset advance payments, or if a list management
arrangement is terminated before NetCreations is able to earn amounts sufficient
to offset advance payments.
NetCreations typically pays Web site owners commissions amounting to 50% of
the revenue it earns, less volume discounts, if applicable, each time
NetCreations sends an e-mail message to any e-mail address list owned by that
Web site owner. However, competitive pressures or strategic or other reasons may
cause NetCreations to make such advances or pay commissions of more than 50% of
the revenue from sending e-mail messages to e-mail address list owners in the
future. If NetCreations pays to its Web site owners a higher rate of
commissions, its margins will be reduced. NetCreations may have reduced profits
or may become unprofitable if any increase in the rate of commissions paid to
Web site owners, and the consequent decrease in its margins, is not offset by
lower general and administrative costs as a percentage of revenues or increased
revenues from other sources.
IF NETCREATIONS' DIRECT MARKETING CUSTOMERS CEASE TO DO BUSINESS WITH IT,
NETCREATIONS MIGHT BE UNABLE TO REPLACE LOST REVENUES.
NetCreations has no long-term contracts with any of its direct marketing
customers. There is no guarantee that any of the direct marketers who have
previously used NetCreations' services will use its lists in any particular
quarter or that they will continue to use its lists in the future. Substantially
all of the contracts with NetCreations' direct marketing customers can be
terminated on short notice without penalty.
NETCREATIONS IS DEPENDENT ON THIRD PARTIES TO GENERATE A SUFFICIENT NUMBER OF
E-MAIL ADDRESSES AND, IF THEY TERMINATE THEIR AGREEMENTS WITH NETCREATIONS,
NETCREATIONS' BUSINESS COULD BE SERIOUSLY HARMED.
NetCreations depends on third parties to generate a sufficient number of
e-mail addresses and, if they terminate their agreements with it, NetCreations'
business could be seriously harmed. NetCreations depends on its network of
third-party Web sites to post sign-up forms on their sites and encourage
visitors to their sites to sign up to receive commercial e-mail messages from
NetCreations' direct marketing customers about topics of interest. Several
high-traffic sites with which it signed agreements in the past have not been
successful in generating significant numbers of opt-in e-mail addresses for
NetCreations' database. Furthermore, the sites in the network:
are not within NetCreations' control;
may incorporate into their Web sites the sign-up forms of other e-mail
marketing companies in addition to or in place of NetCreations' sign-up
form; and
are not obligated to continue to build lists for NetCreations.
32
<PAGE>
Net revenues generated from the e-mail address lists of two of the Web sites
in NetCreations' network accounted for approximately 24% and 28% of
NetCreations' total net revenues during 1999 and the first six months of 2000,
respectively. Loss of these e-mail address lists could materially adversely
affect NetCreations' business, financial condition and results of operations.
NetCreations intends to increase the size of its database through
partnership agreements with high-traffic Web sites, but there is no assurance
that it will do so in timely fashion or at all. NetCreations' increasing
expenditures to develop this channel could materially adversely affect its
operating margins and its cash flow. If NetCreations fails to successfully
implement this strategy, its business, financial condition and results of
operations could be materially adversely affected.
THE INTERNET USERS WHO SIGN UP TO RECEIVE NETCREATIONS' MAILINGS CAN OPT-OUT, OR
REMOVE THEMSELVES FROM ITS LISTS, OR MAY CHANGE THEIR E-MAIL ADDRESSES AT ANY
TIME.
NetCreations provides detailed instructions at the top of every e-mail
message it sends out allowing Internet users to remove themselves from
NetCreations' lists. Because this is a new business model, NetCreations does not
know how long the average Internet user will stay on its lists or how many
mailings they will accept before opting out. Currently, the opt-out rate is less
than one percent on any given mailing. However, as more and more marketers use
its lists and send out offers, the number of mailings sent to names on its lists
also increases and the number of those opting out may increase as well. If the
rate of list removal requests were to increase substantially, NetCreations' fees
for the use of its lists could decrease and its business, financial condition,
and results of operations could be materially adversely affected.
In addition, it is possible that some of the Internet users in NetCreations'
database could change their e-mail addresses, thus making some of NetCreations'
direct marketing customers' messages undeliverable. If a message sent to an
Internet user is returned to NetCreations because the e-mail address is invalid,
NetCreations removes that e-mail address from its database. If a large number of
Internet users in NetCreations' database change their e-mail addresses and do
not update the information in its database, or if they delay before opting in
again or do not opt in again, then NetCreations' business, financial condition
or results of operations could be materially adversely affected.
NETCREATIONS' BUSINESS COULD BE SERIOUSLY AFFECTED BY THE PRIVACY CONCERNS OF
INTERNET USERS.
NetCreations' opt-in e-mail direct marketing service collects consumer
preference and profile information each time an Internet user visits a
participating Web site and volunteers information in response to survey
questions. Privacy concerns may cause users to resist signing up for its lists
and providing the personal data necessary to support the growth and expansion of
its database. More importantly, even the perception of privacy concerns, whether
or not valid, may indirectly inhibit market acceptance of its service.
NETCREATIONS DEPENDS ON ADDING TO AND RETAINING ITS MARKETING CUSTOMER BASE.
NetCreations has sent e-mail messages for direct marketing campaigns to
e-mail addresses in its database on behalf of over 2,000 e-mail direct marketing
customers. However, the largest 15 customers (including resellers) accounted for
approximately 33% of NetCreations' net revenues in 1999 and approximately 50%
and 40% of net revenues for the six months ended June 30, 1999 and 2000,
respectively. NetCreations' ability to attract new marketing customers will
depend on a variety of factors, including the responsiveness, scalability,
reliability and cost-effectiveness of its e-mail marketing services and its
ability to effectively market these services.
Many of NetCreations' current marketing customers initially use a small
number of its lists for testing purposes. If such a test mailing is successful,
the customer may repeat his mailing to a much larger universe of lists and
continue to use its lists in the future. If NetCreations fails to generate
repeat and expanded business from its current and future customers, its
business, financial condition and results of operations would be seriously
harmed.
33
<PAGE>
NETCREATIONS RELIES ON RESELLERS AND INTENDS TO INCREASE ITS RELIANCE ON
RESELLERS.
NetCreations intends to increase the proportion of its marketing customers
obtained through its reseller channels, which include e-mail address list
brokers, interactive advertising agencies, Web design firms and Web sites that
attract small business owners. Such parties are typically referred to as
'resellers' because they place orders in their own names for use of opt-in
e-mail addresses in NetCreations database on behalf of their e-mail direct
marketing customers. NetCreations bills the reseller its customary fees for use
of opt-in e-mail addresses in its database by their e-mail direct marketing
customers, less any applicable volume discounts, but NetCreations also grants a
brokerage discount to the reseller. In 1998, 1999 and the six months ended
June 30, 1999 and 2000, four resellers were responsible for approximately 38%,
49.5%, 40% and 60% of NetCreations' net revenues.
While NetCreations has expanded its own sales force, NetCreations believes
that it can grow its business more rapidly by relying on the larger aggregate
sales force represented by those reseller channels. If NetCreations fails to
grow its business, competitors may be able to enter its industry or find ways to
compete more effectively with NetCreations for its customers. Consequently, if
NetCreations fails to increase the proportion of its marketing customers
obtained through reseller channels, its business, financial condition and
results of operations could be materially adversely affected.
Because NetCreations gives resellers discounts, any sales through resellers
will have lower gross margins than direct sales of the same e-mail addresses. To
the extent NetCreations increases the proportion of sales through resellers, its
net revenues and gross profits could decrease. NetCreations' agreements with
such resellers are generally not exclusive and, in many cases, may be terminated
by either party without cause. These resellers do not have minimum purchase or
resale requirements. Many of these resellers market e-mail lists that are
competitive with its e-mail lists. These resellers may not give a high priority
to the marketing of NetCreations' lists or may not continue to carry its lists.
They may give a higher priority to other lists, including their own lists or the
lists of its competitors. NetCreations may not retain any of its current
resellers or successfully recruit new resellers.
THE PLANNED EXPANSION OF NETCREATIONS' BUSINESS WILL STRAIN ITS MANAGEMENT,
SYSTEMS AND OTHER RESOURCES.
Since inception, NetCreations' net revenues have grown from $102,000 in
1995, to $3.4 million in 1998, to $20.7 million in 1999. Net revenues for the
six months ended June 30, 1999 and 2000 were $5.2 million and $30.6 million,
respectively. NetCreations had two employees in 1995, 10 at the end of 1998, 40
at the end of 1999 and 62 at June 30, 2000. In addition, the pursuit of
NetCreations' business strategy will continue to place a significant strain upon
its managerial, operational and financial resources.
NetCreations will need to continue to improve its financial and management
controls, reporting systems and procedures. NetCreations will also have to
continue to expand, train and manage its work force for marketing, sales and
technical support, product development, and infrastructure management, and
manage multiple relationships with customers and other third parties.
NetCreations also plans to expand the geographic scope of its customer base and
operations. NetCreations will need to continually expand and upgrade its
technology infrastructure and systems and ensure continued high levels of
service, speedy operation, and reliability. To achieve its objectives,
NetCreations may acquire technologies or products or enter into strategic
alliances or acquisitions, although NetCreations has no plans or agreements to
do so at the present time.
NETCREATIONS FACES INTENSE COMPETITION AND MAY BE UNABLE TO COMPETE
SUCCESSFULLY.
NetCreations' business is intensely competitive, evolving and subject to
rapid technological change. NetCreations expects the intensity of competition to
increase in the future. NetCreations believes that it must rapidly expand its
business and market share. If NetCreations fails to do so,
34
<PAGE>
competitors may copy its business strategy or take other steps to prevent it
from achieving its goals.
NetCreations' competitors include other e-mail direct marketing companies;
incentive-based direct marketers; providers of permission-based outsourced
e-mail solutions; e-mail list owners that manage their own e-mail lists
in-house; banner advertising companies; and postal direct marketing companies.
In addition, because there are relatively low barriers to entry in the e-mail
direct marketing business, NetCreations expects additional competition from
other established and emerging companies as the e-mail direct marketing business
continues to develop and expand. NetCreations expects to face competition in the
future from other companies entering the field as e-mail address list owners,
managers and brokers. Companies that operate banner advertising networks have
entered the e-mail marketing business through acquisitions of competing e-mail
marketing companies.
Many of NetCreations' competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
significantly greater name recognition, and a larger installed base of customers
than NetCreations has. In addition, many of NetCreations' competitors have
well-established relationships with its current and potential customers, have
extensive knowledge of its industry and are capable of offering complementary
services and products that are beyond the scope of its current business
operations but might be attractive to customers seeking to purchase services in
addition to e-mail direct marketing services. As a result, its competitors may
be able to respond more quickly to new or emerging technologies and changes in
customer requirements, or to devote greater resources to the development,
promotion and sale of their services than NetCreations can.
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 services to address customer needs. Accordingly,
it is possible that new competitors or alliances among competitors may emerge
and rapidly acquire significant market share. NetCreations also expects that
competition will increase as a result of industry consolidations.
NETCREATIONS' MARKET IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE.
NetCreations' future success depends on its ability to:
adapt to rapidly changing technologies;
adapt its services to evolving industry standards; and
improve the performance, features and reliability of its service and
product offerings in response to competitive product and service offerings
and evolving demands of the marketplace.
NetCreations cannot assure you that it will succeed in addressing these
issues. NetCreations' efforts to upgrade its software or introduce new software
may not be completed in a timely fashion or at all and may result in errors
which could seriously harm it. In addition, the widespread adoption of new
Internet networking technologies or other technological changes could require
NetCreations to expend substantial amounts of capital to change its services or
infrastructure. Moreover, these changes may involve new technologies which may
not be measurable by its current methods.
NETCREATIONS IS HIGHLY DEPENDENT UPON ROSALIND RESNICK AND RYAN SCOTT
DRUCKENMILLER, ITS FOUNDERS, AND ITS OTHER EMPLOYEES AND THE LOSS OF THEIR
SERVICES COULD HARM NETCREATIONS.
Rosalind Resnick, NetCreations' Chief Executive Officer, President and
Chairman of the board of directors, and Ryan Scott Druckenmiller, its Chief
Technology Officer and a member of its board of directors, founded NetCreations
and are essential to the continued viability of the business. NetCreations has
key man life insurance in the amount of $5 million each, and disability
insurance in the amount of $3 million each, on Ms. Resnick and on Mr.
Druckenmiller.
35
<PAGE>
NetCreations cannot assure you that this coverage will be adequate to compensate
it for the loss of services of either one of its founders.
NetCreations' future success depends on the continued service of its senior
management, sales, marketing, customer service, administrative, and technology
personnel. The loss of the services of one or more of NetCreations' personnel
could seriously harm its business, financial condition and results of
operations. Although Ms. Resnick and Mr. Druckenmiller, as well as the Chief
Financial Officer, the Senior Vice President of Sales and Business Development,
the Vice President of Sales and the Chief Information Officer have all executed
and delivered employment contracts with NetCreations which will expire late in
2002 or early in 2003, as the case may be, the employees may terminate the
contracts at any time upon 90-days written notice. In addition, the balance of
NetCreations' work force are employed on an at-will and short-term basis.
NetCreations' future success also depends on its continuing ability to
attract, hire, train and retain other highly skilled managerial, technical,
sales, marketing and customer service personnel in order to accommodate the
growth of NetCreations' business.
NETCREATIONS MAY NOT BE ABLE TO SUCCESSFULLY PROTECT ITS INTELLECTUAL PROPERTY.
Although NetCreations is a marketing company, it also depends heavily on
technology to operate its business. NetCreations has developed proprietary
technology to enable Web site visitors to opt-in to receive targeted advertising
information from NetCreations' direct marketing customers. The software also
enables its direct marketing customers and e-mail address list brokers to target
e-mail addresses in its database associated with persons with specific
demographics, and allows direct marketers to track the response rates to their
mailings. NetCreations has developed a double opt-in confirmation system which
sends Internet users a confirmation e-mail message after they have signed up
their e-mail address in NetCreations' database and requires them to verify that
they would like to begin receiving commercial e-mail messages from NetCreations'
marketing clients. NetCreations has filed a patent application for this
technology. NetCreations also has know-how and trade secrets, including the
identities and other information concerning its direct marketing customers and
the information in its e-mail address database, which NetCreations seeks to
protect. If NetCreations does not adequately protect its intellectual property,
its business, financial condition and results of operations could be materially
adversely affected.
While NetCreations is unable to determine the extent to which piracy of its
technology exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect NetCreations'
proprietary rights to as great an extent as do the laws of the United States.
NetCreations' means of protecting its proprietary rights may not be adequate.
NetCreations' competitors may independently develop similar technology,
duplicate NetCreations' technology design around patents issued to it or its
other intellectual property, attempt to copy aspects of its service, or obtain
and use its proprietary information that NetCreations regards as proprietary.
There has been a substantial amount of litigation in the software industry
regarding intellectual property rights. It is possible that, in the future,
third parties may claim that NetCreations' current or potential future
technologies infringe upon their intellectual property. NetCreations has not
performed any comprehensive analysis of patents of others that may limit its
ability to do business.
NetCreations expects that as the number of products and competitors in its
industry segment grows and the functionality of products in different industry
segments overlaps infringement claims will be made more frequently. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation and diversion of management resources, cause product shipment delays
or require NetCreations to enter into royalty or licensing agreements. Such
royalty or licensing agreements, if required, may not be available on terms
acceptable to it or at all, which could seriously harm its business, financial
condition and results of operations.
36
<PAGE>
INCREASING GOVERNMENT REGULATION COULD LIMIT THE DEMAND FOR NETCREATIONS'
SERVICES, WHICH COULD SERIOUSLY HARM NETCREATIONS' BUSINESS.
As Internet marketing and commerce evolves, NetCreations expects that
federal, state or foreign governments will increasingly adopt laws and
regulations which could hinder the acceptance of the Internet as a
communications and commercial medium or otherwise harm NetCreations' business.
NetCreations expects that laws or regulations will be enacted in various
jurisdictions covering issues such as:
the transmission of unsolicited e-mail marketing messages;
user privacy;
content of e-mail messages;
quality of products and services; and
the solicitation, collection, processing and distribution of
personal/customer information,
which could adversely affect its business. Such laws and regulations could
adversely affect the demand for its services if direct marketers perceive that
NetCreations will be hindered from reaching a substantial targeted audience or
that substantial liability might arise due to technical breaches of such
restrictions, such as limitations on content or transmission. NetCreations'
business exposure might increase substantially if it were to be held responsible
for the content or quality of e-mail messages which NetCreations transmits on
behalf of its direct marketing customers. If NetCreations is forced to bear
additional administrative burdens in collecting, storing or maintaining data,
its expenses would increase and market conditions might preclude NetCreations
from passing its increased costs on to its direct marketing customers. While
NetCreations seeks to respect Web site visitor privacy and does not send
unsolicited e-mail messages to its database, user privacy laws and regulations
might be designed so restrictively as to make it increasingly difficult to
obtain opt-in e-mail addresses or sell the use of those addresses to its direct
marketing customers.
Laws and regulations regulating the transmission of unsolicited e-mail
marketing messages are being considered by many jurisdictions. Legislation of
that type has recently been adopted by the States of California, Delaware,
Illinois, Nevada, Virginia and Washington, and similar legislation is pending in
the State of New York and in Congress. The Telecommunications Act of 1996
prohibits some types of information and content from being transmitted over the
Internet. The prohibition's scope and the liability associated with a
Telecommunications Act violation are currently unsettled. In addition, although
substantial portions of the Communications Decency Act were held to be
unconstitutional, NetCreations cannot be certain that similar legislation will
not be enacted and upheld in the future. The European Union adopted a Directive
on Privacy, effective on October 24, 1998, which establishes minimum standards
for the collection and use of personal identifying information in the European
Union and prohibits the transfer of this information to countries whose privacy
standards are deemed inadequate.
ROSALIND RESNICK AND RYAN SCOTT DRUCKENMILLER CONTROL NETCREATIONS, AND THEIR
INTERESTS MAY CONFLICT WITH YOUR INTERESTS.
As of October 31, 2000, Rosalind Resnick beneficially owned 5,754,500
shares, or approximately 37.0% of NetCreations' outstanding common stock, and
Ryan Scott Druckenmiller beneficially owned 5,230,035 shares, or approximately
33.7% of its common stock. In addition to being NetCreations' founders,
Ms. Resnick and Mr. Druckenmiller are executive officers and members of
NetCreations' board of directors. If Ms. Resnick and Mr. Druckenmiller were to
act in concert, they would be able to exercise control over all matters
requiring approval by shareholders, including the election of directors and
approval of significant corporate transactions, including the proposed merger
with DoubleClick. This concentration of ownership may also have the effect of
delaying or preventing a change in control of the company and of giving
Ms. Resnick and Mr. Druckenmiller the opportunity to substantially impact all
matters requiring approval by shareholders even if Ms. Resnick and
Mr. Druckenmiller do not act in concert.
37
<PAGE>
NETCREATIONS MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS.
Errors, omissions or defects in or other performance problems with
NetCreations' services could result in financial or other damages to its
marketing customers because NetCreations' marketing customers use its service
for time-critical communications with their prospective customers. NetCreations'
marketing customers could seek damages for losses from it. NetCreations' mailing
agreements typically contain provisions designed to limit NetCreations' exposure
to such claims, but the protection afforded by such provisions is dependent upon
the solvency of the parties to NetCreations' list owner agreements and existing
or future laws or unfavorable judicial decisions could negate such limitation of
liability provisions. NetCreations has not experienced material liability claims
to date. However, a liability claim brought against NetCreations, even if not
successful, could be time-consuming and costly. A liability claim could
materially adversely affect NetCreations' business, financial condition and
results of operations.
NETCREATIONS MAY BE SUBJECT TO CLAIMS DUE TO THE ACTIVITIES OF ITS CUSTOMERS.
NetCreations cannot predict whether its role in facilitating its customers'
promotion of products and services would expose NetCreations to liability. If
that should occur, NetCreations could be required to expend significant
management and financial resources to address any such claim or to pay any fines
or penalties which might result or NetCreations could be required to alter or
discontinue certain methods of doing business or take other steps which could be
materially adverse to NetCreations' business, financial condition, or results of
operations. NetCreations' current insurance may not provide adequate coverage
against claims which could have an adverse effect on its business.
THE FUTURE SALE OF SHARES OF NETCREATIONS' COMMON STOCK MAY NEGATIVELY AFFECT
NETCREATIONS' STOCK PRICE.
The market price of NetCreations' common stock could decline as a result of
sales by Ms. Resnick or Mr. Druckenmiller and option holders of a large number
of shares of NetCreations' common stock in the market or because of the
perception that such sales could occur. These sales also might make it more
difficult for NetCreations to sell equity securities in the future at a time and
at a price that NetCreations deems appropriate.
NETCREATIONS STOCK HAS EXPERIENCED, AND MAY CONTINUE TO EXPERIENCE PRICE AND
VOLUME FLUCTUATIONS.
The market price of NetCreations common stock has fluctuated in the past and
is likely to continue to be highly volatile and could be subject to wide
fluctuations. In addition, the market prices of the securities of
Internet-related companies have been especially volatile. These fluctuations
often have been unrelated or disproportionate to the operating performance of
these companies. These broad market and industry factors may materially
adversely affect the market price of NetCreations common stock regardless of
NetCreations' actual operating performance. In the past, companies that have
experienced volatility in the market price of their stock have been the object
of securities class action litigation. Any securities class action litigation
could result in substantial cost and divert the attention and resources of
NetCreations' management.
Following the announcement of the proposed merger with DoubleClick, a
complaint was filed in New York Supreme Court against NetCreations, its board of
directors and DoubleClick. The complaint alleges that the defendants breached
their fiduciary duties of due care and loyalty to NetCreations' public
shareholders in connection with the proposed merger with DoubleClick. The
complaint asks the court to (1) enjoin the consummation of the merger (2) award
unspecified damages from the defendants, (3) invalidate the termination fee
provisions of the merger agreement and (4) award plaintiff his costs and
disbursements, including reasonable counsel and experts' fees and expenses.
38
<PAGE>
NETCREATIONS DOES NOT PLAN TO PAY CASH DIVIDENDS EVEN THOUGH IT MADE
DISTRIBUTIONS TO ITS SHAREHOLDERS WHEN IT WAS A PRIVATE COMPANY.
From the date of commencement of NetCreations' business through
November 15, 1999, NetCreations elected to be taxed as an S corporation under
United States federal and state laws. In connection with that election,
NetCreations typically has made large distributions of income to its
shareholders each year, who were subject to all federal and substantially all
state taxes levied in respect of NetCreations' earnings. NetCreations'
shareholders paid taxes at their personal tax rates on that income and it did
not pay federal corporate income taxes on that income. On November 15, 1999,
NetCreations filed a notice of termination of its status as an S Corporation and
it has been taxed since then as a C corporation. As a result, NetCreations,
rather than its shareholders, has been taxed on income that it earned since
November 15, 1999. NetCreations does not currently intend to pay any cash
dividends from or after that date.
CERTAIN ANTI-TAKEOVER PROVISIONS MAY ADVERSELY AFFECT NETCREATIONS' SHARE PRICE
AND IMPEDE 'CHANGE OF CONTROL' TRANSACTIONS.
NetCreations' restated certificate of incorporation includes provisions
(1) requiring advance notice to NetCreations before nominating any person to be
elected a director or concerning any other matter to be voted upon by its
shareholders, (2) precluding shareholders from taking actions by written consent
in lieu of a meeting, (3) requiring a majority of its shareholders or its
president, chairman of its board of directors or a majority of its board to call
a special meeting of shareholders, and (4) requiring the affirmative vote of at
least two-thirds of its shareholders to amend these provisions. NetCreations'
by-laws include corresponding provisions, as well as a provision permitting its
board of directors to fill vacant directorships or increase the size of its
board of directors. Section 912 of the New York Business Corporation Law
prohibits an 'interested shareholder' from engaging in a 'business combination'
with NetCreations for a period of five years from the date that person first
became an interested shareholder unless certain conditions are met. Those
provisions could, together or separately:
discourage potential acquisition proposals;
delay or prevent a change in control; and
limit the price that certain investors might be willing to pay in the
future for shares of NetCreations' common stock.
In particular, NetCreations' restated certificate of incorporation permits
its board of directors to issue up to 5,000,000 shares of preferred stock with
rights and privileges that might be senior to its common stock, without the
consent of the holders of common stock. Those rights and privileges could
include voting rights that could effectively eliminate the rights of common
shareholders to control NetCreations and direct its affairs.
RISKS RELATED TO @PLAN
In addition to the risks discussed above, if DoubleClick completes the
acquisition of @plan, holders of DoubleClick common stock will also be subject
to the specific risks relating to @plan, including risks relating to its
business model, strategy, market and legal and regulatory environment. For a
detailed discussion of these risks, please see the risk factors included in
@plan's Annual Report on Form 10-K for the year ended December 31, 1999 filed
with the Securities and Exchange Commission under the Securities Exchange Act of
1934, which risk factors are incorporated by reference into this proxy
statement/prospectus.
FORWARD-LOOKING STATEMENTS IN THIS PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus and the documents incorporated by reference
into this proxy statement/prospectus contain forward-looking statements within
the 'safe harbor' provisions of the Private Securities Litigation Reform Act of
1995 with respect to DoubleClick's and NetCreations' financial condition,
results of operations and businesses and the expected impact of the merger on
39
<PAGE>
DoubleClick and NetCreations. Words such as 'anticipates,' 'expects,' 'intends,'
'plans,' 'believes,' 'seeks,' 'estimates' and similar expressions indicate
forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the
forward-looking statements. In evaluating the merger, you should carefully
consider the discussion of risks and uncertainties in the immediately preceding
section entitled 'Risk Factors,' those set forth under 'The Merger -- Background
of the Merger,' 'The Merger -- Reasons For the Merger; Recommendation of
NetCreations' Board of Directors' and 'The Merger -- Opinion of NetCreations'
Financial Advisor,' and in the information incorporated by reference into this
proxy statement/prospectus and included elsewhere in this proxy
statement/prospectus.
Accordingly, you should not place undue reliance on forward-looking
statements, which speak only as of the date of this proxy statement/prospectus,
or, in the case of documents incorporated by reference, the date of those
documents.
All subsequent written and oral forward-looking statements attributable to
DoubleClick or NetCreations or any person acting on their behalf are expressly
qualified in their entirety by the cautionary statements contained or referred
to in this section. Neither DoubleClick nor NetCreations assumes any obligation
to update any such forward-looking statements to reflect events or circumstances
after the date of this proxy statement/prospectus.
40
<PAGE>
THE SPECIAL SHAREHOLDERS MEETING
GENERAL
We are furnishing this proxy statement/prospectus to holders of NetCreations
common stock in connection with the solicitation of proxies by NetCreations'
board of directors for use at the NetCreations special shareholders' meeting to
be held on [ ] [ ], 2000, and any adjournment or postponement.
This proxy statement/prospectus is first being mailed to NetCreations
shareholders on or about [ ] [ ], 2000. This proxy statement/prospectus
is also being furnished to NetCreations shareholders as a prospectus in
connection with the issuance by DoubleClick of shares of DoubleClick common
stock as contemplated by the merger agreement.
DATE, TIME AND PLACE
The NetCreations special shareholders meeting will be held on [ ]
[ ], 2000 at .m., local time, at .
MATTERS TO BE CONSIDERED AT THE SPECIAL SHAREHOLDERS MEETING
At the NetCreations special shareholders meeting and any adjournment or
postponement of the special shareholders meeting, NetCreations shareholders will
be asked:
to consider and vote upon the adoption of the merger agreement;
to grant NetCreations' board of directors discretionary authority to
adjourn the special shareholders meeting to solicit additional votes for
adoption of the merger agreement; and
to transact such other business as may properly come before the special
meeting.
RECORD DATE
NetCreations' board of directors has fixed the close of business on
[ ] [ ], 2000, as the record date for determination of NetCreations'
shareholders entitled to notice of and to vote at the special meeting.
VOTING OF PROXIES
NetCreations requests that its shareholders complete, date and sign the
accompanying proxy and promptly return it in the accompanying envelope or
otherwise mail it to NetCreations. Brokers holding shares in 'street name' may
vote the shares only if the shareholder provides instructions on how to vote.
Brokers will provide instructions to beneficial owners on how to direct the
broker to vote the shares. All properly executed proxies that NetCreations
receives prior to the vote at the special shareholders meeting, and that are not
revoked, will be voted in accordance with the instructions indicated on the
proxies or, if no direction is indicated, to adopt the merger agreement.
NetCreations' board of directors does not currently intend to bring any other
business before the special shareholders meeting, and NetCreations' board of
directors is not aware of any other matters to be brought before the special
shareholders meeting. If other business properly comes before the special
shareholders meeting, the proxies will be voted in accordance with the judgment
of the proxyholders.
A shareholder may revoke his or her proxy at any time prior to its use:
by delivering to the secretary of NetCreations a signed notice of
revocation or a later-dated, signed proxy; or
by attending the special shareholders meeting and voting in person.
Attendance at the special shareholders meeting does not in itself constitute
the revocation of a proxy.
41
<PAGE>
VOTE REQUIRED
As of the close of business on [ ] [ ], 2000, there were 15,534,000
shares of NetCreations common stock outstanding and entitled to vote. The
holders of 66 2/3% of the outstanding shares of NetCreations common stock
outstanding as of the close of business on [ ] [ ], 2000 must adopt the
merger agreement. NetCreations shareholders have one vote per share of
NetCreations common stock owned on the record date.
As of October 31, 2000, directors and executive officers of NetCreations and
their affiliates beneficially owned an aggregate of 10,984,535 shares of
NetCreations common stock (exclusive of any shares issuable upon the exercise of
options) or approximately 70.7% of the shares of NetCreations common stock
outstanding on such date. Pursuant to the NetCreations shareholders agreement in
the form attached as Appendix B, two shareholders of NetCreations, Rosalind
Resnick and Ryan Scott Druckenmiller, have agreed to vote approximately 65% of
NetCreations common stock outstanding on October 2, 2000 for adoption of the
merger agreement. As of October 31, 2000, directors and executive officers of
DoubleClick owned no shares of NetCreations common stock. See 'The
Merger -- Interests of Certain Persons in the Merger.'
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The required quorum for the transaction of business at the NetCreations
special shareholders meeting is a majority of the shares of NetCreations common
stock issued and outstanding on the record date. Abstentions and broker
non-votes each will be included in determining the number of shares present at
the meeting for the purpose of determining the presence of a quorum. Because
adoption of the merger agreement requires the affirmative vote of 66 2/3% of the
outstanding shares of NetCreations common stock entitled to vote, abstentions
and broker non-votes will have the same effect as votes against adoption of the
merger agreement. In addition, the failure of a NetCreations shareholder to
return a proxy or otherwise vote will have the effect of a vote against adoption
of the merger agreement. Brokers holding shares for beneficial owners cannot
vote on the actions proposed in this proxy statement/prospectus without the
owners' specific instructions. Accordingly, NetCreations shareholders are urged
to return the enclosed proxy card marked to indicate their vote.
SOLICITATION OF PROXIES AND EXPENSES
In addition to solicitation by mail, the directors, officers and employees
of NetCreations may solicit proxies from NetCreations' shareholders by
telephone, facsimile or in person. No additional compensation will be paid to
directors, officers or employees of NetCreations for any solicitations.
Brokerage houses, nominees, fiduciaries and other custodians will be requested
to forward soliciting materials to beneficial owners and will be reimbursed for
their reasonable expenses incurred in sending proxy materials to beneficial
owners. The expenses of soliciting proxies, including expenses related to the
printing and mailing of this proxy statement/prospectus are being shared equally
by DoubleClick and NetCreations.
NO DISSENTERS' RIGHTS
NetCreations is organized under New York law. Under New York law,
NetCreations shareholders do not have a right to receive the appraised value of
their shares in connection with the merger.
42
<PAGE>
THE MERGER
This section of the proxy statement/prospectus describes material aspects of
the proposed merger. While we believe that the description covers the material
terms of the merger and the related transactions, this summary may not contain
all of the information that is important to you. NetCreations shareholders
should read the entire merger agreement and the other documents we refer to
carefully and in their entirety for a more complete understanding of the merger.
BACKGROUND OF THE MERGER
Throughout the spring and summer of 2000, NetCreations explored different
strategies to grow its business, including international and domestic joint
ventures and domestic acquisitions.
On September 11, 2000, NetCreations' board of directors met to discuss
NetCreations' third quarter performance and the state of its business and
industry generally. Messrs. Scott Wolf, NetCreations' Senior Vice President of
Sales and Business Development, Robert Mattes, NetCreations' Chief Financial
Officer, and Brian Burlant, NetCreations' General Counsel, also attended the
meeting. After the close of trading on September 12, 2000, NetCreations issued a
press release indicating that while it continued to be profitable it did not
expect to meet its analysts' targets for the third quarter. During the next day,
the price of NetCreations common stock fell by approximately 50%.
A special meeting of NetCreations' board of directors was held on September
15, 2000. Messrs. Mattes and Burlant also attended the meeting. The Board of
Directors authorized NetCreations' management to explore various business
opportunities and strategic alternatives to improve revenue growth and
profitability, including without limitation, joint ventures, acquisitions and
business combinations.
On September 18, 2000, Rosalind Resnick, Chairman and Chief Executive
Officer of NetCreations, contacted Kevin Ryan, Chief Executive Officer of
DoubleClick, expressing an interest in a strategic transaction with DoubleClick.
Ms. Resnick then met with Mr. Ryan and Jeffrey Epstein, Executive Vice President
of DoubleClick. During the discussions, each of the parties expressed an
interest in a potential merger. Based on further discussions during the meeting,
the parties agreed to meet later in the week to discuss and review due diligence
matters.
On September 19, 2000, NetCreations' board of directors held a special
meeting attended by all board members other than Mr. Druckenmiller. Messrs.
Burlant and Mattes also attended. Ms. Resnick informed the board of her
conversations with Messrs. Ryan and Epstein the day before, and stated that she
subsequently had received a telephone call from William Mills, DoubleClick's
Senior Director of Corporate Development, inviting the NetCreations executive
team to DoubleClick's offices to conduct presentations on NetCreations'
business. NetCreations' board of directors authorized Ms. Resnick to continue
discussions with DoubleClick. In addition, the board determined that
NetCreations should retain an investment banking firm to assist NetCreations in
any negotiations with DoubleClick and to assess the fairness of any proposed
transaction. As a result of the board's recommendation and introductions, Ms.
Resnick met with representatives of two investment banks.
On September 20, 2000, Mr. Mattes and other representatives of NetCreations
met with Mr. Epstein and other representatives of DoubleClick at DoubleClick's
offices to discuss NetCreations' business and conduct preliminary due diligence.
At this meeting, DoubleClick and NetCreations entered into a mutual
confidentiality agreement to facilitate additional diligence between the
parties.
On September 20 and September 21, 2000, NetCreations' board of directors met
to discuss the progress of the discussions with DoubleClick. Messrs. Burlant and
Mattes also attended those meetings. Netcreations' board of directors authorized
Ms. Resnick to continue the discussions with DoubleClick.
43
<PAGE>
On September 21, 2000, Mr. Mattes and other representatives of NetCreations
met with Mr. Epstein and other representatives of DoubleClick at DoubleClick's
offices to conduct financial, accounting and legal due diligence.
On September 22, 2000, Mr. Epstein, together with Mr. Mills, Elizabeth Wang,
Vice President and General Counsel of DoubleClick, Stephen Collins, Chief
Financial Officer of DoubleClick, Andy Jacobson, Vice President, General Manager
of DoubleClick, and Jonathan Heller, Vice President, Business Management of
DoubleClick, discussed the proposed transaction at a meeting of DoubleClick's
board of directors. Following the discussion, DoubleClick's board of directors
authorized management to continue negotiations with NetCreations for a business
combination.
Also on September 22, 2000, NetCreations' board of directors met (with
Messrs. Burlant and Mattes in attendance). Ms. Resnick informed NetCreations'
board of directors of her discussions with Mr. Epstein. The board determined
that NetCreations should retain Robertson Stephens, Inc. to act as its financial
advisor in connection with a possible sale of NetCreations to, or business
combination with, DoubleClick, and authorized Ms. Resnick to pursue more
intensive negotiations with DoubleClick. NetCreations and Robertson Stephens
entered into an engagement letter later that day.
On September 25, 2000, Ms. Resnick, together with Messrs. Mattes, Burlant
and Wolf and representatives of Robertson Stephens, met with Messrs. Epstein and
Mills, Ms. Wang, and Jeremy Palley, Associate, Corporate Development of
DoubleClick, to continue due diligence and engage in negotiations relating to
the proposed transaction.
NetCreations' board of directors held a special meeting in the evening of
September 25, 2000 that was attended by all board members other than Mr. York.
Ms. Resnick updated the board regarding the progress of the discussions. Ms.
Resnick and Messrs. Burlant and Mattes reviewed the proposed material business
terms, to the extent then known or anticipated, of the proposed merger.
Representatives of Robertson Stephens also made a presentation to the board of
directors, which included discussion of several matters, including the
following:
historical trading and historical exchange ratio analyses;
a discussion of the strategic fit of NetCreations' and DoubleClick's
businesses;
a review of selected possible alternative partners with which NetCreations
might pursue a business combination or other strategic transaction;
the comparative benefits and disadvantages of selling NetCreations through
an auction process;
an accretion/dilution sensitivity analysis;
an analysis of the valuation of comparable public companies and comparable
precedent acquisitions;
a comparison of the premium per share offered by DoubleClick to comparable
premiums paid per share in selected comparable merger transactions;
a discussion of the fact that the transaction structure did not include
parameters against price fluctuations or a 'collar' and the reasons not to
have such a 'collar' in this transaction;
a review of the terms and effects of the proposed voting and lock-up
agreements pertaining to Ms. Resnick and Mr. Druckenmiller;
a discussion of the proposed 'non-solicitation' provision to be included in
the merger agreement; and
the amount of the termination fee requested by DoubleClick, in particular,
a comparison to termination fees in several recent transactions, and the
circumstances upon which DoubleClick could collect the termination fee.
44
<PAGE>
In the evening of September 25, 2000, Mr. Epstein and Ms. Resnick discussed
the principal terms of the proposed transaction, including the ratio for
exchanging shares of NetCreations common stock for shares of DoubleClick common
stock.
NetCreations' board of directors held another special meeting in the
afternoon of September 26, 2000 to discuss the status of the negotiations
between DoubleClick and NetCreations. All board members other than Messrs. York
and Slayton attended the meeting. The board asked questions of management and
the representatives of Robertson Stephens regarding the transaction. In the
evening of September 26, 2000, DoubleClick and NetCreations entered into an
exclusivity agreement effective until October 9, 2000.
Between September 26 and October 2, 2000, representatives of DoubleClick and
NetCreations continued their business, legal and financial due diligence
inspections and held numerous discussions with each other and their respective
financial and legal advisors regarding various business, financial, operational
(including privacy issues) and technical issues involved in combining the
companies.
On September 27, 2000, Brobeck, Phleger & Harrison LLP, outside counsel to
DoubleClick, delivered an initial draft of the merger agreement to NetCreations.
Representatives of DoubleClick and NetCreations negotiated the terms of the
merger agreement from September 27 until October 2, 2000.
On September 29, 2000, NetCreations' board of directors held a special
meeting at which the board considered the status of the negotiations between
NetCreations and DoubleClick. Messrs. Burlant and Mattes also attended and
reviewed with the board the material business terms of the proposed merger and
the material issues still outstanding.
On October 2, 2000, at 4:00 p.m., NetCreations' board of directors convened
a special meeting to consider and vote upon the proposed merger agreement and
related agreements. All directors attended this meeting. Also attending were
Messrs. Mattes and Burlant of NetCreations; Messrs. Ferguson, Tim Karman, Todd
Scarpato and John Siracuse of Robertson Stephens; Jennifer Bellah McGuire, Esq.
of Gibson Dunn & Crutcher, counsel to Robertson Stephens; and Marjorie Sybul
Adams, Esq., Andrew J. Cosentino, Esq. and William Haddad, Esq. of Piper Marbury
Rudnick & Wolfe LLP, NetCreations' outside legal counsel on the transaction.
At the outset of the meeting, the board agreed that it would first receive
various presentations by NetCreations' management and by various professionals
representing NetCreations concerning the proposed merger with DoubleClick, next
ask questions concerning those matters, and then discuss the transaction, but
that the board would then recess for several hours, without a vote, to permit
further reflection on the matter and further review of written materials
concerning the proposed transaction, before reconvening to vote on the proposed
merger. The board then heard presentations by NetCreations' management and
professional advisors concerning the negotiations with DoubleClick, followed by
a presentation by Robertson Stephens concerning Robertson Stephens' analysis of
the terms of the proposed transaction and its opinion that the proposed
transaction was fair, from a financial point of view, to NetCreations'
shareholders. In addition, NetCreations' outside legal counsel outlined the
directors' legal duties and responsiblities in connection with considering the
merger. Management and various professional advisors next reviewed with the
board the terms of the proposed merger agreement and ancillary documents,
including, among other provisions, the exchange ratio, including the absence of
a collar, the representations and warranties of the parties, the post-execution
covenants and agreements, including the non-solicitation provision, the closing
conditions, the termination and break-up fee provisions, and the ancillary
documents required by DoubleClick, including the shareholder voting agreements
that were to be executed by Ms. Resnick and Mr. Druckenmiller covering
approximately 65% of NetCreations' outstanding voting stock, the post-closing
lock-up agreements pertaining to Ms. Resnick and Mr. Druckenmiller, and the
post-closing employment agreements pertaining to Ms. Resnick and Mr.
Druckenmiller. The board then considered the appropriate procedural and
substantive aspects of performing its fiduciary duties in determining whether to
approve the proposed merger, and discussed the matter with its counsel and its
other professionals present. The board considered whether there were other
realistic strategic alternatives or acquirors, and whether any such alternatives
were likely to be superior to
45
<PAGE>
the proposed merger or to present themselves if the board were to pursue an
auction of NetCreations rather than entering into the proposed merger agreement.
After the completion of the foregoing presentations and discussion, the
meeting was recessed for approximately three hours. The meeting reconvened later
in the evening of October 2, 2000 and the board continued its discussions. At
the conclusion of the discussions, the board unanimously adopted the terms of
the merger and authorized management to continue to negotiate the final terms of
the merger agreement and related agreements.
On October 2, 2000, the board of directors of DoubleClick met to consider
the terms of the merger agreement and the transactions contemplated thereby.
Members of DoubleClick's management made presentations to the board of directors
of DoubleClick and discussed their views and analyses of various aspects of the
proposed merger. Following the discussion, the DoubleClick board of directors
approved the terms of the merger, including the issuance of DoubleClick common
stock in the merger, and authorized management to continue to negotiate the
final terms of the merger agreement and related agreements.
The merger agreement and related transaction documents were signed by the
parties on the evening of October 2, 2000. DoubleClick and NetCreations jointly
announced the merger on the morning of October 3, 2000.
DOUBLECLICK'S REASONS FOR THE MERGER
DoubleClick's board of directors unanimously concluded that the merger was
fair to, and in the best interest of, DoubleClick and its stockholders.
The decision of DoubleClick's board of directors was based on several
potential benefits of the merger that it believes will contribute to
DoubleClick's success. These potential benefits include:
strategic benefits of NetCreations as a platform acquisition to build the
DoubleClick DART for Advertisers business;
the value of the NetCreations brand;
the quality of NetCreations' direct marketing customer base and database of
opt-in e-mail addresses;
the unmet needs of the NetCreations (existing and potential) customer base;
the talent of the NetCreations employees; and
the ability of DoubleClick to enhance NetCreations' products and services
with added features.
DoubleClick's board of directors reviewed a number of factors in evaluating
the merger, including, but not limited to, the following:
information concerning DoubleClick's and NetCreations' respective
businesses, prospects, strategic business plans, financial performance and
condition, results of operations, technology positions, research
methodology, management and competitive positions;
the due diligence investigation conducted by DoubleClick's management and
legal advisors;
DoubleClick management's view of the positive results of combining the
operations and businesses of DoubleClick and NetCreations;
the current financial market conditions and historical stock market prices,
volatility and trading information;
the impact of the merger on DoubleClick's customers and employees; and
the expectation that the merger will be accounted for as a purchase.
During the course of its deliberations concerning the merger, the
DoubleClick board of directors also identified and considered a variety of
potentially negative factors that could materialize as a result of the merger,
including the following:
the risk that the potential benefits sought in the merger might not be
fully realized;
46
<PAGE>
the possibility that the merger might not be completed;
risks related to retaining NetCreations employees;
the effect of the public announcement of the merger on NetCreations'
business, including its employees and customers; and
the risks associated with obtaining the necessary approvals required to
complete the merger.
DoubleClick's board of directors concluded that these factors were
outweighed by the potential benefits to be gained by the merger. In view of the
wide variety of factors, both positive and negative, considered by the
DoubleClick board of directors, the DoubleClick directors did not find it
practical to, and did not, quantify or otherwise assign relative weights to the
specific factors discussed above.
NETCREATIONS' REASONS FOR THE MERGER; UNANIMOUS RECOMMENDATION OF NETCREATIONS'
BOARD OF DIRECTORS
NetCreations' board of directors has unanimously adopted the merger
agreement, has determined that the merger is fair to, and in the best interests
of, NetCreations and its shareholders and has determined to unanimously
recommend that the shareholders adopt the merger agreement and the merger.
At a meeting held on October 2, 2000, the NetCreations' board, with the
assistance of NetCreations' outside financial and legal advisors, considered the
legal, financial and other terms of the merger.
The decision by NetCreations' board of directors was based on several
potential benefits of the merger and involved the consideration of a number of
factors including:
combining leading global Internet email direct marketing and advertising
companies to offer Internet advertisers, publishers and vendors a broad
spectrum of Internet software and service solutions;
enhancing the opportunities to offer NetCreations' solutions to a larger,
more diverse and more geographically dispersed customer base;
significantly expanding its East and West Coast presence in terms of local
senior executives, sales force and customer support personnel;
becoming part of a significantly larger organization with greater
resources, scope of operations and access to capital on attractive terms;
accelerating new product development and features for current and future
e-commerce solutions;
accelerating the introduction and improving the scalability of
NetCreations' future product and service offerings;
the fact that the merger consideration is payable in DoubleClick common
stock, allowing NetCreations' shareholders the opportunity to participate
in the potential long-term appreciation of DoubleClick common stock;
the exchange ratio in the merger and implied per share price, which
compared favorably according to a number of applicable valuation
methodologies, including an analysis of companies comparable to
NetCreations, transactions comparable to the merger and a discounted cash
flow analysis;
the opinion of Robertson Stephens, delivered orally on October 2, 2000, and
later confirmed in writing and more fully described in 'Opinion of
NetCreations' Financial Advisor,' that as of such date, and subject to
assumptions made, matters considered and limitations on the review set
forth in its opinion, the share exchange ratio in the merger is fair to
NetCreations' shareholders from a financial point of view;
47
<PAGE>
NetCreations' board's belief that, based on, among other things, the
analyses of Robertson Stephens, the merger consideration was fair, from a
financial point of view, to, and in the best interest of, NetCreations'
shareholders;
historical information concerning DoubleClick's and NetCreations'
respective businesses, financial performance and condition, operations,
technology and management;
NetCreations management's view of the financial condition, competitive
position and prospects, results of operations and businesses of DoubleClick
and NetCreations before and after giving effect to the merger and the
NetCreations board's determination of the merger's effect on shareholder
value;
the relative trading prices and volumes (as well as prospects for future
growth in value) of NetCreations' common stock as compared with
DoubleClick's common stock;
current financial market conditions and historical stock market prices,
volatility and trading information;
the consideration NetCreations shareholders will receive in the merger in
light of comparable merger transactions;
the belief that the terms of the merger agreement were reasonable;
the impact of the merger on NetCreations' customers and employees;
results of the due diligence investigation of DoubleClick conducted by
NetCreations' investment bankers; and
the structure of the merger, which permits NetCreations shareholders to
exchange their NetCreations common stock for DoubleClick common stock on a
tax-free basis.
In reviewing its alternatives and making its determination, NetCreations'
board also reviewed:
possible synergistic and expansion opportunities for the combined company;
and
the competitive environment for online email direct marketing, online
advertising and interactive marketing companies generally and the trend of
such companies toward offering a complete spectrum of Internet advertising
solutions.
NetCreations' board also reviewed with its legal advisors:
the terms and conditions of the merger agreement;
the terms and conditions of the shareholders' agreement, including the
related proxy;
the terms and conditions of the lock-up agreements;
the terms and conditions of the proposed employment agreements of Rosalind
Resnick and Ryan Druckenmiller with DoubleClick;
the amount of the termination fee and the events triggering payment of the
termination fee; and
the limitations on the ability of NetCreations to negotiate with other
companies regarding an alternative transaction, and the potential effect
these provisions would have on NetCreations' receipt of alternative
proposals that could be superior to the merger with DoubleClick.
NetCreations' board also considered a number of potentially negative factors
in its deliberations concerning the merger, including:
the risk that because the exchange ratio would not be adjusted for changes
in the market price of either DoubleClick common stock or NetCreations
common stock, the per share value of the consideration to be received by
NetCreations shareholders might be significantly less than the price per
share implied by the exchange ratio immediately prior to the announcement
of the merger;
the volatility of the market value of DoubleClick common stock;
the risk that the merger might not be consummated;
48
<PAGE>
the potential loss of revenues and business opportunities for NetCreations
as a result of confusion in the marketplace as a result of the announcement
of the merger, and the possible exploitation of such confusion by
NetCreations' and DoubleClick's competitors;
the possibility of management disruption associated with the merger and the
integration of the companies' operations, and the risk that, despite the
efforts of the combined company, key management and technical personnel of
NetCreations might not continue with the combined company;
the risk that the benefits sought to be achieved by the merger would not be
realized; and
other applicable risks described in this proxy statement/prospectus under
'Risk Factors.'
The decision of NetCreations' board was the result of its careful
consideration of a range of strategic alternatives, including joint ventures,
acquisitions and business combinations and relationships with DoubleClick and
other companies in the pursuit of a long-term business strategy for
NetCreations. The NetCreations board's primary consideration was to identify and
secure the alternative that would provide the best strategic fit for
NetCreations and to provide long-term shareholder value to NetCreations
shareholders. In this regard, NetCreations' board concluded that the merger with
DoubleClick represented the best strategic course of action among several
alternatives considered by the board.
NetCreations' board concluded, however, that, on balance, the merger's
potential benefits to NetCreations and its shareholders outweighed the
associated risks. The discussion of the information and factors considered by
NetCreations' board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the merger,
NetCreations' board did not find it practicable to, and did not quantify or
otherwise assign relative weight to, the specific factors considered in reaching
its determination.
Following the board meeting on October 2, 2000, the board unanimously
adopted the merger agreement and approved the merger. Accordingly, the board
unanimously recommends that NetCreations shareholders vote 'FOR' the adoption of
the merger agreement.
OPINION OF NETCREATIONS' FINANCIAL ADVISOR
Under a letter agreement dated September 22, 2000, NetCreations engaged
Robertson Stephens to act as its financial advisor in connection with a possible
sale of, or business combination involving NetCreations, and to render an
opinion as to the fairness of a transaction, from a financial point of view, to
holders of shares of NetCreations common stock.
On October 2, 2000, at a meeting of the NetCreations board held to consider
and vote upon the proposed merger agreement and related agreements, Robertson
Stephens delivered to NetCreations' board of directors its oral opinion,
subsequently confirmed in writing, that, as of October 2, 2000, and based on the
matters considered and the limitations on the review undertaken described in the
opinion, the 0.41 exchange ratio was fair from a financial point of view to
holders of shares of NetCreations common stock. Robertson Stephens has consented
to the use of its opinion in this proxy statement/prospectus and the full text
of this opinion is reprinted as Appendix C to this proxy statement/prospectus.
No limitations were imposed by NetCreations' board on Robertson Stephens with
respect to the investigations made or procedures followed by it in furnishing
its opinion. The 0.41 exchange ratio was determined through negotiations between
the management of NetCreations and DoubleClick. Although Robertson Stephens did
assist the management of NetCreations in those negotiations, it was not asked by
NetCreations to propose or recommend and did not propose or recommend, any
specific exchange ratio as the appropriate exchange ratio for the merger.
You should consider the following when reading the discussion of the opinion
of NetCreations' financial advisor in this document:
We urge you to read carefully the entire opinion of Robertson Stephens,
which is set forth in Appendix C to this proxy statement/prospectus and is
incorporated by reference.
49
<PAGE>
The following description of the opinion of Robertson Stephens is qualified
by reference to the full opinion located in Appendix C to this proxy
statement/prospectus. The full opinion sets forth, among other things, the
assumptions made by Robertson Stephens, the matters it considered and the
limitations on the review undertaken.
The Robertson Stephens opinion was prepared for the benefit and use of the
NetCreations board in its consideration of the merger and does not
constitute a recommendation to shareholders of NetCreations as to how they
should vote at the special meeting, or take any other action, in connection
with the merger.
The Robertson Stephens opinion does not address the relative merits of the
merger and any other transactions or business strategies discussed by the
NetCreations board as alternatives to the merger or the underlying business
decision of the NetCreations board to proceed with or effect the merger.
Although developments following the date of the Robertson Stephens opinion
may affect the opinion, Robertson Stephens assumed no obligation to update,
revise or reaffirm its opinion. The Robertson Stephens opinion is necessarily
based upon market, economic and other conditions that were in effect on, and
information made available to Robertson Stephens as of, the date of the opinion.
You should understand that subsequent developments may affect the conclusion
expressed in the Robertson Stephens opinion, and that Robertson Stephens
disclaims any undertaking or obligation to advise any person of any change in
any fact or matter affecting its opinion. The Robertson Stephens opinion is
limited to the fairness, from a financial point of view and as of the date
thereof, of the 0.41 exchange ratio to the holders of shares of NetCreations
common stock.
Opinion and Analysis of Robertson Stephens
In connection with the preparation of the Robertson Stephens opinion,
Robertson Stephens:
reviewed certain publicly available financial statements and other business
and financial information of NetCreations and DoubleClick, respectively;
reviewed certain internal financial statements and other financial and
operating data concerning NetCreations and DoubleClick prepared by the
managements of NetCreations and DoubleClick, respectively;
reviewed certain financial forecasts and other forward looking financial
information relating to NetCreations and DoubleClick prepared by the
managements of NetCreations and DoubleClick, respectively;
held discussions with the respective managements of NetCreations and
DoubleClick concerning the businesses, past and current operations,
financial condition and future prospects of both NetCreations and
DoubleClick, independently and combined, including discussions with the
managements of NetCreations and DoubleClick concerning their views
regarding the strategic rationale for the merger;
reviewed the financial terms and conditions set forth in the draft merger
agreement;
reviewed the stock price and trading history of NetCreations and
DoubleClick;
compared the financial performance of NetCreations and DoubleClick and
the prices and trading activity of NetCreations' common stock and
DoubleClick's common stock with that of certain other publicly traded
companies comparable with NetCreations and DoubleClick, respectively;
compared the financial terms of the merger with the financial terms, to the
extent publicly available, of other transactions that Robertson Stephens
deemed relevant;
reviewed the pro forma impact of the merger on DoubleClick's revenues and
earnings per share;
reviewed and considered in the analysis, information prepared by members of
management of NetCreations and DoubleClick relating to the relative
contributions of NetCreations and DoubleClick to the combined company;
50
<PAGE>
prepared a discounted cash flow analysis of NetCreations;
participated in discussions and negotiations among representatives of
NetCreations and DoubleClick and their financial and legal advisors; and
made such other studies and inquiries, and reviewed such other data, as it
deemed relevant.
In its review and analysis, and in arriving at its opinion, Robertson
Stephens assumed and relied upon the accuracy and completeness of all the
financial and other information provided to it (including information furnished
to it orally by management of NetCreations and DoubleClick) or publicly
available and neither attempted to verify, nor assumed responsibility for
verifying, any of such information. Robertson Stephens relied upon the
assurances of the managements of NetCreations and DoubleClick that they were
not aware of any facts that would make such information inaccurate or
misleading. Furthermore, Robertson Stephens did not obtain or make, or assume
responsibility for obtaining or making, any independent evaluation or appraisal
of the properties or assets and liabilities (contingent or otherwise) of
NetCreations or DoubleClick, nor was it furnished with any such evaluations or
appraisals.
With respect to the financial forecasts and projections (and the assumptions
and bases therefor) for each of NetCreations and DoubleClick that Robertson
Stephens reviewed, upon the advice of the managements of NetCreations and
DoubleClick, Robertson Stephens assumed that:
these forecasts and projections were reasonably prepared in good faith on
the basis of reasonable assumptions;
these forecasts and projections reflected the best currently available
estimates and judgments as to the future financial condition and
performance of NetCreations and DoubleClick; and
these projections and forecasts would be realized in the amounts and in the
time periods currently estimated.
In addition, Robertson Stephens assumed that:
the merger will be consummated upon the terms set forth in the draft merger
agreement made available to it without material alteration, including,
among other things, that the merger will be accounted for as a 'purchase
method' business combination in accordance with U.S. generally accepted
accounting principles;
the merger will be treated as a tax-free 'reorganization' as defined in the
Internal Revenue Code of 1986, as amended; and
the historical financial statements of each of NetCreations and DoubleClick
reviewed by it were prepared and fairly presented in accordance with U.S.
generally accepted accounting principles consistently applied.
Robertson Stephens relied as to all legal matters relevant to rendering its
opinion on the advice of its legal counsel.
Robertson Stephens expressed no opinion as to:
the value of any employee arrangements or other arrangements entered into
in connection with the merger;
any tax or other consequences that may result from the merger; or
the value of the DoubleClick common stock when issued to NetCreations'
shareholders in connection with the merger or the price at which the shares
of DoubleClick common stock that are issued in connection with the merger
will be traded in the future.
The following is a summary of the material financial analyses performed by
Robertson Stephens in connection with rendering its opinion. The summary of the
financial analyses is not a complete description of all of the analyses
performed by Robertson Stephens. Certain of the information in this section is
presented in tabular form. IN ORDER TO UNDERSTAND BETTER THE FINANCIAL ANALYSES
PERFORMED BY ROBERTSON STEPHENS, THESE TABLES MUST BE READ TOGETHER WITH THE
TEXT OF EACH SUMMARY. THE ROBERTSON STEPHENS OPINION IS BASED ON THE TOTALITY OF
THE
51
<PAGE>
VARIOUS ANALYSES THAT IT PERFORMED, AND NO PARTICULAR PORTION OF THE ANALYSIS
HAS ANY MERIT STANDING ALONE.
Comparable Company Analysis. Using publicly available information, Robertson
Stephens analyzed, among other things, the trading multiples of NetCreations and
the following selected publicly traded companies in the Internet
advertising/marketing serving segment:
<TABLE>
<S> <C> <C>
24/7 Media Engage Netcentives
Avenue A FreeShop.com Promotions.com
Be Free LifeMinders ValueClick
coolsavings.com MyPoints.com
</TABLE>
Revenues. As set forth in the following table, applying a range of multiples
for these companies for calendar years 2000 and 2001 to corresponding revenue
data for NetCreations resulted in the following range of implied exchange ratios
and equity values for calendar years 2000 and 2001.
<TABLE>
<CAPTION>
IMPLIED
CALENDAR RANGE OF NETCREATIONS IMPLIED
YEAR MULTIPLES EQUITY VALUE (MILLIONS) EXCHANGE RATIO
-------- ------------ ----------------------- ---------------
<S> <C> <C> <C>
2000 1.0x to 3.0x $ 103.2 - $233.2 0.21x - 0.47x
2001 0.5x to 1.5x $ 103.2 - $233.2 0.17x - 0.35x
Mean: 0.30
</TABLE>
Total Enterprise Value Per Member. Robertson Stephens also analyzed the
implied total enterprise value (TEV) per e-mail list name or other relevant
member. Specifically, the TEV (or total capitalization) of each comparable
company was multiplied by the estimated percentage of aggregate revenue that
each comparable company derived from such members. This figure was then divided
by the number of members that each comparable company had (based on the most
recent company filings and other available data). As set forth in the following
table, Robertson Stephens applied these per member values (in dollar terms) to
NetCreations' e-mail address membership base, which resulted in the following
range of implied exchange ratios.
<TABLE>
<CAPTION>
IMPLIED
RANGE OF NETCREATIONS IMPLIED
MULTIPLES EQUITY VALUE (MILLIONS) EXCHANGE RATIO
--------------- ----------------------- ---------------
<S> <C> <C> <C>
TEV per member $4.00 to $10.00 $ 80.6 - $144.2 0.16x - 0.29x
</TABLE>
Selected Precedent Transaction Analysis. Robertson Stephens analyzed the
aggregate value and implied transaction value multiples paid or proposed to be
paid in selected precedent transactions in the Internet advertising/marketing
and related Internet service segments, including:
@plan / DoubleClick (September 25, 2000)
MineShare / Digital Impact (July 19, 2000)
Cybergold / MyPoints (April 17, 2000)
Exactis.com / 24/7 Media (February 29, 2000)
Post Communications / Netcentives (February 15, 2000)
Direct Hit / Ask Jeeves (January 25, 2000)
Yesmail.com / CMGI (December 15, 1999)
Flycast / CMGI (September 30, 1999)
NetGravity / DoubleClick (July 13, 1999)
Alta Vista / CMGI (June 29, 1999)
Abacus Direct / DoubleClick (June 14, 1999)
Encompass / Yahoo! (May 27, 1999)
Robertson Stephens compared, among other things, the aggregate value in
these transactions as a multiple of the latest twelve months' revenues ('LTM')
and the projected next 12 months'
52
<PAGE>
revenues ('NTM'). The multiples used were adjusted to reflect the most recent
closing acquiror stock prices at the time of the opinion, as contrasted with the
prevailing acquiror prices at the time of transaction announcement. Applying
these multiples to similar revenue figures for NetCreations resulted in the
following range of implied exchange ratios.
<TABLE>
<CAPTION>
IMPLIED
RANGE OF NETCREATIONS IMPLIED
MULTIPLES EQUITY VALUE (MILLIONS) EXCHANGE RATIO
---------- ----------------------- --------------
<S> <C> <C> <C>
LTM 5.0x to 8.0x $ 268.1 - $406.1 .54 - .81
NTM 2.5x to 5.0x $ 222.2 - $406.2 .45 - .81
1 Day Premium
to Market 20% to 30% $ 200.1 - $216.8 .40-.43
30 Day Premium
to Market 40% to 60% $ 233.4 - $266.8 .47-.53
Mean: 0.56x
</TABLE>
No company, transaction or business used in the comparable company analysis
or the selected precedent transaction analysis as a comparison is identical to
NetCreations, DoubleClick or the merger. Accordingly, an analysis of the results
of the foregoing is not entirely mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors and trends that could affect the acquisition,
public trading and other values of the comparable companies or the business
segment, company or transactions to which they are compared.
Discounted Cash Flow Analysis. Robertson Stephens performed a discounted
cash flow analysis of the after-tax free cash flows of NetCreations for calendar
years 2001 through 2005 using Robertson Stephens estimates. Robertson Stephens
first discounted the projected, after-tax free cash flows through December 31,
2005 using discount rates ranging from 18.0% to 22.0%. NetCreations after-tax
free cash flows were calculated as the after-tax operating earnings of
NetCreations adjusted to add back non-cash expenses and deduct uses of cash not
reflected in the income statement. Robertson Stephens then added to the present
value of the cash flows the terminal value of NetCreations at December 31, 2005,
discounted back at the same discount rate to represent a present value. The
terminal value was computed by multiplying the projected EBITDA for NetCreations
in calendar year 2005 by terminal multiples ranging from 9.0x to 13.0x. The
range of terminal multiples selected reflects Robertson Stephens' judgment as to
an appropriate range of multiples at the end of the reference period. The
following table summarizes the resulting implied equity valuations and exchange
ratios.
<TABLE>
<CAPTION>
DISCOUNT IMPLIED NETCREATIONS IMPLIED
RATES EQUITY VALUE (MILLIONS) EXCHANGE RATIO
--------------- ----------------------- --------------
<S> <C> <C>
18.0% - 22.0% $ 145.5 - $207.6 0.29 - 0.42
</TABLE>
Exchange Ratio and Implied Premium Analysis. Robertson Stephens reviewed and
analyzed historical ratios of the daily per share closing prices of NetCreations
common stock and DoubleClick common stock over various periods ending September
29, 2000. The following table sets forth the average ratios of closing prices
for the two companies for various periods ending September 29, 2000 and the
implied premium (discount) of the exchange ratios to the closing prices:
<TABLE>
<CAPTION>
RATIO OF CLOSING PRICES OF PREMIUM (DISCOUNT)
NETCREATIONS COMMON OF EXCHANGE RATIO
TIME STOCK TO DOUBLECLICK TO CLOSING PRICE
PERIOD COMMON STOCK RATIO
----------------------- -------------------------- ------------------
<S> <C> <C>
On September 29, 2000 0.334 22.8 %
Last 5 days 0.302 35.8 %
Last 10 days 0.277 48.0 %
Last 30 days 0.428 (4.2)%
Last 90 days 0.783 (47.6)%
Since November 12, 1999
(NetCreations IPO) 0.575 (28.7)%
</TABLE>
53
<PAGE>
Pro Forma Merger Analysis. Robertson Stephens analyzed the impact of the
merger on the revenues and earnings per share (excluding the goodwill
amortization charges resulting from this merger) of the combined company for
fiscal year 2001 based on publicly available data for NetCreations and
DoubleClick. Without taking into account certain cost savings that the combined
company may realize in its operations, the results of this analysis suggested
that the merger is accretive in fiscal year 2001, with fiscal year 2001
estimated net revenue per share accretion of 7.4% and fiscal year 2001 estimated
net earnings per share accretion of 14.6%.
The actual results achieved by the combined company may materially vary from
their projected results.
Other Factors. While the foregoing summary describes the analyses and
factors that Robertson Stephens deemed material in its presentation to the
NetCreations board of directors, it is not a comprehensive description of all
analysis and factors considered by Robertson Stephens. For example, Robertson
Stephens performed a contribution analysis which indicated that, on a pro forma
combined projected basis, NetCreations would contribute approximately 11% to
revenue, 8% to gross profit and 39% to operating income in fiscal year 2000, and
such analysis results in an implied exchange ratio ranging from .76 to .97.
Robertson Stephens concluded that the contribution analysis was not materially
relevant due to a variety of factors, including, without limitation,
DoubleClick's relative size and leadership position in its market.
The preparation of a fairness opinion is a complex process that involves
various determinations as to the most appropriate and relevant methods of
financial analysis and to the particular circumstances. Therefore, a fairness
opinion is not readily susceptible to partial analysis or summary description.
In arriving at its opinion, Robertson Stephens did not attribute any particular
weight to any analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis and factor.
Accordingly, Robertson Stephens believes that its analyses must be considered as
a whole and that selecting portions of its analyses and of the factors
considered by it, without considering all analyses and factors, could create a
misleading or incomplete view of the evaluation process underlying its opinion.
Several analytical methodologies were employed and no one method of analysis
should be regarded as critical to the overall conclusion reached by Robertson
Stephens. Each analytical technique has inherent strengths and weaknesses, and
the nature of the available information may further affect the value of
particular techniques. The conclusion reached by Robertson Stephens is based on
all analyses and factors taken as a whole and also on application of Robertson
Stephens' own experience and judgment. This conclusion may involve significant
elements of subjective judgment and qualitative analysis. Robertson Stephens
therefore gives no opinion as to the value or merit standing alone of any one or
more parts of the analysis it performed. In performing its analyses, Robertson
Stephens made numerous assumptions with respect to anticipated industry
performance, general business and other conditions and matters, and present
industry and transaction trends, many of which are beyond the control of
NetCreations or Robertson Stephens and their likely impact on future performance
of NetCreatios on a stand-alone basis and as a part of DoubleClick. Any
estimates contained in these analyses are not necessarily indicative of actual
values or predicative of future results or values, which may be significantly
more or less favorable than those suggested by these analyses. Accordingly,
analyses relating to the value of businesses do not purport to be appraisals or
to reflect the prices at which these businesses actually may be sold in the
future, and these estimates are inherently subject to uncertainty. Furthermore,
no opinion is being expressed as to the prices at which shares of NetCreations
common stock or DoubleClick common stock may be traded at any future time.
NetCreations engaged Robertson Stephens under a letter agreement dated
September 22, 2000. The agreement provides that, for its services, Robertson
Stephens is entitled to receive a transaction fee based on an agreed formula.
Assuming under the formula a per share price of DoubleClick common stock on the
last trading day prior to the consummation of the merger of $29.625 (which was
the closing price on October 2, 2000) the transaction fee would be approximately
$2.7 million. Robertson Stephens was paid $250,000 on the date of the delivery
of its opinion, which will be credited against the transaction fee. NetCreations
has also agreed to
54
<PAGE>
reimburse Robertson Stephens for its out-of-pocket expenses and to indemnify and
hold harmless Robertson Stephens and its affiliates and any other person,
director, employee or agent of Robertson Stephens or any of its affiliates, or
any person controlling Robertson Stephens or its affiliates, for certain losses,
claims, damages, expenses and liabilities relating to or arising out of services
provided by Robertson Stephens as financial advisor to NetCreations. The terms
of the fee arrangement with Robertson Stephens, which NetCreations and Robertson
Stephens believe are customary in transactions of this nature, were negotiated
at arm's length between NetCreations and Robertson Stephens, and the
NetCreations board of directors was aware of these fee arrangements. Robertson
Stephens was retained based on Robertson Stephens' experience as a financial
advisor in connection with mergers and acquisitions and in securities valuations
generally, as well as Robertson Stephens' investment banking relationship and
familiarity with NetCreations.
Robertson Stephens is an internationally recognized investment banking firm.
As part of its investment banking business, Robertson Stephens is frequently
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
securities, private placements and other purposes.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of NetCreations' board, NetCreations
shareholders should be aware that certain officers and directors of NetCreations
have interests in the merger that differ from, or are in addition to, those of
NetCreations shareholders generally. The NetCreations board was aware of these
potential conflicts and considered them.
As of October 31, 2000, options to purchase a total of 300,000 shares of
NetCreations common stock, at an exercise price of $10.00 per share, were held
by the non-employee directors of NetCreations. Assuming the merger occurs on
December 15, 2000, options held by these directors to purchase 99,996 shares of
NetCreations common stock, at an exercise price of $10.00 per share, will
automatically vest upon completion of the merger as follows:
<TABLE>
<CAPTION>
NAME OPTIONS ACCELERATED
---- -------------------
<S> <C>
Michael Levy............................... 33,332
Gary Slayton............................... 33,332
Mitchell York.............................. 33,332
</TABLE>
On October 2, 2000, the non-employee director stock options were amended to
permit them to be exercisable until October 8, 2004, the original term of such
option grants, notwithstanding their termination as directors upon the closing
of the merger.
DoubleClick has entered into employment agreements with Rosalind Resnick,
NetCreations' Chairman and Chief Executive Officer, Ryan Scott Druckenmiller,
NetCreations' Chief Technology Officer and one of its directors, Robert Mattes,
NetCreations' Chief Financial Officer, Scott Wolf, NetCreations' Senior Vice
President of Sales and Business Development, and Michael Mayor, NetCreations'
Vice President of Sales. None of these agreements will become effective until
the consummation of the merger. See 'The Merger Agreement and Related
Agreements -- Related Agreements.'
Because the number of shares of DoubleClick common stock outstanding is
larger than the number of shares of NetCreations common stock outstanding,
Rosalind Resnick and Ryan Scott Druckenmiller may be allowed to sell or transfer
a greater number of shares in a single transaction than would be possible prior
to the merger pursuant to the volume restrictions of Rule 144 of the Securities
Act, subject, however, to limitations imposed by lock-up agreements entered into
in connection with the merger.
The merger agreement provides that, from and after the effective time,
DoubleClick will, and DoubleClick will cause NetCreations to, for a period of
six years after the effective time of the merger, indemnify each person who is
or was a director or officer of NetCreations or any of its subsidiaries at or at
any time prior to the effective time of the merger against losses incurred as a
result of actions or omissions (or alleged actions or omissions) occurring on or
prior to the
55
<PAGE>
effective time of the merger. During this period, NetCreations' current
certificate of incorporation, by-laws and contractual arrangements with respect
to indemnification of directors, officers, employees or agents of NetCreations
will not be modified. In addition, the merger agreement provides that for a
period of three years after the effective time, DoubleClick will maintain
directors' and officers' liability insurance covering persons who are covered by
NetCreations' directors' and officers' insurance policy. See 'The Merger
Agreement and Related Agreements -- Director and Officer Indemnification and
Insurance.'
APPLICABLE WAITING PERIODS AND REGULATORY APPROVALS
The merger is subject to U.S. antitrust laws. We have made the required
filings with the Department of Justice and the Federal Trade Commission. We are
not, however, permitted to complete the merger until the applicable waiting
period has expired or terminated. We expect the applicable waiting period to
expire at 11:59 p.m. (EST) on November 18, 2000. The Department of Justice and
the Federal Trade Commission, as well as a state antitrust authority or private
person, may challenge the merger at any time before or after it is completed.
Neither NetCreations nor DoubleClick is aware of any other material
governmental or regulatory approval required for completion of the merger, other
than compliance with applicable corporate law of New York.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain material federal income tax
considerations relevant to the exchange of shares of NetCreations common stock
for DoubleClick common stock pursuant to the merger agreement that generally are
applicable to holders of NetCreations common stock. This discussion is based on
currently existing provisions of the Internal Revenue Code, existing and
proposed United States Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change,
possibly with retroactive effect. Any such change could alter the tax
consequences to NetCreations shareholders as described herein.
NetCreations shareholders should be aware that this discussion does not deal
with all federal income tax considerations that may be relevant to particular
NetCreations shareholders in light of their particular circumstances, such as
shareholders who:
are financial institutions, dealers in securities, tax-exempt organizations
or insurance companies;
are subject to the alternative minimum tax provisions of the Internal
Revenue Code;
are foreign persons;
do not hold their NetCreations common stock as capital assets;
acquired their shares in connection with stock option or stock purchase
plans or in other compensatory transactions; or
acquired their shares as part of an integrated investment such as a hedge,
straddle or other risk reduction transaction.
In addition, the following discussion does not address the tax consequences
of the merger under foreign, state or local tax laws, the tax consequences of
transactions effectuated prior or subsequent to, or concurrently with, the
merger (whether or not any such transactions are undertaken in connection with
the merger), including any transaction in which shares of NetCreations common
stock are acquired or shares of DoubleClick common stock are disposed of, or the
tax consequences of the assumption by DoubleClick of NetCreations stock options
or purchase rights or the tax consequences of the receipt of rights to acquire
DoubleClick common stock. ACCORDINGLY, NETCREATIONS SHAREHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF
THE MERGER, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES.
In connection with the filing with the Securities and Exchange Commission of
the registration statement of which this proxy statement/prospectus is a part,
the law firm of Piper Marbury Rudnick & Wolfe LLP, has delivered to NetCreations
an opinion to the effect that the merger will constitute a reorganization under
Section 368(a) of the Internal Revenue Code. This opinion has
56
<PAGE>
been rendered on the basis of facts, representations and assumptions set forth
or referred to in the opinion. In rendering this opinion, Piper Marbury Rudnick
& Wolfe LLP required and relied upon factual representations contained in
certificates of officers of NetCreations and DoubleClick. This opinion has been
filed as an exhibit to the registration statement of which this proxy
statement/prospectus is a part. This opinion neither binds the IRS or courts of
law nor precludes the IRS or a court from adopting a contrary position. No
ruling has been, or will be, sought from the IRS as to the United States federal
income tax consequences of the merger.
In addition, it is a condition to the obligation of NetCreations to
consummate the merger that it receive an opinion of its counsel, dated as of the
closing date of the merger, to the effect that the merger will constitute such a
reorganization, although this condition shall be deemed satisfied if
NetCreations is unable to obtain such an opinion and DoubleClick's counsel
delivers an opinion to NetCreations to the same effect.
In addition, the tax opinions assume and are conditioned upon the following:
the truth and accuracy of the statements, covenants, representations and
warranties contained in the merger agreement, in the tax representations
relating to DoubleClick, Genesis Merger Sub, and NetCreations and in all
other instruments and documents related to the formation and operation of
DoubleClick, Genesis Merger Sub, and NetCreations examined and relied upon
by in connection with the opinions;
that original documents submitted to counsel are authentic, documents
submitted to counsel as copies conform to the original documents, and that
those documents have been or will be by the effective time duly and validly
executed and delivered;
that all covenants contained in the merger agreement and the tax
representations relating to DoubleClick, Genesis Merger Sub, and
NetCreations are performed without waiver or breach of any material
provision;
that the merger will be effected under applicable state law; and
that any representation or statement made 'to the best of knowledge' or
similarly qualified is correct without being so qualified.
Assuming the merger qualifies as a reorganization under Section 368(a) of
the Internal Revenue Code, the merger will result in the following federal
income tax consequences to NetCreations shareholders described above:
A holder of NetCreations common stock will not recognize gain or loss to
the extent they receive DoubleClick common stock in exchange for their
NetCreations common stock (except to the extent of any cash received in
lieu of fractional shares of DoubleClick common stock):
A holder of NetCreations common stock who receives cash in lieu of a
fractional share of DoubleClick common stock will be treated as having
received the fractional share in the merger and having it redeemed by
DoubleClick. A shareholder who holds his or her NetCreations common stock
as a capital asset at the time of the merger generally will recognize
capital gain or loss from the sale in an amount equal to the difference
between the amount of cash received and the holder's tax basis allocable to
the fractional share;
The aggregate tax basis of the DoubleClick common stock received in the
merger by a NetCreations shareholder will be the same as the aggregate tax
basis of the NetCreations common stock surrendered in exchange for that
DoubleClick common stock reduced by any tax basis allocable to any
fractional share interest for which cash is received;
The holding period of the DoubleClick common stock received in the merger
by a NetCreations shareholder will include the period during which the
shareholder held the NetCreations common stock surrendered in exchange for
that DoubleClick common stock, so long as the NetCreations common stock is
held as a capital asset by that shareholder at the time of the merger; and
NetCreations will not recognize gain or loss solely as a result of the
merger.
Any gain recognized by a NetCreations shareholder will generally constitute
capital gain if that shareholder held his or her NetCreations common stock as a
capital asset at the time the
57
<PAGE>
merger becomes effective, and any capital gain will be a long-term capital gain
if the NetCreations shareholder's holding period for those shares was greater
than one year at the time the merger becomes effective. In the case of an
individual, any long-term capital gain will be subject to a maximum federal
income tax rate of 20%.
A successful IRS challenge to the reorganization status of the merger would
result in NetCreations shareholders recognizing taxable gain or loss with
respect to each share of NetCreations common stock surrendered equal to the
difference between each shareholder's basis in such share and the fair market
value, as of the effective time of the merger, of the DoubleClick common stock
received in exchange therefor. In such event, a shareholder's aggregate basis in
the DoubleClick common stock so received would equal its fair market value as of
the date of completion of the merger, and the shareholder's holding period for
such stock would begin the day after the merger.
There are other tax-related issues that you should be aware of such as:
Reporting Requirements. Each NetCreations shareholder that receives
DoubleClick common stock in the merger will be required to file a statement
with his or her federal income tax return providing his or her basis in the
NetCreations stock surrendered and the fair market value of the DoubleClick
common stock and any cash received in the merger, and to retain permanent
records of these facts relating to the merger.
Backup Withholding. Unless an exemption applies under applicable law and
regulations, the exchange agent is required to withhold, and will withhold,
31% of any cash payments to a NetCreations shareholder in the merger unless
the shareholder provides the appropriate form as described below.
Therefore, each NetCreations shareholder should complete and sign the
Substitute Form W-9 included as part of the letter of transmittal to be
sent to each NetCreations shareholder, so as to provide the information,
including the shareholder's taxpayer identification number, and
certification necessary to avoid backup withholding, unless an applicable
exemption exists and is proved in a manner satisfactory to DoubleClick and
the exchange agent.
ACCOUNTING TREATMENT
DoubleClick will account for the merger under the purchase method of
accounting, which means that DoubleClick will allocate the purchase price to the
fair value of net tangible assets and intangible assets, which includes
goodwill, acquired. After the completion of the merger, the results of
operations of NetCreations will be included in the financial statements of
DoubleClick. Based on a preliminary allocation of the purchase price,
DoubleClick expects to allocate approximately 29.3% of the purchase price to the
fair value of net tangible assets acquired and approximately 70.7% to the fair
value of intangible assets, including goodwill to be amortized by DoubleClick
over three years in accordance with generally accepted accounting principles.
The ultimate allocation of the purchase price will depend on the results of the
fair value appraisals in accordance with generally accepted accounting
principles. DoubleClick believes that the effect of the ultimate allocation will
not differ materially from that assumed in the unaudited pro forma financial
data included in this proxy statement/prospectus.
DELISTING AND DEREGISTRATION OF NETCREATIONS' COMMON STOCK FOLLOWING THE MERGER
If the merger is completed, NetCreations' common stock will be delisted from
the Nasdaq National Market and will be deregistered under the Securities
Exchange Act of 1934.
RESTRICTIONS ON SALE OF SHARES BY AFFILIATES
The issuance of the shares of DoubleClick common stock in the merger will be
registered under the Securities Act and such shares will be freely transferable
under the Securities Act, except for shares of DoubleClick common stock issued
to any person who is deemed to be an affiliate of DoubleClick or NetCreations
under the Securities Act. Persons who may be deemed to be affiliates include
individuals or entities that control, are controlled by, or are under common
control of DoubleClick or NetCreations, as the case may be, and may include some
of the officers,
58
<PAGE>
directors or principal stockholders of DoubleClick or NetCreations. Affiliates
may not sell their shares of DoubleClick common stock acquired in connection
with the merger except pursuant to:
an effective registration statement under the Securities Act covering the
resale of those shares;
an exemption under paragraph (d) of Rule 145 under the Securities Act; or
another applicable exemption under the Securities Act.
DoubleClick's registration statement on Form S-4, of which this proxy
statement/prospectus forms a part, does not cover the resale of shares of
DoubleClick common stock to be received by affiliates in the merger.
OPERATIONS FOLLOWING THE MERGER
Following the merger, NetCreations will operate as a separate business unit
of DoubleClick. Upon completion of the merger, the members of NetCreations'
board will be Kevin Ryan, Stephen Collins and Andrew Jacobson. The shareholders
of NetCreations will become stockholders of DoubleClick, and their rights as
stockholders will be governed by DoubleClick's amended and restated certificate
of incorporation, as amended, DoubleClick's amended and restated bylaws and the
laws of the State of Delaware.
59
<PAGE>
THE MERGER AGREEMENT AND RELATED AGREEMENTS
The following is a brief summary of the material provisions of the merger
agreement, a copy of which is attached as Appendix A to this proxy
statement/prospectus and incorporated herein by reference. We urge you to read
the merger agreement in its entirety for a more complete description of the
merger. In the event of any discrepancy between the terms of the merger
agreement or other agreements and the following summary, the merger agreement
and other agreements will control.
THE MERGER
Genesis Merger Sub, Inc., a wholly-owned subsidiary of DoubleClick, will
merge with and into NetCreations following:
the adoption of the merger agreement by the NetCreations shareholders; and
the satisfaction or waiver of the other conditions to the merger.
NetCreations will be the surviving corporation and will become a
wholly-owned subsidiary of DoubleClick following the merger.
EFFECTIVE TIME
At the time of the closing of the merger, the parties will cause the merger
to become effective by filing the certificate of merger with the New York
Secretary of State. DoubleClick and NetCreations are working toward completing
the merger as soon as possible and hope to complete the merger during the fourth
quarter of 2000. Because the merger is subject to expiration or termination of a
waiting period under U.S. antitrust laws and to the satisfaction or waiver of
other conditions specified in the merger agreement, however, we cannot predict
the exact timing of the completion of the merger.
DIRECTORS AND OFFICERS OF NETCREATIONS AFTER THE MERGER
The directors and officers of Genesis Merger Sub, Inc. will become the new
directors and officers, respectively, of NetCreations at the effective time.
CONVERSION OF NETCREATIONS SHARES IN THE MERGER
At the effective time, each outstanding share of NetCreations common stock
will automatically be converted into the right to receive 0.41 of a share of
DoubleClick common stock.
The number of shares of DoubleClick common stock issuable in the merger will
be proportionately adjusted as appropriate for any stock split, stock dividend
or similar event with respect to NetCreations common stock or DoubleClick common
stock effected between the date of this proxy statement/prospectus and the
completion of the merger.
NO FRACTIONAL SHARES
No fractional shares of DoubleClick common stock will be issued in
connection with the merger. Instead you will receive an amount of cash, in lieu
of a fraction of a share of DoubleClick common stock, equal to the product of
such fraction multiplied by the closing price of DoubleClick common stock on the
Nasdaq National Market on the first business day immediately prior to the
effective time of the merger.
NETCREATIONS' STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS
At the effective time of the merger, each outstanding option to purchase
shares of NetCreations common stock issued under NetCreations' stock option plan
and each outstanding right to purchase shares of NetCreations common stock under
NetCreations' Employee Stock Purchase Plan will be assumed by DoubleClick. Each
NetCreations stock option or purchase right assumed by DoubleClick will continue
to have the same terms, and be subject to the same
60
<PAGE>
conditions, that were applicable to the option or purchase right immediately
prior to the effective time, except that:
each NetCreations stock option or purchase right will be exercisable for
shares of DoubleClick common stock, and the number of shares of DoubleClick
common stock issuable upon exercise of any given option or purchase right
will be determined by multiplying 0.41 by the number of shares of
NetCreations common stock underlying such option or purchase right, rounded
down to the nearest whole number; and
the per share exercise price of any given option or purchase right will be
determined by dividing the exercise price of the option or purchase right
immediately prior to the effective time by 0.41, rounded up, if necessary,
to the nearest whole cent.
Adjustments with respect to any options that are 'incentive stock options'
(as defined in the Internal Revenue Code) will be effected in a manner
consistent with the requirements of the Internal Revenue Code.
THE EXCHANGE AGENT
As of the effective time, DoubleClick is required to deposit with a bank or
trust company certificates representing the shares of DoubleClick common stock
to be exchanged for shares of NetCreations common stock and cash to be paid in
lieu of issuing fractional shares.
EXCHANGE OF NETCREATIONS STOCK CERTIFICATES FOR DOUBLECLICK STOCK CERTIFICATES
Promptly after the effective time, the exchange agent will mail to
NetCreations shareholders a letter of transmittal and instructions for
surrendering NetCreations stock certificates in exchange for DoubleClick stock
certificates and cash in lieu of fractional shares.
NETCREATIONS SHAREHOLDERS SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR
EXCHANGE UNTIL RECEIPT OF THE LETTER OF TRANSMITTAL AND INSTRUCTIONS REFERRED TO
ABOVE.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES
NetCreations shareholders are not entitled to receive any dividends or other
distributions on DoubleClick common stock with a record date after the merger is
completed until surrender of NetCreations stock certificates.
REPRESENTATIONS AND WARRANTIES
DoubleClick and NetCreations each made a number of representations and
warranties in the merger agreement.
NetCreations made representations about the following topics:
NetCreations' organization, qualification to do business and good standing,
and absence of subsidiaries;
NetCreations' certificate of incorporation and by-laws;
NetCreations' capitalization;
NetCreations' corporate power to enter into and its authorization of the
merger agreement and the transactions contemplated by the merger agreement;
the non-violation of certificate of incorporation or by-laws of
NetCreations, laws or agreements as a result of the merger agreement;
required approvals of governmental authorities relating to the merger
agreement;
possession of and compliance with permits required to conduct NetCreations'
business, and compliance with laws applicable to NetCreations;
NetCreations' filings and reports with the Securities and Exchange
Commission;
61
<PAGE>
NetCreations' financial statements;
absence of any material adverse effect and other changes in NetCreations'
business since December 31, 1999;
NetCreations' employee benefit plans and matters relating to NetCreations'
employees;
the treatment of the merger as a tax-free reorganization;
NetCreations' listed contracts and obligations;
litigation involving NetCreations;
environmental laws that apply to NetCreations;
intellectual property used or owned by NetCreations;
NetCreations' taxes;
NetCreations' insurance;
NetCreations' properties;
NetCreations' affiliates;
the opinion of NetCreations' financial advisor;
NetCreations' brokers' and finders' fees in connection with the merger;
the absence of certain business practices;
restrictions on NetCreations' business;
NetCreations' privacy policy; and
the inapplicability of state anti-takeover statutes to the merger.
DoubleClick made representations about the following topics:
DoubleClick's and Genesis Merger Sub's organization, qualification to do
business and good standing;
DoubleClick's and Genesis Merger Sub's certificate of incorporation and
bylaws;
DoubleClick's capitalization;
appropriate authorization of the issuance of DoubleClick common stock in
the merger;
DoubleClick's and Genesis Merger Sub's corporate power to enter into and
their authorization of the merger agreement and the transactions
contemplated by the merger agreement;
non-violation of certificate of incorporation or bylaws of DoubleClick or
Genesis Merger Sub, laws or agreements as a result of the merger agreement;
DoubleClick's filings and reports with the Securities and Exchange
Commission;
DoubleClick's financial statements;
the treatment of the merger as a tax-free reorganization; and
the absence of brokers' or finders' fees in connection with the merger on
behalf of DoubleClick.
The representations and warranties in the merger agreement are complicated
and not easily summarized. We urge you to read carefully the provisions in the
merger agreement captioned 'Representations and Warranties of Company' and
'Representations and Warranties of Parent.'
NETCREATIONS' CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER
NetCreations has agreed that, until the completion of the merger, unless
DoubleClick consents in writing and except as contemplated by the merger
agreement, NetCreations will conduct its
62
<PAGE>
businesses in the ordinary course of business consistent with past practice and
will use its best efforts:
to keep available the services of its present officers, significant
employees and consultants; and
to preserve its relationships with corporate partners, customers, suppliers
and other persons with which it has significant business dealings in order
to preserve substantially intact its business organization.
NetCreations has also agreed that, until the completion of the merger,
unless DoubleClick consents in writing and except as contemplated by the merger
agreement, NetCreations will conduct its business in compliance with the
specific restrictions set forth in the merger agreement, including not
permitting:
the modification of NetCreations' certificate of incorporation or by-laws;
the issuance, sale, pledge or encumbrance of NetCreations' material
property or assets, except sales of inventory in the ordinary course of
business consistent with past practice and the providing of opt-in e-mail
addresses to direct marketers and brokers in the ordinary course of
business, or shares of NetCreations capital stock or securities convertible
into NetCreations capital stock, except for limited issuances of securities
in connection with grants and exercises of stock options or purchase
rights;
the acquisition of any interest in any entities outside of the ordinary
course of business;
the incurrence of any indebtedness, other than a de minimis amount, or
issuance of any debt securities;
the amendment or premature termination of any listed contract (as defined
in merger agreement);
the making or authorization of any capital expenditures other than in the
ordinary course of business and in an amount that is in the aggregate
greater than $250,000;
the declaration or payment of dividends or other distributions on its
capital stock;
any split, combination, purchase or reclassification of any of its capital
stock;
the modification or acceleration of any stock options or authorization of
cash payments in exchange for stock options;
the amendment of the terms of, repurchase or redemption of any of its
securities, except in certain instances;
the increase of compensation payable to directors, officers, consultants or
employees;
the granting of any severance arrangements or entering into of any
agreement providing benefits upon a change of control that would be
triggered by the merger with any person who is not currently entitled to
such benefits from the merger;
the adoption, entering into or amendment in a material respect of any plan,
agreement, policy or arrangement for the benefit of any director, officer
or employee, except to the extent required by law or the terms of a
collective bargaining agreement;
the payment, discharge or satisfaction of any claims, liabilities or
obligations, other than in the ordinary course of business or as excepted
in NetCreations' filings with the Securities and Exchange Commission or in
schedules to the merger agreement;
the making of any changes with respect to NetCreations' accounting policies
or methods, except as required by generally accepted accounting principles
or by any governmental entity;
the making of any tax election or settlement or compromise of any tax
liability; or
the agreement in writing or otherwise to do any of the above or to take any
action which would make NetCreations' representations and warranties untrue
or prevent NetCreations
63
<PAGE>
from performing its covenants under the merger agreement or result in any of the
conditions to the merger not being satisfied.
The agreements related to the conduct of NetCreations' business contained in
the merger agreement are complicated and not easily summarized. We urge you to
carefully read the provision of the merger agreement captioned 'Conduct of
Business by Company Pending the Closing.'
Each of NetCreations and DoubleClick has also agreed:
to notify the other promptly of certain events and changes, including
changes that could reasonably be expected to have a material adverse effect
on either party, or to affect its ability to perform its obligations
pursuant to the merger agreement; and
to provide access at reasonable times to its offices, employees and books
to the other party and to furnish such information as the other party may
reasonably request.
NO SOLICITATION OF TRANSACTIONS
Until the merger agreement is terminated, NetCreations has agreed not to
take any of the following actions, directly or indirectly, and shall cause its
representatives not to, directly or indirectly:
solicit, initiate or knowingly encourage any inquiries or the making of any
proposal or offer that constitutes or could lead to a competing
transaction;
enter into or maintain or continue discussions or negotiate with any person
in furtherance of such inquiries or to obtain a competing transaction; or
agree to or endorse any competing transaction, or authorize or permit any
of its representatives to take any such action.
Further, NetCreations is required to notify DoubleClick promptly if any
proposal, offer or inquiry regarding a company competing transaction is made,
including the identity of the person making the proposal, offer or inquiry, and
the terms of the competing transaction. NetCreations is required to keep
DoubleClick apprised of any modifications to the terms of any competing
transaction. Prior to accepting a competing proposal, NetCreations will provide
DoubleClick with 24 hours' written notice of its intention.
NetCreations agreed, as of October 2, 2000, to immediately cease and cause
to be terminated all existing discussions or negotiations with any parties with
respect to a competing transaction.
A 'competing transaction' is defined in the merger agreement as any of the
following involving NetCreations (other than the contemplated merger with
Genesis Merger Sub):
any merger, consolidation, share exchange, business combination or other
similar transaction;
any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of 20% or more of the assets of NetCreations in a single transaction or
series of transactions (excluding for this purpose the providing of opt-in
e-mail addresses to direct marketers and brokers by NetCreations in the
ordinary course of business);
any tender offer or exchange offer for 20% or more of the outstanding
voting securities of NetCreations or the filing of a registration statement
in connection therewith;
any person having acquired beneficial ownership or the right to acquire
beneficial ownership of, or any group having been formed which beneficially
owns, or has the right to acquire beneficial ownership of, 20% or more of
the outstanding voting securities of NetCreations; or
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
NetCreations' board of directors is not prohibited, however, from taking and
disclosing to NetCreations' shareholders a position with respect to a tender or
exchange offer under Rules 14d-9 and 14e-2(a) under the Exchange Act not made in
violation of the merger agreement.
64
<PAGE>
NetCreations may engage in any of the foregoing actions, other than
solicitation, initiation or encouragement of any competing transaction proposal,
if:
NetCreations' board of directors concludes in good faith, based on the
advice from outside legal counsel that this action is necessary to prevent
the board from violating its fiduciary duties under applicable law;
NetCreations' board of directors determines, based upon advice of its
independent financial advisors, in the exercise of its fiduciary duties
that the acquiring party is reasonably capable of consummating the
competing transaction as proposed; and
NetCreations' board of directors reasonably believes in good faith, based
on the advice of NetCreations' independent financial advisors, that the
competing transaction is a 'superior proposal.'
A 'superior proposal' is defined in the merger agreement as a competing
transaction with respect to which NetCreations' board of directors reasonably
believes in good faith, based on the advice of NetCreations' independent
financial advisors, that such competing transaction is more favorable to
NetCreations' shareholders than the merger taking into account all the terms and
conditions of the competing transaction and the merger.
The agreements related to NetCreations' non-solicitation of transactions
contained in the merger agreement are complicated and not easily summarized. We
urge you to carefully read the provisions of the merger agreement captioned 'No
Solicitation of Transactions.'
DIRECTOR AND OFFICER INDEMNIFICATION AND INSURANCE
The merger agreement provides that:
the provisions with respect to immunities and indemnification that are set
forth in NetCreations' certificate of incorporation, by-laws and
contractual arrangements in effect on the date of the merger agreement,
with certain exceptions, will survive the merger and not be amended,
repealed or otherwise modified for a period of six years from the effective
time of the merger in any manner that would affect adversely the rights
thereunder of individuals who at or at any time prior to the effective time
of the merger were directors, officers, employees or agents of
NetCreations;
in the event that NetCreations or the surviving corporation in the merger
or any of their respective successors or assigns consolidates with or
merges into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or transfers a
material amount of its properties and assets to any person in a single
transaction or a series of transactions, then, and in each such case,
DoubleClick will either guaranty the indemnification obligations described
in the merger agreement or will make or cause to be made proper provision
so that the successors and assigns of NetCreations or the surviving
corporation, as the case may be, assume the indemnification obligations
described in the merger agreement for the benefit of the indemnified
parties and have substantially equal financial ability as NetCreations
(immediately prior to the effective time of the merger) to satisfy the
obligations of the parties pursuant to the merger agreement as a condition
to any such future merger, consolidation or transfer becoming effective;
and
for three years after the effective time of the merger, DoubleClick will
maintain in effect the directors' and officers' liability insurance
policies maintained by NetCreations.
DoubleClick is not required to pay premiums in excess of 150% of the annual
premium currently paid by NetCreations for such coverage. If the premium for
such coverage exceeds this amount, DoubleClick will purchase a policy with the
greatest coverage available for such amount.
BENEFIT PLANS AND ARRANGEMENTS
After the effective time of the merger, for all purposes under the employee
benefit plans of DoubleClick providing benefits to former NetCreations
employees, each such employee will be credited with his or her years of service
with NetCreations before the effective time, to the same
65
<PAGE>
extent as such employee was entitled, before the effective time, to credit for
such service under any similar NetCreations benefit plans, except for purposes
of benefit accrual under defined benefit pension plans, if any. NetCreations
will take all actions necessary and appropriate to terminate any NetCreations
benefit plan that is a 401(k) plan or any other defined contribution retirement
plan, effective before the effective time of the merger.
CONDITIONS TO THE MERGER
DoubleClick's and NetCreations' respective obligations to complete the
merger and the related transactions are subject to the satisfaction or waiver,
if permitted by law, of each of the following conditions:
the registration statement (of which this proxy statement/prospectus is a
part) relating to the issuance of shares of DoubleClick common stock as
contemplated by the merger agreement must have been declared effective by
the Securities and Exchange Commission and no stop order suspending the
effectiveness of the registration statement shall have been issued by the
Securities and Exchange Commission and no proceeding for that purpose shall
have been initiated by the Securities and Exchange Commission and not
concluded or withdrawn;
the merger agreement and the merger must have been duly adopted by the
requisite vote of NetCreations shareholders in accordance with the New York
Business Corporation Law;
no court of competent jurisdiction shall have issued or entered any order,
writ, injunction or decree, and no other government entity shall have
issued any order, which is then in effect and has the effect of making the
merger illegal or otherwise prohibiting its consummation;
any waiting period (and any extension thereof) applicable to the
consummation of the merger under U.S. antitrust laws must have expired or
been terminated; and
all consents, approvals and authorizations legally required to be obtained
to consummate the merger must have been obtained from all governmental
entities, except where the failure to obtain such consent, approval or
authorization could not reasonably be expected to result in a DoubleClick
or NetCreations material adverse effect.
NetCreations' obligations to consummate the merger, or to permit the
consummation of the merger are subject to the satisfaction or waiver, if
permitted by law, of each of the following additional conditions:
each of the representations and warranties of DoubleClick contained in the
merger agreement must be true, complete and correct in all respects (other
than representations and warranties subject to 'materiality' or 'material
adverse effect' qualifiers, which must be true, complete and correct in all
respects) both when made and on and as of the effective time of the merger
(other than representations and warranties which address matters only as of
a certain date which shall have been true, complete and correct as of such
certain date, and failures to be true, complete and correct that do not, in
the aggregate, constitute a DoubleClick material adverse effect);
DoubleClick must have performed or complied in all material respects with
all covenants required by the merger agreement;
NetCreations shall have received a certificate signed by the chief
executive officer and chief financial officer of DoubleClick to the effect
that the two conditions above have been satisfied; and
NetCreations must have received the opinion of its counsel, Piper Marbury
Rudnick & Wolfe LLP, to the effect that the merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, provided that if NetCreations is unable to obtain such an opinion,
this condition shall be deemed satisfied if DoubleClick's legal counsel
delivers an opinion to NetCreations to the same effect.
66
<PAGE>
DoubleClick's obligations to consummate the merger are subject to the
satisfaction or waiver of the following additional conditions:
each of the representations and warranties of NetCreations contained in the
merger agreement must be true, complete and correct in all respects (other
than representations and warranties subject to 'materiality' or 'material
adverse effect' qualifiers, which shall be true, complete and correct in
all respects), both when made and on and as of the effective time of the
merger (other than representations and warranties which address matters
only as of a certain date which shall have been true, complete and correct
as of such certain date, and failures to be true, complete and correct that
do not, in the aggregate, constitute a NetCreations material adverse
effect);
NetCreations must have performed or complied in all material respects with
all covenants required by the merger agreement;
there shall have been no NetCreations material adverse effect since the
date of the merger agreement;
NetCreations must have received from certain persons, a valid and effective
assignment, in a form reasonably acceptable to DoubleClick, of all
intellectual property rights in all work created by such persons on behalf
of NetCreations; and
Rosalind Resnick and Ryan Scott Druckenmiller must have terminated their
respective employment agreements with NetCreations and have agreed to the
terms of employment offered by DoubleClick and shall not have terminated,
or given notice of termination of, such employees' employment with
NetCreations.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated and the merger may be abandoned at
any time before the completion of the merger, notwithstanding the adoption of
the merger agreement by NetCreations' shareholders, as summarized below:
by mutual written consent of the boards of directors of each of
NetCreations and DoubleClick;
by either NetCreations or DoubleClick, if, without the fault of the
terminating party, the merger has not been consummated before February 28,
2001;
by either NetCreations or DoubleClick, if any governmental order, writ,
injunction or decree preventing the consummation of the merger has been
entered by any court of competent jurisdiction and has become final and
nonappealable; or
by NetCreations or DoubleClick, if the merger agreement and the merger fail
to receive the requisite votes for adoption at the NetCreations
shareholders meeting or any adjournment or postponement thereof.
Furthermore, the merger agreement may be terminated by DoubleClick if any of
the following occur:
the board of directors of NetCreations withdraws, modifies or changes its
recommendation of the merger agreement or the merger in a manner adverse to
DoubleClick;
the board of directors of NetCreations recommends a competing transaction
to the shareholders of NetCreations;
NetCreations fails to comply in all material respects with provisions in
the merger agreement dealing with non-solicitation of transactions and
holding the NetCreations shareholders meeting;
a competing transaction is announced and the board of directors of
NetCreations:
fails to recommend against acceptance of such competing transaction by
its shareholders (including by taking no position, or indicating its
inability to take a position, with respect to the acceptance of a
company competing transaction involving a tender offer
67
<PAGE>
or exchange offer by its shareholders) within five business days of delivery of
a written request from DoubleClick for such action, or
fails to reconfirm its approval and recommendation of the merger
agreement and the transactions contemplated thereby within five
business days of delivery of a written request from DoubleClick of such
action;
the board of directors of NetCreations determines that a competing
transaction is a superior proposal and the board, prior to termination of
the merger agreement, does not reconfirm its approval and recommendation of
the merger agreement and does not recommend against acceptance of such
superior proposal by its shareholders; or
ten business days after receipt by NetCreations of a written notice from
DoubleClick of a breach of any representation, warranty, covenant or
agreement on the part of NetCreations set forth in the merger agreement, or
if any representation or warranty of NetCreations becomes untrue,
incomplete or incorrect, in either case such that the conditions to the
obligation of DoubleClick to close set forth in the merger agreement would
not be satisfied, unless such breach is curable by NetCreations through the
exercise of its reasonable efforts within ten days.
Furthermore, the merger agreement may be terminated by NetCreations if any
of the following occur:
ten business days after receipt by DoubleClick of a written notice from
NetCreations of a breach of any representation, warranty, covenant or
agreement on the part of DoubleClick set forth in the merger agreement, or
if any representation or warranty of DoubleClick becomes untrue, incomplete
or incorrect, in either case such that the conditions to the obligation of
NetCreations to close set forth in the merger agreement would not be
satisfied, unless such breach is curable by DoubleClick through the
exercise of its reasonable efforts within ten days; or
if (1) the board of directors of NetCreations authorizes NetCreations,
subject to complying with the terms of the merger agreement, to enter into
a binding written agreement concerning a transaction that constitutes a
superior proposal and NetCreations notifies DoubleClick in writing that it
intends to enter into such an agreement, attaching the most current version
of such agreement (or description of all material terms and conditions
thereof) to such notice, and (2) DoubleClick does not make, within three
business days of receipt of NetCreations' written notification of its
intention to enter into a binding agreement for a superior proposal, an
offer that the board of directors of NetCreations determines, in good faith
after consultation with its financial advisors, is at least as favorable to
the shareholders of NetCreations as the superior proposal, it being
understood that NetCreations shall not enter into any such binding
agreement during such three-day period. NetCreations, will not, however, be
permitted to terminate the merger agreement for this reason if such
superior proposal is attributable to a violation by NetCreations of its
obligations under provisions of the merger agreement dealing with
non-solicitation of competing transactions, and such termination by
NetCreations will not be effective until after the payment of the
termination fee, as provided in the merger agreement.
PAYMENT OF FEES AND EXPENSES
Except as described below, all expenses incurred in connection with the
merger agreement and the merger will be paid by the party incurring such
expenses, whether or not the merger is consummated, except that DoubleClick and
NetCreations each will pay one-half of all expenses incurred in connection with
printing, filing and mailing the registration statement, of which this proxy
statement/prospectus is a part, and all Securities and Exchange Commission and
other regulatory filing fees incurred in connection with such documents and any
fees required to be paid under U.S. antitrust laws.
68
<PAGE>
NetCreations will pay DoubleClick an amount equal to $8.6 million and an
additional amount equal to DoubleClick's expenses, in the event that:
DoubleClick terminates the merger agreement following the occurrence of any
of the following events:
the board of directors of NetCreations withdraws, modifies or changes
its recommendation of the merger agreement or the merger in a manner
adverse to DoubleClick;
the board of directors of NetCreations recommends a competing
transaction to the shareholders of NetCreations;
NetCreations fails to comply in all material respects with certain
provisions in the merger agreement dealing with non-solicitation of
transactions and holding the NetCreations shareholders meeting;
a competing transaction is announced or becomes otherwise publicly
known and the board of directors of NetCreations:
fails to recommend against acceptance of such competing transaction
by its shareholders (including by taking no position, or indicating
its inability to take a position, with respect to the acceptance of
a company competing transaction involving a tender offer or exchange
offer by its shareholders) within five business days of delivery of
a written request from DoubleClick for such action, or
fails to reconfirm its approval and recommendation of the merger
agreement and the transactions contemplated thereby within five
business days of the first announcement or other public knowledge of
such proposal for a company competing transaction;
the board of directors of NetCreations determines that a competing
transaction is a superior proposal and does not reconfirm its approval
and recommendation of the merger agreement and does not recommend
against acceptance of such superior proposal by its shareholders prior
to termination of the merger agreement, or resolves to do any of the
foregoing;
NetCreations terminates the merger agreement following the authorization by
its board of directors, subject to complying with the terms of the merger
agreement, to enter into a binding written agreement concerning a
transaction that constitutes a superior proposal;
DoubleClick terminates the merger agreement following receipt by
NetCreations of a written notice from DoubleClick of a breach of any
covenant or agreement on the part of NetCreations set forth in the merger
agreement; or
at or prior to the time of termination (pursuant to the following events),
either a competing transaction was proposed or publicly announced or within
12 months after such termination, NetCreations enters into a definitive
agreement with respect to any competing transaction or any competing
transaction involving NetCreations is consummated, and the merger agreement
is terminated in either of the following ways:
either NetCreations or DoubleClick terminates the merger agreement,
without the fault of the terminating party, because the merger has not
been consummated before February 28, 2001; or
either NetCreations or DoubleClick terminates the merger agreement
because the merger agreement and the merger fail to receive the
requisite votes for adoption at the NetCreations special shareholders
meeting.
In the event NetCreations terminates the merger agreement due to a breach by
DoubleClick of its representations, warranties, covenants and agreements
contained in the merger agreement, then DoubleClick will reimburse NetCreations
for NetCreations' expenses associated with the merger.
69
<PAGE>
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
At any time prior to the completion of the merger, either DoubleClick or
NetCreations may extend the time for or waive compliance with the performance of
any obligation or other act of the other party, waive any inaccuracy in the
representations and warranties contained in the merger agreement or in any
document delivered pursuant to the merger agreement and waive compliance by the
other party with any of the agreements or conditions contained in the merger
agreement.
The merger agreement may be amended by DoubleClick and NetCreations at any
time prior to, the completion of the merger. However, after the adoption of the
merger agreement by NetCreations' shareholders, no amendment may be made that
changes the amount or type of consideration into which NetCreations common stock
will be converted pursuant to the merger agreement.
RELATED AGREEMENTS
SHAREHOLDERS' AGREEMENT
In connection with the merger, Rosalind Resnick and Ryan Scott
Druckenmiller, as shareholders of NetCreations, have entered into a
shareholders' agreement and irrevocable proxies with DoubleClick. The terms of
the shareholders' agreement and irrevocable proxies provide that these
shareholders' will vote the shares of NetCreations common stock specified in the
shareholders' agreement, representing, in the aggregate, approximately 65% of
NetCreations' outstanding common stock as of October 2, 2000, at every meeting
of the shareholders of NetCreations at which the merger agreement or the merger
is considered or voted upon, and at every adjournment and on every action or
approval by written resolution of the shareholders of NetCreations with respect
to the merger agreement or the merger, in favor of approval of the merger
agreement and of the merger. In addition, except in certain circumstances, each
such shareholder has agreed not to initiate or solicit, directly or indirectly,
any proposal, plan or offer to acquire all or any material part of the business
or properties or capital stock of NetCreations, or to initiate, directly or
indirectly, any contact with any person in an effort to or with a view towards
soliciting any such transaction; or to furnish information regarding
NetCreations' business, properties or assets to any person or group (other than
DoubleClick, or any associate, agent or representative of DoubleClick) under any
circumstances that could reasonably be expected to relate to such a transaction;
or to negotiate or enter into discussions or an agreement, directly or
indirectly, with any entity or group with respect of any such potential
transaction. The NetCreations shareholders who are parties to the shareholders'
agreement and irrevocable proxies retained the right to vote their shares of
NetCreations common stock on all matters other than those identified in the
shareholders' agreement. Nothing in the shareholders' agreement will limit the
discretion of either shareholder a party thereto with respect to any action
which may be taken by him or her acting in his or her fiduciary duty as a
director of NetCreations. The shareholders who are parties to the shareholders'
agreement were not paid additional consideration in connection with such
shareholders' agreement.
EMPLOYMENT AND NON-COMPETE AGREEMENTS
Concurrently with the execution of the merger agreement, DoubleClick entered
into employment agreements with Rosalind Resnick, NetCreations' Chairman and
Chief Executive Officer, Ryan Scott Druckenmiller, NetCreations' Chief
Technology Officer and one of its directors, Robert Mattes, NetCreation's Chief
Financial Officer, Scott Wolf, NetCreation's Senior Vice President of Sales and
Business Development, and Michael Mayor, NetCreations' Vice President of Sales.
These agreements will become effective upon the consummation of the merger.
Under the terms of the employment agreements, Ms. Resnick and Mr.
Druckenmiller each agreed to be employed by DoubleClick for a term of one year
and on an at-will basis thereafter. Messrs. Mattes, Wolf and Mayor have agreed
to be employed by DoubleClick on an at-will basis. Ms. Resnick will be employed
in the position of Vice President, Corporate Development, E-mail,
70
<PAGE>
with an annual salary of $175,000. Mr. Druckenmiller will be employed in a
position to be determined by him and DoubleClick, with an annual salary of
$175,000. Mr. Mattes will be employed in the position of Director, Business
Management, with an annual salary of $125,000. Mr. Wolf will be employed in the
position of Director, Sales, with an annual salary of $200,000. Mr. Mayor will
be employed in the position of Director, Sales, with an annual salary of
$125,000. If the employment of either Ms. Resnick or Mr. Druckenmiller is
terminated by DoubleClick without cause or by such employee for good reason
prior to twelve months after the closing date of the merger, that employee will
be entitled to receive salary continuation until the later of six (6) months
after the last date of employment or the first anniversary of the closing date
of the merger. If the employment of Mr. Mattes, Mr. Wolf or Mr. Mayor is
terminated by DoubleClick without cause or by such employee with good reason
prior to twelve months after the closing date of the merger, that employee will
be entitled to receive salary continuation for a period of six (6) months after
the last date of employment.
'Cause' as used in these employment agreements, means termination of
employment based upon:
the employee's breach of any material provision contained in the employment
agreement;
misconduct, which includes misappropriating DoubleClick funds or property,
obtaining any personal profit from any transaction in which the employee
has an interest that is adverse to DoubleClick or any material breach of
the duty of loyalty and fidelity to DoubleClick, or any other act or
omission by the employee which substantially impairs DoubleClick's ability
to conduct its ordinary business in its usual manner;
willful neglect or refusal to perform the material duties assigned to the
employee under or pursuant to the terms of the employment agreement;
conviction of, or plea of guilty or nolo contendere to, criminal charges
involving moral turpitude or conduct that concerns the business in which
DoubleClick is engaged, or conduct which, if prosecuted, would warrant
conviction on such charges under a 'beyond a reasonable doubt' standard of
proof;
acts of dishonesty or moral turpitude by the employee that DoubleClick
reasonably believes are materially detrimental to DoubleClick;
any act or omission which subjects DoubleClick or any of its affiliates to
substantial public disrespect, scandal, or ridicule, or that causes
DoubleClick to be in violation of governmental regulations that subjects
DoubleClick either to sanctions by governmental authority or to civil
liability to its employees or third parties; or
disclosure or use of DoubleClick's confidential information, other than as
specifically authorized and required (or as the employee reasonably
believes to be authorized and required) in the performance of the
employee's duties.
If an employee declares bankruptcy, such declaration will not constitute
grounds for termination for Cause under the employee's employment agreement.
'Good reason' as used in the employment agreements, means resignation by the
employee within thirty days after the occurrence of any of the following events:
any reduction in the employee's base salary as specified in the employment
agreement;
a requirement by DoubleClick that the employee relocate to an office more
than a fifty (50) mile radius from the employee's office at the time of the
execution of the employment agreement; or
an adverse change in the employee's job title.
The employment agreements also contain customary non-competition and
non-solicitation provisions which provide that Ms. Resnick and Messrs.
Druckenmiller, Mattes, Mayor and Wolf will not:
engage in any activity in certain markets specified in the employment
agreements; permit such employee's name to be used in connection with a
business which is competitive or
71
<PAGE>
substantially similar to a business specified in the employment agreements;
or acquire any debt, equity, or other ownership interest in any person or
entity engaged in a business, except that such employee may own, in the
aggregate, not more than one percent (1%) of the outstanding shares of any
publicly held corporation which is competitive with DoubleClick. In the
case of Ms. Resnick, such restrictions shall apply during the period of her
employment and for a period of three (3) years thereafter. In the case of
Messrs. Druckenmiller and Mayor, such restrictions shall apply during the
period of his employment and for a period of two (2) years thereafter. In
the case of Messrs. Mattes and Wolf, such restrictions shall apply during
the period of each of their respective employment and for a period of one
(1) year thereafter.
request or otherwise attempt to induce or influence, directly or
indirectly, any present or prospective customer of DoubleClick, its
affiliates, or other persons sharing a business relationship with
DoubleClick to cancel, limit, or postpone their business with DoubleClick,
or otherwise take action which might be to the material disadvantage of
DoubleClick. For Ms. Resnick and Messrs. Druckenmiller and Mayor, such
restrictions shall apply during the period of each of their respect
employment and for a period of two (2) years thereafter. In the case of
Messrs. Mattes and Wolf, such restrictions shall apply during the period of
each of their respective employment and for a period of one (1) year
thereafter.
solicit for employment, directly or indirectly, or induce or attempt to
influence any employee, agent, officer, director, contractor, consultant,
or other business associate of DoubleClick to terminate his or her
employment or discontinue such person's consultant, contractor, or other
business association with DoubleClick. For Ms. Resnick and Messrs.
Druckenmiller, Mattes and Mayor, such restrictions shall apply during the
period of each of their respective employment and for a period of two (2)
years thereafter. In the case of Mr. Wolf, such restrictions shall apply
during the period of each of their respective employment and for a period
of one (1) year thereafter.
LOCK-UP AGREEMENTS
Concurrently with the execution of the merger agreement, Ms. Resnick and Mr.
Druckenmiller each entered into stockholder lock-up agreements which will
restrict his or her disposition of DoubleClick common stock for a period of time
after the closing of the merger. Under the terms of their respective stockholder
lock-up agreements, Ms. Resnick and Mr. Druckenmiller have each agreed, subject
to the following paragraphs, that in the event the merger is consummated, he or
she will not, without the prior written consent of DoubleClick, until April 30,
2001, sell or otherwise dispose of any shares of DoubleClick common stock owned
by him or her.
Notwithstanding the foregoing, Ms. Resnick and Mr. Druckenmiller may each
sell or otherwise transfer, without the prior consent of DoubleClick, up to an
aggregate of 10% of his or her DoubleClick common stock; provided, however, that
each of Ms. Resnick and Mr. Druckenmiller may not sell more than 2.5% of his or
her DoubleClick common stock on any calendar day.
The sale or transfer of shares of DoubleClick common stock through execution
by Ms. Resnick or Mr. Druckenmiller of block trades of DoubleClick common stock
in one or more valid private placements to one or more accredited investors or
qualified institutional buyers is excluded from any restriction or transfer
described in the lock-up agreements.
72
<PAGE>
MATERIAL CONTACTS BETWEEN DOUBLECLICK AND NETCREATIONS
In July 1999, while NetCreations was exploring the feasibility of an initial
public offering, Ms. Resnick contacted Kevin O'Connor, then DoubleClick's
Chairman and Chief Executive Officer, to commence discussions regarding
potential strategic cooperation between the companies. Over the course of
several weeks, Ms. Resnick met with Mr. O'Connor, Eli Chalfin, then head of
DoubleClick's e-mail business, and Jeffrey Epstein, DoubleClick's Executive Vice
President, Business Development. As a result of this discussion, DoubleClick and
NetCreations entered into a non-binding letter of intent for an acquisition of
NetCreations by DoubleClick. This letter of intent provided for an exchange of
approximately 650,000 DoubleClick shares for all of the outstanding NetCreations
shares, which, as of the close of business on the date of the letter of intent,
valued NetCreations at approximately $50 million. The letter of intent allowed
NetCreations to continue to pursue an initial public offering, but prohibited it
for a limited period of time from exploring the sale of NetCreations to other
potential buyers. Discussions with DoubleClick eventually ended without
completion of a definitive agreement and with the formal termination of the
letter of intent in July 1999.
In the spring of 2000, DoubleClick commenced brokering NetCreations' e-mail
address lists on a non-exclusive basis.
73
<PAGE>
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements of
DoubleClick Inc. have been prepared to illustrate the estimated effects of the
assumed acquisition by DoubleClick of all the shares of NetCreations, Inc. in
exchange for 6,368,940 shares of DoubleClick common stock and the issuance by
DoubleClick of options to acquire approximately 482,000 DoubleClick common stock
in connection with this transaction.
Pro forma amounts have been derived by applying pro forma adjustments to the
historical consolidated financial information of DoubleClick and NetCreations.
On September 24, 2000 DoubleClick entered into an agreement to acquire
@plan.inc for a combination of cash and shares of DoubleClick common stock.
DoubleClick does not believe that this anticipated acquisition would have a
significant impact on its pro forma financial position and results of operations
for the periods reported.
THE ACQUISITION OF NETCREATIONS
The purchase price of NetCreations has been estimated based on the average
market price of DoubleClick common stock, as quoted on the Nasdaq national
market, for the day immediately prior to, the day of, and the day immediately
after, the announcement of the transaction, plus the fair value of options and
warrants, which was estimated using the Black-Scholes option pricing model. The
estimated purchase price does not include the effect of direct acquisition
costs. The final cost of the acquisition will be a different amount.
The excess of the estimated purchase price over the recorded amount of net
assets has been preliminarily allocated to goodwill and amortized over three
years. The ultimate allocation of the purchase price will depend on the results
of fair value appraisals. DoubleClick believes that the effect of the ultimate
allocation will not differ materially from that assumed in the following
unaudited pro forma financial data.
The unaudited pro forma condensed statements of operations for the year
ended December 31, 1999 and the six month period ended June 30, 2000 have been
prepared as if the NetCreations acquisition had occurred on January 1, 1999. The
unaudited pro forma condensed balance sheet as of June 30, 2000 has been
prepared as if the acquisition occurred on June 30, 2000. The pro forma
adjustments are described in the accompanying notes.
Certain assets, liabilities and shareholders' equity balances in the
consolidated balance sheets of DoubleClick and NetCreations have been
reclassified to conform to the line item presentation in the pro forma balance
sheet. Certain costs and other deductions in the consolidated
statements of operations of DoubleClick and NetCreations have been reclassified
to conform to the line item presentation in the pro forma statement of
operations.
The unaudited pro forma financial information should not be considered
indicative of actual results that would have been achieved had the NetCreations
acquisition been consummated on the date indicated and does not purport to
indicate balance sheet data or results of operations as of any future date or
any future period. The unaudited pro forma financial information should be read
in conjunction with the historical financial statements of DoubleClick and
NetCreations, and the related notes thereto incorporated by reference into and
included elsewhere in this proxy statement/prospectus.
74
<PAGE>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
AS OF JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
DOUBLECLICK NETCREATIONS ADJUSTMENTS COMBINED
----------- ------------ ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash, cash equivalents and short-term
investments............................. $ 482,883 $38,333 $ -- $ 521,216
Accounts receivable....................... 124,351 10,981 -- 135,332
Prepaid expenses and other................ 51,824 7,519 -- 59,343
---------- ------- -------- ----------
Total current assets.................... 659,058 56,833 -- 715,891
Investments in marketable securities........ 399,099 -- -- 399,099
Property and equipment, net................. 126,261 3,274 -- 129,535
Intangible assets, net...................... 104,835 -- 129,045 (1) 233,880
Investments in affiliates................... 74,667 -- -- 74,667
Other assets................................ 4,345 600 -- 4,945
---------- ------- -------- ----------
Total assets............................ $1,368,265 $60,707 $129,045 $1,558,017
---------- ------- -------- ----------
---------- ------- -------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Payables and accrued expenses............. $ 139,365 $11,034 $ -- $ 150,399
Deferred revenue.......................... 34,478 -- -- 34,478
Other..................................... -- 106 -- 106
---------- ------- -------- ----------
Total current liabilities............... 173,843 11,140 -- 184,983
Long-term obligations and notes............. 8,196 59 -- 8,255
Convertible subordinated notes.............. 250,000 -- -- 250,000
Stockholders equity:
Common stock.............................. 123 155 (155)(2) 129
6 (1)
Treasury stock............................ (23,766) -- -- (23,766)
Additional paid in capital................ 1,114,751 46,078 (46,078)(2) 1,297,305
182,554 (1)
Deferred compensation..................... (635) (1,518) 1,518 (2) (4,642)
(4,007)(1)
Retained earnings (deficit)............... (150,337) 4,793 (4,793)(2) (150,337)
Other comprehensive income................ (3,910) -- -- (3,910)
---------- ------- -------- ----------
Total stockholders' equity.............. 936,226 49,508 129,045 1,114,779
---------- ------- -------- ----------
Total liabilities and stockholders'
equity................................ $1,368,265 $60,707 $129,045 $1,558,017
---------- ------- -------- ----------
---------- ------- -------- ----------
</TABLE>
75
<PAGE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
DOUBLECLICK NETCREATIONS ADJUSTMENTS COMBINED
----------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenues.................................................... $238,143 $30,642 $ -- $268,785
Cost of revenues............................................ 112,016 17,224 -- 129,240
-------- ------- -------- --------
Gross profit................................................ 126,127 13,418 -- 139,545
Operating expenses:
Sales and marketing........................................ 95,661 4,186(3) -- 99,847
General and administrative................................. 42,899 1,404(3) -- 44,303
Product development........................................ 20,851 1,308(3) -- 22,159
Amortization of intangible assets.......................... 18,538 -- 21,508 (5) 40,046
Non cash compensation...................................... 9,855 361(3) -- 10,216
-------- ------- -------- --------
Total operating expense.................................. 187,804 7,259 21,508 216,571
Income (loss) from operations............................... (61,677) 6,159 (21,508) (77,026)
Equity in losses of affiliates.............................. (4,759) -- -- (4,759)
Gain on issuance of affiliate stock......................... 8,949 -- -- 8,949
Interest and other, net..................................... 18,613 1,087 -- 19,700
-------- ------- -------- --------
Income (loss) before income taxes........................... (38,874) 7,246 (21,508) (53,136)
Provision for income tax.................................... 1,632 3,361 (3,361)(4) 1,632
-------- ------- -------- --------
Net income (loss)........................................... $(40,506) $ 3,885 $(18,147) $(54,768)
-------- ------- -------- --------
-------- ------- -------- --------
Weighted-average number of shares used in calculation of
basic and diluted EPS:..................................... 119,552 125,921
Basic and diluted EPS:...................................... $ (0.34) $ (0.43)
</TABLE>
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
DOUBLECLICK NETCREATIONS ADJUSTMENTS COMBINED
----------- ------------ ----------- --------
<S> <C> <C> <C> <C>
Revenues.................................................... $258,294 $20,659 $ -- $278,953
Cost of revenues............................................ 107,156 10,465 -- 117,621
-------- ------- -------- --------
Gross profit................................................ 151,138 10,194 -- 161,332
Operating expenses:
Sales and marketing........................................ 103,578 2,824(3) -- 106,402
General and administrative................................. 36,306 595(3) -- 36,901
Product development........................................ 28,364 921(3) -- 29,285
Amortization of intangible assets.......................... -- -- 43,015 (5) 43,015
Non cash compensation...................................... -- 552(3) 4,007 (6) 4,559
Facility relocation and other.............................. 41,605 -- -- 41,605
-------- ------- -------- --------
Total operating expense.................................. 209,853 4,892 47,022 261,767
Income (loss) from operations............................... (58,715) 5,302 (47,022) (100,435)
Interest and other, net..................................... 11,481 176 -- 11,657
-------- ------- -------- --------
Income (loss) before income taxes........................... (47,234) 5,478 (47,022) (88,778)
Provision for income tax.................................... 8,587 946 (946)(4) 8,587
-------- ------- -------- --------
Net income (loss)........................................... $(55,821) $ 4,532 $(46,076) $(97,365)
-------- ------- -------- --------
-------- ------- -------- --------
Weighted-average number of shares used in calculation of
basic and diluted EPS:..................................... 109,756 116,125
Basic and diluted EPS:...................................... $ (0.51) $ (0.84)
</TABLE>
76
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
1. The total acquisition cost of NetCreations was calculated as follows:
<TABLE>
<S> <C>
6,368,940 shares issued at $27.31(i) per share.............. $173,936
Estimated fair value of options and warrants................ 8,624
--------
Total acquisition cost:..................................... $182,560
--------
--------
Purchase price.............................................. $182,560
Less:
Deferred compensation -- FIN 44......................... (7)
Deferred compensation -- contingent consideration....... (4,000)
Book value of net assets acquired....................... (49,508)
--------
Goodwill:................................................... $129,045
--------
--------
</TABLE>
---------
(i) The average market price of DoubleClick common stock, as quoted in the
Nasdaq National Market, for the day immediately prior to, the day of, and
the day immediately after, the announcement of the transaction.
The adjustment to deferred compensation reflects:
a) the unearned compensation cost associated with the unvested options of
NetCreations assumed by DoubleClick. Pursuant to the guidance of FIN 44,
this unearned compensation cost is calculated by taking the aggregate
intrinsic value of the assumed awards, multiplied by the ratio of the
remaining vesting period to the total vesting period. This cost is then
subsequently recognized over the remaining vesting period.
b) the portion of the acquisition price paid to certain NetCreations employees
that is contingent upon their continued employment. This cost is being
recognized over the minimum continued employment period of six months.
2. These amounts reflect the elimination on consolidation of DoubleClick's
investment in NetCreations against the net equity of NetCreations.
3. The following tables illustrate the reclassifications that were made to
certain NetCreations historical operating expenses in order to conform them
to the line item presentation used by DoubleClick in its statement of
operations.
For the six months ended June 30, 2000:
<TABLE>
<CAPTION>
AS REPORTED RECLASSIFICATION PRO FORMA
----------- ---------------- ---------
<S> <C> <C> <C>
Sales and marketing.............................. $2,942 $ 1,244 $4,186
General and administrative....................... 2,878 (1,474) 1,404
Technology, support and development.............. 832 476 1,308
Depreciation and amortization.................... 607 (607) 0
Non-cash compensation............................ 0 361 361
------ ------- ------
Total operating expenses......................... $7,259 $ 0 $7,259
------ ------- ------
------ ------- ------
</TABLE>
For the year ended December 31, 1999:
<TABLE>
<CAPTION>
AS REPORTED RECLASSIFICATION PRO FORMA
----------- ---------------- ---------
<S> <C> <C> <C>
Sales and marketing.............................. $2,088 $ 736 $2,824
General and administrative....................... 1,915 (1,320) 595
Technology, support and development.............. 694 227 921
Depreciation and amortization.................... 195 (195) 0
Non-cash compensation............................ 0 552 552
------ ------- ------
Total operating expenses......................... $4,892 $ 0 $4,892
------ ------- ------
------ ------- ------
</TABLE>
4. This adjustment reflects the reversal of NetCreations' historical tax
provision due to the fact that NetCreations operated in tax jurisdictions
where DoubleClick had taxable losses exceeding
77
<PAGE>
NetCreations' income during such periods. Therefore, had the merger been
consummated on January 1, 1999, the combined company would not have incurred
these expenses.
5. This represents the amortization of goodwill over a three-year period
generated on the acquisition of NetCreations for the period reported.
6. This adjustment reflects the recognition of the compensation cost associated
with the assumption by DoubleClick of NetCreations' unvested options, as well
as the costs related to the portion of the acquisition price paid to certain
NetCreations employees that is contingent upon their continued employment.
78
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE DATA
MARKET PRICE INFORMATION
DOUBLECLICK MARKET PRICE DATA
DoubleClick common stock has traded on the Nasdaq National Market under the
symbol 'DCLK' since February 20, 1998. The following table sets forth the range
of high and low sales prices reported on the Nasdaq National Market for
DoubleClick common stock for the periods indicated, adjusted to reflect (1) a
two-for-one stock split effected in the form of a dividend which became
effective on April 5, 1999 and (2) a two-for-one stock split effected in the
form of a dividend which became effective on January 11, 2000.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1998
First Quarter (from February 20, 1998)................ $ 9.250 $ 6.906
Second Quarter........................................ 12.438 7.719
Third Quarter......................................... 19.281 4.547
Fourth Quarter........................................ 14.500 3.375
FISCAL 1999
First Quarter......................................... $ 50.000 $11.000
Second Quarter........................................ 88.000 33.750
Third Quarter......................................... 62.625 30.250
Fourth Quarter........................................ 127.719 54.875
FISCAL 2000
First Quarter......................................... $135.250 $74.000
Second Quarter........................................ 93.875 32.875
Third Quarter......................................... 45.516 27.562
Fourth Quarter (through [ ]).................. [ ] [ ]
</TABLE>
NETCREATIONS MARKET PRICE DATA
NetCreations' common stock has traded on the Nasdaq National Market under
the symbol 'NTCR' since November 12, 1999. The following table sets forth the
range of high and low sales prices reported on the Nasdaq National Market for
NetCreations common stock for the periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1999
Fourth Quarter (from November 12, 1999)................ $69.750 $17.500
FISCAL 2000
First Quarter.......................................... $64.625 29.875
Second Quarter......................................... 60.375 20.141
Third Quarter.......................................... 53.250 8.875
Fourth Quarter (through [ ]).................. [ ] [ ]
</TABLE>
RECENT CLOSING PRICES
As of October 2, 2000, the last trading day before announcement of the
proposed merger, the actual closing prices per share of DoubleClick common stock
and NetCreations common stock on the Nasdaq National Market were $29.625 and
$11.375, respectively. On [ ] [ ], 2000, the closing prices per share of
DoubleClick common stock and NetCreations common stock on the Nasdaq National
Market were $ and $ , respectively.
Because the market price of DoubleClick common stock is subject to
fluctuation, the market value of the shares of DoubleClick common stock that
holders of NetCreations common stock will receive in the merger may increase or
decrease prior to and following the merger. WE URGE
79
<PAGE>
NETCREATIONS SHAREHOLDERS TO OBTAIN CURRENT MARKET QUOTATIONS FOR DOUBLECLICK
COMMON STOCK AND NETCREATIONS COMMON STOCK. WE CANNOT GIVE YOU ANY ASSURANCE AS
TO THE FUTURE PRICES OR MARKETS FOR DOUBLECLICK COMMON STOCK OR NETCREATIONS
COMMON STOCK.
DIVIDEND POLICY
Neither DoubleClick nor NetCreations has ever paid cash dividends on its
stock, and both anticipate that they will continue to retain any earnings for
the foreseeable future for use in the operation of their respective businesses.
80
<PAGE>
BUSINESS OF NETCREATIONS
OVERVIEW
NetCreations provides Internet-based opt-in e-mail direct marketing services
that enable direct marketers to target promotional campaigns to consumers who
have given their permission through NetCreations' proprietary double opt-in
process to receive e-mail messages in any of over 3,000 topical categories.
NetCreations' technology allows real-time, online e-mail address selection and
ordering by direct marketers, as well as response-tracking. NetCreations has, as
of September 30, 2000, over 15.7 million e-mail addresses in its database, which
is currently growing at an average net rate of more than 55,000 e-mail addresses
per day.
Through NetCreations' www.postmasterdirect.com Web site and through
third-party Web sites whose e-mail address lists NetCreations manages,
NetCreations has collected e-mail addresses in its database from consumers who
have elected to receive promotional e-mail messages and have subsequently
confirmed their request by replying to a PostMasterDirect.com e-mail.
NetCreations refers to these third-party Web sites and the NetCreations' Web
site as the NetCreations Network because they provide NetCreations e-mail
addresses for the database. NetCreations charges direct marketers a fee each
time it sends marketing materials on their behalf to an e-mail address they have
selected from its database. NetCreations pays a percentage of that fee to the
third-party Web sites in the NetCreations Network each time an e-mail address
owned by such third-party Web site is used for a particular e-mail marketing
campaign. NetCreations generates substantially all of its revenues from the fees
obtained from its direct marketing customers.
There are currently over 380 third-party Web sites in the NetCreations
Network, including sites such as CNET, Uproar, About.com, Network Solutions,
internet.com, CBS SportsLine, CDROM Guide and LuckySurf. Each Web site in the
NetCreations Network accumulates e-mail addresses by placing a sign-up template
on one or more of its Web pages which allows consumers to elect to receive
e-mail pertaining to a selection of topical categories. NetCreations believes
that the aggregation of topically targeted, double opt-in e-mail addresses
collected from third-party Web sites is an important element of the
attractiveness of NetCreations' services to direct marketers.
NetCreations sent approximately 206 million e-mail messages on behalf of
more than 2,000 direct marketers and resellers during the six month period ended
June 30, 2000. NetCreations' direct marketing customers range from large
companies, such as Compaq, Ziff-Davis, IBM, Avenue A and OgilvyOne, to small
retailers selling items over the Internet, such as SmarterKids.com,
NutriSystem.com, ememories, Inc. and imandi.com. NetCreations also sells use of
e-mail addresses in the database to e-mail address list brokers for use by their
direct marketing customers. For the years ended December 31, 1997, 1998 and 1999
and the six month periods ended June 30, 1999 and 2000, NetCreations generated
net revenues of $1.1 million, $3.4 million, $20.7 million, $5.3 million and
$30.6 million, respectively, and during those same periods NetCreations
generated net income of $260,000, $606,000, $4,531,000, $1,325,000 and
$3,885,000, respectively.
INDUSTRY BACKGROUND
The Internet and Online Commerce. The Internet is an increasingly
significant global medium for communications, content and commerce.
International Data Corporation estimates that the number of Web users worldwide
was approximately 142 million at the end of 1998 and will grow to approximately
500 million by the end of 2003. E-mail was originally viewed as a simple
personal communications tool, but it is increasingly used as a powerful and
cost-effective business tool. Consequently, it has become one of the most
popular Internet applications.
The increasing functionality, accessibility and overall usage of the
Internet and online services have made them an attractive commercial medium. The
Internet and other online services are evolving into a unique sales and
marketing channel, similar to retail stores, mail-order catalogs and television
shopping. According to International Data Corporation, the number of Web buyers
worldwide is estimated to increase from 30.8 million in 1998 to 182.6 million in
2003, which represents a compounded annual growth rate of 44%. International
Data Corporation also estimates that the total value of goods and services
purchased worldwide over the Web will
81
<PAGE>
increase from $50.4 billion in 1998 to $1 trillion in 2003, a compounded annual
growth rate of 92%. The growing use of the Internet has led businesses to
develop e-commerce strategies to drive traffic to their Web sites, attract
customers and facilitate transactions.
Advertising. Businesses use two forms of advertising to attract customers:
brand advertising and direct marketing. Brand advertisements, including
television, radio, magazine displays, and billboards, target a mass audience to
generate awareness of a particular company, product or service. The goal of
direct marketing, by contrast, is to target specific individuals who appear from
behavioral patterns or demographic data to be likely purchasers of products or
services. Direct marketing includes direct mail, telemarketing, and direct
response advertising in newspapers and magazines and on radio and television.
According to the DMA, overall media spending for direct marketing initiatives
reached $176.5 billion in 1999, up 7.2% over 1998 expenditures. Furthermore, the
DMA projects direct marketing spending to grow to $221.5 billion by 2003.
Internet Advertising. The rise of the Internet and its fast-growing
popularity among consumers and business owners has led both brand advertisers
and direct marketers to begin experimenting with advertising and marketing
online. According to Forrester Research, Internet advertising expenditures are
expected to increase from $3.3 billion in 1999 to $33.1 billion in 2004
worldwide, and from $2.8 billion in 1999 to $22.2 billion in 2004 in the United
States. According to the DMA, online direct marketing expenditures in the United
States are expected to increase from $1.3 billion in 1999 to $8.6 billion in
2003.
Currently, the most popular form of Internet advertising is banner
advertising. Web sites display advertising banners which users can click through
to visit the advertiser's Web site and obtain more information about a company's
product or service. However, while banners provide advertisers with the ability
to reach broad audiences and establish brand awareness, they have proven to be
less than effective as vehicles for direct marketing. Response rates, or
click-throughs, from banner advertisements averaged approximately 0.45% as
reported by Nielsen/Net Ratings in August 2000.
E-mail advertising campaigns are cheaper and faster than traditional direct
marketing. However, the practice of sending unsolicited commercial e-mail, or
'spam,' is strongly opposed by many Internet users. Spam lists are databases of
e-mail addresses gathered without the recipients' knowledge or consent from
Internet newsgroups, chat rooms, Web sites, and member directories. While spam
lists may be inexpensive to rent, costing less than $1 for 1,000 addresses, the
hostile reaction they can generate among Internet users can be very costly to a
marketer's reputation. Spamming can also result in attacks on the marketer's
corporate mail server by the automated transmission of extremely large volumes
of angry e-mail messages. Moreover, a marketer who engages in spamming risks
being disconnected from the Internet service provider or having all subsequent
e-mail transmission attempts blocked. Over the last few years, spam transmitters
have been successfully sued by Internet service providers such as America Online
and Earthlink, the federal government and several states have passed legislation
barring or restricting the transmission of unsolicited e-mail messages.
Businesses attempt to utilize the most cost-effective advertising source to
maximize their advertising dollar. Drawbacks to traditional direct mail include
the high costs involved, the delay in response and the difficulty in tracking
responses. Banner advertising is not a cost-effective form of direct marketing
because of its relatively low click-through rate. Unsolicited e-mail advertising
is generally not desirable because of privacy concerns and potential damage to
marketers' reputations.
BUSINESS OF NETCREATIONS
NetCreations provides Internet-based opt-in e-mail direct marketing services
which respect consumers' privacy. NetCreations' opt-in e-mail marketing system
enables direct marketers to target promotional campaigns to consumers who choose
(1) whether or not they would like to receive commercial messages, (2) the type
or categories of information that they would like to receive and (3) amount of
personal data that they are willing to disclose. The users can opt-out, or stop
82
<PAGE>
receiving these messages, at any time. Unlike some 'permission-based' e-mail
marketing companies that do not always verify the election of their list members
to receive e-mail messages, NetCreations has developed a double opt-in
confirmation system. NetCreations requires each Internet user to confirm the
user's desire to receive messages, typically by responding to a verification
e-mail. This way, no Internet user can be signed up for NetCreations' lists by
an unauthorized third party.
NetCreations' opt-in e-mail direct marketing business offers direct
marketers three key advantages over postal direct marketing and banner
advertising:
Speed. Opt-in e-mail campaigns can be sent out immediately without waiting
days or weeks at a postal lettershop. NetCreations believes that e-mail
campaigns also generate results in a shorter period of time than
traditional direct mail, producing leads and sales within 24 to 48 hours,
compared to six to eight weeks offline;
Responsiveness. Opt-in e-mail campaigns typically generate higher response
rates than postal mail or banner ad campaigns. NetCreations believes that
opt-in e-mail campaigns typically generate response rates ranging from 5%
to 15%. This greatly exceeds the typical banner advertising response rate
of 0.45% and typical postal direct mail response rates, which NetCreations
believes to be approximately 2%. NetCreations also believes, based on the
response rates reported to NetCreations by its direct marketing, that the
double opt-in system contributes to NetCreations' lists generating higher
response rates than other e-mail lists in the market. In addition,
NetCreations can confirm to Internet service providers that messages sent
are not unsolicited spam. As a result, NetCreations' and its direct
marketers' e-mail messages are allowed to travel freely through the
networks of all of the major Internet service providers;
Cost. Opt-in e-mail campaigns cost less than postal mail campaigns.
Forrester Research estimates that the typical costs for e-mail campaigns
range from 15 to 45 cents per e-mail message sent (to rent a list and have
an e-mail service bureau send it out). This compares to an average cost of
60 cents per delivery for a postal direct mail campaign, including the list
rental, printing, postage and processing fees. While banner ads may cost
less than e-mail campaigns, on a CPM (cost per thousand) basis, banner
campaigns often end up costing more because of their low response rates.
The customers of NetCreations include Web sites that collect e-mail
addresses and direct marketers, including advertisers and e-mail address list
brokers. NetCreations' service allows demographic selection of e-mail addresses
based on the personal data provided by Internet users when their sign-up forms
were completed. Additionally, NetCreations provides real-time, online list
selection and ordering. NetCreations also provides an optional response-tracking
program that allows marketers to monitor and improve the effectiveness of their
e-mail marketing campaigns.
NetCreations' e-mail address database offers direct marketers and e-mail
address list brokers more than 15.7 million e-mail addresses gathered from a
network of more than 380 third-party Web sites, such as CNET, Uproar, About.com,
Network Solutions, internet.com, CBS SportsLine, CDROM Guide and LuckySurf.
NetCreations provides marketers and e-commerce retailers a selection of targeted
e-mail address lists designed to achieve maximum response to their offers.
NetCreations currently has e-mail addresses listed in its database in over 3,000
topical categories, from general consumer lists to business-to-business lists.
NetCreations' services enable Web site owners to compile e-mail address
lists and demographic profiles of NetCreations' members. NetCreations then makes
these lists available to direct marketers on NetCreations'
www.postmasterdirect.com online store, providing incremental revenue
opportunities in the form of commissions for Web sites when e-mail addresses
owned by those Web sites are used by marketers. In addition, NetCreations' Web
site provides marketing, mailing, merging of lists, purging of duplicate e-mail
addresses, and subscribe/unsubscribe services to users of NetCreations' e-mail
addresses.
83
<PAGE>
STRATEGY OF NETCREATIONS
NetCreations' goal is to become the leader in opt-in direct marketing
services on the Internet. Key elements of NetCreations' strategy include the
following:
Maintain and Extend Market Leadership in Opt-In E-mail Direct Marketing.
NetCreations intends to maintain and extend its leadership role in e-mail
direct marketing by aggressively expanding the NetCreations Network of
third-party Web sites with additional Web sites worldwide. NetCreations is
exploring ways to encourage third-party Web sites currently participating
in the NetCreations Network to refer additional Web sites to join the
NetCreations Network. NetCreations may also acquire other Web sites in an
effort to aggregate more opt-in e-mail addresses. In connection with its
worldwide list expansion, NetCreations intends to develop capabilities for
adding e-mail addresses to its database from non-English language
consumers. NetCreations also plans on hiring additional business
development personnel to assist NetCreations in obtaining more list
members.
Develop New Internet Marketing Products and Services. NetCreations is
expanding its direct marketing services to additional applications on the
Internet such as incentive programs and sweepstakes promotions, including
its DoubleLotto sweepstakes, an online sweepstakes that is a destination
Web site and is intended to be syndicated to the NetCreations Network; its
Click4Cash incentive program, which is a promotion that incentivizes
NetCreations list members to click-through to its advertisers' offers; and
its Backpage Offers program, which offers NetCreations' advertisers the
opportunity to place banners on a cost-per-click basis. NetCreations also
intends to expand the use of its current response-tracking system to create
an end-to-end system that measures responses all the way from the message
delivery to the sale.
Expand NetCreations' Sales Channels. In addition to its direct sales
efforts, NetCreations markets its services through indirect sales channels
such as list brokers, advertising agencies, Web design firms and other
resellers. NetCreations intends to develop additional sales channels to
penetrate vertical markets such as small business/home office, technology,
publishing and manufacturing. In addition, NetCreations continuously works
with its existing indirect sales channels to further the growth of sales
through these sales channels. NetCreations recently launched an online list
brokerage program that enables Web sites that target small business owners
and entrepreneurs to private-label NetCreations' e-mail address list rental
program and earn commissions by referring customers to NetCreations.
Leverage NetCreations' Scaleable Technology Platform. NetCreations has
developed and relies upon its proprietary software and intends to capitalize
on its modular design to easily expand its capabilities to process
increasing demand for e-mail messaging by its direct marketing customers.
NetCreations' platform also enables the addition of new features and
products to satisfy the needs of NetCreations' customers for quality,
innovative products and services.
SERVICES OF NETCREATIONS
NetCreations provides Internet-based opt-in e-mail address list management,
e-mail address list brokerage, a response management system and e-mail delivery
services through NetCreations' www.postmasterdirect.com Web site.
E-mail Address List Management. NetCreations currently aggregates and
manages opt-in e-mail addresses across a network of more than 380 third-party
Web sites. Once a Web site joins NetCreations Network, NetCreations provides a
sign-up template for the site to place on one or more of NetCreations' Web
pages. Generally, this is a page that receives a large number of visitors, such
as a registration page or a page thanking visitors for entering a contest or
downloading some software. NetCreations' template allows the participating site
to facilitate the gathering of opt-in e-mail addresses in a variety of topical
categories, including business, investing, sports, travel, computing, contests,
and entertainment. Although the NetCreations' system is capable of processing
elections to receive e-mail messages relating to more than 3,000 topical
84
<PAGE>
categories, most Web sites post the selection of category choices that they
believe will be of greatest interest to their visitors. The sign-up form also
includes a demographic profile asking the visitor for an e-mail address, postal
address, age, income, gender, occupation, title and other information. However,
the only information users are required to submit is an e-mail address.
In November 1997, NetCreations adopted a double opt-in process to protect
Internet users' privacy by preventing anyone from signing them up without
authorization. Generally, whenever a visitor to a participating Web site opts in
to receive e-mail, the sign-up request is immediately transmitted to the server.
NetCreations' server then sends the visitor a confirmation message requiring the
person to click on an embedded link in the message and enter a special code on
NetCreations' www.postmasterdirect.com Web site. When the visitor confirms the
sign-up request and becomes an e-mail list member, the visitor's e-mail address
is added to NetCreations' database and is made available to NetCreations' direct
marketing customers. However, the Web site from which the e-mail address was
derived continues to own its list of e-mail addresses which are included in the
database.
NetCreations typically pays to the applicable Web site owner a commission of
50% of the revenue it has earned, less volume discounts, if applicable, each
time NetCreations sends an e-mail message to the e-mail addresses owned by that
Web site owner. In the event that an e-mail address appears on more than one
e-mail address list selected by NetCreations' customer, the 50% commission is
paid only to the Web site owner whose e-mail address list is designated by
NetCreations' customer as the preferred list. NetCreations currently does not
charge the list owners any additional setup, processing or maintenance fees for
NetCreations' service. In a small number of cases, primarily involving Web sites
that NetCreations believes are well-known to both consumers and NetCreations'
direct marketing customers, NetCreations has agreed to pay advance fees to such
Web sites. In those cases, NetCreations generally, but not always, has the right
to offset against those payments any payment of the percentage of fees that may
become payable to those Web sites. In addition, NetCreations may pay third-party
Web sites flat fees for the collection of e-mail addresses for inclusion in
NetCreations' database.
E-mail Address List Brokerage. NetCreations provides marketers and
e-commerce retailers with a selection of targeted e-mail address lists designed
to achieve the maximum response rates to their offers. Direct marketers can make
their own list selections and place their own orders through NetCreations' Web
site. On-screen menus and instructions help direct marketers pick lists and
choose selection criteria. Alternatively, NetCreations' sales and customer
service staff provides assistance with e-mail address list recommendations,
order placement, and, occasionally, copywriting of e-mail messages. Orders
placed by 5 PM Eastern Time are generally sent out that night. Orders placed
through NetCreations' online marketplace by the direct marketers themselves are
generally paid by credit card.
NetCreations' service allows direct marketers to:
open a customer account;
search for e-mail address lists by topical category or keyword, such as
'travel' or 'sports;'
select demographic data characteristics, such as age, income and zip code,
to define the e-mail addresses to which they would like to send e-mail
messages (but they do not actually access demographic data in NetCreations'
database); and
aggregate the various e-mail address lists the direct marketer wants to use
and remove any duplicate addresses.
TrackBot E-mail Response Management System. Through TrackBot, NetCreations
can provide campaign results to its customers, but only on an anonymous,
aggregate basis that does not violate an individual's expectation that personal
data will not be disclosed without their permission. TrackBot offers direct
marketers, if they elect to use this service, a way to track aggregate responses
to their mailings through the responder's click-through, allowing direct
marketers to gauge the success of their campaigns quickly and to focus their
campaigns on the best-performing e-mail address lists. TrackBot provides a
simple one-click setup through www.postmasterdirect.com's automated Web ordering
system and easy to read charts that display aggregate response rates by
85
<PAGE>
list or by offer. Direct marketers who select e-mail address lists from
NetCreations' e-mail marketing service simply place their order in their online
accounts and TrackBot automatically generates customized hypertext links for
insertion into the e-mail messages sent out. The click-throughs produced by the
campaign are then tracked and recorded by NetCreations' servers. TrackBot is a
free service to companies that use NetCreations' opt-in e-mail address lists.
E-mail List Delivery. In addition to e-mailing messages for its direct
marketing customers' campaigns, NetCreations' e-mail list delivery service
provides high-volume e-mail distribution for delivery of e-mail for customers
sending messages to e-mail addresses owned by such customers. NetCreations'
sophisticated e-mail infrastructure is available to direct marketers,
publishers, list managers, online merchants and Web site owners seeking a fast,
affordable way to communicate with their own customers by e-mail.
CUSTOMERS OF NETCREATIONS
E-mail Address List Management Customers. NetCreations manages e-mail
address lists for the NetCreations Network, which currently consists of more
than 380 third-party Web sites. NetCreations Network sites include a variety of
Web sites such as CNET, Uproar, About.com, Network Solutions, internet.com, CBS
SportsLine, CDROM Guide and LuckySurf. Net revenues generated from the e-mail
address lists of two of the Web sites in the NetCreations Network accounted for
approximately 24% and 28% of NetCreations' total net revenues during 1999 and
the six months ended June 30, 2000, respectively. Loss of these e-mail address
lists could materially adversely affect NetCreations' business, financial
condition and results of operations.
E-mail Address List Brokerage Customers. NetCreations' e-mail direct
marketing customers consist of advertisers and e-mail list brokers. During 1999
and the six months ended June 30, 2000, NetCreations sent e-mail messages on
behalf of more than 1,800 and 2,000 direct marketing customers, respectively,
from large companies such Compaq, Ziff-Davis, IBM, Avenue A and OgilvyOne, to
small retailers selling items over the Internet, such as SmarterKids.com,
NutriSystem.com, ememories, Inc. and imandi.com. No e-mail direct marketing
customer accounted for more than 5% of NetCreations' net revenues during 1999,
and only one e-mail direct marketing customer, Internet.com with 8%, accounted
for more than 5% of NetCreations' net revenues for the six months ended June 30,
2000.
SALES AND MARKETING
NetCreations markets its services through its direct sales organization and
through indirect distribution channels, including e-mail list brokers,
advertising agencies, Web design firms and other resellers. NetCreations sells
its services to direct marketers primarily through its direct sales
organization. As of September 30, 2000, NetCreations' direct sales organization
included 32 employees responsible for account management, business development
and customer service and it had one employee engaged in separate marketing
activities.
NetCreations' sales organization is complemented by independent resellers,
such as list brokers, advertising agencies and Web design firms. These resellers
purchase NetCreations' service at a discount for resale to their own marketing
customers and may provide list selection, support and customer service to end
users.
RESEARCH AND DEVELOPMENT
NetCreations' research and development efforts include product architecture,
core technology, product testing, quality assurance and expanding the ability of
NetCreations' products to operate with the leading e-mail software and Web
browser platforms. In addition, NetCreations' research and development group
also provides some customer support activities. As of September 30, 2000,
NetCreations had 16 employees, including its Chief Technology Officer, Ryan
Scott Druckenmiller, who devote a substantial portion of their time to
NetCreations' research and development efforts. NetCreations believes that
research and development expenses will increase in the future and that
NetCreations will need to hire more developers as operations expand.
86
<PAGE>
NetCreations believes that its future performance will depend in large part
on its ability to:
scale its technology platform;
maintain and enhance its speed, reliability, capacity, and connectivity
across multiple platforms; and
assure its ease-of-use by customers, flexibility and effectiveness in
satisfying evolving customer requirements.
TECHNOLOGY
NetCreations employs a combination of hardware and custom and third-party
software to implement NetCreations' opt-in direct marketing services.
NetCreations believes that this results in a highly scaleable, secure, reliable,
and modular architecture that blends its internal expertise with
industry-standard technology to create a proprietary infrastructure.
NetCreations intends to continue expanding its technology infrastructure to
support the growth of the business. This will include, among other things,
expanding storage and processing capacity and increasing the redundancy of the
NetCreations Network and database storage systems.
Connectivity. NetCreations currently has redundant T1 Internet connections
provided by Globix and Frontier Communications, enabling NetCreations to deliver
approximately two million e-mail messages per day. NetCreations believes that
the scaleable nature of its system's design will allow it to increase e-mail
delivery capacity as needed. NetCreations has co-located its systems, which will
initially triple its internet access and provide NetCreations with access to
additional Internet bandwidth to meet its growth for the next 12 months.
NetCreations continues to add bandwidth, as its business needs require.
NetCreations' online ordering system provides for secure e-commerce credit
card purchases and for e-mail delivery. NetCreations believes that this
encourages use of its online marketplace.
Hardware. Multiple servers and personal computers are dedicated to specific
functions within the Network architecture. NetCreations utilizes three ALPHA
servers from Digital Equipment Corporation running Digital Unix operating
systems. One server utilizes an Oracle database to aggregate, sort, and store
the data NetCreations manages from the NetCreations Network of Web sites. The
second server is dedicated to the task of calculating counts of e-mail addresses
for individual orders. In addition, a third server has been installed which is
used to back up system information and increase processing power and redundancy.
Intel-based servers are dedicated to sending out e-mail messages and
allowing tens of thousands of users per day to access the list sign-up forms on
NetCreations' third-party Web sites, to opt-in to receive e-mail messages on
topics of interest, and to confirm that their elections to receive commercial
e-mail messages are valid. NetCreations utilizes a dedicated server to balance
the load among NetCreations' e-mail delivery servers and to provide redundancy
within the e-mail delivery system. NetCreations currently has a server which is
dedicated for system backup. In addition, a separate server is dedicated to
monitoring system activity and will notify an administrator if a problem arises.
All of these servers run Linux operating systems from Red Hat Software.
NetCreations believes that more servers can be added to increase capacity as
needed.
NetCreations employs a combination of hardware and software firewalls to
protect its computer systems from unauthorized access.
Software. NetCreations' research and development team developed proprietary
software using MetaHTML, PERL, PHP and SQL. This software enables Internet users
to opt-in to receive targeted advertising information from NetCreations'
marketing customers through sign-up forms on the NetCreations Network of more
than 380 third-party Web sites. In addition, this software enables NetCreations'
direct marketing customers and e-mail address list brokers to target Internet
users with specific demographics who have opted in to the NetCreations'
database. This process allows NetCreations' marketing customers to send specific
advertising messages to recipients who have indicated an interest in receiving
messages on the topic.
87
<PAGE>
The software of NetCreations is modular. Modularity enhances NetCreations'
ability to add, remove, or replace system applications as needed. For example,
NetCreations implemented TrackBot, a proprietary software application which
allows marketers to track the response rates to their mailings. NetCreations can
continue to enhance TrackBot, or any other application, as well as add
additional software elements as needed.
NetCreations has also developed a double opt-in list subscription
confirmation system which sends Internet users a confirmation e-mail message
after they have signed up for a list and requires them to verify that they would
like to begin receiving commercial e-mail messages from NetCreations' marketing
clients. NetCreations developed the double opt-in system in November 1997 and
has filed a patent application for this technology.
COMPETITION
The business for NetCreations' e-mail address list management and brokerage
services is intensely competitive, evolving and subject to rapid technological
change. NetCreations expects the intensity of competition to increase in the
future. Competitors vary in size and in the scope and breadth of the services
offered. While no competitor, to NetCreations' knowledge, currently has a
network of third-party Web sites similar to NetCreations' that generates double
opt-in e-mail address lists, NetCreations faces intense competition for
companies' Internet-based direct marketing budgets.
NetCreations faces direct competition from companies in the following
categories:
e-mail direct marketers such as YesMail.com, BulletMail and 24/7 Media;
incentive-based direct marketers such as MyPoints.com and Netcentives; and
permission-based outsourced e-mail direct marketers such as Exactis.com and
MessageMedia.
In addition, NetCreations presently indirectly competes with companies in
the following categories:
e-mail address list owners who manage their own e-mail address lists, such
as Xoom.com;
banner advertising managers such as DoubleClick and Flycast Communications;
and
postal direct marketing companies such as Direct Media (Acxiom) and
American List Counsel.
In addition, because there are relatively low barriers to entry in the
e-mail direct marketing business, NetCreations expects additional competition
from other established and emerging companies as the e-mail direct marketing
business continues to develop and expand. NetCreations also expects to face
competition in the future from other companies entering the field as e-mail
address list owners, managers and brokers.
Many of NetCreations' competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources,
significantly greater name recognition and a larger installed base of customers
than NetCreations has. In addition, many of NetCreations' competitors have
well-established relationships with NetCreations' current and potential
marketing customers, have extensive knowledge of NetCreations' industry and are
capable of offering non-e-mail based advertising and marketing products that are
beyond the scope of NetCreations' current business operations but might be
attractive to customers seeking to purchase services in addition to e-mail
direct marketing services. As a result, the competitors of NetCreations may be
able to respond more quickly to new or emerging technologies and changes in
customer requirements or to devote greater resources to the development,
promotion and sale of their services than NetCreations can. 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 services to address their customers' needs. Accordingly, it is possible
that new competitors or alliances among competitors may emerge and rapidly
acquire significant market share. NetCreations also expects that competition
will increase as a result of industry consolidations.
88
<PAGE>
NetCreations may not be able to compete successfully against current and
future competitors, because increased competition is likely to result in price
reductions, reduced gross margins and loss of market share, any of which could
seriously harm NetCreations' business, financial condition and results of
operations.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
While NetCreations provides a direct marketing service, NetCreations is also
a technology company. A large part of NetCreations' success depends on
protecting its intellectual property, which is one of NetCreations' most
important assets. If NetCreations does not adequately protect its intellectual
property, NetCreations' business, financial condition and results of operations
could be seriously harmed.
NetCreations has developed and will continue to develop its proprietary
software and make it available for its customers' use over the Internet. This
way, NetCreations never allows its customers access to its source code. In
addition, NetCreations requires employees, contractors and other persons with
access to NetCreations proprietary information to execute confidentiality and
non-compete agreements with NetCreations. NetCreations seeks to protect its
software, documentation and other written materials under trade secret and other
intellectual property laws, which afford only limited protection.
NetCreations has one pending United States patent application, which
pertains to its double opt-in process and has received a Notice of Allowance
regarding the claims in the application. This application seeks to protect
NetCreations' 'double opt-in' system of verifying the requests of Internet users
who ask to join NetCreations' targeted e-mail lists. NetCreations has no issued
foreign patents, nor does NetCreations have any pending foreign patent
applications. It is also possible that any potential future patents may be found
invalid or unenforceable, or otherwise be successfully challenged. Also, any
patent issued to NetCreations may not provide it with any competitive
advantages. NetCreations may not develop future proprietary products or
technologies that are patentable, and the patents of others may seriously limit
NetCreations' ability to do business. In this regard, NetCreations has not
performed any comprehensive analysis of patents of others that may limit its
ability to do business.
Despite NetCreations' efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of NetCreations' products or to
obtain and use information that NetCreations regards as proprietary. Policing
unauthorized use of NetCreations' products is difficult, and, while NetCreations
is unable to determine the extent to which piracy of NetCreations' software
products exists, software piracy can be expected to be a persistent problem. In
addition, the laws of some foreign countries do not protect NetCreations'
proprietary rights to as great an extent as do the laws of the United States.
NetCreations' means of protecting its proprietary rights may not be adequate,
and NetCreations' competitors may independently develop similar technology,
duplicate NetCreations' products or design around patents issued to it or its
other intellectual property.
There has been a substantial amount of litigation in the software industry
regarding intellectual property rights. It is possible that, in the future,
third parties may claim that NetCreations' current or potential future products
infringe upon their intellectual property. NetCreations expects that persons,
such as it, that develop software will increasingly be subject to infringement
claims as the number of products and competitors in the industry segment grows
and the functionality of products in different industry segments overlaps. Any
such claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require NetCreations to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to NetCreations or at all,
which could seriously harm NetCreations' business, financial condition and
results of operations.
NetCreations integrates third-party software in its software products.
NetCreations licenses server software from Digital Equipment Corporation and
Universal Access, Inc. The third-party software may not continue to be available
to NetCreations on commercially reasonable terms.
89
<PAGE>
NetCreations may not be able to renew these agreements or develop alternative
technology. If NetCreations cannot maintain licenses to key third-party
software, develop similar technology or license similar technology from another
source on a timely or commercially feasible basis, NetCreations' business,
financial condition and results of operations could be seriously harmed.
GOVERNMENT REGULATION
Currently, there are relatively few laws and regulations directly applicable
to access to or commerce on the Internet. However, due to the increasing
popularity and use of the Internet, it is likely that a growing number of laws
and regulations will be adopted and that existing laws or regulations may be
applied differently with respect to the Internet and e-mail direct marketing
services covering issues such as user privacy, pricing, content, copyrights,
distribution, antitrust, and characteristics and quality of products and
services. Also, the growth and development of the market for e-mail direct
marketing may lead to more stringent consumer protection laws and regulations
that may impose additional burdens on those companies conducting business
online. In addition, the applicability to the Internet of existing laws in
various jurisdictions governing issues such as property ownership, sales and
other taxes, libel and personal privacy is uncertain and may take years to
resolve. Any such new laws or regulations or new applications of those existing
laws or regulations could hinder the growth of the Internet or e-mail direct
marketing, which could, in turn, decrease the demand for NetCreations' products
and services and increase NetCreations' cost of doing business or otherwise
adversely affect its business.
Legislation has recently been enacted in several states relating to
spamming. The federal government and several states, including New York, are
considering, or have considered, similar legislation. The provisions of these
current and contemplated laws vary, but they generally limit or prohibit both
the transmission of unsolicited e-mails and the use of familiar spamming
techniques such as the use of forged or fraudulent routing and header
information. Some states, including California, require that unsolicited e-mails
include opt-out instructions and that senders of such e-mails honor any opt-out
requests, a requirement that is consistent with NetCreations' permission e-mail
policies. NetCreations believes that its opt-in e-mail system will not be
affected by such legislation because it does not send unsolicited messages and
because its current practices are intended to comply with current and proposed
legislation. However, there can be no assurance that such legislation or similar
legislation will not also affect permission e-mail marketing in a way that could
force NetCreations to change its business practices, particularly in light of
the rapidly evolving state of the law in this area. In such event, NetCreations'
business could suffer.
EMPLOYEES
As of September 30, 2000, NetCreations had a total of 58 employees,
including 32 employees responsible for account management, business development
and customer service, 16 in technology and ten in administration. All of these
employees were located at NetCreations' headquarters in New York City. None of
NetCreations' employees is represented by a collective bargaining agreement, and
NetCreations believes its employee relations to be good.
DESCRIPTION OF NETCREATIONS' PROPERTIES
NetCreations leases its principal sales, marketing, technology, and
administrative facility of approximately 7,400 square feet in New York City at
an annual cost of approximately $195,000 with customary escalation clauses. The
lease expires on August 31, 2005. NetCreations has no other offices at this
time. NetCreations has also taken a lease for additional space of approximately
10,740 square feet at an annual cost of approximately $460,000 in its current
location intended to accommodate its expansion. NetCreations believes that with
the addition of that space, its facilities will be adequate for its current
needs and for at least 18 months thereafter and that suitable additional or
alternative space will be available in the future as required on commercially
reasonable terms.
90
<PAGE>
DESCRIPTION OF NETCREATIONS' LEGAL PROCEEDINGS
Following the announcement of the proposed merger with DoubleClick, a
complaint was filed in New York Supreme Court against NetCreations, its board of
directors and DoubleClick. The complaint alleges that the defendants breached
their fiduciary duties of due care and loyalty to NetCreations public
shareholders in connection with the proposed merger with DoubleClick. The
complaint asks the court to: (i) enjoin the consummation of the merger;
(ii) award unspecified damages from the defendants; (iii) invalidate the
termination fee provision of the merger agreement and (iv) award plaintiff his
costs and disbursements, including reasonable counsel and experts' fees and
expenses. NetCreations believes the claims asserted in the complaints are
without merit and intends to vigorously contest them.
91
<PAGE>
SECURITY OWNERSHIP OF NETCREATIONS MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
For the purposes of calculating percentage ownership of NetCreations as of
October 31, 2000 15,534,000 shares were issued and outstanding and, for any
individual who beneficially owns shares represented by options exercisable on or
before October 31, 2000, these shares are treated as if outstanding for that
person, but not for any other person. Unless otherwise indicated, the address of
each of the individuals and entities named below is: c/o NetCreations, Inc.,
379 West Broadway, Suite 202, New York, New York 10012.
The following table sets forth certain information with respect to the
beneficial ownership of NetCreations common stock as of October 31, 2000, as to:
each person known by NetCreations to own beneficially more than 5% of its
outstanding common stock;
each of NetCreations' directors and executive officers; and
all of NetCreations' directors and executive officers as a group.
In addition, as a result of entering into the shareholders' agreement with
two NetCreations shareholders, a form of which is attached as Appendix B to this
proxy statement/prospectus, DoubleClick may be deemed to be the beneficial owner
of 10,097,100 shares of NetCreations common stock. DoubleClick disclaims
beneficial ownership of such shares.
Unless otherwise indicated, NetCreations believes that each beneficial owner
set forth in the table below has sole voting and investment power with respect
to the number of shares set forth opposite such NetCreations shareholder's name.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME BENEFICIALLY OWNED PERCENT OF CLASS
---- ------------------ ----------------
<S> <C> <C>
Rosalind B. Resnick......................................... 5,754,500 37.0%
Ryan Scott Druckenmiller.................................... 5,230,035 33.7%
Gary Sindler (1)............................................ -- *
Robert A. Mattes (2)........................................ -- *
Scott Wolf (2).............................................. 50,000 *
Tej Anand (2)............................................... 50,000 *
Brian Burlant (2)........................................... 16,666 *
Nicolle Comeforo (2)........................................ 14,166 *
Michael Levy (2)............................................ 66,668(3) *
Gregory W. Slayton (2)...................................... 66,668(3) *
Mitchell York (2)........................................... 66,668(3) *
All directors and executive officers as a group (11
persons).................................................. 11,117,871 72.8%
</TABLE>
---------
* Less than 1% of the outstanding common stock
(1) Resigned as Chief Financial Officer effective August 15, 2000.
(2) Consists of options to purchase shares of common stock which are exercisable
within 60 days following the issuance of this proxy statement/prospectus.
(3) Does not include 33,332 options which will vest immediately upon the closing
of the merger.
92
<PAGE>
SELECTED FINANCIAL DATA OF NETCREATIONS
This section presents selected historical financial data of NetCreations.
The data set forth below should be read in conjunction with NetCreations'
financial statements and the related notes and 'Management's Discussion and
Analysis of Financial Condition and Results of Operations of NetCreations'
included elsewhere in this proxy statement/prospectus.
NetCreations derived the statement of operations data for the years ended
December 31, 1997, 1998 and 1999, and balance sheet data as of December 31, 1998
and 1999, from the audited financial statements in this proxy
statement/prospectus. Those financial statements were audited by Grant Thornton
LLP, independent certified public accountants. NetCreations derived the balance
sheet data as of December 31, 1996 and 1997, and the statement of operations for
the year ended December 31, 1996, from audited financial statements that are not
included in this proxy statement/prospectus. NetCreations derived the statement
of operations data for the period from NetCreations' inception to December 31,
1995 and the balance sheet data as of December 31, 1995 from unaudited financial
statements prepared by NetCreations' management. In the opinion of NetCreations'
management, this information has been prepared on the same basis as the audited
financial statements included elsewhere in this proxy statement/prospectus.
NetCreations derived the statement of operations data for the six months ended
June 30, 2000 and 1999 and balance sheet data as of June 30, 2000 from the
unaudited financial statements included in this proxy statement/prospectus.
NetCreations' management believes that the unaudited historical financial
statements contain all adjustments needed to present fairly the information
included in those statements, and that the adjustments made consist only of
normal recurring adjustments. Historical results are not necessarily indicative
of the results to be expected in the future. The results of operations for the
six months ended June 30, 2000 are not necessarily indicative of the results to
be expected for the entire year.
93
<PAGE>
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
INCEPTION TO YEAR ENDED DECEMBER 31, JUNE 30,
DECEMBER 31, ----------------------------------------------------- -------------------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF
OPERATIONS DATA:
Net revenues........... $ 101,652 $ 476,190 $ 1,100,781 $ 3,446,539 $20,658,223 $ 5,272,594 $30,642,483
Cost of revenues....... 8,213 43,090 173,124 1,509,776 10,464,359 2,577,967 17,224,098
----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross profit........... 93,439 433,100 927,657 1,936,763 10,193,864 2,694,627 13,418,385
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating expenses:
Selling and
marketing.......... 29,482 195,451 289,904 492,004 2,088,100 601,960 2,942,380
Technology, support
and development.... 28,275 177,923 193,554 373,746 694,311 191,805 831,921
General and
administrative..... 12,893 60,734 151,221 365,343 1,914,608 364,889 2,877,718
Depreciation and
amortization....... -- 554 9,515 23,414 195,362 45,151 606,906
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating
expenses.............. 70,650 434,662 644,194 1,254,507 4,892,381 1,203,805 7,258,925
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) from
operations............ 22,789 (1,562) 283,463 682,256 5,301,483 1,490,822 6,159,460
----------- ----------- ----------- ----------- ----------- ----------- -----------
Interest income........ -- -- -- -- 209,182 0 1,094,004
Interest expense....... -- -- (86) (4,165) (33,157) (7,615) (7,418)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Interest income
(expense) -- net...... -- -- (86) (4,165) 176,025 (7,615) 1,086,586
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before
income taxes.......... 22,789 (1,562) 283,377 678,091 5,477,508 1,483,207 7,246,046
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income tax provision... -- 7,434 23,028 72,228 946,000 158,000 3,361,275
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)...... $ 22,789 $ (8,996) $ 260,349 $ 605,863 $ 4,531,508 $ 1,325,207 $ 3,884,771
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) per
share basic and
diluted............... $ 0.00 $ (0.00) $ 0.02 $ 0.05 $ 0.37 $ 0.11 $ 0.25
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Weighted average shares
used in per share
computation:
For basic............. 11,700,000 11,700,000 11,700,000 11,700,000 12,187,315 11,700,000 15,495,000
For diluted........... 11,700,000 11,700,000 11,700,000 11,700,000 12,351,642 11,700,000 15,825,363
PRO FORMA DATA (1)
Historical income
(loss) before income
tax provision......... $ 22,789 $ (1,562) $ 283,377 $ 678,091 $ 5,477,508 $ 1,483,207 $ 7,246,046
Pro forma income tax
provision (benefit)... 3,500 (1,000) 129,000 316,000 2,537,000 677,000 3,361,275
----------- ----------- ----------- ----------- ----------- ----------- -----------
Pro forma net income
(loss)................ $ 19,289 $ (562) $ 154,377 $ 362,091 $ 2,940,508 $ 806,207 $ 3,884,771
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Pro forma basic and
diluted net income
(loss) per share...... $ 0.00 $ (.00) $ 0.01 $ 0.03 $ 0.24 $ 0.07 $ 0.25
----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- -----------
Shares used in per
share computation:
For basic............. 11,700,000 11,700,000 11,700,000 11,700,000 12,187,315 11,700,000 15,495,000
For diluted........... 11,700,000 11,700,000 11,700,000 11,700,000 12,351,642 11,700,000 15,825,363
</TABLE>
---------
(1) Prior to November 15, 1999, NetCreations had elected to be taxed as an S
corporation for federal and state income tax purposes. Accordingly, no
provision has been made for federal and certain state income taxes during
these periods. On November 15, 1999, NetCreations terminated the S
corporation election and became a C corporation which is fully subject to
federal, state and local income taxes. The financial statements subsequent
to November 15, 1999 reflect all federal, state and local taxes. Pro forma
net income has been computed as if NetCreations had been fully subject to
federal, state and local income taxes.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------- -----------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 32,981 $ 54,002 $ 96,855 $41,305,824 $38,332,991
Working capital (deficiency)............................ (16,593) 68,698 339,981 43,047,007 45,693,172
Total assets............................................ 59,372 233,489 943,804 52,391,415 60,707,019
Long-term debt (less current portion)................... -- -- 30,180 101,225 58,967
Total stockholders' equity (deficiency)................. (5,459) 121,129 476,992 45,262,021 49,508,356
</TABLE>
94
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF NETCREATIONS
You should read the following discussion in conjunction with NetCreations'
financial statements and the notes to those statements appearing elsewhere in
this proxy statement/prospectus.
OVERVIEW
NetCreations provides Internet-based opt-in e-mail direct marketing services
that enable direct marketers to target promotional campaigns to consumers who
have given their permission to receive e-mail messages regarding selected
topical categories. In addition, NetCreations' technology provides direct
marketers, as well as list brokers who purchase use of NetCreations' e-mail
address lists on behalf of their customers, with real-time, online e-mail
address selection and ordering as well as response-tracking.
As of September 30, 2000, NetCreations had over 15.7 million e-mail
addresses in its database. The e-mail addresses in its database were collected
from consumers who opted in through NetCreations' Web site or a third-party Web
site, and have not subsequently opted out or been removed from its database
because an e-mail to that address had been returned as undeliverable.
NetCreations currently manages opt-in e-mail address lists for over 380 Web
sites. Each Web site in the NetCreations Network accumulates e-mail addresses by
placing a sign-up template on one or more of its Web pages which allows
consumers to opt-in to receive e-mail messages in a selection of topical
categories that the Web site owner believes will be of greatest interest to the
Web site's visitors. NetCreations currently has e-mail addresses listed in more
than 3,000 topical categories in its database. For the year ended December 31,
1999, NetCreations had net revenues of $20,658,223 and net income of $4,531,508.
For the six months ended June 30, 2000 NetCreations had net revenues of
$30,642,483 and net income of $3,884,771. During the first six months of the
year 2000, NetCreations generated substantially all of its net revenues by
providing Internet opt-in e-mail direct marketing services to its advertising
customers. NetCreations charges direct marketers for each use of an opt-in
e-mail address from its database. In some cases, NetCreations grants volume
discounts to its customers.
Some of NetCreations' customers consist of resellers. These resellers,
principally consisting of e-mail list brokers but also including interactive
advertising agencies, Web design firms and Web sites that attract small business
owners, place orders in the reseller's own name for use of opt-in e-mail
addresses in its database by the reseller's e-mail direct marketing customers.
NetCreations bills the reseller NetCreations' customary fees for that use of
opt-in e-mail addresses, less any applicable volume discounts. In addition,
NetCreations grants a brokerage discount to the reseller. Revenue earned for
NetCreations' services after volume and broker discounts, is reported in
NetCreations' financial statements as net revenues and is recognized when e-mail
messages are transmitted to the selected e-mail addresses.
NetCreations generally pays to the applicable Web site owner a commission,
typically amounting to 50% of the revenue NetCreations has earned, less volume
discounts, if applicable, each time NetCreations sends an e-mail message to the
e-mail addresses owned by that Web site owner. Net revenues generated from the
e-mail address lists of two of the Web sites in the NetCreations Network
accounted for approximately 24% and 28% of its total net revenues during 1999
and the first six months of 2000, respectively. Loss of these e-mail address
lists could materially adversely affect its business, financial condition and
results of operations. In the event that an e-mail address appears on more than
one e-mail address list selected by NetCreations' customer, the commission is
only paid to the Web site owner whose e-mail address list is designated by
NetCreations' customer as the preferred list. These commissions, along with
amounts incurred in implementing the Web site's sign-up program are reported as
cost of revenues in NetCreations' financial statements. NetCreations does not
incur these commissions when customers select names from its own e-mail address
lists. As of December 31, 1999 and June 30, 2000, NetCreations derived less than
5% of the total e-mail addresses in its database from its own Web site. At the
end of September 2000, NetCreations purchased approximately 3.8 million e-mail
addresses from Web site owners who were part of the NetCreations Network for
approximately
95
<PAGE>
$6,300,000. Through these purchases, NetCreations' ownership of e-mail addresses
has increased to approximately 25% of the database as of September 30, 2000. The
cost of these e-mail address lists will be amortized over their average expected
useful lives, which is estimated to be two years. NetCreations will evaluate the
recoverability of the capitalized address lists at each reporting period and if
it determines that the life of the e-mail address lists is less than two years,
NetCreations will record a charge to operations as of such date to reduce the
carrying value of the asset to its net realizable value.
In a certain number of cases, primarily involving Web sites that
NetCreations believes are well-known to both consumers and NetCreations' direct
marketing customers, NetCreations has agreed to pay advance fees to such Web
sites. In those cases, NetCreations generally, but not always, has the right to
offset against those payments any payment of the percentage of fees that may
become payable to those Web sites. In addition, NetCreations may pay third-party
Web sites flat fees for the collection of e-mail addresses for inclusion in its
database. Advance payments could impact NetCreations' cash flow and may prevent
NetCreations from making other expenditures that could generate other revenues
or growth for it. NetCreations net income could be negatively affected, and in
some cases materially adversely affected, if a list management arrangement is
not profitable enough for NetCreations to earn amounts sufficient to offset
advance payments with regard to that list management agreement, or if a list
management arrangement is terminated before NetCreations is able to earn amounts
sufficient to offset advance payments with regard to that list management
agreement.
NetCreations has paid certain advances of commissions and exclusivity fees
under third-party list management agreements that are accounted for as prepaid
commissions. As of December 31 1999 and June 30, 2000, NetCreations has recorded
prepaid commissions of $3,000,000 and $7,133,400, respectively. Commission
expense is generally recognized when revenue is earned by NetCreations upon the
transmission of applicable e-mail messages and applied against the advances and
in the case of exclusivity fees. Commission expense is recognized on a straight
line basis over the life of the contract. Management will continue to assess the
recoverability of prepaid commissions at each reporting period. To the extent
that it is probable that some or all of the prepaid commissions have become
nonrecoverable, a charge to operations will be made in that period to reduce the
balance to the amount estimated to be recoverable. There were no such required
charges as of June 30, 2000. As of September 30, 2000, NetCreations determined
that the prepaid commissions that were capitalized in connection with its
contract with ICQ were not fully recoverable and, therefore, has recorded a
$1,000,000 write-down of the advance as of September 30, 2000.
NetCreations' margins have been reduced in one instance by the failure to
recover advance payments. If competitive pressures or strategic or other reasons
cause NetCreations to make advance payments that are not recovered or pay
commissions of more than 50% of the revenue from sending e-mail messages to
e-mail address list owners, NetCreations' margins will be reduced. NetCreations
may have reduced profits or may become unprofitable if any increase in the
amount of unrecovered advance payments to Web site owners or the rate of
commissions paid to Web site owners, and the consequent decrease in
NetCreations' margins, is not offset by lower general and administrative costs
as a percentage of revenues or increased revenues from other sources.
During 1999, NetCreations granted stock options to employees under
NetCreations' 1999 Stock Option Plan. To the extent that options are granted at
an exercise price which is below fair market value on the date of grant a charge
will result to NetCreations' operations under Financial Accounting Standards
Board Statement No. 123 ('FASB 123'), 'Accounting for Stock-Based Compensation.'
During the year ended December 31, 1999, NetCreations granted options to acquire
546,500 shares of its common stock to its employees and directors other than Ms.
Resnick and Mr. Druckenmiller. Of these options, 241,000 were granted at an
exercise price of $5.00 per share, which was below fair market value on the date
of grant, 300,000 were at an exercise price of $10.00 per share, which was below
fair market value on the date of grant, and 5,500 were granted at various prices
below fair market value on the date of grant. During the year ended
96
<PAGE>
December 31, 1999, NetCreations recorded deferred compensation in connection
with these grants of $2,865,465, of which $552,294 was amortized to expense.
As permitted by FASB 123, NetCreations has elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ('APB
25') and related interpretations in accounting for its stock options. Under APB
25, when the exercise price of stock options equals or exceeds the market price
of the underlying stock on the date of grant, no compensation expense is
recorded. If the exercise price of the stock option is less than the market
price of the underlying stock on the date of grant, NetCreations will record an
expense equal to the difference between the market price on the date of grant
and the exercise price. Such expense will be recorded in NetCreations'
statements of income, ratably over the vesting periods of such stock options.
As of June 30, 2000, the remaining amount of compensation expense expected
to be recognized over the next three years relating to the options with an
exercise price below fair market value on the date of grant, is as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
2000.................................................. $ 401,810
2001.................................................. 773,113
2002.................................................. 343,059
----------
Total........................................... $1,517,982
----------
----------
</TABLE>
Additionally, in 2000, NetCreations granted options to acquire 1,321,000
options to purchase its common stock at an exercise price equal to the fair
market value of the common stock on the date of the grant. There were 565,500
options cancelled during the year resulting in 1,302,000 options outstanding at
June 30, 2000. NetCreations amortized $361,564 in equity based compensation
expenses during the first six months of 2000. Forfeited options reduce the
amount of compensation expense to be recorded in future periods.
RESULTS OF OPERATIONS
The following table sets forth NetCreations' statement of operations for the
periods indicated, expressed as a percentage of total net revenues.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- ----------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues............................. 15.7 43.8 50.7 48.9 56.2
Gross profit................................. 84.3 56.2 49.3 51.1 43.8
----- ----- ----- ----- -----
Operating expenses
Selling and marketing.................... 26.3 14.3 10.0 11.4 9.6
Technology, support and development...... 17.6 10.8 3.4 3.6 2.7
General and administrative............... 13.7 10.6 9.3 6.9 9.4
Depreciation and amortization............ 0.9 0.7 0.9 0.9 2.0
----- ----- ----- ----- -----
Total operating expenses............. 58.5 36.4 23.6 22.8 23.7
----- ----- ----- ----- -----
Operating income............................. 25.8 19.8 25.7 28.3 20.1
Interest income (expense) -- net............. -- (0.1) 0.8 (0.2) 3.5
----- ----- ----- ----- -----
Income before income tax provision........... 25.8 19.7 26.5 28.1 23.6
Income tax provision......................... 2.1 2.1 4.6 3.0 11.0
----- ----- ----- ----- -----
Net income (loss)........................ 23.7% 17.6% 21.9% 25.1% 12.6%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
97
<PAGE>
SIX MONTHS ENDED JUNE 30, 2000 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1999
Net Revenues. For the six months ended June 30, 2000, net revenues increased
481% to $30,642,483 from $5,272,594. The increase for the quarter and six month
periods resulted from higher demand for e-mail marketing services, which was
supported by the continued growth in the number of e-mail messages delivered for
NetCreations' customers as well as in the number of customers utilizing
NetCreations' opt-in e-mail address database. The number of opt-in e-mail
addresses in NetCreations' database grew to over 10.6 million at June 30, 2000,
from approximately 3.2 million at June 30, 1999, primarily as a result of the
addition of third-party Web sites added to the NetCreations Network, which
exceeded 340 at June 30, 2000.
For the six months ended June 30, 2000, volume and broker discounts were
$7,367,599 and $4,094,354, respectively. For the six months ended June 30, 1999,
volume and broker discounts were $662,652 and $942,015, respectively. The
increase in volume discounts for the six month period is attributable to the
significant growth in demand for its e-mail marketing services and the increase
in broker discounts is attributable to the growth in utilization of its services
by resellers. For the six months ended June 30, 2000, resellers accounted for
approximately 58% of NetCreations' net revenues compared to approximately 40% of
NetCreations' net revenues for the comparable 1999 period. The proportion of
marketing customers obtained through NetCreations' reseller channels has
continued to increase. To the extent NetCreations continues to increase the
proportion of sales through resellers, NetCreations net revenues and gross
profits could decrease.
Cost of Revenues. Cost of revenues increased 568% to $17,224,098, or 56% of
net revenues for the six months ended June 30, 2000 from $2,577,967 or 49% of
net revenues, for the comparable 1999 period. The increase in the cost of
revenues for the quarter and six month periods is directly attributable to the
overall growth in net revenues as well as the amortization of list management
fees paid to third-party partner web sites. Such amortization was $590,250,
respectively, for six months ended June 30, 2000. There were no such amounts in
1999. The increase in the cost of revenue to net revenue percentage for the six
month periods is the result of an increase in the utilization of NetCreations'
services by resellers, resulting in higher broker discounts, as well as an
increase in the proportion of opt-in e-mail addresses added to NetCreations'
database from third-party Web sites.
Selling and Marketing. Selling and marketing expenses increased 389% to
$2,942,380 for the six months ended June 30, 2000, from $601,960 for the six
months ended June 30, 1999. Selling and marketing expenses consisted primarily
of personnel costs and direct expenditures for advertising, promotional programs
and other related activities. This increase was the result of NetCreations'
business expansion and is attributable to an increase of 22 sales and marketing
employees from June 30, 1999 to June 30, 2000. Additionally, there was an
increase in advertising expenditures of $470,604 for the six month period ended
June 30, 2000 as compared to the six months ended June 30, 1999 in connection
with NetCreations' efforts to broaden recognition of the company and its
services.
Technology, Support and Development. Technology, support and development
expenses increased 334% to $831,921 for the six months ended June 30, 2000, from
$191,805 for the six months ended June 30, 1999. Technology, support and
development expenses consisted primarily of personnel costs and expenditures for
software and related supplies. This increase was primarily attributed to the
addition of 13 employees from June 30, 1999 to June 30, 2000, in connection with
NetCreations' efforts to expand its capabilities and improve the efficiency of
its www.postmasterdirect.com Web site.
General and Administrative. General and administrative expenses increased
689% to $2,877,718 for the six months ended June 30, 2000, from $364,889 for the
six months ended June 30, 1999. General and administrative expenses consisted
primarily of personnel, facilities, communication costs and professional fees.
The increase was primarily attributable to the addition of 8 employees from
June 30, 1999 to June 30, 2000 to support growth in business activity and
increased overhead. In addition, a portion of the increase for the six month
period is attributable to $361,564 of expenses relating to the amortization of
the equity-based compensation that were granted in the third quarter of 1999 at
less than fair market value.
98
<PAGE>
Depreciation and Amortization. Depreciation and amortization expenses
increased 1,244% to $606,906 for the six months ended June 30, 2000, from
$45,151 for the six months ended June 30, 1999. Depreciation and amortization
expenses consisted primarily of depreciation of computer equipment. This
increase for the six month period is primarily a result of investments in
computer equipment during the later part of 1999.
Net Interest Income (Expense). NetCreations earned net interest income of
$1,086,586 for the six months ended June 30, 2000 compared to an expense of
$7,615 for the six months ended June 30, 1999. These changes are due to
NetCreations' investing the proceeds from its Initial Public Offering in
November 1999. Prior to that NetCreations incurred interest expense in
conjunction with its capital leases.
Income Taxes. Income taxes for the six months ended June 30, 2000 reflect
all Federal, state and local taxes on an accrual basis. As NetCreations had
elected to be taxed as an S corporation for Federal and certain state tax
purposes until November 15, 1999, the 1999 provision for income taxes represents
state and local taxes only to the extent that they do not recognize the
S corporation status, based on the pre-tax operating results for each year.
NetCreations was a cash basis taxpayer through December 31, 1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1999
Net Revenues. Net revenues increased 499.4% from $3,446,539 for the year
ended December 31, 1998, to $20,658,223 for the year ended December 31, 1999.
This increase was the result of increased demand for e-mail marketing services,
continued growth in the number of e-mail messages delivered for customers as
well as in the number of customers utilizing NetCreations' opt-in e-mail address
database. The number of opt-in e-mail addresses in the database grew from
approximately 1.9 million at the end of 1998, to over 6 million by the end of
December 1999, primarily as a result of the addition of opt-in e-mail addresses
to the database from third-party Web sites added to the NetCreations Network.
During 1998 and 1999 net revenues generated from the e-mail address lists of two
of the Web sites in the NetCreations Network accounted for approximately 15% and
24%, respectively, of total net revenues.
For the year ended December 31, 1998, volume discounts and broker discounts
were $357,733 and $317,549, respectively. For the year ended December 31, 1999,
volume discounts and broker discounts were $3,511,686 and $2,755,069,
respectively. The increase in volume discounts is attributable to the
significant growth in demand for NetCreations' e-mail marketing services and the
increase in broker discounts is attributable to the growth in utilization of
services by resellers. For the year ended December 31, 1998, resellers accounted
for approximately 38% of net revenues compared to approximately 49% of net
revenues for the year ended December 31, 1999. The proportion of marketing
customers obtained through reseller channels has continued to increase during
1999. To the extent NetCreations continues to increase the proportion of sales
through resellers, net revenues and gross profits could decrease.
Cost of Revenues. Cost of revenues increased 593.1% from $1,509,776, or
43.8% of net revenues, for the year ended December 31, 1998, to $10,464,359, or
50.7% of net revenues, for the year ended December 31, 1999. This increase was
the result of an increase in commissions due to a greater proportion of opt-in
e-mail addresses being added to the database from third-party Web sites.
Selling and Marketing. Selling and marketing expenses increased 324.4% from
$492,004 for the year ended December 31, 1998, to $2,088,100 for the year ended
December 31, 1999. Selling and marketing expenses consisted primarily of
personnel costs and direct expenditures for advertising, promotional programs
and other related activities. This increase was the result of business expansion
and is attributable to the addition of 17 sales and marketing employees during
1999 as well as an increase in advertising expenditures of $624,658 in
connection with efforts to enhance recognition of NetCreations and its services.
Technology, Support and Development. Technology, support and development
expenses increased 85.8% from $373,746 for the year ended December 31, 1998, to
$694,311 for the year
99
<PAGE>
ended December 31, 1999. Technology, support and development expenses consisted
primarily of personnel costs and expenditures for software and related supplies.
This increase was the result of the addition of nine employees during 1999, in
connection with efforts to improve the efficiency of NetCreations'
www.postmasterdirect.com Web site and expand its capabilities.
General and Administrative. General and administrative expenses increased
424.1% from $365,343 for the year ended December 31, 1998, to $1,914,608 for the
year ended December 31, 1999. General and administrative expenses consisted
primarily of personnel, facilities, communication costs and professional fees.
This increase was attributable to the addition of five employees to support
growth in business activity, space expansion at NetCreations' current location,
increased costs for expenses that support increased business activities,
profession fees in connection with various legal matters relating to customer
and employment agreements, intellectual property and employee benefit matters,
and accounting and auditing fees. In addition, a portion of the increase was
attributable to the provision for doubtful accounts of $232,402 in 1999 and
$552,294 of expense relating to the amortization of the cost of options granted
to employees prior to NetCreations' initial public offering.
Depreciation and Amortization. Depreciation and amortization expenses
increased 734.4% from $23,414 for the year ended December 31, 1998, to $195,362
for the year ended December 31, 1999. Depreciation and amortization expenses
consisted primarily of depreciation of computer equipment. This increase was
primarily a result of investments in computer equipment during the later part of
1999.
Income Taxes. As NetCreations had elected to be taxed as an S corporation
for federal and certain state tax purposes until November 15, 1999, the
provision for income taxes for 1998 and substantially all of 1999 represents
state and local taxes to the extent certain jurisdictions do not recognize the S
corporation status.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1998.
Net Revenues. Net revenues increased 213.1% from $1,100,781 for the year
ended December 31, 1997, to $3,446,539 for the year ended December 31, 1998.
This increase was the result of continued growth in the number of e-mail
messages delivered for customers as well as in the number of customers utilizing
opt-in e-mail address database. The number of opt-in e-mail addresses in the
database grew from approximately 675,000 at the end of 1997, to approximately
1.9 million by the end of 1998, primarily as a result of the addition of opt-in
e-mail addresses to the database from third-party Web sites added to the
NetCreations Network. During 1998, net revenues generated from the e-mail
address lists of two of the Web sites in the NetCreations Network accounted for
approximately 15% of NetCreations' net revenues.
For the year ended December 31, 1997, volume discounts were $16,181 and
there were no broker discounts. For the year ended December 31, 1998, volume and
broker discounts were $357,733 and $317,549, respectively. The increase in
volume discounts is attributable to the growth in demand for e-mail marketing
services. The increase in broker discounts is attributable to NetCreations' use
of resellers as an additional sales channel in 1998. During 1998, resellers
accounted for approximately 38% of net revenues.
Cost of Revenues. Cost of revenues increased 772.1% from $173,124, or 15.7%
of net revenues, for the year ended December 31, 1997, to $1,509,776, or 43.8%
of net revenues, for the year ended December 31, 1998. This increase was the
result of an increase in commissions due to a greater proportion of opt-in
e-mail addresses being added to NetCreations' database from third-party Web
sites.
Selling and Marketing. Selling and marketing expenses increased 69.7% from
$289,904 for the year ended December 31, 1997, to $492,004 for the year ended
December 31, 1998. Of this increase, $145,000 was attributable to rising
personnel costs, including the addition of four employees. Additionally,
advertising expenditures increased by approximately $54,000 to heighten market
awareness of NetCreations and the e-mail marketing services it provides.
100
<PAGE>
Technology, Support and Development. Technology, support and development
expenses increased 93.1% from $193,554 for the year ended December 31, 1997, to
$373,746 for the year ended December 31, 1998. This increase was attributable to
a combination of hiring additional employees and utilizing consultants to
enhance the business support system and improving the infrastructure and
capabilities of NetCreations'www.postmasterdirect.com Web site.
General and Administrative. General and administrative expenses increased
141.6% from $151,221 for the year ended December 31, 1997, to $365,343 for the
year ended December 31, 1998. This was generally attributable to growth in
business activities and the establishment of an office facility, replacing the
former home-based office.
Depreciation and Amortization. Depreciation and amortization expenses
increased 146.1% from $9,515 for the year ended December 31, 1997, to $23,414
for the year ended December 31, 1998. This increase was primarily a result of
investments in computer equipment.
Income Taxes. As NetCreations had elected to be taxed as an S corporation
for federal and certain state tax purposes, the provision for income taxes for
1997 and 1998 represents state and local taxes only to the extent that they do
not recognize the S corporation status, based on the pre-tax operating results
for each year.
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited quarterly information for
each quarter of fiscal year 1998 and 1999 and for the first two quarters of
calendar year 2000. This quarterly information has been prepared on a basis
consistent with the audited financial statements and, NetCreations believes,
includes all adjustments, consisting of normal recurring adjustments, necessary
for a fair presentation of the information shown. NetCreations' quarterly
operating results may fluctuate significantly as a result of a variety of
factors and operating results for any quarter are not necessarily indicative of
results for a full fiscal year.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1998 1998 1998 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues................................... $476,545 $709,653 $876,135 $1,384,206
Cost of revenues............................... 139,913 282,580 390,054 697,229
-------- -------- -------- ----------
Gross profit................................... 336,632 427,073 486,081 686,977
Operating Expenses
Selling and marketing...................... 82,870 119,422 129,872 159,840
Technology, support and Development........ 55,169 82,762 94,498 141,317
General and administrative................. 71,050 80,950 114,286 99,057
Depreciation and amortization.............. 4,130 5,352 7,193 6,739
-------- -------- -------- ----------
Total operating expenses............... 213,219 288,486 345,849 406,953
-------- -------- -------- ----------
Income from operations......................... 123,413 138,587 140,232 280,024
Interest (expense) income -- net............... (450) (1,411) (441) (1,863)
-------- -------- -------- ----------
Income before income tax provision............. 122,963 137,176 139,791 278,161
Income tax provision........................... 13,100 14,600 14,900 29,628
-------- -------- -------- ----------
Net income..................................... $109,863 $122,576 $124,891 $ 248,533
-------- -------- -------- ----------
-------- -------- -------- ----------
</TABLE>
101
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues................................ $1,694,505 $3,578,089 $4,930,020 $10,455,609
Cost of revenues............................ 827,152 1,750,815 2,383,700 5,502,692
---------- ---------- ---------- -----------
Gross profit................................ 867,353 1,827,274 2,546,320 4,952,917
---------- ---------- ---------- -----------
Operating Expenses
Selling and marketing................... 294,328 307,632 516,923 969,217
Technology, support and Development..... 85,981 105,824 147,710 354,796
General and administrative.............. 135,886 229,003 424,259 1,125,460
Depreciation and amortization........... 17,354 27,797 34,605 115,606
---------- ---------- ---------- -----------
Total operating expenses............ 533,549 670,256 1,123,497 2,565,079
---------- ---------- ---------- -----------
Income from operations...................... 333,804 1,157,018 1,422,823 2,387,838
Interest (expense) income -- net............ (2,980) (4,635) (6,106) 189,746
---------- ---------- ---------- -----------
Income before income tax provision.......... 330,824 1,152,383 1,416,717 2,577,584
Income tax provision........................ 36,300 121,700 144,355 643,645
---------- ---------- ---------- -----------
Net income.................................. $ 294,524 $1,030,683 $1,272,362 $ 1,933,939
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
MARCH 31, JUNE 30,
2000 2000
---- ----
<S> <C> <C>
Net revenues............................................... $14,408,306 $16,234,177
Cost of revenues........................................... 7,872,280 9,351,818
----------- -----------
Gross profit............................................... 6,536,026 6,882,359
----------- -----------
Operating Expenses
Selling and marketing.................................. 1,379,899 1,562,481
Technology, support and Development.................... 429,957 401,964
General and administrative............................. 1,217,746 1,659,971
Depreciation and amortization.......................... 270,160 336,746
----------- -----------
Total operating expenses........................... 3,297,762 3,961,162
----------- -----------
Income from operations..................................... 3,238,264 2,921,197
Interest (expense) income -- net........................... 563,610 522,976
----------- -----------
Income before income tax provision......................... 3,801,874 3,444,173
Income tax provision....................................... 1,765,500 1,595,775
----------- -----------
Net income................................................. $ 2,036,374 $ 1,848,398
----------- -----------
----------- -----------
</TABLE>
102
<PAGE>
NetCreations' operating results for these fiscal quarters expressed as a
percentage of sales were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1998 1998 1998 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues................................... 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenues............................... 29.4 39.8 44.5 50.4
----- ----- ----- -----
Gross profit................................... 70.6 60.2 55.5 49.6
----- ----- ----- -----
Selling and marketing...................... 17.3 16.8 14.8 11.5
Technology, support and development........ 11.6 11.7 10.8 10.2
General and administrative................. 14.9 11.4 13.0 7.2
Depreciation and amortization.............. 0.9 0.8 0.8 0.5
----- ----- ----- -----
Total operating expenses............... 44.7 40.7 39.4 29.4
----- ----- ----- -----
Income from operations......................... 25.9 19.5 16.1 20.2
Interest (expense) income -- net............... (0.1) (0.2) (0.1) (0.1)
----- ----- ----- -----
Income before income tax provision............. 25.8 19.3 16.0 20.1
Income tax provision........................... 2.7 2.0 1.7 2.1
----- ----- ----- -----
Net income..................................... 23.1 % 17.3 % 14.3 % 18.0 %
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues................................... 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenues............................... 48.8 48.9 48.4 52.6
----- ----- ----- -----
Gross profit................................... 51.2 51.1 51.6 47.4
----- ----- ----- -----
Selling and marketing...................... 17.4 8.6 10.5 9.3
Technology, support and development........ 5.1 3.0 3.0 3.4
General and administrative................. 8.0 6.4 8.6 10.7
Depreciation and amortization.............. 1.0 0.8 0.7 1.1
----- ----- ----- -----
Total operating expenses............... 31.5 18.8 22.8 24.5
Income from operations......................... 19.7 32.3 28.8 22.9
Interest (expense) income -- net............... (0.2) (0.1) (0.1) 1.8
----- ----- ----- -----
Income before income tax provision............. 19.5 32.2 28.7 24.7
Income tax provision........................... 2.1 3.4 2.9 6.2
----- ----- ----- -----
Net income..................................... 17.4 % 28.8 % 25.8 % 18.5 %
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
103
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
MARCH 31, JUNE 30
2000 2000
---- ----
<S> <C> <C>
Net revenues................................................ 100.0 % 100.0 %
Cost of revenues............................................ 54.6 57.6
----- -----
Gross profit................................................ 45.4 42.4
----- -----
Selling and marketing................................... 9.5 9.6
Technology, support and development..................... 3.0 2.5
General and administrative.............................. 8.5 10.2
Depreciation and amortization........................... 1.9 2.1
----- -----
Total operating expenses............................ 22.9 24.4
Income from operations...................................... 22.5 18.0
Interest (expense) income -- net............................ 3.9 3.2
----- -----
Income before income tax provision.......................... 26.4 21.2
Income tax provision........................................ 12.3 9.8
----- -----
Net income.................................................. 14.1 % 11.4 %
----- -----
----- -----
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents was approximately $30,000,000 at September 30,
2000.
Net cash used in operating activities was $1,311,634 for the six months
ended June 30, 2000 compared with net cash provided by operations of $1,439,673
for the six months ended June 30, 1999. The decrease in cash provided by
operating activities for 2000 is primarily attributable to payments made to
third-party partner web sites. The 1999 cash flow from operations is primarily
attributed to net income from operations.
Net cash used in investing activities was $1,612,431 for the six months
ended June 30, 2000 compared with $76,918 for the six months ended June 30,
1999. Cash used in investing activities was used for capital expenditures
consisting primarily of computer hardware and software for the operation and
support of its business activities.
Net cash used in financing activities was $48,758 for the six months ended
June 30, 2000 compared with $938,554 for the six months ended June 30, 1999.
During 2000, the cash used in financing activities related to payments on
capital lease obligations, while the 1999 uses were primarily for distributions
to the shareholders relating to its election to be taxed as an S corporation.
Cash and cash equivalents was $38,332,991 at June 30, 2000 compared with
$41,305,814 at December 31, 1999. NetCreations believes that its cash and cash
equivalents on hand will be sufficient to satisfy its working capital and the
anticipated capital expenditure requirements for at least the next 12 months.
SEASONALITY
The traditional postal direct marketing industry tends to have higher
revenues in the fourth quarter of the year, when direct marketers send out
holiday promotions, and somewhat lower revenues during the summer, when direct
marketing activity is reduced overall. To date, because of the rapid growth of
the e-mail direct marketing industry, NetCreations' revenues have grown
sequentially from quarter to quarter. Therefore, NetCreations' revenues have not
followed the seasonal patterns of the traditional postal direct marketing
industry. While NetCreations anticipates that as its business matures, its
revenues will track more closely to the seasonal patterns experienced in the
traditional postal direct marketing industry, NetCreations cannot assure you
that its revenues will reflect such seasonality.
104
<PAGE>
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 ('SFAS No. 133'), 'Accounting for Derivative Instruments and Hedging
Activities,' which defines derivatives, requires that all derivatives be carried
at fair value, and provides for hedge accounting when certain conditions are
met. SFAS No. 133 is effective for NetCreations in 2001. NetCreations does not
believe that the adoption of this statement will have a material impact on its
financial position or results of operations.
105
<PAGE>
COMPARISON OF STOCKHOLDERS' RIGHTS
NetCreations is a New York corporation subject to the provisions of the New
York Business Corporation Law, or the NYBCL. DoubleClick is a Delaware
corporation subject to the provisions of the Delaware General Corporation Law,
or the DGCL. Shareholders of NetCreations, upon consummation of the merger, will
become stockholders of DoubleClick, whose rights will then be governed by
DoubleClick's amended and restated certificate of incorporation, as amended, and
amended and restated bylaws, and by the DGCL. The following is a summary of the
material differences in the rights of the shareholders of NetCreations and the
rights of the stockholders of DoubleClick and is qualified in its entirety by
reference to the applicable governing law and certificate of incorporation and
bylaws of DoubleClick and the applicable governing law and certificate of
incorporation and by-laws of NetCreations.
REQUIRED VOTE FOR AUTHORIZATION OF SPECIAL ACTIONS
Under the NYBCL, a merger, consolidation, dissolution or disposition of
substantially all of the assets of a corporation requires the approval of the
corporation's board of directors and the adoption by 66 2/3% of all outstanding
shares entitled to vote, unless the corporation was incorporated after February
22, 1998, or the corporation's certificate of incorporation expressly adopts a
lower requirement, in which case a majority of the votes of the shares entitled
to vote is required. NetCreations was incorporated on January 17, 1996, and its
certificate of incorporation does not provide for a lower standard; therefore,
the approval of 66 2/3% of all outstanding shares is required to adopt the
merger agreement.
Under the NYBCL, unless a higher vote is required in a corporation's
certificate of incorporation, an amendment to a corporation's certificate of
incorporation must be approved by the board of directors and then by the holders
of a majority of all outstanding shares entitled to vote on the proposed
amendment. NetCreations' certificate of incorporation provides that at least
66 2/3% of the shares of capital stock of the corporation issued and outstanding
and entitled to vote are required to amend or repeal certain provisions of the
certificate. Such a vote is required for alterations relating to:
director's limitation of liability;
indemnification;
a shareholder's right to nominate and introduce new business;
the prohibition of shareholder action by written consent; and
who may call a special meeting and how this meeting may be called.
Under the NYBCL, except as otherwise provided in its certificate of
incorporation or a by-law adopted by the shareholders, a corporation's by-laws
may be adopted, amended or repealed by a majority of votes cast by the shares
then entitled to vote in the election of directors. By-laws may also be adopted,
amended or repealed by the board of directors when so provided in the
corporation's certificate of incorporation or pursuant to a by-law adopted by
the shareholders, but any by-law adopted by the board of directors may be
amended or repealed by the shareholders. NetCreations' by-laws provide that the
board of directors may amend, repeal, or adopt new by-laws at any regular or
special meeting of the board. These by-laws may be amended or repealed by a
majority vote of shareholders.
The DGCL generally provides that the recommendation of a corporation's board
of directors and an approval of the majority of the outstanding shares of a
corporation's common stock entitled to vote is generally required to effect a
merger or consolidation, to amend a certificate of incorporation in most
instances and to sell, lease or exchange all or substantially all of the
corporation's assets. An authorization by the DoubleClick board, followed by the
affirmative vote of a majority of the outstanding shares of DoubleClick stock,
is required for an amendment to DoubleClick's certificate of incorporation.
DoubleClick's bylaws may be amended or repealed by a majority of the votes cast
by stockholders entitled to vote or by a majority vote of the directors.
106
<PAGE>
NUMBER OF DIRECTORS; REMOVAL OF DIRECTORS
The number of directors of NetCreations is determined by NetCreations'
by-laws and is presently five persons. The by-laws provide for an initial board
of two persons, but this number may be increased by an affirmative vote of a
majority of the entire board of directors or by action of the shareholders of
the corporation. Each director is elected annually at the annual meeting of the
shareholders. Each director holds office until the next annual meeting of the
shareholders and until his or her successor shall have been elected and
qualified. A director may be removed, either with or without cause, at any time,
by the shareholders at a special meeting. Any director may be removed for cause
by the board of directors at a special meeting.
The number of directors of DoubleClick is determined by DoubleClick's bylaws
and is presently eight persons. The board of directors of DoubleClick is divided
into three classes, each as nearly equal in number as possible, with one class
being elected annually to a three year term. A director may only be removed for
cause and only by the holders of more than two-thirds of the shares entitled to
vote at an election of directors.
LIMITATION OF LIABILITY; INDEMNIFICATION
NetCreations' certificate of incorporation provides that a person who is or
was a director will not be liable to NetCreations or its shareholders for
damages for any breach of duty as a director, except to the extent liability may
not be eliminated or limited by applicable law.
The NYBCL prohibits NetCreations from eliminating or limiting the personal
liability of a director for damages for any breach of duty under the following
circumstances:
if a judgment or other final adjudication adverse to the director
establishes any of the following:
his or her acts or omissions were in bad faith, involved intentional
misconduct or a knowing violation of law;
he or she personally gained a financial profit or other advantage to
which he or she was not legally entitled; or
his or her acts involved the declaration of an unlawful dividend or
other distribution, the unlawful purchase or redemption of
NetCreations' own shares, the unlawful distribution of assets to
stockholders after dissolution, or the making of an unlawful loan to
directors; or
for any act or omission of the director before the adoption of the
provision in NetCreations' certificate of incorporation that limits the
liability of NetCreations' directors for breach of fiduciary duty.
The NetCreations certificate of incorporation provides that NetCreations
will indemnify its directors, officers, employees or agents for any liability
incurred in their official capacity to the maximum extent permissible under the
NYBCL. Under the NYBCL, a corporation may indemnify any person made, or
threatened to be made, a party to any action or proceeding (other than an action
by or in the right of the corporation) because he or she is or was or has agreed
to become a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or firm. In order to be indemnified, the director,
officer, employee or agent:
must have acted in good faith and in a manner he or she reasonably believed
to be in, or not opposed to, the best interest of the corporation; and
with respect to a criminal proceeding, must not have reasonable cause to
believe that his or her conduct was unlawful.
In the case of shareholder derivative suits under the NYBCL, NetCreations
will provide full indemnification if the individual acted in good faith and in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the corporation, except that no indemnification shall be made in
respect to any claim as to which such person shall have been
107
<PAGE>
adjudged to be liable to the corporation unless and only to the extent that the
appropriate court shall determine that, despite the adjudication of such
liability, such person is fairly entitled to indemnity for such expenses which
are deemed proper.
NetCreations' certificate of incorporation provides that if a party has been
successful on the merits or otherwise, in defense of any action, he or she shall
be indemnified against all expenses (including attorneys' fees) actually and
reasonably incurred by him or her or on his or her behalf in connection
therewith. An indemnitee can be considered successful in actions that are
disposed of, provided the disposition was not adverse to the indemnitee, there
was not an adjudication that the indemnitee was liable to the corporation, the
indemnitee did not plead guilty or nolo contendere, there was not an
adjudication that the indemnitee did not act in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to criminal proceedings, an adjudication was not
rendered that the indemnitee had reasonable cause to believe his or her conduct
was unlawful.
As a condition precedent to an individual's right to be indemnified, the
indemnitee must notify the corporation in writing as soon as practicable of any
action, suit, proceeding or investigation involving him for which indemnity will
or could be sought. The corporation will be entitled to participate at its own
expense and/or to assume the defense, with legal counsel reasonably acceptable
to the indemnitee. If the corporation chooses not to assume the defense, any
expense incurred by an indemnitee in defending a civil or criminal action shall
be paid by the corporation in advance of the final disposition, provided that
the payment of such expenses incurred by an indemnitee shall be made only upon
receipt of an undertaking by or on behalf of the indemnitee to repay all amounts
so advanced in the event that it shall ultimately be determined that the
indemnitee is not entitled to be indemnified by the corporation. Such
undertaking shall be accepted without reference to the financial ability of the
indemnitee to make such repayment. The indemnitee shall submit to the
corporation a written request, including in such request such documentation and
information as is reasonably available to the indemnitee and is reasonably
necessary to determine whether and to what extent the indemnitee is entitled to
indemnification or advancement of expenses.
The indemnification and expense advancement provisions under the NYBCL and
NetCreations' certificate of incorporation described above are not exclusive of
other rights of indemnification and advancement that an indemnitee may be
entitled under any law, agreement or vote of shareholders or disinterested
directors or otherwise.
As permitted by the DCGL, DoubleClick's certificate of incorporation
contains a provision that eliminates the personal liability of directors to
DoubleClick or to its stockholders for damages for breaches of fiduciary duty,
except where the director's acts or omissions:
were in breach of the director's duty of loyalty to DoubleClick or its
stockholders;
were not in good faith or involved intentional misconduct or a knowing
violation of the law;
resulted in a violation of a statute prohibiting certain dividend payments
or stock purchases or redemptions; or
involved transactions from which the director derived an improper personal
benefit.
DoubleClick's certificate of incorporation and bylaws provide that it will
indemnify its directors, officers, employees or agents for any liability
incurred in their official capacity to the maximum extent permissible under the
DGCL. Under the DGCL, a corporation may indemnify any person made or threatened
to be made a party to any action or proceeding (other than shareholder
derivative suits) because he or she is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation,
as a director, officer, employee or agent of another corporation or firm. In
order to be indemnified, the director, officer, employee or agent:
must act in good faith and in a manner he or she reasonably believed to be
in, and not opposed to, the best interest of the corporation, and
108
<PAGE>
in respect to a criminal proceeding, must have no reasonable cause to
believe that his or her conduct was unlawful.
In the case of stockholder derivative suits under the DGCL, the corporation
may also provide indemnification if the director, officer, employee or agent
acted in good faith and in a manner the director reasonably believed to be in,
and not opposed to, the best interest of the corporation. Unless a court finds
that an individual is fairly and reasonably entitled to indemnification, the
corporation cannot indemnify an individual in stockholder derivative suits where
there is any claim, issue or matter in which the individual has been found
liable to the corporation.
Under the DGCL, a corporation must indemnify a director or officer who
successfully defends himself or herself in a proceeding to which he or she was a
party because of his or her position as a director or officer for expenses
actually or reasonably incurred by the person. Expenses incurred by an officer
or director in defending any civil or criminal proceeding may be paid by the
corporation in advance of the final disposition of the proceeding upon receipt
of an undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined that he or she is not entitled to be indemnified
by the corporation.
The indemnification and expense advancement provisions under the DGCL
described above are not exclusive of other rights of indemnification and
advancement that a director or officer may be granted by a corporation in its
bylaws or by a vote of stockholders or disinterested directors or by a separate
agreement.
ANNUAL MEETINGS OF STOCKHOLDERS; SPECIAL MEETINGS OF STOCKHOLDERS
The annual meeting of NetCreations shareholders must be held on a date and
at a place fixed by NetCreations' board of directors or its President. A special
meeting of the shareholders may be called by only the Chairman of the Board of
Directors, the president, a majority of the board of directors or the holders of
at least fifty percent of the shares of capital stock of the corporation issued
and outstanding and entitled to vote. Business transacted at any special meeting
is limited to matters relating to the purpose stated in the notice of meeting.
The annual meeting of DoubleClick stockholders must be held on a date and at
a place fixed by the DoubleClick board of directors. A special meeting of the
stockholders may be called at any time by DoubleClick's president and must be
called by its president or secretary at the request of two-thirds of the board
of directors. DoubleClick stockholders do not have the right to call a special
meeting of the stockholders.
STOCKHOLDER INSPECTION RIGHTS AND STOCKHOLDER LISTS
Under the NYBCL, any NetCreations shareholder is entitled upon at least five
days written demand to examine in person or by agent the corporation's minutes
of the proceedings of its shareholders and record of shareholders and to make
extracts therefrom for any purpose reasonably related to such person's interest
as a shareholder. An inspection may be denied if the shareholder refuses to
furnish to the corporation an affidavit stating that such inspection is desired
for a purpose that is in the interest of the corporation and that the
shareholder has not within five years sold or offered for sale any list of
shareholders of any corporation.
Under the DGCL, any DoubleClick stockholder is entitled to inspect and copy
books and records, including the corporation's stock ledger, and a list of the
stockholders. These inspection and copying rights are permitted as long as the
inspection is for a proper purpose and must be accomplished during the usual
hours of business.
STOCKHOLDER ACTION WITHOUT A MEETING
Under NetCreations' certificate of incorporation, the shareholders may not
take any action by written consent in lieu of a meeting. Action required or
permitted by the NYBCL to be taken at a shareholders meeting may not be taken
without a meeting.
109
<PAGE>
Similarly, DoubleClick's certificate of incorporation provides that its
stockholders may act only at duly called annual or special meetings of
stockholders, not by written consent.
STOCKHOLDER PROPOSALS
A NetCreations shareholder wishing to bring business before the annual
shareholders meeting must provide timely notice to NetCreations' secretary. To
be timely, a shareholder's notice must be delivered to or mailed and received at
the principal executive offices of the corporation not less than sixty (60)
days, nor more than ninety (90) days prior to the meeting; provided, however,
that in the event that less than seventy (70) days notice or prior public
disclosure of the date of the meeting is given, notice must be provided within
ten days from the date notice is mailed. A shareholder's notice to the secretary
shall set forth each matter the shareholder proposes to bring before the annual
meeting.
The NetCreations' shareholder's written notice must include:
the name and record address of the shareholder;
the number and class of shares of stock owned beneficially or of record by
the shareholder;
a brief discussion of the business to be discussed as well as the reasons
why it should be discussed at the annual meeting; and
disclosure of any financial interest that the shareholder has in the
subject matter of the proposal.
A DoubleClick stockholder wishing to bring business before the annual
stockholders' meeting must provide timely notice to DoubleClick's secretary at
its principal executive offices. To be timely the notice must be received
between one-hundred and twenty (120) days and one-hundred and fifty (150) days
prior to the first anniversary of the date of the proxy statement for the
preceding year's annual meeting. If, however, the date of the stockholder's
meeting is more than thirty (30) days before or more than sixty (60) days after
such an anniversary date, or if no proxy statement was delivered to the
stockholders for the previous year's annual meeting, notice must be given
between ninety (90) and sixty (60) days of the annual meeting or no later than
ten (10) days following the day on which DoubleClick first made a public
announcement of the meeting date.
The stockholder's written notice must include:
the name and record address of the stockholder;
the number of shares owned beneficially or of record by the stockholder;
and
a brief description of the business to be discussed and the reasons why it
should be discussed at the annual meeting.
EXPERTS
The audited financial statements of DoubleClick, incorporated by reference
in this proxy statement/prospectus, except as they relate to NetGravity, Inc. as
of December 31, 1998, and for the years ended December 31, 1998 and 1997, have
been audited by PricewaterhouseCoopers LLP, independent accountants, and insofar
as they relate to NetGravity, Inc. as of December 31, 1998, and for the years
ended December 31, 1998 and 1997, have been audited by KPMG LLP, independent
accountants. Such financial statements have been so incorporated in reliance on
the reports of such independent accountants given on the authority of such firms
as experts in auditing and accounting.
The balance sheets of NetCreations as of December 31, 1999 and 1998 and the
statements of operations, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1999, included in this proxy
statement/prospectus, have been included herein in reliance on the report of
Grant Thornton LLP, New York, New York, independent certified public
accountants, given on the authority of that firm as experts in accounting and
auditing.
110
<PAGE>
LEGAL MATTERS
The validity of the shares of DoubleClick common stock offered by this proxy
statement/prospectus will be passed upon for DoubleClick by Brobeck, Phleger &
Harrison LLP, New York, New York. Attorneys of Brobeck, Phleger & Harrison LLP
own an aggregate of 5,122 shares of DoubleClick common stock. Certain legal
matters with respect to federal income tax consequences in connection with the
merger will be passed upon for NetCreations by Piper Marbury Rudnick & Wolfe
LLP, New York, New York.
WHERE YOU CAN FIND MORE INFORMATION
DoubleClick and NetCreations file reports, proxy statements and other
information with the Securities and Exchange Commission. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the public reference rooms. You may read and copy this information at the
following locations of the Securities and Exchange Commission:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The Securities and
Exchange Commission also maintains an Internet World Wide Web site that contains
reports, proxy statements and other information about issuers, including
DoubleClick and NetCreations, who file electronically with the Securities and
Exchange Commission. The address of that site is http://www.sec.gov. You can
also inspect reports, proxy statements and other information about DoubleClick
and NetCreations at the offices of the National Association of Securities
Dealers, 1735 K Street, N.W. Washington, D.C. 20006.
DoubleClick has filed a registration statement with the Securities and
Exchange Commission to register the DoubleClick common stock to be issued to
NetCreations shareholders in the merger. This proxy statement/prospectus is a
part of that registration statement and constitutes a proxy statement of
NetCreations for use at its special shareholders meeting.
DoubleClick has supplied all information contained or incorporated by
reference in this proxy statement/prospectus relating to DoubleClick, and
NetCreations has supplied all information contained in this proxy
statement/prospectus relating to NetCreations. Neither DoubleClick nor
NetCreations shall have any responsibility relating to the accuracy or
completeness of information relating to the other or information relating to
@plan.inc.
Stockholders can obtain any of the documents incorporated by reference
through DoubleClick or the Securities and Exchange Commission. Documents
incorporated by reference are available from DoubleClick without charge,
excluding all exhibits. Stockholders may obtain documents incorporated by
reference in this proxy statement/prospectus by requesting them orally or in
writing to the following addresses or by telephone:
DoubleClick Inc.
Investor Relations
450 West 33rd Street
New York, NY 10001
(212) 683-0001
111
<PAGE>
NetCreations will send you copies of documents it has filed with the
Securities and Exchange Commission, excluding exhibits, without charge. You may
contact NetCreations at:
NetCreations, Inc.
Investor Relations
379 West Broadway, Suite 202
New York, NY 10012
(212) 625-1370
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY [ ] [ ],
2000 IN ORDER TO RECEIVE THEM BEFORE THE SPECIAL SHAREHOLDERS MEETING.
NETCREATIONS SHAREHOLDERS SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN
OR INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON
ADOPTION OF THE MERGER AGREEMENT. NEITHER DOUBLECLICK NOR NETCREATIONS HAS
AUTHORIZED ANYONE TO PROVIDE INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS
DATED [ ] [ ], 2000. STOCKHOLDERS SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY
OTHER DATE, AND NEITHER THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO
NETCREATIONS SHAREHOLDERS NOR THE ISSUANCE OF DOUBLECLICK COMMON STOCK IN THE
MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
SHAREHOLDER/STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
shareholders of NetCreations may present proper proposals for inclusion in
NetCreations' proxy statement and for consideration at the next annual meeting
of its shareholders by submitting their proposals to NetCreations in a timely
manner. If the merger is not consummated, shareholders of NetCreations may
submit proposals for consideration at the next annual meeting of NetCreations
shareholders. In order to be so included for the next annual meeting,
shareholder proposals must be received by NetCreations no later than
November 15, 2000 and must comply with the requirements of Rule 14a-8. In
addition, NetCreations' by-laws establish an advance notice procedure with
regard to certain matters, including shareholder proposals not included in
NetCreations' proxy statement, to be brought before an annual meeting of
shareholders. In general, notice must be received by NetCreations' secretary not
less than 60 days prior to the date NetCreations' proxy statement was released
to shareholders in connection with the previous year's annual meeting and must
contain specified information concerning the matters to be brought before such
meeting and concerning the shareholder proposing such matters.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to 'incorporate by
reference' the information DoubleClick files with the Securities and Exchange
Commission, 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 proxy statement/prospectus, and later information
filed with the Securities and Exchange Commission will update and supersede this
information. This proxy statement/prospectus incorporates by reference the
documents set forth below that DoubleClick has previously filed with the
Securities and Exchange Commission. The documents contain important information
about DoubleClick and its finances.
We incorporate by reference DoubleClick's:
Annual report on Form 10-K for the year ended December 31, 1999;
Quarterly reports on Form 10-Q for the periods ended March 31, 2000 and
June 30, 2000;
Current reports on Form 8-K, filed on November 10, 1999 (as amended by the
Form 8-K/A filed on January 10, 2000), December 8, 1999 (as amended by the
Form 8-K/A filed on January 10, 2000), January 13, 2000 (as amended by the
Form 8-K/A filed on March 10, 2000), January 27, 2000, February 16, 2000,
March 17, 2000, June 26, 2000, August 10, 2000, September 27, 2000 and
October 4, 2000;
Definitive Proxy Statement on Schedule 14A, filed on April 27, 2000; and
112
<PAGE>
The description of DoubleClick common stock contained in DoubleClick's
registration statement on Form 8-A (File No. 000-23709) filed on December
1, 1998, registering the DoubleClick common stock under Section 12(g) of
the Securities Exchange Act of 1934.
In addition, all of DoubleClick's filings with the Securities and Exchange
Commission after the date of this proxy statement/prospectus under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 shall be deemed
to be incorporated by reference until the NetCreations shareholders meeting.
Any statement contained in this proxy statement/prospectus or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this proxy statement/prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this proxy statement/prospectus.
113
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF NETCREATIONS, INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Financial Statements:
Balance Sheets.......................................... F-3
Statements of Income.................................... F-4
Statement of Stockholders' Equity....................... F-5
Statements of Cash Flows................................ F-6
Notes to Financial Statements........................... F-7 to F-18
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders of
NETCREATIONS, INC.
We have audited the accompanying balance sheets of NetCreations, Inc. as of
December 31, 1998 and 1999, and the related statements of income, stockholders'
equity and cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of NetCreations, Inc. as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999 in conformity
with accounting principles generally accepted in the United States of America.
GRANT THORNTON LLP
New York, New York
February 11, 2000
F-2
<PAGE>
NETCREATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1998 1999 2000
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................ $ 96,885 $41,305,814 $38,332,991
Accounts receivable (net of allowance for doubtful
accounts of $0, $150,000 and $350,000 at
December 31, 1998, 1999 and June 30, 2000,
respectively)...................................... 673,706 5,636,967 10,981,150
Prepaid commissions.................................. -- 3,000,000 7,133,400
Other current assets................................. 6,022 132,395 385,327
-------- ----------- -----------
Total current assets............................. 776,613 50,075,176 56,832,868
Fixed assets, net........................................ 155,740 2,268,225 3,273,750
Deferred income taxes.................................... -- -- 514,225
Other assets............................................. 11,451 48,014 86,176
-------- ----------- -----------
Total assets..................................... $943,804 $52,391,415 $60,707,019
-------- ----------- -----------
-------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable......................................... $ 7,197 $ 1,825,896 $ 53,013
Accrued expenses......................................... 77,466 939,405 918,083
Commissions payable...................................... 293,000 3,696,466 9,263,761
Current portion of capital lease obligations............. 14,331 112,350 105,850
Income taxes payable..................................... 12,138 325,552 798,989
Deferred income taxes.................................... 32,500 128,500 --
-------- ----------- -----------
Total current liabilities........................ 436,632 7,028,169 11,139,696
Capital lease obligations................................ 30,180 101,225 58,967
-------- ----------- -----------
Total liabilities................................ 466,812 7,129,394 11,198,663
Common stock, $.01 par value; 50,000,000 shares
authorized; 11,700,000, 15,495,000 and 15,495,000
issued and outstanding at December 31, 1998, 1999, and
June 30, 2000, respectively............................ 117,000 154,950 154,950
Additional paid-in capital............................... -- 46,512,376 46,078,751
Deferred compensation.................................... -- (2,313,171) (1,517,982)
Retained earnings........................................ 359,992 907,866 4,792,637
-------- ----------- -----------
Total stockholders' equity....................... 476,992 45,262,021 49,508,356
-------- ----------- -----------
Total liabilities and stockholders' equity....... $943,804 $52,391,415 $60,707,019
-------- ----------- -----------
-------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
NETCREATIONS, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------- ------------------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues........................................ $1,100,781 $3,446,539 $20,658,223 $5,272,594 $30,642,483
Cost of revenues.................................... 173,124 1,509,776 10,464,359 2,577,967 17,224,098
---------- ---------- ----------- ---------- -----------
Gross profit.................................. 927,657 1,936,763 10,193,864 2,694,627 13,418,385
Operating expenses
Selling and marketing............................ 289,904 492,004 2,088,100 601,960 2,942,380
Technology, support and development.............. 193,554 373,746 694,311 191,805 831,921
General and administrative....................... 151,221 365,343 1,914,608 364,889 2,877,718
Depreciation and amortization.................... 9,515 23,414 195,362 45,151 606,906
---------- ---------- ----------- ---------- -----------
Total operating expenses...................... 644,194 1,254,507 4,892,381 1,203,805 7,258,925
---------- ---------- ----------- ---------- -----------
Operating income.................................... 283,463 682,256 5,301,483 1,490,822 6,159,460
Interest income (expense):
Interest income.................................. 209,182 0 1,094,004
Interest expense................................. (86) (4,165) (33,157) (7,615) (7,418)
---------- ---------- ----------- ---------- -----------
Interest income (expense) -- net................. (86) (4,165) 176,025 (7,615) 1,086,586
---------- ---------- ----------- ---------- -----------
Income before income tax provision............ 283,377 678,091 5,477,508 1,483,207 7,246,046
Income tax provision................................ 23,028 72,228 946,000 158,000 3,361,275
---------- ---------- ----------- ---------- -----------
Net income.................................... $ 260,349 $ 605,863 $ 4,531,508 $1,325,207 $ 3,884,771
---------- ---------- ----------- ---------- -----------
---------- ---------- ----------- ---------- -----------
Net income per common share
Basic and diluted................................ $ 0.02 $ 0.05 $ 0.37 $ 0.11 $ 0.25
---------- ---------- ----------- ---------- -----------
---------- ---------- ----------- ---------- -----------
Weighted-average common shares outstanding
For basic net income per share................... 11,700,000 11,700,000 12,187,315 11,700,000 15,495,000
For dilutive net income per share................ 11,700,000 11,700,000 12,351,642 11,700,000 15,825,363
Pro forma data
Historical income before income taxes............ $ 283,377 $ 678,091 $ 5,477,508 $1,483,207 $ 7,246,046
Pro forma income tax provision................... 129,000 316,000 2,537,000 677,000 3,361,275
---------- ---------- ----------- ---------- -----------
Pro forma net income................................ $ 154,377 $ 362,091 $ 2,940,508 $ 806,207 $ 3,884,771
---------- ---------- ----------- ---------- -----------
---------- ---------- ----------- ---------- -----------
Pro forma net income per common share
Basic and diluted................................ $ 0.01 $ 0.03 $ 0.24 $ 0.07 $ 0.25
---------- ---------- ----------- ---------- -----------
---------- ---------- ----------- ---------- -----------
Pro forma weighted-average common shares outstanding
For basic net income per share................... 11,700,000 11,700,000 12,187,315 11,700,000 15,495,000
For dilutive net income per share................ 11,700,000 11,700,000 12,351,642 11,700,000 15,825,363
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
NETCREATIONS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
--------------------- PAID-IN DEFERRED EARNINGS
SHARES DOLLARS CAPITAL COMPENSATION (DEFICIENCY) TOTAL
------ ------- ------- ------------ ------------ -----
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997.... 11,700,000 $117,000 $ -- $ -- $ (122,459) $ (5,459)
Net income.................... -- -- -- -- 260,349 260,349
S Corporation distributions to
shareholders................ -- -- -- -- (133,761) (133,761)
---------- -------- ----------- ----------- ----------- -----------
Balance at December 31,
1997........................ 11,700,000 117,000 -- -- 4,129 121,129
Net income.................... -- -- -- -- 605,863 605,863
S Corporation distributions to
shareholders................ -- -- -- -- (250,000) (250,000)
---------- -------- ----------- ----------- ----------- -----------
Balance at December 31,
1998........................ 11,700,000 117,000 -- -- 359,992 476,992
Net income.................... -- -- -- -- 4,531,508 4,531,508
Issuance of common stock...... 3,795,000 37,950 43,544,911 -- -- 43,582,861
Grant of stock options........ -- -- 2,865,465 (2,865,465) --
Equity-based expense.......... -- -- -- 552,294 -- 552,294
Reclassification of additional
S Corporation earnings to
paid-in capital............. -- -- 102,000 -- (102,000) --
S Corporation distributions to
shareholders................ -- -- -- -- (3,881,634) (3,881,634)
---------- -------- ----------- ----------- ----------- -----------
Balance at December 31,
1999........................ 15,495,000 154,950 46,512,376 (2,313,171) 907,866 45,262,021
Net income (unaudited)........ -- -- -- -- 3,884,771 3,884,771
Adjustment to deferred
compensation................ -- -- (433,625) (433,625) -- --
Equity-based expense.......... -- -- -- 361,564 -- 361,564
---------- -------- ----------- ----------- ----------- -----------
Balance at June 30, 2000
(unaudited)................. 15,495,000 $154,950 $46,078,751 $(1,517,982) $ 4,792,637 $49,508,356
---------- -------- ----------- ----------- ----------- -----------
---------- -------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
NETCREATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------- ------------------------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income............................................... $ 260,349 $ 605,863 $ 4,531,508 $1,325,207 $ 3,884,771
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization......................... 9,515 23,414 195,362 45,151 606,906
Provision for doubtful accounts....................... -- 3,613 232,403 -- 200,000
Deferred taxes........................................ 10,520 24,200 96,000 (1,000) (642,725)
Equity-based compensation............................. -- -- 552,294 -- 361,564
Changes in assets and liabilities
Accounts receivable................................ (107,702) (556,580) (5,195,665) (902,410) (5,544,183)
Prepaid commissions................................ -- -- (3,000,000) -- (4,133,401)
Other current assets............................... (6,317) 295 (126,372) (1,033) (307,499)
Other assets....................................... 143 (10,980) (36,563) (22,825) (38,163)
Accounts payable and accrued expenses.............. 21,493 13,505 2,680,638 129,739 (1,739,636)
Commissions payable................................ 18,883 260,098 3,403,466 733,495 5,567,295
Income taxes payable............................... (1,147) 12,138 313,414 133,349 473,437
--------- ----------- ----------- ---------- -----------
Net cash provided by (used in) operating
activities.................................... 205,737 375,566 3,646,485 1,439,673 (1,311,634)
--------- ----------- ----------- ---------- -----------
Cash flows from investing activities
Capital expenditures..................................... (50,955) (79,422) (2,063,075) (76,918) (1,612,431)
--------- ----------- ----------- ---------- -----------
Net cash used in investing activities........... (50,955) (79,422) (2,063,075) (76,918) (1,612,431)
--------- ----------- ----------- ---------- -----------
Cash flows from financing activities
Proceeds from sale of common stock, net.................. -- -- 45,881,550 --
Distributions to shareholders............................ (133,761) (250,000) (3,881,634) (881,632) --
Borrowings under line of credit.......................... -- 284,240 1,300,000 25,000 --
Payments on line of credit............................... -- (284,240) (1,300,000) -- --
Payments of offering costs............................... -- -- (2,298,689) (59,662) --
Payments on capital lease obligations.................... -- (3,261) (75,708) (22,260) (48,758)
--------- ----------- ----------- ---------- -----------
Net cash provided by (used in) financing
activities.................................... (133,761) (253,261) 39,625,519 (938,554) (48,758)
--------- ----------- ----------- ---------- -----------
Net increase in cash and cash equivalents................... 21,021 42,883 41,208,929 424,201 (2,972,823)
Cash and cash equivalents at beginning of year.............. 32,981 54,002 96,885 96,885 41,305,814
--------- ----------- ----------- ---------- -----------
Cash and cash equivalents at end of year.................... $ 54,002 $ 96,885 $41,305,814 $ 521,086 $38,332,991
--------- ----------- ----------- ---------- -----------
--------- ----------- ----------- ---------- -----------
Supplemental disclosures of cash flow information:
Cash paid during the year for
Income taxes.......................................... $ 18,825 $ 28,825 $ 535,000 $ 25,141 $ 3,530,427
--------- ----------- ----------- ---------- -----------
--------- ----------- ----------- ---------- -----------
Interest.............................................. $ -- $ -- $ 33,157 $ 7,615 $ 7,418
--------- ----------- ----------- ---------- -----------
--------- ----------- ----------- ---------- -----------
</TABLE>
Noncash financing activities:
Capital lease obligations of $47,772, $297,773, $219,312 and $0 during the
years ended December 31, 1998, 1999, and six months ended June 30, 1999 and
2000, respectively, were incurred when the Company entered into leases for
new equipment.
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1998 AND 1999
NOTE A -- NATURE OF OPERATIONS
NetCreations, Inc. (the 'Company') was incorporated and commenced operations
in 1995. NetCreations, Inc. is a provider of opt-in e-mail marketing services on
the Internet. The Company manages an extensive database of e-mail addresses
gathered from its own and from third-party Web sites. These lists are available
for rental, including list rental, e-mail delivery, and merge/purge. The Company
also maintains a Web site at www.postmasterdirect.com as a vehicle for its
services and another Web site that contains its corporate information at
www.netcreations.com.
The Company's primary revenue source is the rental of opt-in e-mail lists.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. REVENUE RECOGNITION
The Company recognizes revenue when e-mail messages are transmitted to
selected addresses, net of volume discounts and broker discounts.
2. FIXED ASSETS
Owned fixed assets are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally
ranging from three to five years. Leased equipment meeting certain criteria is
capitalized and the present value of related lease payments is recorded as a
liability. Amortization of assets under capital leases and leasehold
improvements are computed using the straight-line method over the lesser of the
lease term or the estimated useful lives of the assets, generally three to five
years.
3. INCOME TAXES
Deferred tax assets and liabilities are recognized for the estimated future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
4. USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions in determining the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
5. ADVERTISING
Advertising costs are expensed as incurred. Advertising expense for the
years ended December 31, 1997, 1998 and 1999 amounted to $74,000, $128,000 and
$753,000, respectively.
F-7
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
6. COST OF REVENUES
Cost of revenues consists primarily of commissions to the Web site owners
that are incurred for each e-mailing to the e-mail addresses owned by the Web
sites.
7. LIST MANAGEMENT AGREEMENT
When the Company advances amounts under a third-party list management
agreement, the Company accounts for advances made as prepaid commissions.
Commission expense is recognized as revenue is earned by NetCreations upon the
transmission of applicable e-mail messages and applied against the advances.
Should management determine that it is no longer probable that sufficient
revenue will be generated over the term of the agreement to meet the minimum
amounts advanced, the Company will amortize the remaining advances at the
greater of the method described in the preceding sentence or the straight-line
basis over the remaining term of the agreement.
Management will also assess the recoverability of prepaid commissions at
each reporting period. To the extent that it is probable that some or all of the
prepaid commissions have become nonrecoverable, a charge to operations will be
made in that period to reduce the balance to the amount recoverable. There are
no required charges as of December 31, 1999.
8. NET INCOME PER SHARE
Basic and diluted net income per share is included, in accordance with SFAS
No. 128, 'Earnings Per Share,' for all periods presented. Basic net income per
share is computed by dividing the net income per share for the period by the
weighted-average number of common shares outstanding during the period. The
weighted-average shares have been adjusted retroactively to give effect to a
117,000-to-1 share split effective September 14, 1999. Diluted net income per
share is computed by dividing the net income for the period by the
weighted-average number of common shares adjusted for the dilutive effect of any
potential shares issuable, outstanding during the period.
Reference is made to Notes E, K and N.
9. STOCK SPLIT
On September 14, 1999, the Company effected a 117,000-to-1 stock split. The
accompanying financial statements have been adjusted retroactively to reflect
the stock split.
10. CASH AND CASH EQUIVALENTS
The Company considers all securities with a maturity of three months or less
when purchased as cash and cash equivalents.
11. OTHER COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130 ('SFAS No. 130'), 'Reporting
Comprehensive Income.' SFAS No. 130 establishes standards for reporting
comprehensive income and its components in financial statements. Other
comprehensive income, as defined, includes all changes in equity during a period
from non-owner sources. To date, the Company has not had any transactions that
are required to be reported as other comprehensive income.
F-8
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
12. SEGMENT INFORMATION
In June 1997, the Financial Accounting Standards Board ('FASB') issued
Statement of Financial Accounting Standards No. 131 ('SFAS No. 131'),
'Disclosures About Segments of an Enterprise and Related Information.'
SFAS No. 131 established standards for the way companies report information
about operating segments in annual financial statements. It also established
standards for related disclosures about products and services, geographic areas
and major customers. The disclosures prescribed in SFAS No. 131 became effective
for the year ended December 31, 1998. The Company has determined that it
operates as one business segment, a provider of internet marketing services.
13. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133 ('SFAS No. 133'), 'Accounting for Derivative Instruments and Hedging
Activities,' which defines derivatives, requires that all derivatives be carried
at fair value, and provides for hedge accounting when certain conditions are
met. SFAS No. 133 is effective for the Company in 2001. The Company does not
believe that the adoption of this statement will have a material impact on the
Company's financial position or results of operations.
14. TECHNOLOGY, SUPPORT AND DEVELOPMENT EXPENSES
Technology, support and development costs, which consist principally of
salaries, including that of the Company's Chief Technology Officer, have been
expensed as incurred.
15. INTERIM FINANCIAL INFORMATION (UNAUDITED)
Information in the accompanying financial statements for six months ended
June 30, 1999 and 2000 is unaudited.
The financial information as of June 30, 2000 and for the six months ended
June 30, 1999 and 2000 have been prepared in accordance with generally accepted
accounting principles applicable to interim financial information and the rules
and regulations promulgated by the Securities and Exchange Commission.
Accordingly, such condensed financial statements do not include all of the
information and footnote disclosures required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company's
management, the June 30, 2000 and 1999 unaudited condensed interim financial
statements include all adjustments, consisting of normal recurring adjustments
necessary for a fair presentation of such financial statements. The results of
operations for the six months ended June 30, 2000 and 1999 are not necessarily
indicative of the results to be expected for the entire year.
16. RECLASSIFICATIONS
Certain amounts in the 1997 and 1998 financial statements have been
reclassified to conform to the 1999 presentation.
F-9
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
NOTE C -- FIXED ASSETS
Fixed assets consist of the following at December 31:
<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Computer equipment.......................................... $177,342 $ 2,450,008
Office equipment............................................ 11,881 15,474
Leasehold improvements...................................... -- 31,589
-------- -----------
189,223 2,497,071
Less accumulated depreciation and amortization.............. (33,483) (228,846)
-------- -----------
$155,740 $ 2,268,225
-------- -----------
-------- -----------
</TABLE>
Assets under capital lease at December 31, 1998 and 1999 were $47,772 and
$292,544, respectively, and related accumulated amortization was $4,060 and
$67,941, respectively, at December 31, 1998 and 1999.
NOTE D -- INCOME TAXES
The Company was an S Corporation for Federal and state income tax purposes
through the consummation of its IPO on November 15, 1999. Accordingly, no
provision has been made for Federal and certain state income taxes in the 1997
and 1998 financial statements, since the income of the Company was included in
the personal income tax returns of the stockholders. The Company was, however,
responsible for taxes in jurisdictions which do not recognize S Corporation
status (e.g., New York City). Provision was made for income taxes relating to
these jurisdictions in the 1997 and 1998 financial statements. The Company files
its tax returns on the cash basis of accounting.
Effective November 15, 1999, the Company terminated its S Corporation
status. The Company converted to a C Corporation and is now subject to Federal
and all applicable state and local income taxes. In connection with the
termination of the S Corporation election, the Company recognized a net Federal
deferred tax liability of $93,000.
The components of the income tax provision are as follows for the years
ended December 31:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Current
Federal............................................. $ -- $ $205,000
State and local..................................... 12,508 48,028 645,000
------- ------- --------
Total current................................... 12,508 48,028 850,000
------- ------- --------
Deferred
Federal............................................. $ -- $ $ 77,000
State and local..................................... 10,520 24,200 19,000
------- ------- --------
Total deferred.................................. 10,520 24,200 96,000
------- ------- --------
$23,028 $72,228 $946,000
------- ------- --------
------- ------- --------
</TABLE>
F-10
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
The differences between income tax expense shown in the statements of income
and the computed income tax expense based on the Federal statutory corporate
rate are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Computed income tax expense based on the Federal
statutory rate of 34%........................... $ 96,000 $ 231,000 $ 1,862,000
State and local income taxes, net of Federal
benefit......................................... 33,000 80,000 641,000
Effect of S Corporation........................... (105,972) (238,772) (1,557,000)
--------- --------- -----------
$ 23,028 $ 72,228 $ 946,000
--------- --------- -----------
--------- --------- -----------
</TABLE>
The significant components of the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
---- ----
<S> <C> <C>
Deferred tax liabilities -- current
Accounts receivable and other current assets............ $ 73,100 $ 2,664,500
Deferred tax assets -- current
Accounts payable and accrued expenses................... (40,600) (2,536,000)
-------- -----------
Net deferred tax liability.......................... $ 32,500 $ 128,500
-------- -----------
-------- -----------
</TABLE>
On January 1, 2000 the Company will become an accrual basis taxpayer
pursuant to the Internal Revenue Code. This change will result in a reversal of
the deferred tax liabilities of $128,500 and the recognition of a deferred tax
asset of approximately $443,000 and an additional current tax payable of
$141,000 as of January 1, 2000.
NOTE E -- PRO FORMA INCOME STATEMENT INFORMATION (UNAUDITED)
The Company had elected to be taxed as an S Corporation pursuant to the
Internal Revenue Code through November 15, 1999. Pro forma adjustments in the
statements of income for each of the three years in the period ended
December 31, 1999 reflect a pro forma provision for income taxes based upon
pretax income, as if the Company had been subject to all applicable Federal,
state and local income taxes for the entire period. As the Company is a cash
basis taxpayer, the pro forma tax provision is calculated assuming that taxes
are reported on a cash basis.
The pro forma income tax provision, after giving effect to the Federal
statutory rate of 34% and an applicable state and local tax provision, consists
of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Current
Federal......................................... $ 52,000 $115,000 $1,530,000
State and local................................. 33,000 71,000 1,015,500
-------- -------- ----------
Total current............................... 85,000 186,000 2,545,500
-------- -------- ----------
Deferred
Federal......................................... 27,000 80,000 (7,000)
State and local................................. 17,000 50,000 (1,500)
-------- -------- ----------
Total deferred.............................. 44,000 130,000 (8,500)
-------- -------- ----------
$129,000 $316,000 $2,537,000
-------- -------- ----------
-------- -------- ----------
</TABLE>
F-11
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
The differences between the pro forma provision for income taxes shown in
the statements of income and the pro forma computed income tax expense based on
the Federal statutory corporate rate are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Computed income taxes based on Federal statutory
of 34%............................................ $ 96,000 $231,000 $1,862,000
State and local income taxes, net of Federal
benefit........................................... 33,000 85,000 675,000
-------- -------- ----------
$129,000 $316,000 $2,537,000
-------- -------- ----------
-------- -------- ----------
</TABLE>
The significant components of the pro forma net deferred tax liability,
assuming a 34% Federal statutory rate and an applicable state and local
provision, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1999
---- ----
<S> <C> <C>
Deferred tax liability -- current
Accounts receivable and prepaid expenses................ $ 309,000 $ 2,664,500
Deferred tax asset -- current
Accounts payable and accrued expenses................... (172,000) (2,536,000)
--------- -----------
Net deferred tax liability.......................... $ 137,000 $ 128,500
--------- -----------
--------- -----------
</TABLE>
NOTE F -- LINE OF CREDIT
The Company has an available unused line of credit in the amount of
$1,300,000 at December 31, 1999. Borrowings are guaranteed by the Company's
Chief Executive Officer and Chief Technology Officer. The interest rate on such
borrowings is 1% above the bank's prime rate (8.75% at December 31, 1999).
NOTE G -- LEASES
1. Capital Lease Obligations
The annual maturities of capital lease obligations are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
-----------------------
<S> <C>
2000................................................. $112,350
2001................................................. 107,320
2002................................................. 20,541
--------
240,211
Less amount representing interest.................... 26,636
--------
Present value of net minimum lease payments.......... 213,575
Less: Current portion................................ 112,350
--------
Long term portion.................................... $101,225
--------
--------
</TABLE>
F-12
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
2. Operating Lease Commitments
The Company leases office space under the terms of operating leases that
expire at various dates through 2003. Future minimum payments under
noncancellable operating leases consisted of the following at December 31, 1999:
<TABLE>
<S> <C>
2000................................................. $194,000
2001................................................. 198,000
2002................................................. 202,000
2003 and thereafter.................................. 75,000
--------
$669,000
--------
--------
</TABLE>
The Company paid $49,600 and $136,000 in rent expense for the years ended
December 31, 1998 and 1999, respectively. No rent expense was incurred for the
year ended December 31, 1997, since the stockholders provided minimum facilities
in that year.
NOTE H -- DEFINED CONTRIBUTION PLAN
In 1997, the Company had a money purchase pension and profit sharing plan
for its officers/ shareholders. Upon termination, the Company established a
defined contribution plan in 1998 for eligible employees under Section 401(k) of
the Internal Revenue Code. Employees must complete one year of service to be
eligible to participate in the 401(k) plan. In 1997, 1998 and 1999, the Company
incurred contribution expenses of $60,000, $60,000 and $40,000, respectively,
relating to these plans.
NOTE I -- CONCENTRATIONS
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents
and trade receivables. The Company places its cash investments with high quality
financial institutions. The Company's cash equivalents are invested in high
quality government securities. Concentrations of credit risk with respect to
trade receivables are limited due to the Company's large number of customers and
their dispersion across many different industries and countries worldwide. The
Company had no significant concentrations of credit risk. No single customer
represented more than 10% of the Company's revenues during the years ended
December 31, 1997, 1998 and 1999. During the years ended December 31, 1998 and
1999, revenues generated from the e-mail address lists of two Web sites each
represented 15.3% and 16.6% of revenues, and 0.0% and 8.7% respectively.
For the year ended December 31, 1998, one reseller accounted for
approximately 7% of net revenues as a reseller and 3.3% of net revenues as a
list owner. In July 1999, the Company terminated its agreement with this
reseller.
NOTE J -- STOCKHOLDERS' EQUITY
a. COMMON STOCK
As of December 31, 1999, there were 15,495,000 shares of common stock
outstanding. Holders of common stock are entitled to one vote for each share
held on all matters submitted to a vote of shareholders and do not have
cumulative voting rights. Accordingly, holders of a majority of the shares of
common stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of common stock are entitled to receive
ratably such dividends, if any, as may be declared by the board of directors out
of funds legally available for that purpose, subject to any preferential
dividend rights of any outstanding preferred stock. Holders of common stock have
no preemptive, subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of common stock are subject to, and may be
adversely affected by, the
F-13
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
rights of the holders of shares of any series of preferred stock which the
Company may designate and issue in the future.
b. PREFERRED STOCK
The Company's amended certificate authorizes the board of directors, without
further shareholder approval, to issue from time to time up to an aggregate of
5,000,000 shares of preferred stock in one or more series and to fix or alter
the designations, powers, preferences, rights and any qualifications,
limitations or restrictions of the shares of each such series thereof, including
the dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption price or prices,
liquidation preferences and the number of shares constituting any series or
designations of such series. No shares of preferred stock have been issued.
c. STOCK OPTION PLAN
The Company adopted its 1999 Stock Option Plan (the 'Plan') in July 1999.
The Plan provides for the granting of up to 1,170,000 options to directors,
officers, employees and consultants. (See Note M) The Plan provides for the
granting of options intended to qualify as incentive stock options under the
Internal Revenue Code and nonqualified options. The Plan will terminate in July
2009 unless terminated earlier. As of September 14, 1999 and as of November 11,
1999, the Company granted options totaling 241,000 to officers and employees
other than the Company's officer/shareholders at an exercise price of $5.00 per
share. Additionally, the Company granted an additional 5,500 shares at prices
less than the fair market value on the date of grant. The options vest ratably
over a three-year period and may be accelerated under certain conditions. The
officer/shareholders of the Company did not receive any of the options or
stock-based compensation. In addition, the Company granted, effective
October 8, 1999, options to purchase 100,000 shares of common stock to each of
the three nonmanagement directors at an exercise price per share equal to $10.00
per share. These options vest at a rate of one-third as of the date of the
initial public offering and the remainder vests quarterly over the next two
years and may be accelerated under certain conditions. During the year ended
December 31, 1999, the Company recorded deferred compensation for the above
options granted totaling $2,865,465, of which $552,294 was amortized to expense
during 1999. The amount of compensation expense that will be recognized
subsequent to December 31, 1999 over the next three years, relating to the
options that have been granted through December 31, 1999, is as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
-----------------------
<S> <C>
2000................................................. $ 955,155
2001................................................. 917,655
2002................................................. 440,361
----------
$2,313,171
----------
----------
</TABLE>
The Company accounts for options issued under the intrinsic value method of
APB 25. Had compensation cost been determined based on the fair value at the
grant date for stock option
F-14
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
awards consistent with the provisions of SFAS No. 123, the Company's basic and
diluted net income per share for the year ended December 31, 1999 would have
been as follows:
<TABLE>
<S> <C>
Net income
As reported............................................. $4,531,508
Pro forma............................................... $4,007,854
Net income per share
As reported -- basic and diluted........................ $0.37
Pro forma -- basic...................................... $0.33
Pro forma -- diluted.................................... $0.32
</TABLE>
The weighted-average fair value at the date of grant for options granted
during 1999 was $9.83 per option. The fair value at each option at date of grant
was estimated using the Black-Scholes option pricing model with the following
weighted-average assumptions for grants in 1999:
<TABLE>
<S> <C>
Expected stock price volatility............................. 73.8%
Expected lives of options................................... 5 years
Risk-free interest rate..................................... 6.1%
Expected dividend yield..................................... 0%
</TABLE>
Information regarding these options for 1999 is as follows:
<TABLE>
<CAPTION>
NONQUALIFIED OPTIONS
------------------------------
WEIGHTED -- AVERAGE
SHARES EXERCISE PRICE
------ --------------
<S> <C> <C>
Options outstanding at beginning of year.................. -- --
Granted............................................... 546.500 $ 7.93
Exercised............................................. -- --
Cancelled or forfeited................................ -- --
------- ------
Options outstanding at end of year........................ 546,500 $ 7.93
------- ------
------- ------
Exercisable............................................... 100,000 $10.00
------- ------
------- ------
</TABLE>
The following tables summarize information about stock options outstanding
as of December 31, 1999
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- ------------------------
NUMBER WEIGHTED- NUMBER
OUTSTANDING AVERAGE WEIGHTED- EXERCISABLE WEIGHTED-
RANGES OF AS OF REMAINING AVERAGE AS OF AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICES 1999 LIFE PRICE 1999 PRICE
------ ---- ---- ----- ---- -----
<S> <C> <C> <C> <C> <C>
$ 5.00.................................. 241,000 4.68 years $ 5.00 -- --
$10.00.................................. 300,000 4.87 years $10.00 100,000 $10.00
$19.50 - $31.50......................... 5,500 4.94 years $23.25 -- --
</TABLE>
Summary of weighted-average fair value of stock options granted during the
year ended December 31, 1999:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
EXERCISE PRICE FAIR VALUE
-------------- ----------
<S> <C> <C>
Equals market price on grant date.................... $19.50 $12.69
Exercise price less than market price on grant
date............................................... $ 7.91 $ 9.82
</TABLE>
As of December 31, 1999 623,500 options were available for issuance pursuant
to the Plan.
F-15
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
NOTE K -- NET INCOME AND PRO FORMA NET INCOME PER SHARE
A reconciliation between basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net income................................... $260,349 $605,863 $4,531,508
-------- -------- ----------
-------- -------- ----------
Pro forma net income (unaudited)............. $154,377 $362,091 $2,940,508
-------- -------- ----------
-------- -------- ----------
Shares used in the computation of basic net
income per share........................... 11,700,000 11,700,000 12,187,315
Potential common shares...................... -- -- 164,327
---------- ---------- ----------
Shares used in the computation of basic net
income per share........................... 11,700,000 11,700,000 12,351,642
---------- ---------- ----------
---------- ---------- ----------
Net income per common share -- basic and
diluted.................................... $0.02 $0.05 $0.37
----- ----- -----
----- ----- -----
Pro forma net income per common share basic
and diluted (unaudited).................... $0.01 $0.03 $0.24
----- ----- -----
----- ----- -----
</TABLE>
NOTE L -- EMPLOYMENT AGREEMENTS
The Company has entered into three-year employment agreements with three of
its executive officers. The agreements provide for, among other things,
aggregate annual compensation of $500,000 and for bonuses that will be earned
upon the achievement of specified goals.
In January and February 2000, the Company entered into employment agreements
with four executive officers. These agreements provide for, among other things,
aggregate annual compensation of $815,000 and for bonuses and performance based
options that will be earned upon the achievement of specified goals. See Note M
below.
All of the above agreements include customary non-competition arrangements.
NOTE M -- SUBSEQUENT EVENTS (UNAUDITED)
1. STOCK OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN
In January 2000, the Board of Directors approved an increase in the number
of shares available for issuance pursuant to the 1999 Stock Option Plan to
2,000,000, subject to shareholder approval. During the six months ended
June 30, 2000, 1,321,000 options were granted pursuant to employment agreements
and to other employees. Of the shares granted pursuant to employment agreements,
an aggregate of 16 2/3% of these options vest on the six month anniversary of
the date of grant while the remainder vest in equal quarterly installments over
the next ten quarters. The exercise price of such options was equal to the fair
market value on the date of grant. At the Company's Annual Meeting of
Shareholders, the shareholders approved the increase in the number of shares
available for issuance.
Effective July 1, 2000, the shareholders of the Company approved the 2000
Employee Stock Purchase Plan ('ESPP'). Pursuant to the plan, eligible employees
may elect to withhold a portion of their compensation in order to purchase
shares of the Company's common stock at a discount. Amounts withheld are
credited to the participant's account balance which do not accrue interest.
Purchases of common stock are made quarterly with the purchase price being
determined based on the lower of 85% of the market price at the beginning and
end of each period. The Company reserved 1,000,000 shares of stock for issuance
pursuant to the plan.
F-16
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
2. LIST MANAGEMENT AGREEMENTS
The Company has paid certain advances and fees under third-party list
management agreements that are accounted for as prepaid commissions. As of June
30, 2000 the Company has recorded prepaid commissions of $7,133,000. Commission
expense is generally recognized when revenue is earned by the Company upon the
transmission of applicable email messages and applied against the advances.
Should management determine that it is no longer probable that sufficient
revenue will be generated over the term of the agreement to meet the minimum
amounts advanced, the Company will amortize the remaining advances at the
greater of the method described in the preceding sentence or the straight-line
basis over the remaining term of the agreement. Management will continue to
assess the recoverability of prepaid commissions at each reporting period. To
the extent that it is probable that some or all of the prepaid commissions have
become nonrecoverable, a charge to operations will be made in that period to
reduce the balance to the amount recoverable. There are no required charges as
of June 30, 2000. As of September 30, 2000, the Company took a write-down of
$1,000,000 on one list management agreement.
3. MERGER AGREEMENT
DoubleClick Inc. ('DoubleClick'), Genesis Merger Sub, Inc. ('Merger Sub'), a
wholly owned subsidiary of DoubleClick, and the Company have entered into a
merger agreement that provides for the merger of the Company and Merger Sub. As
a result of the merger, the Company will become a wholly owned subsidiary of
DoubleClick. Shareholders of the Company will become stockholders of DoubleClick
following the merger, and each share of the Company's common stock will be
exchanged for the right to receive 0.41 of a share of DoubleClick common stock.
4. LITIGATION
Following the announcement of the proposed merger with DoubleClick, a
complaint was filed in New York Supreme Court against the Company, its board of
directors and DoubleClick. The complaint alleges that the defendants breached
their fiduciary duties of due care and loyalty to the Company's public
shareholders in connection with the proposed merger with DoubleClick. The
complaint asks the court to (i) enjoin the consummation of the merger
(ii) award unspecified damages from the defendants, (iii) invalidate the
termination fee provision of the merger agreement and (iv) award plaintiff his
costs and disbursements, including reasonable counsel and experts' fees and
expenses. The Company believes the claims asserted in the complaint are
without merit and intends to vigorously contest them.
5. STOCK OPTIONS MODIFICATION
On October 2, 2000 the non-employee director stock options were amended to
permit them to be exerciseable for up to the original term of such option
grants, notwithstanding their termination as directors upon the closing of the
merger. The Company estimates that such modification would result in a charge to
operations in the fourth quarter of 2000 of approximately $400,000.
F-17
<PAGE>
NETCREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
NOTE N -- NET INCOME AND PRO FORMA NET INCOME PER SHARE (UNAUDITED)
A reconciliation between basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------
1999 2000
---- ----
<S> <C> <C>
Net income.................................................. $1,325,207 $3,884,771
Pro forma net income........................................ $ 806,207 $3,884,771
Shares used in the computation of basic net income per
share..................................................... 11,700,000 15,495,000
Potential common shares..................................... -- 330,363
---------- ----------
Shares used in the computation of basic net income per
share..................................................... 11,700,000 15,825,363
---------- ----------
---------- ----------
Net income per common share -- basic and diluted............ $0.11 $0.25
Pro forma net income per common share basic and diluted..... $0.07 $0.25
</TABLE>
F-18
<PAGE>
APPENDIX A
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
DOUBLECLICK INC.,
GENESIS MERGER SUB, INC.
and
NETCREATIONS, INC.
Dated as of October 2, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEFINITIONS.............................................................. A-4
SECTION 1.01 Certain Defined Terms....................................... A-4
ARTICLE II THE MERGER.............................................................. A-7
SECTION 2.01 The Merger.................................................. A-7
SECTION 2.02 Closing..................................................... A-7
SECTION 2.03 Effective Time.............................................. A-7
SECTION 2.04 Effect of the Merger........................................ A-7
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors and Officers
of Surviving Corporation.................................. A-7
ARTICLE III CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES..................... A-8
SECTION 3.01 Conversion of Shares........................................ A-8
SECTION 3.02 Exchange of Shares Other than Treasury Shares............... A-8
SECTION 3.03 Stock Transfer Books........................................ A-10
SECTION 3.04 No Fractional Share Certificates............................ A-10
SECTION 3.05 Options to Purchase Company Common Stock.................... A-10
SECTION 3.06 Unvested Stock.............................................. A-11
SECTION 3.07 Employee Stock Purchase Plan................................ A-11
SECTION 3.08 Certain Adjustments......................................... A-12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF COMPANY............................... A-12
SECTION 4.01 Organization and Qualification; Subsidiaries................ A-12
SECTION 4.02 Certificate of Incorporation and Bylaws..................... A-12
SECTION 4.03 Capitalization.............................................. A-12
SECTION 4.04 Authority Relative to This Agreement........................ A-13
SECTION 4.05 No Conflict; Required Filings and Consents.................. A-13
SECTION 4.06 Permits; Compliance with Laws............................... A-13
SECTION 4.07 SEC Filings; Financial Statements........................... A-14
SECTION 4.08 Absence of Certain Changes or Events........................ A-14
SECTION 4.09 Employee Benefit Plans; Labor Matters....................... A-15
SECTION 4.10 Certain Tax Matters......................................... A-17
SECTION 4.11 Contracts................................................... A-17
SECTION 4.12 Litigation.................................................. A-18
SECTION 4.13 Environmental Matters....................................... A-18
SECTION 4.14 Intellectual Property....................................... A-18
SECTION 4.15 Taxes....................................................... A-21
SECTION 4.16 Insurance................................................... A-21
SECTION 4.17 Properties.................................................. A-21
SECTION 4.18 Affiliates.................................................. A-22
SECTION 4.19 Opinion of Financial Advisor................................ A-22
SECTION 4.20 Brokers..................................................... A-22
SECTION 4.21 Certain Business Practices.................................. A-22
SECTION 4.22 Section 912 of New York Law Not Applicable.................. A-22
SECTION 4.23 Business Activity Restriction............................... A-22
SECTION 4.24 Privacy..................................................... A-22
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT................................. A-23
SECTION 5.01 Organization and Qualification; Subsidiaries................ A-23
SECTION 5.02 Certificate of Incorporation and Bylaws..................... A-23
SECTION 5.03 Capitalization.............................................. A-23
SECTION 5.04 Authority Relative to this Agreement........................ A-23
SECTION 5.05 No Conflict; Required Filings and Consents.................. A-24
SECTION 5.06 SEC Filings; Financial Statements........................... A-24
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 5.07 Certain Tax Matters......................................... A-25
SECTION 5.08 Brokers..................................................... A-25
ARTICLE VI COVENANTS............................................................... A-25
SECTION 6.01 Conduct of Business by Company Pending the Closing.......... A-25
SECTION 6.02 Notices of Certain Events................................... A-26
SECTION 6.03 Access to Information; Confidentiality...................... A-27
SECTION 6.04 No Solicitation of Transactions............................. A-27
SECTION 6.05 Tax-Free Transaction........................................ A-28
SECTION 6.06 Control of Operations....................................... A-28
SECTION 6.07 Further Action; Consents; Filings........................... A-28
SECTION 6.08 Additional Reports.......................................... A-29
SECTION 6.09 Tax Information............................................. A-29
ARTICLE VII ADDITIONAL AGREEMENTS.................................................. A-29
SECTION 7.01 Registration Statement; Proxy Statement..................... A-29
SECTION 7.02 Company Shareholders' Meeting............................... A-31
SECTION 7.03 Affiliates.................................................. A-31
SECTION 7.04 Directors' and Officers' Indemnification and Insurance...... A-31
SECTION 7.05 No Shelf Registration....................................... A-32
SECTION 7.06 Public Announcements........................................ A-32
SECTION 7.07 NNM Listing................................................. A-32
SECTION 7.08 Company Stock Options/Registration Statements on Form S-8... A-32
SECTION 7.09 Employee Benefit Matters.................................... A-33
ARTICLE VIII CONDITIONS TO THE MERGER.............................................. A-33
SECTION 8.01 Conditions to the Obligations of Each Party to Consummate
the Merger................................................ A-33
SECTION 8.02 Conditions to the Obligations of Company.................... A-34
SECTION 8.03 Conditions to the Obligations of Parent..................... A-34
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER....................................... A-35
SECTION 9.01 Termination................................................. A-35
SECTION 9.02 Effect of Termination....................................... A-36
SECTION 9.03 Amendment................................................... A-36
SECTION 9.04 Waiver...................................................... A-37
SECTION 9.05 Termination Fee; Expenses................................... A-37
ARTICLE X GENERAL PROVISIONS....................................................... A-37
SECTION 10.01 Non-Survival of Representations and Warranties.............. A-37
SECTION 10.02 Notices..................................................... A-37
SECTION 10.03 Severability................................................ A-38
SECTION 10.04 Assignment; Binding Effect; Benefit......................... A-38
SECTION 10.05 Incorporation of Exhibits................................... A-38
SECTION 10.06 Governing Law............................................... A-38
SECTION 10.07 Waiver of Jury Trial........................................ A-39
SECTION 10.08 Headings; Interpretation.................................... A-39
SECTION 10.09 Counterparts................................................ A-39
SECTION 10.10 Entire Agreement............................................ A-39
ANNEXES
ANNEX A Form of Company Shareholders' Agreement
ANNEX B Certificate of Incorporation of Surviving Corporation
ANNEX C Form of Company Affiliate Agreement
</TABLE>
A-3
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, , dated as of October 2,
2000 (as amended, supplemented or otherwise modified from time to time, this
'Agreement'), among DOUBLECLICK INC., a Delaware corporation ('Parent'),
NETCREATIONS, INC., a New York corporation ('Company'), and GENESIS MERGER SUB,
INC., a New York corporation and a direct wholly owned subsidiary of Parent
('Merger Sub'):
WITNESSETH:
WHEREAS, the boards of directors of Parent and Company have determined that
it is advisable and in the best interests of their respective companies and
shareholders to enter into a business combination by means of the merger of
Merger Sub with and into Company (the 'Merger') and have approved and adopted
this Agreement;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, certain shareholders of
Company have entered into a company shareholders' agreement (the 'Shareholders'
Agreement') in the form attached hereto as Annex A; and
WHEREAS, for United States Federal income tax purposes, it is intended that
the Merger shall qualify as a tax-free reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended (together with the rules and
regulations promulgated thereunder, the 'Code'), and that this Agreement shall
be, and hereby is, adopted as a plan of reorganization for purposes of
Section 368 of the Code;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. Unless the context otherwise requires,
the following terms, when used in this Agreement, shall have the respective
meanings specified below (such meanings to be equally applicable to the singular
and plural forms of the terms defined):
'Affiliate' shall mean, with respect to any person, any other person that
controls, is controlled by or is under common control with the first person.
'Blue Sky Laws' shall mean state securities or 'blue sky' laws.
'Business Day' shall mean any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized by law or executive order to close in New York.
'Company Disclosure Schedule' shall mean the disclosure schedule delivered
by Company to Parent prior to the execution of this Agreement and forming a part
hereof.
'Company Material Adverse Effect' shall mean any change in or effect on the
business of Company that, individually or in the aggregate (taking into account
all other such changes or effects), is, or is reasonably likely to be,
materially adverse to the business, assets, liabilities, financial condition or
results of operations of Company, taken as a whole, except to the extent any
such change or effect results from or is attributable to (i) changes in general
economic conditions or changes affecting the industry generally in which Company
operates (provided that such changes do not affect Company in a materially
disproportionate manner) or (ii) any litigation or loss of current or
prospective customers, employees or revenues as to which Company furnishes
reasonable evidence that it occurred primarily from the announcement of Company
entering into this Agreement; provided, however, that in no event shall (x) a
decrease in the trading price of
A-4
<PAGE>
Company Common Stock or litigation relating thereto (y) any matter publicly
disclosed in a Company Report (as defined in Section 4.07) or otherwise, in any
case prior to the date hereof, or (z) the termination of any agreement listed on
Schedule I to the Company Disclosure Schedules be considered a Company Material
Adverse Effect.
'Company Stock Plan' shall mean Company's 1999 Employee Stock Option Plan,
as amended.
'Company Stock Purchase Plan' shall mean Company's 2000 Employee Stock
Purchase Plan.
'Company Shareholders' Meeting' shall mean the special meeting of Company
shareholders to consider approval of this Agreement and the Merger.
'Competing Transaction' shall mean any of the following involving Company
(other than the Merger):
(i) any merger, consolidation, share exchange, business combination or
other similar transaction;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 20% or more of the assets of Company and its subsidiaries,
taken as a whole, in a single transaction or series of related transactions
(excluding for this purpose the providing of opt-in e-mail addresses to
direct marketers and brokers by Company in the ordinary course of business);
(iii) any tender offer or exchange offer for 20% or more of the
outstanding voting securities of Company or the filing of a registration
statement under the Securities Act in connection therewith;
(iv) any person having acquired beneficial ownership or the right to
acquire beneficial ownership of, or any 'group' (as such term is defined
under Section 13(d) of the Exchange Act) having been formed that
beneficially owns or has the right to acquire beneficial ownership of, 20%
or more of the outstanding voting securities of Company; and
(v) any public announcement of a proposal, plan or intention to do any
of the foregoing or any agreement to engage in any of the foregoing.
'Confidentiality Agreement' shall mean the confidentiality agreement, dated
as of September 20, 2000, between Parent and Company.
'$' shall mean United States Dollars.
'Environmental Law' shall mean any Law and any enforceable judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to pollution or protection of the
environment or natural resources, including, without limitation, those relating
to the use, handling, transportation, treatment, storage, disposal, release or
discharge of Hazardous Material, as in effect as of the date hereof.
'Environmental Permit' shall mean any permit, approval, identification
number, license or other authorization required under or issued pursuant to any
applicable Environmental Law.
'ERISA' shall mean the Employee Retirement Income Security Act of 1974, as
amended.
'Exchange Act' shall mean the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
'Expenses' shall mean, with respect to any party hereto, all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its Affiliates) incurred by such party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of its obligations pursuant to this Agreement and the consummation
of the Merger, the preparation, printing, filing and mailing of the Registration
Statement and the Proxy Statement, the solicitation of shareholder approvals,
the filing of HSR Act notice, if any, and all other matters related to the
transactions contemplated hereby and the closing of the Merger.
'Governmental Entity' shall mean any United States Federal, state or local
or any foreign governmental, regulatory or administrative authority, agency or
commission or any court, tribunal or arbitral body.
A-5
<PAGE>
'Governmental Order' shall mean any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Entity.
'Hazardous Material' shall mean (i) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (ii) any chemical, material or
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
'HSR Act' shall mean Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, together with the rules and regulations promulgated thereunder.
'IRS' shall mean the United States Internal Revenue Service.
'Knowledge of Company' shall mean that any officer of Company is actually
aware of a fact or other matter, or should have been aware of a fact or other
matter based upon due inquiry and investigation.
'Knowledge of Parent' shall mean that any executive officer of Company is
actually aware of a fact or other matter, or should have been aware of a fact or
other matter based upon due inquiry and investigation.
'Law' shall mean any Federal, state, foreign or local statute, law,
ordinance, regulation, rule, code, order, judgment, decree, other requirement or
rule of law of the United States or any other jurisdiction, and any other
similar act or law.
'NNM' shall mean the Nasdaq National Market.
'New York Law' shall mean the New York Business Corporation Law.
'Parent Convertible Notes' shall mean the $250,000,000 4.75% Convertible
Notes of Parent Due 2006.
'Parent Disclosure Schedule' shall mean the disclosure schedule delivered by
Parent to Company prior to the execution of this Agreement and forming a part
hereof.
'Parent Material Adverse Effect' shall mean any change in or effect on the
business of Parent and the Parent Subsidiaries that, individually or in the
aggregate (taking into account all other such changes or effects), is, or is
reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of Parent and the
Parent Subsidiaries, taken as a whole, except to the extent any such change or
effect results from or is attributable to (i) changes in general economic
conditions or changes affecting the industry generally in which Parent operates
(provided that such changes do not affect Parent in a materially
disproportionate manner) or (ii) any litigation or loss of current or
prospective customers, employees or revenues that Parent successfully bears the
burden of proving arose solely from the announcement of Parent entering into
this Agreement; provided, however, that in no event shall (x) a decrease in the
trading price of Parent Common Stock or litigation relating thereto or (y) a
matter publicly disclosed in a Parent Report (as defined in Section 5.06) or
otherwise, in any case prior to the date hereof, be considered a Parent Material
Adverse Effect.
'Parent Stock Plans' shall mean Parent's 1996 Stock Plan, 1997 Stock
Incentive Plan, 1999 Non-Officer Stock Option/Stock Issuance Plan and Employee
Stock Purchase Plan.
'Person' shall mean an individual, corporation, partnership, limited
partnership, limited liability company, limited liability partnership,
syndicate, person (including, without limitation, a 'person' as defined in
Section 13(d)(3) of the Exchange Act), trust, association, entity or government
or political subdivision, agency or instrumentality of a government.
'Securities Act' shall mean the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
'Subsidiary' shall mean, with respect to any person, any corporation,
partnership, limited partnership, limited liability company, limited liability
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any other subsidiary of such person) owns,
directly or indirectly, a majority of the stock or other equity interests, the
holders of
A-6
<PAGE>
which are generally entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal entity.
'Tax' shall mean (i) any and all taxes, fees, levies, duties, tariffs,
imposts and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect thereto)
imposed by any Governmental Entity or taxing authority, including, without
limitation, taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value-added or gains taxes; license,
registration and documentation fees; and customers' duties, tariffs and similar
charges; (ii) any liability for the payment of any amounts of the type described
in (i) as a result of being a member of an affiliated, combined, consolidated or
unitary group for any Taxable period; and (iii) any liability for the payment of
amounts of the type described in (i) or (ii) as a result of being a transferee
of, or a successor in interest to, any person or as a result of an express or
implied obligation to indemnify any person.
'Tax Return' shall mean any return, statement or form (including, without
limitation, any estimated tax reports or return, withholding tax reports or
return and information report or return) required to be filed with respect to
any Taxes.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with New York Law, at the Effective
Time (as defined in Section 2.03), Merger Sub shall be merged with and into
Company. As a result of the Merger, the separate corporate existence of Merger
Sub shall cease and Company shall continue as the surviving corporation of the
Merger as a wholly owned subsidiary of Parent (the 'Surviving Corporation').
SECTION 2.02 Closing. Unless this Agreement shall have been terminated and
the Merger herein contemplated shall have been abandoned pursuant to
Section 9.01 and subject to the satisfaction or waiver of the conditions set
forth in Article VIII, the consummation of the Merger shall take place as
promptly as practicable (and in any event within three Business Days) after
satisfaction or waiver of the conditions set forth in Article VIII, at a closing
(the 'Closing') to be held at the offices of Brobeck, Phleger & Harrison LLP,
1633 Broadway, 47th Floor, New York, New York 10019, unless another date, time
or place is agreed to by Parent and Company.
SECTION 2.03 Effective Time. Immediately upon the Closing, the parties shall
cause the Merger to be consummated by filing a certificate of merger (the
'Certificate of Merger') with the Secretary of State of the State of New York in
such form as required by, and executed in accordance with the relevant
provisions of, New York Law (the date and time of such filing, or such later
date and time as may be set forth therein, being the 'Effective Time').
SECTION 2.04 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of New York Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property, rights,
privileges, powers and franchises of Company and Merger Sub shall vest in
Company as the Surviving Corporation, and all debts, liabilities and duties of
Company and Merger Sub shall become the debts, liabilities and duties of Company
as the Surviving Corporation.
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors and Officers of
Surviving Corporation. Unless otherwise agreed by Parent and Company before the
Effective Time, at the Effective Time:
(a) the certificate of incorporation of Company shall be amended and
restated as of the Effective Time to read in its entirety as set forth on
Annex B hereto and, as so amended,
A-7
<PAGE>
shall constitute the certificate of incorporation of the Surviving
Corporation until thereafter amended;
(b) subject to the requirements of Section 7.04(a) herein, the bylaws of
Merger Sub, as in effect immediately prior to the Effective Time, shall be
adopted as the bylaws of the Surviving Corporation until thereafter amended;
(c) the officers of Merger Sub immediately prior to the Effective Time
shall serve in their respective offices of the Surviving Corporation from
and after the Effective Time, in each case until their successors are
elected or appointed and qualified or until their resignation or removal;
and
(d) the directors of Merger Sub immediately prior to the Effective Time
shall serve as the directors of the Surviving Corporation from and after the
Effective Time, in each case until their successors are elected or appointed
and qualified or until their resignation or removal.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01 Conversion of Shares. At the Effective time, by virtue of the
Merger, and without any action on the part of Parent, Merger Sub, Company or the
holders of any of the following securities:
(a) each share of common stock, $.01 par value per share, of Company
('Company Common Stock') issued and outstanding immediately before the
Effective Time (excluding those held in the treasury of Company and those
owned by any wholly owned Subsidiary of Company) and all rights in respect
thereof, shall, forthwith cease to exist and be converted into and become
exchangeable for 0.41 of a share (the 'Exchange Ratio') of common stock,
$.001 par value, of Parent ('Parent Common Stock');
(b) each share of Company Common Stock held in the treasury of Company
or owned by any wholly owned Subsidiary of Company immediately prior to the
Effective Time shall be canceled and retired and no shares of stock or other
securities of Parent, the Surviving Corporation or any other corporation
shall be issuable, and no payment of other consideration shall be made, with
respect thereto;
(c) each issued and outstanding share of capital stock of Merger Sub
shall be converted into and become one fully paid and nonassessable share of
common stock of the Surviving Corporation; and
(d) from and after the Effective Time, each outstanding certificate
theretofore representing shares of Merger Sub common stock shall be deemed
for all purposes to evidence ownership of and to represent the number of
shares of Surviving Corporation common stock into which such shares of
Merger Sub common stock shall have been converted.
SECTION 3.02 Exchange of Shares Other than Treasury Shares.
(a) Exchange Agent. As of the Effective Time, Parent shall enter into an
agreement with a bank or trust company to act as exchange agent for the Merger
(the 'Exchange Agent') as may be designated by Parent and shall be reasonably
acceptable to Company.
(b) Parent to Provide Common Stock and Cash. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for the benefit of the
holder of Company Common Stock: (i) certificates of Parent Common Stock ('Parent
Certificates') representing the number of whole shares of Parent Common Stock
issuable pursuant to Section 3.01(a) in exchange for shares of Company Common
Stock outstanding immediately prior to the Effective Time; and (ii) sufficient
funds to permit payment in lieu of fractional shares pursuant to Section 3.04.
(c) Exchange Procedures. The Exchange Agent shall mail to each holder of
record of certificates of Company Common Stock ('Company Certificates'), whose
shares were converted into the right to receive shares of Parent Common Stock
(and cash in lieu of fractional shares
A-8
<PAGE>
pursuant to Section 3.04) promptly after the Effective Time (and in any event no
later than three Business Days after the later to occur of the Effective Time
and receipt by Parent of a complete list from Company of the names and addresses
of its holders of record): (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon receipt of the Company Certificates by the
Exchange Agent, and shall be in such form and have such other provisions as
Parent may reasonably specify); and (ii) instructions for use in effecting the
surrender of the Company Certificates in exchange for Parent Certificates (and
cash in lieu of fractional shares). Upon surrender of a Company Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed, and such other documents as may be reasonably required by
the Exchange Agent, the holder of such Company Certificate shall be entitled to
receive in exchange therefor a Parent Certificate representing the number of
whole shares of Parent Common Stock that such holder has the right to receive
pursuant to this Article III and payment of cash in lieu of fractional shares
which such holder has the right to receive pursuant to Section 3.04, and the
Company Certificate so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding Company Certificate that, prior to the Effective
Time, represented shares of Company Common Stock will be deemed from and after
the Effective Time, for all corporate purposes other than the payment of
dividends and distributions, to evidence the ownership of the number of full
shares of Parent Common Stock into which such shares of Company Common Stock
shall have been so converted and the right to receive an amount in cash in lieu
of the issuance of any fractional shares in accordance with Section 3.04.
Notwithstanding any other provision of this Agreement, no interest will be paid
or will accrue on any cash payable to holders of Company Certificates pursuant
to the provisions of this Article III.
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions with respect to Parent Common Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Company
Certificate with respect to the shares of Parent Common Stock represented
thereby until the holder of record of such Company Certificate shall surrender
such Company Certificate. Subject to the effect of applicable escheat or similar
laws, following surrender of any such Company Certificate, there shall be paid
to the record holder of the Parent Certificates issued in exchange therefor,
without interest, at the time of such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time
theretofore payable (but for the provisions of this Section 3.02(d)) with
respect to such shares of Parent Common Stock.
(e) Transfer of Ownership. If any Parent Certificate is to be issued in a
name other than that in which the Company Certificate surrendered in exchange
therefor is registered, it will be a condition of the issuance thereof that the
Company Certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will have
paid to Parent or any agent designated by it any transfer or other taxes
required by reason of the issuance of a Parent Certificate for shares of Parent
Common Stock in any name other than that of the registered holder of the Company
Certificate surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
(f) Termination of Exchange Agent Funding. Any portion of funds (including
any interest earned thereon) or Parent Certificates held by the Exchange Agent
which have not been delivered to holders of Company Certificates pursuant to
this Article III within six months after the Effective Time shall promptly be
paid or delivered, as appropriate, to Parent, and thereafter holders of Company
Certificates who have not theretofore complied with the exchange procedures
outlined in and contemplated by this Section 3.02 shall thereafter look only to
Parent (subject to abandoned property, escheat and similar laws) only as general
creditors thereof for their claim for shares of Parent Common Stock, any cash in
lieu of fractional shares of Parent Common Stock and any dividends or
distributions (with a record date after the Effective Time) with respect to
Parent Common Stock to which they are entitled.
A-9
<PAGE>
(g) No Liability. Notwithstanding anything to the contrary in this
Section 3.02, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any person in respect of any shares of Parent Common
Stock or cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(h) Lost, Stolen or Destroyed Company Certificates. In the event any Company
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Company Certificates, upon
the making of an affidavit of that fact by the holder thereof, a Parent
Certificate representing such shares of Parent Common Stock (and cash in lieu of
fractional shares) as may be required pursuant to this Article III; provided,
however, that Parent may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed Company
Certificates to indemnify Parent against any claim that may be made against
Parent, the Surviving Corporation or the Exchange Agent with respect to the
Company Certificates alleged to have been lost, stolen or destroyed.
SECTION 3.03 Stock Transfer Books.
(a) At the Effective Time, the stock transfer books of Company shall each be
closed, and there shall be no further registration of transfers of shares of
Company Common Stock thereafter on the records of any such stock transfer books.
In the e vent of a transfer of ownership of shares of Company Common Stock that
is not registered in the stock transfer records of Company at the Effective
Time, a certificate or certificates representing the number of full shares of
Parent Common Stock into which such shares of Company Common Stock shall have
been converted shall be issued to the transferee together with a cash payment in
lieu of fractional shares, if any, in accordance with Section 3.04 hereof, and a
cash payment in the amount of dividends, if any, in accordance with
Section 3.02(d) hereof, if the certificate or certificates representing such
shares of Company Common Stock is or are surrendered as provided in
Section 3.02(c) hereof, accompanied by all documents required to evidence and
effect such transfer and by evidence of payment of any applicable stock transfer
tax.
(b) Notwithstanding anything to the contrary herein, certificates
surrendered for exchange by any person constituting an Affiliate of Company
shall not be exchanged until Parent shall have received from such person an
affiliate letter as provided in Section 7.03.
SECTION 3.04 No Fractional Share Certificates. No scrip or fractional share
Parent Certificate shall be issued upon the surrender for exchange of Company
Certificates, and an outstanding fractional share interest shall not entitle the
owner thereof to vote, to receive dividends or to any rights of a stockholder of
Parent or of Surviving Corporation with respect to such fractional share
interest. As promptly as practicable following the Effective Time, Parent shall
deposit with the Exchange Agent an amount in cash, rounded to the nearest whole
cent, sufficient for the Exchange Agent to pay each holder of Company Common
Stock an amount in cash equal to the product obtained by multiplying (i) the
fractional share interest to which such holder would otherwise be entitled
(after taking into account all shares of Company Common Stock held at the
Effective Time by such holder) by (ii) the closing price for a share of Parent
Common Stock on the NNM on the first Business Day immediately prior to the
Effective Time. As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Company Common Stock with respect to any
fractional share interests, the Exchange Agent shall make available such
amounts, net of any required withholding Taxes, to such holders of Company
Common Stock, subject to and in accordance with the terms of Section 3.02
hereof.
SECTION 3.05 Options and Warrants to Purchase Company Common Stock. At the
Effective Time, the Company Stock Plan and each option granted by Company to
purchase shares of Company Common Stock pursuant to the Company Stock Plan
('Company Stock Options') which is outstanding and unexercised immediately prior
to the Effective Time, shall be assumed by Parent, and the Company Stock Options
shall be converted into an option to purchase shares of Parent Common Stock in
such number and at such exercise price as provided below and otherwise having
the same terms and conditions as in effect immediately prior to the Effective
Time (except to the extent that such terms, conditions and restrictions may be
altered in accordance with their
A-10
<PAGE>
terms as a result of the Merger contemplated hereby and except that all
references in each such Company Stock Option to Company shall be deemed to refer
to Parent):
(a) the number of shares of Parent Common Stock to be subject to the new
option shall be equal to the product of (x) the number of shares of Company
Common Stock subject to the original Company Stock Option immediately prior
to the Effective Time and (y) the Exchange Ratio;
(b) the exercise price per share of Parent Common Stock under the new
option shall be equal to (x) the exercise price per share of Company Common
Stock in effect under the original Company Stock Option immediately prior to
the Effective Time divided by (y) the Exchange Ratio; and
(c) in effecting such assumption and conversion, the aggregate number of
shares of Parent Common Stock to be subject to each assumed Company Stock
Option will be rounded down, if necessary, to the next whole share and the
aggregate exercise price shall be rounded up, if necessary, to the next
whole cent.
The adjustments provided herein with respect to any options that are
'incentive stock options' (as defined in Section 422 of the Code) shall be
effected in a manner consistent with the requirements of Section 424(a) of the
Code. The assumption of the outstanding Company Stock Options in the Merger and
their conversion into options for Parent Common Stock will not result in any
accelerated vesting of those options or the shares purchasable thereunder, and
the vesting schedule in effect for each Company Stock Option immediately prior
to the Effective Time shall remain in full force after the assumption thereof by
Parent.
SECTION 3.06 Unvested Stock. At the Effective Time, any unvested shares of
Company Common Stock awarded to employees, directors or consultants pursuant to
any of the Company's plans or arrangements and outstanding immediately prior to
the Effective Time shall be converted into unvested shares of Parent Common
Stock in accordance with the Exchange Ratio and shall remain subject to the same
terms, restrictions and vesting schedule as in effect immediately prior to the
Effective Time. All outstanding rights which Company may hold immediately prior
to the Effective Time to repurchase unvested shares of Company Common Stock
shall be assigned to the Parent in the Merger and shall thereafter be
exercisable by Parent upon the same terms and conditions in effect immediately
prior to the Effective Time, except that the shares purchasable pursuant to such
rights and the purchase price payable per share shall be adjusted to reflect the
Exchange Ratio.
SECTION 3.07 Employee Stock Purchase Plan. At the Effective Time, the
Company Stock Purchase Plan and each outstanding purchase right under the
Company Stock Purchase Plan shall be assumed by Parent. Section 3.07 of the
Company Disclosure Schedule sets forth a true and complete list as of the date
hereof of all holders of outstanding purchase rights under the Company Stock
Purchase Plan, including the payroll deduction amount elected by each holder and
the price per share of Company Common Stock at the start of the current purchase
periods. On the Closing Date, Company shall deliver to Parent an updated version
of such schedule, current as of such date. Each such purchase right so assumed
by Parent under this Agreement shall continue to have, and be subject to, the
terms and conditions set forth in the Company Stock Purchase Plan and the
documents governing the outstanding purchase rights under the Company Stock
Purchase Plan immediately prior to the Effective Time, except that the purchase
price of shares of Parent Common Stock and the number of shares of Parent Common
Stock to be issued upon the exercise of each such purchase right shall be
adjusted in accordance with the Exchange Ratio (with the number of shares
rounded down to the nearest whole share and the purchase price rounded up to the
nearest whole cent). The assumed outstanding purchase rights under the Company
Stock Purchase Plan shall be exercised at such times following the Effective
Time as set forth in the Company Stock Purchase Plan, and each participant
shall, accordingly, be issued shares of Parent Common Stock at such times. The
Company Stock Purchase Plan, and all outstanding purchase rights thereunder,
shall terminate with the exercise of the last assumed purchase right, and no
additional purchase rights shall be granted under the Company Stock Purchase
Plan following the Effective Time.
A-11
<PAGE>
SECTION 3.08 Certain Adjustments. If between the date of this Agreement and
the Effective Time, (i) the outstanding shares of Parent Common Stock or Company
Common Stock shall be changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of shares,
or any dividend payable in stock or other securities shall be declared thereon
with a record date within such period, or (ii) the number of shares of Company
Common Stock on a fully diluted basis is in excess of that specified in
Section 4.03 and disclosed in Section 4.03 of the Company Disclosure Schedule
(regardless of whether such excess is a result of an additional issuance of
capital stock or a correction to such Sections) other than changes caused by
issuances of Company Common Stock pursuant to the Company Stock Purchase Plan,
then the Exchange Ratio established pursuant to the provisions of Section 3.01
shall be adjusted accordingly to provide to Parent the same economic effect as
contemplated by this Agreement prior to such reclassification, recapitalization,
split-up, combination, exchange, dividend or increase.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent and Merger Sub, subject to
the exceptions specifically disclosed in writing in the Company Disclosure
Schedule, all such exceptions to be referenced to a specific representation set
forth in this Article IV or to otherwise be reasonably apparent to relate to
representations hereof not specifically referenced, that:
SECTION 4.01 Organization and Qualification; Subsidiaries.
(a) Company has been duly organized and is validly existing and in good
standing (to the extent applicable) under the laws of the State of New York and
has the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Company is
duly qualified or licensed to do business, and is in good standing (to the
extent applicable), in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that could not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
(b) Company does not own an equity interest in any corporation, partnership,
joint venture arrangement or other business entity.
SECTION 4.02 Certificate of Incorporation and Bylaws. The copies of
Company's certificate of incorporation and bylaws previously provided to Parent
by Company are true, complete and correct copies thereof. Such certificate of
incorporation and bylaws are in full force and effect. Company is not in
violation of any of the provisions of its certificate of incorporation or
bylaws.
SECTION 4.03 Capitalization. The authorized capital stock of Company
consists of 50,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, no par value ('Company Preferred Stock'). As of the date
hereof, (i) 15,534,000 shares of Company Common Stock are issued and
outstanding, all of which are validly issued, fully paid and nonassessable, (ii)
no shares of Company Common Stock are held in the treasury of Company, (iii)
2,961,000 shares of Company Common Stock are reserved for future issuance
pursuant to Company Stock Options, (iv) 1,000,000 shares of Company Common Stock
are reserved for issuance under the Company Stock Purchase Plan and (v) no
shares of Company Preferred Stock are outstanding. The name of each holder of a
Company Stock Option as of the date hereof, the grant date of each Company Stock
Option, the number of shares of Company Common Stock for which each Company
Stock Option is exercisable, the exercise price of each Company Stock Option and
the vesting schedule of each Company Stock Option are set forth in Section 4.03
of the Company Disclosure Schedule. Except for shares of Company Common Stock
issuable pursuant to Company Stock Plan or the Company Stock Purchase Plan,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which Company is a party or by which Company is
bound relating to the issued or unissued capital stock of Company or obligating
A-12
<PAGE>
Company to issue or sell any shares of capital stock of, or other equity
interests in, Company. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance prior to the Effective Time on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and nonassessable. There are no
outstanding contractual obligations of Company to repurchase, redeem or
otherwise acquire any shares of Company Common Stock. There are no material
outstanding contractual obligations of Company to provide funds to, or make any
material investment (in the form of a loan, capital contribution or otherwise)
in, any entity or Person.
SECTION 4.04 Authority Relative to This Agreement. Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Company and
the consummation by Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Company are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby (other than,
with respect to the Merger, the approval of this Agreement by the holders of
two-thirds (2/3) of the outstanding shares of Company Common Stock entitled to
vote with respect thereto at the Company Shareholders' Meeting, and the filing
and recordation of the Certificate of Merger as required by New York Law). This
Agreement has been duly executed and delivered by Company and, assuming the due
authorization, execution and delivery by the other parties hereto, constitutes
legal, valid and binding obligations of Company, enforceable against Company in
accordance with its terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law affecting the
enforceability of creditors' rights generally and to the effect of general
principles of equity which may limit the availability of remedies (whether in a
proceeding at law or in equity).
SECTION 4.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Company do not, and the
performance by Company of its obligations hereunder and the consummation of the
Merger will not, (i) conflict with or violate any provision of the certificate
of incorporation or bylaws of Company, (ii) assuming that all filings and
notifications described in Section 4.05(b) have been made, conflict with or
violate any Law applicable to Company or by which any material property or asset
of Company is bound or affected or (iii) result in any material breach of or
constitute a material default (or an event which with the giving of notice or
lapse of time or both could reasonably be expected to become a default) under,
or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
material property or asset of Company pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation.
(b) The execution and delivery of this Agreement by Company do not, and the
performance by Company of its obligations hereunder and the consummation of the
Merger will not, require any consent, approval, authorization or permit of, or
filing by Company with or notification by Company to, any Governmental Entity,
except pursuant to applicable requirements of the Exchange Act, the Securities
Act, Blue Sky Laws, the rules and regulations of the NNM, state takeover laws,
the premerger notification requirements of the HSR Act, and the filing and
recordation of the Certificate of Merger as required by New York Law.
SECTION 4.06 Permits; Compliance with Laws. Company is in possession of all
material franchises, grants, authorizations, licenses, establishment
registrations, product listings, permits, easements, variances, exceptions,
consents, certificates, identification and registration numbers, approvals and
orders of any Governmental Entity necessary for Company to own, lease and
operate its properties or to produce, store, distribute and market its products
or otherwise to carry on its business as it is now being conducted
(collectively, the 'Company Permits'), and, as of the date of this Agreement,
none of the Company Permits has been suspended or cancelled nor is any such
suspension or cancellation pending or, to the Knowledge of Company, threatened.
Company is not in conflict in any material respect with, or in material default
or violation of, (i) any Law
A-13
<PAGE>
applicable to Company or by which any property or asset of Company is bound or
affected or (ii) any Company Permits. Section 4.06 of the Company Disclosure
Schedule sets forth, as of the date of this Agreement, all actions, proceedings,
investigations or surveys pending or, to the Knowledge of Company, threatened
against Company that could reasonably be expected to result in the suspension or
cancellation of any other Company Permit. Since January 17, 1996, Company has
not received from any Governmental Entity any written notification with respect
to possible conflicts, defaults or violations of Laws.
SECTION 4.07 SEC Filings; Financial Statements.
(a) Company has timely filed all forms, reports, statements and documents
required to be filed by it (A) with the SEC and the NNM since November 12, 1999
(collectively, together with any such forms, reports, statements and documents
Company may file subsequent to the date hereof until the Closing, the 'Company
Reports') and (B) with any other Governmental Entities. Each Company Report (i)
was prepared in all material respects in accordance with the requirements of the
Securities Act, the Exchange Act or the rules and regulations of the NNM, as the
case may be, and (ii) did not at the time it was filed (or, in the case of
registration statements filed under the Securities Act, at the time of
effectiveness) contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. Each material form, report, statement and document
referred to in clause (B) of this paragraph was prepared in all material
respects in accordance with the requirements of applicable Law.
(b) Each of the financial statements (including, in each case, any notes
thereto) contained in the Company Reports was prepared in accordance with U.S.
GAAP (except as may be permitted by Form 10-Q under the Exchange Act) applied on
a consistent basis throughout the periods indicated (except as may be indicated
in the notes thereto) and each presented fairly, in all material respects, the
financial position of Company as at the respective dates thereof and its results
of operations, shareholders' equity and cash flows for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring immaterial year-end adjustments).
(c) Except as and to the extent set forth or reserved against on the balance
sheet of Company as reported in the Company Reports, including the notes
thereto, Company has no liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet or in notes thereto prepared in accordance with
U.S. GAAP, except for immaterial liabilities or obligations incurred in the
ordinary course of business consistent with past practice since December 31,
1999.
SECTION 4.08 Absence of Certain Changes or Events. Since December 31, 1999,
Company has conducted its business in all material respects only in the ordinary
course consistent with past practice and, since such date, there has not been
(i) any Company Material Adverse Effect, (ii) any event that could reasonably be
expected to prevent or materially delay the performance of Company's obligations
pursuant to this Agreement and the consummation of the Merger by Company, (iii)
any material change by Company in its accounting methods, principles or
practices, (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of the shares of Company Common Stock or any redemption,
purchase or other acquisition of any of Company's securities, (v) except for
changes in the ordinary course of business consistent with past practice that
only affect non-officer employees of the Company, any increase in the
compensation or benefits or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any employees, officers,
consultants or directors of Company, (vi) any issuance or sale of any stock,
notes, bonds or other securities other than pursuant to offerings registered
under the Securities Act or pursuant to the exercise of outstanding securities,
or entering into any agreement with respect thereto, (vii) any amendment to the
Company's certificate of incorporation or bylaws,
A-14
<PAGE>
(viii) other than in the ordinary course of business consistent with past
practice, any (x) purchase, sale, assignment or transfer of any material assets,
(y) mortgage, pledge or existence of any lien, encumbrance or charge on any
material assets or properties, tangible or intangible, except for liens for
Taxes not yet delinquent and such other liens, encumbrances or charges which do
not, individually or in the aggregate, have a Company Material Adverse Effect,
or (z) waiver of any rights of material value or cancellation or any material
debts or claims, (ix) any incurrence of any material liability (absolute or
contingent), except for current liabilities and obligations incurred in the
ordinary course of business consistent with past practice, (x) any incurrence of
any damage, destruction or similar loss, whether or not covered by insurance,
materially affecting the business or properties of Company, or (xi) any entering
into any transaction of a material nature other than in the ordinary course of
business, consistent with past practice.
SECTION 4.09 Employee Benefit Plans; Labor Matters.
(a) The Company Disclosure Schedule lists each employee benefit fund, plan,
program, arrangement and contract (including, without limitation, any 'pension'
plan, fund or program, as defined in Section 3(2) of ERISA, and any 'employee
benefit plan,' as defined in Section 3(3) of ERISA and any plan, program,
arrangement or contract providing for severance; medical, dental or vision
benefits; life insurance or death benefits; disability benefits, sick pay or
other wage replacement; vacation, holiday or sabbatical; pension or
profit-sharing benefits; stock options or other equity compensation; bonus or
incentive pay or other material fringe benefits), whether written or not
('Benefit Plans'), maintained, sponsored or contributed to or required to be
contributed to by Company (the 'Company Benefit Plans'). With respect to each
Company Benefit Plan, Company has delivered or made available to Parent a true,
complete and correct copy of (i) such Company Benefit Plan (of, if not written,
a written summary of its material terms) and the most recent summary plan
description, if any, related to such Company Benefit Plan, (ii) each trust
agreement or other funding arrangement, if any, relating to such Company Benefit
Plan, (iii) the most recent annual report (Form 5500), if any, filed with the
IRS with respect to such Company Benefit Plan (and, if the most recent annual
report is a Form 5500R, the most recent Form 5500C filed with respect to such
Company Benefit Plan), (iv) the most recent actuarial report or financial
statement, if any, relating to such Company Benefit Plan and (v) the most recent
determination, notification, advisory or opinion letter, issued by the IRS with
respect to such Company Benefit Plan and any pending request for such a
determination letter. Company nor, to the Knowledge of Company, any other person
or entity, has any express or implied commitment, whether legally enforceable or
not, to modify, change or terminate any Company Benefit Plan, other than with
respect to a modification, change or termination required by ERISA or the Code.
(b) Each Company Benefit Plan has been administered in all material respects
in accordance with its terms and all applicable laws, including ERISA and the
Code, and all contributions required to be made under the terms of any of the
Company Benefit Plans as of the date of this Agreement have been timely made or,
if not yet due, have been properly reflected on the most recent balance sheet
filed or incorporated by reference in the Company Reports prior to the date of
this Agreement. With respect to the Company Benefit Plans, no event has occurred
and, to the Knowledge of Company, there exists no condition or set of
circumstances in connection with which Company could be subject to any material
liability (other than for routine benefit liabilities) under the terms of, or
with respect to, such Company Benefit Plans, ERISA, the Code or any other
applicable Law.
(c) Company on behalf of itself and each Company ERISA Affiliate (as defined
below) hereby represents that: (i) each Company Benefit Plan which is intended
to qualify under Section 401(a), Section 401(k), Section 401(m) or Section
4975(e)(5) of the Code has received a favorable determination, notification,
advisory or opinion letter from the IRS as to its qualified status, and each
trust established in connection with any Company which is intended to be exempt
from federal income taxation under Section 501(a) of the Code has received a
determination letter from the IRS that it is so exempt, and to the Knowledge of
Company no fact or event has occurred that could adversely affect the qualified
status of any such Company Benefit Plan or the exempt status of any such trust;
(ii) to the Knowledge of Company there has been no prohibited
A-15
<PAGE>
transaction (within the meaning of Section 406 of ERISA or Section 4975 of the
Code and other than a transaction that is exempt under a statutory or
administrative exemption) with respect to any Company Plan that could result in
liability to the Company and (iii) each Company Benefit Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without material liability (other than (A) liability for ordinary
administrative expenses typically incurred in a termination event or (B)
liability for the accrued benefits as of the date of such termination to the
extent that either there are sufficient assets set aside in a trust or insurance
contract to satisfy such liability or such liability is reflected on the most
recent consolidated balance sheet filed or incorporated by reference in the
Company Reports prior to the date of this Agreement. No suit, administrative
proceeding, action or other litigation has been brought, or to the Knowledge of
Company is threatened, against or with respect to any such Company Benefit Plan,
including any audit or inquiry by the IRS or United States Department of Labor
(other than routine benefits claims).
(d) No Company Benefit Plan is a multiemployer pension plan (as defined in
Section 3(37) of ERISA) or other pension plan subject to Title IV of Part 3 of
Title I of ERISA or Section 412 of the Code and neither the Company nor any
other trade or business (whether or not incorporated) that is under 'common
control' with Company (within the meaning of ERISA Section 4001) or with respect
to which Company could otherwise incur liability under Title IV of ERISA (a
'Company ERISA Affiliate') has sponsored or contributed to or been required to
contribute to a multiemployer pension plan or other pension plan subject to
Title IV of ERISA. No material liability under Title IV of ERISA has been
incurred by Company or any Company ERISA Affiliate that has not been satisfied
in full, and no condition exists that presents a material risk to Company of
incurring or being subject (whether primarily, jointly or secondarily) to a
material liability thereunder. None of the assets of Company is, or may
reasonably be expected to become, the subject of any lien arising under ERISA or
Section 412(n) of the Code.
(e) Company has delivered to Parent true, complete and correct copies of (i)
all employment agreements with officers and all consulting agreements of Company
providing for annual compensation in excess of $100,000, (ii) all severance
plans, agreements, programs and policies of Company with or relating to their
respective employees, directors or consultants, and (iii) all plans, programs,
agreements and other arrangements of Company with or relating to their
respective employees, directors or consultants which contain 'change of control'
provisions. No payment or benefit which may be required to be made by Company or
which otherwise may be required to be made under the terms of any Company
Benefit Plan or other arrangement will constitute a parachute payment under Code
Section 280(G)(1), and the consummation of the transactions contemplated by this
Agreement will not, alone or in conjunction with any other possible event
(including termination of employment), (i) entitle any current or former
employee or other service provider of Company to severance benefits or any other
payment, compensation or benefit (including forgiveness of indebtedness), except
as expressly provided by this Agreement, or (ii) accelerate the time of payment
or vesting, or increase the amount of compensation or benefit due any such
employee or service provider.
(f) Company is not a party to, and has no obligations under or with respect
to, any collective bargaining or other labor union contract applicable to
persons employed by Company and no collective bargaining agreement is being
negotiated by Company or any person or entity that may obligate the Company
thereunder. As of the date of this Agreement, there is no labor dispute, strike
or work stoppage against Company pending or, to the Knowledge of Company,
threatened which may interfere with the respective business activities of
Company. As of the date of this Agreement, to the Knowledge of Company, none of
Company or any of its representatives or employees has committed any unfair
labor practice in connection with the operation of the respective businesses of
Company, and there is no charge or complaint against Company by the National
Labor Relations Board or any comparable Governmental Entity pending or
threatened in writing.
(g) Except as required by Law, no Company Benefit Plan provides any of the
following retiree or post-employment benefits to any person: medical, disability
or life insurance benefits. To
A-16
<PAGE>
the Knowledge of Company, Company and the Company ERISA Affiliates are in
compliance in all material respects with (i) the requirements of the applicable
health care continuation and notice provisions of the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ('COBRA') and the regulations
(including proposed regulations) thereunder and (ii) the applicable requirements
of the Health Insurance Portability and Accountability Act of 1996, as amended,
and the regulations (including the proposed regulations) thereunder.
SECTION 4.10 Certain Tax Matters. Neither Company nor, to the Knowledge of
Company, any of its Affiliates has taken or agreed to take any action (other
than actions contemplated by this Agreement) that could be expected to prevent
the Merger from constituting a 'reorganization' under Section 368 of the Code.
Company is not aware of any agreement or plan to which Company or any of its
Affiliates is a party or other circumstances relating to Company or any of its
Affiliates that could reasonably be expected to prevent the Merger from so
qualifying as a reorganization under Section 368 of the Code.
SECTION 4.11 Contracts. Except for the contracts and agreements described in
Section 4.11 of the Company Disclosure Schedule (collectively, the 'Listed
Contracts'), Company is not a party to any of the following:
(a) any list owners agreement, purchase agreement and bill of sale relating
to the purchase of e-mail user lists, customer marketing agreement (or similar
agreement with brokers) or agreement with non-standard payment terms, in each
case, which ranks in Company's 25 largest customer or supplier relationships, as
measured by dollar value, for each of these categories of agreements;
(b) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than
$100,000 over the life of the contract;
(c) any contract that expires more than one year after the date of this
Agreement or any contract that may be renewed at the option of any person other
than the Company so as to expire more than one year after the date of this
Agreement;
(d) any trust indenture, mortgage, promissory note, loan agreement or other
contract for the borrowing of money, any currency exchange, commodities or other
hedging arrangement or any leasing transaction of the type required to be
capitalized in accordance with GAAP in excess of $100,000;
(e) any contract for capital expenditures in excess of $100,000 in the
aggregate;
(f) any contract limiting the freedom of Company to engage in any line of
business or to compete with any other corporation, partnership, limited
liability company, trust, individual or other entity, or any confidentiality,
secrecy or non-disclosure contract or any contract that may be terminable as a
result of Parent's status as a competitor of any party to such contract;
(g) any contract pursuant to which Company is a lessor of any machinery,
equipment, motor vehicles, office furniture, fixtures or other personal
property, pursuant to which payments in excess of $100,000 remain outstanding;
(h) any contract with an Affiliate;
(i) any agreement of guarantee, support, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other person other than customary customer agreements made in the
ordinary course of business; or
(j) any employment contract, arrangement or policy (including without
limitation any collective bargaining contract or union agreement) which may not
be immediately terminated without penalty (or any augmentation or acceleration
of benefits).
Company has performed all of the obligations required to be performed by it
and is entitled to all benefits under, and is not alleged to be in default in
respect of any Listed Contract. Each of the Listed Contracts is valid and
binding and in full force and effect, and there exists no default or event of
default or event, occurrence, condition or act, with respect to Company, or to
the Knowledge of Company, with respect to the other contracting party, which,
with the giving of
A-17
<PAGE>
notice, the lapse of the time or the happening of any other event or conditions,
would become a default or event of default under any Listed Contract. True,
correct and complete copies of all Listed Contracts have been delivered to
Parent.
SECTION 4.12 Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the Knowledge of Company, threatened against
Company that could reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect or materially interfere with
Company's ability to consummate the transactions contemplated hereby, and, to
the Knowledge of Company, there are no existing facts or circumstances that
could reasonably be expected to result in such a suit, claim, action, proceeding
or investigation. Company is not aware of any facts or circumstances which could
reasonably be expected to result in the denial of insurance coverage under
policies issued to Company in respect of such suits, claims, actions,
proceedings and investigations, except in any case as could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. Company is not subject to any outstanding order, writ, injunction or
decree which could reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect or materially interfere with
Company's ability to consummate the transactions contemplated hereby.
SECTION 4.13 Environmental Matters. Except as could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect, (i) Company is in compliance with all applicable Environmental Laws and
all Company Permits required by Environmental Laws; (ii) all past noncompliance
of Company with Environmental Laws or Environmental Permits has been resolved
without any pending, ongoing or future obligation, cost or liability; and (iii)
Company has not released a Hazardous Material at, or transported a Hazardous
Material to or from, any real property currently or formerly owned, leased or
occupied by Company in violation of any Environmental Law.
SECTION 4.14 Intellectual Property.
(a) All patents (including, without limitation, all U.S. and foreign
patents, patent applications, patent disclosures, and all divisions,
continuations, continuations-in-part, reissues, re-examinations and extensions
thereof), design rights, trademarks, trade names and service marks (whether or
not registered), trade dress, Internet domain names, copyrights (whether or not
registered) and any renewal rights therefor, technology, supplier lists, trade
secrets, know-how, computer software programs or applications in both source and
object code form, technical documentation of such software programs, statistical
models, supplier lists, e-mail lists, inventions, sui generis database rights,
databases, data ('Technical Documentation'), registrations and applications for
any of the foregoing and all other tangible or intangible proprietary
information or materials that are or have been used (including without
limitation in the development of) Company's business and/or in any product,
technology or process (i) currently being or formerly manufactured, published,
marketed or used by Company or (ii) previously or currently under development
for possible future manufacturing, publication, marketing or other use by
Company are hereinafter referred to as the 'Company Intellectual Property.'
(b) Section 4.14(b) of the Company Disclosure Schedule contains a true and
complete list of Company's patents, patent applications, registered trademarks,
trademark applications, common law trademarks, trade names, registered service
marks, service mark applications, common law service marks, material Internet
domain names, Internet domain name applications, copyright registrations and
applications and other filings and formal actions made or taken pursuant to
Federal, state, local and foreign laws by Company to protect its interests in
Company Intellectual Property, and includes details of all due dates for further
filings, maintenance, payments or other actions falling due in respect of
Company Intellectual Property within twelve (12) months of the Closing Date. All
of Company's patents, patent applications, registered trademarks, trademark
applications, registered service marks and service mark registrations, and
registered copyrights remain in good standing with all fees and filings due as
of the Closing Date duly made and the due dates specified in the Company
Disclosure Schedule are accurate and complete in all material respects.
(c) Section 4.14(c) of the Company Disclosure Schedule contains a true and
complete list of the registrations that Company has obtained anywhere in the
World in relation to the processing
A-18
<PAGE>
of data. Company has made all such registrations which it is required to have
made and is in good standing with respect to such registrations with all fees
due as of the Effective Time duly made. Company has received Valid Consents from
all persons who have provided personal information which are sufficient to give
Company (i) the right to use such personal information for the purposes of
conducting Company's current activities, and Company's future activities to the
extent such future activities are already planned, and (ii) the right to assign
the personal information and the applicable consents to Parent. For the purposes
of this Section 4.14(c), 'Valid Consents' shall mean consents obtained (i) for
persons aged 13 and over, using Company's double opt-in method by which the
persons providing personal information to Company have both (a) indicated their
consent by checking a box which signifies his or her desire to have his or her
personal information registered with the site and used by Company, and (b)
thereafter responded to a confirmatory e-mail message to signify his or her
desire to have his or her personal information registered with the site and used
by Company and (ii) for persons under the age of 13, in accordance with the
Children's Online Privacy Protection Act of 1998. Company has not used any
personal information without or beyond the scope of a Valid Consent. Company has
placed all personal information relating to persons who have signified that they
do not grant or later revoke a Valid Consent in an unsubscribed archive file
where such data is stored but not used by Company. Company has not collected and
maintains no personal information about persons outside the United States in
violation of any local, state or federal law.
(d) Company Intellectual Property consists solely of items and rights which
are: (i) owned by Company; (ii) in the public domain; or (iii) rightfully used
by Company pursuant to a valid license (the 'Company Licensed Intellectual
Property'), the parties and date of each such license agreement (each, a
'License Agreement') being set forth on Section 4.14(c) of the Company
Disclosure Schedule. Company has all rights in Company Intellectual Property
necessary to carry out Company's current activities (and had all rights
necessary to carry out its former activities at the time such activities were
being conducted), including without limitation, to the extent required to carry
out such activities, rights to make, use, reproduce, modify, adopt, create
derivative works based on, translate, distribute (directly and indirectly),
transmit, display and perform publicly, license, rent and lease and, other than
with respect to the Company Licensed Intellectual Property, assign and sell, the
Company Intellectual Property.
(e) The reproduction, manufacturing, distribution, licensing, sublicensing,
sale, use or any other exercise of rights in any Company Intellectual Property,
product, service, work, technology or process as now used or offered or proposed
for use, licensing or sale by Company does not infringe on any copyright, trade
secret, trademark, service mark, trade name, trade dress, firm name, Internet
domain name, logo, mask work or other proprietary or personal right of any
person or, to the actual knowledge of Company, the patent of any person anywhere
in the world. No claims (i) challenging the validity, effectiveness or, other
than with respect to the Company Licensed Intellectual Property, ownership by
Company of any of the Company Intellectual Property, or (ii) to the effect that
the use, distribution, licensing, sublicensing, sale or any other exercise of
rights in any product, service, work, technology or process as now used or
offered or proposed for use, licensing, sublicensing, use or sale by Company
infringes or will infringe on any intellectual property or other proprietary or
personal right of any person have been asserted or, to the Knowledge of Company,
are threatened by any person, nor are there, to the Knowledge of Company, any
valid grounds for any bona fide claim of any such kind. All registered, granted
or issued patents, trademarks, Internet domain names and copyrights held by
Company are subsisting and, to the Knowledge of Company, enforceable. To the
Knowledge of Company, there is no unauthorized use, infringement or
misappropriation of any of the Company Intellectual Property by any third party,
employee or former employee.
(f) All personnel, including employees, agents, consultants and contractors,
who have contributed to or participated in the conception and development of the
Company Intellectual Property on behalf of Company, have executed nondisclosure
agreements in the form set forth in Section 4.14(f) of the Company Disclosure
Schedule and either (i) have been a party to a 'work-for-hire' arrangement or
agreements with Company in accordance with applicable national and state law
that has accorded Company full, effective, exclusive and original ownership of
all tangible
A-19
<PAGE>
and intangible property thereby arising, or (ii) have executed appropriate
instruments of assignment in favor or Company as assignee that have conveyed to
Company effective and exclusive ownership of all tangible and intangible
property thereby arising.
(g) Company is not, nor as a result of the execution or delivery of this
Agreement, or performance of Company's obligations hereunder, will Company be,
in violation of any license, sublicense, agreement or instrument relating to
Company Intellectual Property to which Company is a party or otherwise bound,
nor will execution or delivery of this Agreement, or performance of Company's
obligations hereunder, cause the diminution, termination or forfeiture of any
Company Intellectual Property.
(h) Section 4.14(h) of the Company Disclosure Schedule contains a true and
complete list of all of Company's software programs (the 'Company Software
Programs'). Except with respect to software or technology licensed by Company
(to which Company holds appropriate and valid licenses), Company owns full and
unencumbered right and good, valid and marketable title to such Company Software
Programs free and clear of all mortgages, pledges, liens, security interests,
conditional sales agreements, encumbrances or charges of any kind.
(i) The source code and system documentation relating to the Company
Software Programs (i) have at all times been maintained in strict confidence,
(ii) have been disclosed by Company only to employees who have a 'need to know'
the contents thereof in connection with the performance of their duties to
Company and who have executed the nondisclosure agreements referred to in
Section 4.14(f), and (iii) have not been disclosed to any third party, except
those third parties set forth in Section 4.14(i) of the Company Disclosure
Schedule who have executed nondisclosure agreements with Company.
(j) Company has taken all reasonable steps, in accordance with normal
industry practice, to preserve and maintain complete notes and records relating
to Company Intellectual Property to cause the same to be readily understood,
identified and available.
(k) The Company Software Programs (i) have been designed to ensure year 2000
compatibility, which includes, but is not limited to, date data century
recognition, and calculations that accommodate same century and multi-century
formulas and date values; (ii) operate and will operate in accordance with their
specifications prior to, during and after the calendar year 2000 AD; and (iii)
shall not end abnormally or provide invalid or incorrect results as a result of
date data, specifically including date data which represents or references
different centuries or more than one century.
(l) The Company Intellectual Property is free and clear of any and all
mortgages, pledges, liens, security interests, conditional sale agreements,
charges or encumbrances of any kind.
(m) Company does not owe any royalties or other payments to third parties in
respect of Company Intellectual Property. All royalties or other payments set
forth in Section 4.14(m) of the Company Disclosure Schedule that have accrued
prior to the Effective Time have been paid.
(n) Company uses commercially reasonable efforts to regularly scan the
Company Software Programs and the Company Intellectual Property with
'best-in-class' virus detection software. To the Knowledge of Company, the
Company Software Programs and other Company Intellectual Property contain no
'viruses.' For the purposes of this Agreement, 'virus' means any computer code
intentionally designed to disrupt, disable or harm in any manner the operation
of any software or hardware. To the Knowledge of Company, none of the foregoing
contains any worm, bomb, backdoor, clock, timer, or other disabling device code,
design or routine which causes the software to be erased, inoperable, or
otherwise incapable of being used, either automatically or upon command by any
party.
(o) Company has implemented all reasonable steps which are known in the
information systems industry in the physical and electronic protection of its
information assets from unauthorized disclosure, use or modification. Section
4.14(o) of the Company Disclosure Schedule sets forth (i) each breach of
security of which Company is aware, (ii) its known or anticipated consequences,
and (iii) the steps Company has taken to remedy such breach.
A-20
<PAGE>
SECTION 4.15 Taxes.
(a) Company and any consolidated, combined, unitary or aggregate group for
Tax purposes of which Company is or has been a member, have properly completed
and timely filed all Tax Returns required to be filed by them and have paid all
Taxes shown thereon to be due. Company has provided adequate accruals in
accordance with generally accepted accounting principles in its latest financial
statements included in the Company Reports for any Taxes that have not been
paid, whether or not shown as being due on any Tax Returns. Other than Taxes
incurred in the ordinary course of business, Company has no material liability
for unpaid Taxes accruing after the date of the Company's latest financial
statements included in the Company Reports.
(b) There is (i) no material claim for Taxes that is a lien against the
property of Company or is being asserted against Company other than liens for
Taxes not yet due and payable, (ii) no audit of any Tax Return of Company being
conducted by a Tax Authority; (iii) no extension of the statute of limitations
on the assessment of any Taxes granted by Company and currently in effect, and
(iv) no agreement, contract or arrangement to which Company is a party that may
result in the payment of any amount that would not be deductible by reason of
Section 280G or Section 404 of the Code.
(c) There has been no change in ownership of Company that has caused the
utilization of any losses of such entities to be limited pursuant to Section 382
of the Code, and any loss carryovers reflected on the latest financial
statements included in the Company Reports are properly computed and reflected.
(d) Company has not been and will not be required by reason of the Merger to
include any material adjustment in Taxable income for any Tax period (or portion
thereof) pursuant to Section 481 or 263A of the Code or any comparable provision
under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Merger.
(e) Company has not filed and will not file any consent to have the
provisions of paragraph 341(f)(2) of the Code (or comparable provisions of any
state Tax laws) apply to Company.
(f) Company is not a party to any Tax sharing or Tax allocation agreement
nor does Company have any liability or potential liability to another party
under any such agreement.
(g) Company has not filed any disclosures under Section 6662 or comparable
provisions of state, local or foreign law to prevent the imposition of penalties
with respect to any Tax reporting position taken on any Tax Return.
(h) Company has not ever been a member of a consolidated, combined or
unitary group of which Company was not the ultimate parent corporation.
(i) Company has in its possession receipts for any Taxes paid to foreign Tax
authorities. Company has not ever been a 'personal holding company' within the
meaning of Section 542 of the Code or a 'United Sates real property holding
corporation' within the meaning of Section 897 of the Code.
SECTION 4.16 Insurance. Company is presently insured, and since its
inception has been insured, against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured. The policies of fire, theft, liability and other insurance maintained
with respect to the assets or businesses of Company, in Company's reasonable
estimation, provide adequate coverage against loss. Company has heretofore
furnished to Parent a complete and correct list as of the date hereof of all
insurance policies maintained by Company, and has made available to Parent
complete and correct copies of all such policies, together with all riders and
amendments thereto. All such policies are in full force and effect and all
premiums due thereon have been paid to the date hereof. Company has complied in
all material respects with the terms of such policies.
SECTION 4.17 Properties. Company has good and marketable title, free and
clear of all material mortgages, liens, pledges, charges or other encumbrances
to all their material tangible properties and assets, whether tangible or
intangible, real, personal or mixed, reflected in the Company's financial
statements contained in the Company's Annual Report on Form 10-K for the
A-21
<PAGE>
fiscal year ended December 31, 1999, as being owned by Company as of the date
thereof, other than (i) any properties or assets that have been sold or
otherwise disposed of in the ordinary course of business since the date of such
financial statements, (ii) liens disclosed in the notes to such financial
statements, and (iii) liens arising in the ordinary course of business after the
date of such financial statements. All buildings, and all fixtures, equipment
and other property and assets that are material to its business on a
consolidated basis, held under leases or sub-leases by Company are held under
valid instruments enforceable in accordance with their respective terms, subject
to applicable laws of bankruptcy, insolvency or similar laws relating to
creditors' rights generally and to general principles of equity (whether applied
in a proceeding in law or equity). Substantially all of Company's equipment in
regular use which is material to the operation of Company has been reasonably
maintained and is in serviceable condition, reasonable wear and tear excepted.
SECTION 4.18 Affiliates. Section 4.18 of the Company Disclosure Schedule
sets forth the names and addresses of each person who is, in Company's
reasonable judgment, an Affiliate (as such term is used in Rule 145 under the
Securities Act) of Company.
SECTION 4.19 Opinion of Financial Advisor. BancBoston Robertson Stephens
Inc. ('Robertson Stephens') has delivered to the board of directors of Company
its written opinion to the effect that, as of the date hereof, the Exchange
Ratio is fair to the holders of shares of Company Common Stock from a financial
point of view.
SECTION 4.20 Brokers. No broker, finder or investment banker (other than
Robertson Stephens and Friedman, Billings, Ramsey & Co., Inc.) is entitled to
any brokerage, finder's or other fee or commission in connection with the Merger
based upon arrangements made by or on behalf of Company. Company has heretofore
made available to Parent true, complete and correct copies of all agreements
between Company and Robertson Stephens pursuant to which such firm would be
entitled to any payment relating to the Merger.
SECTION 4.21 Certain Business Practices. Neither Company nor any directors,
officers, agents or employees of Company (in their capacities as such) has (i)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment.
SECTION 4.22 Section 912 of New York Law Not Applicable. The board of
directors of Company has approved the Merger, this Agreement and the
Shareholders' Agreement, and such approval is sufficient to render inapplicable
to the Merger, this Agreement and the Shareholders' Agreement and the
transactions contemplated by this Agreement and the Shareholders' Agreement the
provisions of Section 912 of New York Law. To the Knowledge of Company, no other
state takeover statute or similar statute or regulation applies or purports to
apply to the Merger, this Agreement, the Shareholders' Agreement or the
transactions contemplated by this Agreement and the Shareholders' Agreement.
SECTION 4.23 Business Activity Restriction. There is no non-competition or
other similar agreement, commitment, judgment, injunction, order or decree to
which Company is a party or subject to that has or could reasonably be expected
to have the effect of prohibiting or impairing the conduct of business by
Company in any material respect. Company has not entered into any agreement
under which Company is restricted in any material respect from selling,
licensing or otherwise distributing any of its technology or products to, or
providing services to, customers or potential customers or any class of
customers, in any geographic area, during any period of time or in any segment
of the market or line of business.
SECTION 4.24 Privacy. Company is, and has always been, in compliance with
its then-current privacy policy, including those posted on Company's Web
site(s). Company has conducted its business and maintained its data at all times
in accordance with (i) the standards promulgated by the Online Privacy Alliance,
(ii) the standards promulgated by the Direct Marketing Association, and (iii)
all applicable Federal, state and other laws, including, but not limited to,
those relating to
A-22
<PAGE>
the use of information collected from or about consumers. Company is, and has
always been, in compliance with its customers' privacy policies, when required
to do so by contract.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Company that:
SECTION 5.01 Organization and Qualification; Subsidiaries. Parent and Merger
Sub have each been duly organized and each is validly existing and in good
standing (to the extent applicable) under the laws of the jurisdiction of its
incorporation or organization, as the case may be, and has the requisite
corporate power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted. Each of Parent and Merger Sub is duly qualified or licensed to do
business, and is in good standing (to the extent applicable), in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that could not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
SECTION 5.02 Certificate of Incorporation and Bylaws. The copies of each of
Parent's and Merger Subs' certificate of incorporation and bylaws previously
provided to Company by Parent are true, complete and correct copies thereof.
Such certificates of incorporation and bylaws are in full force and effect.
SECTION 5.03 Capitalization.
(a) The authorized capital stock of Parent consists of 400,000,000 shares of
Parent Common Stock and 5,000,000 shares of preferred stock, no par value
('Parent Preferred Stock'). As of the close of business on September 18, 2000,
(i) 122,867,958 shares of Parent Common Stock are issued and outstanding, all of
which are validly issued, fully paid and nonassessable, (ii) no shares of Parent
Common Stock are held in the treasury of the Company, (iii) no shares of Parent
Common Stock are held by any directly owned or indirectly owned subsidiary of
Parent, including Merger Sub (each a 'Parent Subsidiary'), and (iv) no shares of
Parent Preferred Stock are issued and outstanding. Except for the shares of
Parent Common Stock issuable pursuant to the Parent Stock Plans and shares of
Parent Common Stock issuable upon conversion of the Parent Convertible Notes,
there are no options, warrants or other rights, agreements, arrangements or
commitments of any character to which Parent is a party or by which Parent is
bound relating to the issued or unissued capital stock of Parent or any Parent
Subsidiary or obligating Parent or any Parent Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, Parent or any Parent
Subsidiary. All shares of Parent Common Stock subject to issuance as aforesaid,
upon issuance prior to the Effective Time on the terms and conditions specified
in the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual obligations of Parent or any Parent Subsidiary to repurchase, redeem
or otherwise acquire any shares of Parent Common Stock. Except as have been
otherwise publicly disclosed by Parent, there are no material outstanding
contractual obligations of Parent to provide funds to, or make any material
investment (in the form of a loan, capital contribution or otherwise) in, any
Parent Subsidiary or any other Person.
(b) All of the shares of Parent Common Stock to be issued (i) in connection
with the Merger, when issued in accordance with this Agreement, and (ii) upon
the conversion of any Company Stock Option into an option to purchase shares of
Parent Common Stock in accordance with Section 3.05, when issued upon exercise
thereof following the Effective Time, will be validly issued, fully paid and
nonassessable and will not be subject to preemptive rights or similar
contractual rights granted by Parent.
SECTION 5.04 Authority Relative to this Agreement. Each of Parent and Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by each of Parent and Merger Sub and the consummation by Parent
A-23
<PAGE>
and Merger Sub of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action, and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize this
Agreement or to consummate such transactions (other than the consent of Parent
as sole shareholder of Merger Sub and the filing and recordation of the
Certificate of Merger as required by New York Law). This Agreement has been duly
executed and delivered by each of Parent and Merger Sub and, assuming the due
authorization, execution and delivery by Company, constitutes a legal, valid and
binding obligation of each of Parent and Merger Sub enforceable against Parent
and Merger Sub in accordance with its terms, subject to the effect of any
applicable bankruptcy, moratorium, insolvency, reorganization or other similar
law affecting the enforceability of creditors' rights generally and to the
effect of general principles of equity which may limit the availability of
remedies (whether in a proceeding at law or in equity).
SECTION 5.05 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and Merger Sub
does not, and the performance by Parent and Merger Sub of their obligations
hereunder and the consummation of the Merger will not, (i) conflict with or
violate any provision of the certificate of incorporation or bylaws of Parent or
any equivalent organizational documents of any Parent Subsidiary, (ii) assuming
that all consents, approvals, authorizations and permits described in Section
5.05(b) have been obtained and all filings and notifications described in
Section 5.05(b) have been made, conflict with or violate any Law applicable to
Parent or any other Parent Subsidiary or by which any property or asset of
Parent or any Parent Subsidiary is bound or affected or (iii) result in any
material breach of or constitute a material default (or an event which with the
giving of notice or lapse of time or both could reasonably be expected to become
a default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any material property or asset of Parent or any Parent Subsidiary
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation.
(b) The execution and delivery of this Agreement by Parent and Merger Sub
does not, and the performance by Parent and Merger Sub of their obligations
hereunder and the consummation of the Merger will not, require any consent,
approval, authorization or permit of, or filing by Parent with or notification
by Parent to, any Governmental Entity, except pursuant to applicable
requirements of the Exchange Act, the Securities Act, Blue Sky Laws, the rules
and regulations of the NNM, state takeover laws, the premerger notification
requirements of the HSR Act, if any, and the filing and recordation of the
Certificate of Merger as required by New York Law.
SECTION 5.06 SEC Filings; Financial Statements.
(a) Parent has timely filed all forms, reports, statements and documents
required to be filed by it (A) with the SEC and the NNM since February 20, 1998
(collectively, together with any such forms, reports, statements and documents
Parent may file subsequent to the date hereof until the Closing, the 'Parent
Reports') and (B) with any other Governmental Entities. Each Parent Report
(i) was prepared in all material respects in accordance with the requirements of
the Securities Act, the Exchange Act or the NNM, as the case may be, and
(ii) did not at the time it was filed (or, in the case of registration
statements filed under the Security Act, at the time of effectiveness) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each material form, report, statement and document referred to in
clause (B) of this paragraph was prepared in all material respects in accordance
with the requirements of applicable Law. No Parent Subsidiary is subject to the
periodic reporting requirements of the Exchange Act or required to file any
form, report or other document with the SEC, the NNM, any other stock exchange
or any other comparable Governmental Entity.
(b) Except as is provided in the Parent Reports, each of the consolidated
financial statements (including, in each case, any notes thereto) contained in
the Parent Reports was prepared in accordance with U.S. GAAP applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each presented fairly, in all material respects, the
A-24
<PAGE>
consolidated financial position of Parent and the consolidated Parent
Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein, except as otherwise noted therein (subject, in the case of
unaudited statements, to normal and recurring immaterial year-end adjustments).
(c) Except as and to the extent set forth or reserved against on the
consolidated balance sheet of Parent and the Parent Subsidiaries as reported in
the Parent Reports, including the notes thereto, none of Parent or any Parent
Subsidiary has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on a
balance sheet or in notes thereto prepared in accordance with U.S. GAAP, except
for liabilities or obligations incurred in the ordinary course of business
consistent with past practice since December 31, 1999 that have not had and
could not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
SECTION 5.07 Certain Tax Matters. Neither Parent nor, to the Knowledge of
Parent, any of its Affiliates has taken or agreed to take any action (other than
actions contemplated by this Agreement) that could reasonably be expected to
prevent the Merger from constituting a 'reorganization' under Section 368 of the
Code. Parent is not aware of any agreement, plan or other circumstance that
could reasonably be expected to prevent the Merger from so qualifying as a
reorganization under Section 368 of the Code.
SECTION 5.08 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the Merger
based upon arrangements made by or on behalf of Parent.
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business by Company Pending the Closing. Company
agrees that, between the date of this Agreement and the Effective Time, except
as contemplated by this Agreement, unless Parent shall otherwise agree in
writing, (x) the business of Company shall be conducted only in, and Company
shall not take any action except in, the ordinary course of business consistent
with past practice and (y) Company shall use best efforts to keep available the
services of such of the current officers, significant employees and consultants
of Company and to preserve the current relationships of Company with such of the
corporate partners, customers, suppliers and other persons with which Company
has significant business relations in order to preserve substantially intact its
business organization. By way of amplification and not limitation, Company shall
not, between the date of this Agreement and the Effective Time, except as
contemplated by this Agreement, directly or indirectly, do, or agree to do, any
of the following without the prior written consent of Parent:
(a) amend or otherwise change its certificate of incorporation or bylaws or
equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee or encumber, or authorize the issuance, sale, pledge, disposition,
grant, transfer, lease, license or encumbrance of, (i) any shares of capital
stock of Company of any class, or securities convertible into or exchangeable or
exercisable for any shares of such capital stock, or any options, warrants or
other rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom interest),
of Company, other than the issuance of shares of Company Common Stock pursuant
to the exercise of stock options therefor outstanding as of the date of this
Agreement or pursuant to the Company Stock Purchase Plan or (ii) any material
property or assets of Company except sales of inventory in the ordinary course
of business consistent with past practice and the providing of opt-in e-mail
addresses to direct marketers and brokers by Company in the ordinary course of
business;
(c) (i) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets) any interest in any corporation, partnership,
other business organization or Person or any division thereof; (ii) incur any
indebtedness for borrowed money (other than in de minimus
A-25
<PAGE>
amounts) or issue any debt securities or assume, guarantee or endorse, or
otherwise as an accommodation become responsible for, the obligations of any
person for borrowed money or make any loans or advances material to the
business, assets, liabilities, financial condition or results of operations of
Company; (iii) terminate, cancel or request any material change in, or agree to
any material change in, any Company Listed Contract or other License Agreement;
(iv) make or authorize any capital expenditure, other than capital expenditures
in the ordinary course of business consistent with past practice that have been
described in the Disclosure Schedule and that are not, in the aggregate, in
excess of $250,000 for Company; or (v) enter into or amend any contract,
agreement, commitment or arrangement that, if fully performed, would not be
permitted under this Section 6.01(c);
(d) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock;
(e) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) amend or change the period (or permit any acceleration, amendment or
change) of exercisability of options granted under the Company Stock Plan or
authorize cash payments in exchange for any Company Stock Options granted under
the Company Stock Plan;
(g) amend the terms of, repurchase, redeem or otherwise acquire any of its
securities or propose to do any of the foregoing;
(h) increase the compensation payable or to become payable to its directors,
officers, consultants or employees, grant any rights to severance or termination
pay to, or enter into any employment or severance agreement which provides
benefits upon a change in control of Company that would be triggered by the
Merger with, any director, officer, consultant or other employee of Company who
is not currently entitled to such benefits from the Merger, establish, adopt,
enter into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any director, officer,
consultant or employee of Company, except to the extent required by applicable
Law or the terms of a collective bargaining agreement, or enter into or amend
any contract, agreement, commitment or arrangement between Company and any of
Company's directors, officers, consultants or employees;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against on
the balance sheet of Company dated as of June 30, 2000 included in Company's
quarterly report on Form 10-Q for the period then ended;
(j) except as required by any Governmental Entity, make any change with
respect to Company's accounting policies, principles, methods or procedures,
including, without limitation, revenue recognition policies, other than as
required by U.S. GAAP;
(k) make any Tax election or settle or compromise any Tax liability; or
(l) authorize or enter into any formal or informal agreement or otherwise
make any commitment to do any of the foregoing or to take any action which would
make any of the representations or warranties of Company contained in this
Agreement untrue or incorrect or prevent Company from performing or cause
Company not to perform its covenants hereunder in any material respect or result
in any of the conditions to the Merger set forth herein not being satisfied or
prevent Company from performing or cause Company not to perform its covenants
hereunder.
SECTION 6.02 Notices of Certain Events.
A-26
<PAGE>
(a) Each of Parent and Company shall give prompt notice to the other of
(i) any notice or other communication from any person alleging that the consent
of such person is or may be required in connection with the Merger; (ii) any
notice or other communication from any Governmental Entity in connection with
the Merger; (iii) any actions, suits, claims, investigations or proceedings
commenced or, to its Knowledge, threatened against, relating to or involving or
otherwise affecting Parent or Company, respectively, or that relate to the
consummation of the Merger; (iv) the occurrence of a default or event that, with
the giving of notice or lapse of time or both, will become a default under any
Parent Listed Contract or Company Listed Contract, respectively; and (v) any
change that could reasonably be expected to have a Parent Material Adverse
Effect or a Company Material Adverse Effect, respectively, or to delay or impede
the ability of either Parent or Company, respectively, to perform their
respective obligations pursuant to this Agreement and to effect the consummation
of the Merger.
SECTION 6.03 Access to Information; Confidentiality.
(a) Except as required pursuant to any confidentiality agreement or similar
agreement or arrangement to which Parent or Company is a party or pursuant to
applicable Law or the regulations or requirements of any stock exchange or other
regulatory organization with whose rules a party hereto is required to comply,
from the date of this Agreement to the Effective Time, Parent and Company shall
(i) provide to the other (and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively,
'Representatives')) access at reasonable times upon prior notice to its and its
subsidiaries' officers, employees, agents, properties, offices and other
facilities and to the books and records thereof, and (ii) furnish promptly such
information concerning its and its subsidiaries' business, properties,
contracts, assets, liabilities and personnel as the other party or its
Representatives may reasonably request. No investigation conducted pursuant to
this Section 6.03 shall affect or be deemed to modify any representation or
warranty made in this Agreement.
(b) The parties hereto shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
Confidentiality Agreement with respect to the information disclosed pursuant to
this Section 6.03.
SECTION 6.04 No Solicitation of Transactions.
(a) Until this Agreement has been terminated as provided herein, Company
shall not, directly or indirectly, and shall cause its Representatives not to,
directly or indirectly, solicit, initiate or knowingly encourage (including by
way of furnishing nonpublic information), any inquiries or the making of any
proposal or offer (including, without limitation, any proposal or offer to its
shareholders) that constitutes, or may reasonably be expected to lead to, any
Competing Transaction, or enter into or maintain or continue discussions or
negotiate with any person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of Company's Representatives or subsidiaries, or any
Representative retained by Company's subsidiaries, to take any such action;
provided, however, that nothing contained in this Agreement, including this
Section 6.04, shall prohibit the Company or the board of directors of Company
(i) from complying with Rule 14d-9 or 14e-2(a) promulgated under the Exchange
Act with regard to a tender or exchange offer not made in violation of this
Section 6.04, (ii) referring any third party to this Section 6.04 or making a
copy of this Section 6.04 available to any third party solely in response to an
unsolicited inquiry; (iii) prior to receipt of the approval by the shareholders
of Company of this Agreement and the Merger, from providing information (subject
to a confidentiality agreement at least as restrictive as the Confidentiality
Agreement) in connection with, and negotiating, another unsolicited, bona fide
proposal regarding a Competing Transaction that (i) Company's board of directors
shall have concluded in good faith, based upon the advice of independent outside
counsel of nationally recognized reputation (who may be the Company's regularly
engaged independent legal counsel), that such action is necessary to prevent
Company's board of directors from violating its fiduciary duties to the Company
or its shareholders under applicable law, (ii) with respect to which Company's
board of directors shall have determined, based upon the advice of Company's
independent financial advisors of nationally recognized reputation (who may be
the Company's
A-27
<PAGE>
regularly engaged independent financial advisors), in the proper exercise of its
fiduciary duties to the Company and its shareholders that the acquiring party is
reasonably capable of consummating such Competing Transaction on the terms
proposed, and (iii) Company's board of directors reasonably believes in good
faith, based on the advice of the Company's independent financial advisors of
nationally recognized reputation (who may be the Company's regularly engaged
independent financial advisors), that such Competing Transaction is more
favorable to the shareholders of the Company from a financial point of view than
the Merger, that such Competing Transaction is more favorable to the
shareholders of Company than the Merger taking into account all the terms and
conditions of the Competing Transaction and the Merger (any such Competing
Transaction being referred to herein as a 'Superior Proposal'). Any violation of
the restrictions set forth in this Section 6.04 by any Representative of
Company, whether or not such Person is purporting to act on behalf of Company or
otherwise, shall be deemed to be a breach of this Section 6.04 by Company.
Company shall notify Parent promptly if any proposal or offer, or any inquiry or
contact with any person with respect thereto, regarding a Competing Transaction
is made, such notice to include the identity of the person making such proposal,
offer, inquiry or contact, and the terms of such Competing Transaction, and
shall keep Parent apprised, as promptly as reasonably practicable, of any
modifications to the terms thereof. Prior to accepting a Company Superior
Proposal, Company shall provide Parent with 24 hours' written notice of such
intention. Notwithstanding the foregoing, nothing contained in this Section 6.04
shall prevent the Board of Directors of Company from withdrawing or modifying
its recommendation of this Agreement, provided that the Company has complied
with this Section 6.04, following the receipt of a proposal that constitutes, or
may reasonably be expected to lead to, a Competing Transaction if the Board of
Directors of the Company, after consultation with independent legal counsel (who
may be the Company's regularly engaged independent legal counsel) determines in
good faith that such action is necessary for the directors of Company to comply
with their fiduciary duties to the Company or its shareholders under applicable
law.
(b) Company immediately shall cease and cause to be terminated all existing
discussions or negotiations with any parties conducted heretofore with respect
to a Competing Transaction. Company shall not release any third party from, or
waive any provision of, any confidentiality or standstill agreement to which it
is a party.
SECTION 6.05 Tax-Free Transaction.
(a) From and after the date of this Agreement, each party hereto shall use
all reasonable efforts to cause the Merger to qualify, and shall not take any
actions or cause any actions to be taken which could reasonably be expected to
prevent the Merger from qualifying as a 'reorganization' under Section 368(a) of
the Code.
(b) Each of Company and Parent shall execute and deliver to the other a
certificate, in form reasonably acceptable to Company and Parent, as the case
may be, signed by an officer of Company or Parent, as the case may be, setting
forth factual representations and covenants that will serve as a basis for the
tax opinion required under Section 8.02(c) hereof. Company shall use its
reasonable efforts to obtain a tax opinion that would satisfy the condition to
the Closing set forth in Section 8.02(c).
SECTION 6.06 Control of Operations. Nothing contained in this Agreement
shall give Parent, directly or indirectly, the right to control or direct the
operations of Company prior to the Effective Time. Prior to the Effective Time,
Company shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its operations.
SECTION 6.07 Further Action; Consents; Filings.
(a) Upon the terms and subject to the conditions hereof, each of the parties
hereto shall use all reasonable efforts to (i) take, or cause to be taken, all
appropriate action, and do, or cause to be done, all things necessary, proper or
advisable under applicable Law or otherwise to consummate and make effective the
Merger, (ii) obtain from Governmental Entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
Parent or Company in connection with the authorization, execution and delivery
of this Agreement
A-28
<PAGE>
and the consummation of the Merger and (iii) make all necessary filings, and
thereafter make any other required or appropriate submissions, with respect to
this Agreement and the Merger required under (A) the rules and regulations of
the NNM, (B) the Securities Act, the Exchange Act and any other applicable
Federal or state securities Laws, (C) the HSR Act, if any, and (D) any other
applicable Law. The parties hereto shall cooperate and consult with each other
in connection with the making of all such filings, including by providing copies
of all such documents to the nonfiling parties and their advisors prior to
filing, and none of the parties shall file any such document if any of the other
parties shall have reasonably objected to the filing of such document. No party
shall consent to any voluntary extension of any statutory deadline or waiting
period or to any voluntary delay of the consummation of the Merger at the behest
of any Governmental Entity without the consent and agreement of the other
parties hereto, which consent shall not be unreasonably withheld or delayed.
(b) Each of Company and Parent will give any notices to third persons, and
use, and cause their respective subsidiaries to use, reasonable efforts to
obtain any consents from third persons necessary, proper or advisable (as
determined in good faith by Parent with respect to such notices or consents to
be delivered or obtained by Company) to consummate the transactions contemplated
by this Agreement.
SECTION 6.08 Additional Reports. Company and Parent shall each furnish to
the other copies of any reports of the type referred to in Sections 4.07 and
5.06, which it files with the SEC on or after the date hereof, and Company and
Parent, as the case may be, covenant and warrant that as of the respective dates
thereof, such reports will not contain any 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. Any unaudited consolidated interim financial statements
included in such reports (including any related notes and schedules) will fairly
present in all material respects the financial position of Company and its
consolidated subsidiaries or Parent and its consolidated subsidiaries, as the
case may be, as of the dates thereof and the results of operations and changes
in financial position or other information including therein for the periods or
as of the date then ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with past practice and U.S. GAAP
consistently applied during the periods involved (except as otherwise disclosed
in the notes thereto).
SECTION 6.09 Tax Information. Company shall provide the following
information to Parent not later than two weeks after the date of this Agreement:
(i) a complete list of the types of Tax Returns being filed by Company in each
taxing jurisdiction, (ii) a list of all closed years with respect to each such
type of Tax Return filed in each jurisdiction, (iii) a list of any deferred
intercompany gain with respect to transactions to which Company has been a party
and (iv) a list of the acquisition date, original cost, accumulated
depreciation, adjusted tax basis and methods of depreciation for all depreciable
and amortizable assets of the Company. Company shall provide Parent and its
accountants, counsel and other representatives reasonable access, during normal
business hours during the period prior to the Effective Time, to all of
Company's Tax Returns and other records and workpapers relating to Taxes.
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.01 Registration Statement; Proxy Statement.
(a) As promptly as practicable after the execution of this Agreement, Parent
and Company shall jointly prepare and shall file with the SEC a document or
documents that will constitute (i) the prospectus forming part of the
registration statement on Form S-4 of Parent (together with all amendments
thereto, the 'Registration Statement'), in connection with the registration
under the Securities Act of Parent Common Stock to be issued to Company's
shareholders pursuant to the Merger and (ii) the proxy statement with respect to
the Merger relating to the special meeting of Company's shareholders to be held
to consider approval and adoption of this Agreement and the
A-29
<PAGE>
Merger (the 'Company Shareholders' Meeting') (together with any amendments
thereto, the 'Proxy Statement'). Copies of the Proxy Statement shall be provided
to the NNM in accordance with its rules. Each of the parties hereto shall use
all reasonable efforts to cause the Registration Statement to become effective
as promptly as practicable after the date hereof, and, prior to the effective
date of the Registration Statement, the parties hereto shall take all action
required under any applicable Laws in connection with the issuance of shares of
Parent Common Stock pursuant to the Merger. Parent or Company, as the case may
be, shall furnish all information concerning Parent or Company as the other
party may reasonably request in connection with such actions and the preparation
of the Registration Statement and the Proxy Statement. Each of Parent and
Company shall notify the other of the receipt of any comments from the SEC on
the Registration Statement and the Proxy Statement and of any requests by the
SEC for any amendments or supplements thereto or for additional information and
shall provide to each other promptly copies of all correspondence between
Parent, Company or any of their representatives and advisors and the SEC. As
promptly as practicable after the effective date of the Registration Statement,
the Proxy Statement shall be mailed to the shareholders of Company. Each of the
parties hereto shall cause the Proxy Statement to comply as to form and
substance as to such party in all material respects with the applicable
requirements of (i) the Exchange Act, (ii) the Securities Act and (iii) the
rules and regulations of the NNM.
(b) The Proxy Statement shall include with respect to Company and its
shareholders, (i) the approval and adoption of the Merger and the recommendation
of the board of directors of Company to Company's shareholders that they vote in
favor of approval of this Agreement and the Merger, subject to the right of the
board of directors of Company to withdraw its recommendation and recommend a
Superior Proposal in compliance with Section 6.04 of this Agreement, and
(ii) the opinion of Robertson Stephens referred to in Section 4.19.
(c) No amendment or supplement to the Proxy Statement or the Registration
Statement shall be made without the approval of Parent and Company, which
approval shall not be unreasonably withheld or delayed. Each of the parties
hereto shall advise the other parties hereto, promptly after it receives notice
thereof, of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order, of
the suspension of the qualification of the Parent Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or of any
request by the SEC for amendment of the Proxy Statement or the Registration
Statement or comments thereon and responses thereto or requests by the SEC for
additional information.
(d) None of the information supplied by Company for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement
shall, at the respective times filed with the SEC or other regulatory agency
and, in addition, (A) in the case of the Proxy Statement, at the date it or any
amendments or supplements thereto are mailed to shareholders of Company, at the
time of the Company Shareholders' Meeting and at the Effective Time and (B) in
the case of the Registration Statement, when it becomes effective under the
Securities Act and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. If at any time prior to
the Effective Time any event or circumstance relating to Company, or their
respective officers or directors, should be discovered by Company that should be
set forth in an amendment or a supplement to the Registration Statement or the
Proxy Statement, Company shall promptly inform Parent. All documents that
Company is responsible for filing with the SEC in connection with the Merger
will comply as to form in all material respects with the applicable requirements
of the rules and regulations of the Securities Act and the Exchange Act.
(e) None of the information supplied by Parent for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement
shall, at the respective times filed with the SEC or other regulatory agency
and, in addition, (A) in the case of the Proxy Statement, at the date it or any
amendments or supplements thereto are mailed to shareholders of Company, at the
time of Company Shareholders' Meeting and at the Effective Time and (B) in the
case of the Registration
A-30
<PAGE>
Statement, when it becomes effective under the Securities Act and at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. If, at any time prior to the Effective Time, any event or
circumstance relating to Parent or any Parent Subsidiary, or their respective
officers or directors, should be discovered by Parent that should be set forth
in an amendment or a supplement to the Registration Statement or the Proxy
Statement, Parent shall promptly inform Company. All documents that Parent is
responsible for filing with the SEC in connection with the Merger will comply as
to form in all material respects with the applicable requirements of the rules
and regulations of the Securities Act and the Exchange Act.
SECTION 7.02 Company Shareholders' Meeting. Subject to the provisions of
Section 6.04 and 9.01 herein, Company shall call and hold the Company
Shareholders' Meeting as promptly as practicable after the date hereof for the
purpose of voting upon the approval of this Agreement and the Merger pursuant to
the Proxy Statement, and Company shall use all reasonable efforts to hold the
Company Shareholders' Meeting as soon as practicable after the date on which the
Registration Statement becomes effective. Unless Company's board of directors
has withdrawn its recommendation of this Agreement and the Merger in compliance
with Section 6.04, Company shall use all reasonable efforts to solicit from its
shareholders proxies in favor of the approval and adoption of this Agreement and
the Merger pursuant to the Proxy Statement and shall take all other action
necessary or advisable to secure the vote or consent of shareholders required by
New York Law or applicable other stock exchange requirements to obtain such
approval. Company shall take all other action necessary or, in the reasonable
opinion of Parent, advisable to promptly and expeditiously secure any vote or
consent of shareholders required by applicable Law and Company's certificate of
incorporation and bylaws to effect the Merger. Subject to the right of Company
to terminate this Agreement set forth in Section 9.01 hereof, Company shall call
and hold the Company Shareholders' Meeting for the purpose of voting upon the
approval and adoption of this Agreement and the Merger whether or not Company's
board of directors at any time subsequent to the date hereof determines that
this Agreement is no longer advisable or recommends that Company's shareholders
reject it.
SECTION 7.03 Affiliates. Company will use reasonable efforts to obtain an
executed letter agreement substantially in the form of Annex C hereto from
(i) each person identified in Section 4.18 of the Company Disclosure Schedule
within 15 days following the execution and delivery of this Agreement and
(ii) from any person who, to the Knowledge of Company, may be deemed to have
become an Affiliate of Company after the date of this Agreement and prior to the
Effective Time as soon as practicable after attaining such status. The foregoing
notwithstanding, Parent shall be entitled to place legends as specified in the
Affiliate Agreement on the certificates evidencing any of the Parent Common
Stock to be received by (i) any Affiliate of Company or (ii) any person Parent
reasonably identifies (by written notice to Company) as being a person who may
be deemed an 'affiliate' within the meaning of Rule 145 promulgated under the
Securities Act, and to issue appropriate stop transfer instructions to the
transfer agent for such Parent Common Stock, consistent with the terms of the
Affiliate Agreement, regardless of whether such person has executed Affiliate
Agreement and regardless of whether such person's name and address appear on
Section 4.18 of the Company Disclosure Schedule.
SECTION 7.04 Directors' and Officers' Indemnification and Insurance.
(a) Parent and the Merger Sub agree that all rights to indemnification,
advancement of expenses, exculpation, limitation of liability and any and all
similar rights now existing in favor of each present and former director,
officer, employee and agent of Company (collectively, the 'Indemnified Parties')
as provided in Company's present certificate of incorporation, by-laws or
contractual arrangement in effect on the date hereof, shall survive the Merger
and shall continue in full force and effect for a period of six years from the
Effective Time, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would affect adversely the rights thereunder of individuals who at any time
prior to the Effective Time were directors, officers, employees or agents of the
Company, unless
A-31
<PAGE>
such modification shall be required by Law, and Parent agrees to cause the
Surviving Corporation to comply with its obligations thereunder and hereby
guarantees the indemnification obligations referred to in this Section 7.04.
(b) In the event the Company or the Surviving Corporation or any of their
respective successors or assigns (i) consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers a material amount of its
properties and assets to any person in a single transaction or a series of
transactions, then, and in each such case, Parent will either guaranty the
indemnification obligations referred to in this Section 7.04 or will make or
cause to be made proper provision so that the successors and assigns of the
Company or the Surviving Corporation, as the case may be, assume the
indemnification obligations described herein for the benefit of the Indemnified
Parties and have substantially equal financial ability as the Company
(immediately prior to the Effective Time) to satisfy the obligations of the
parties pursuant to this Section 7.04 as a condition to such merger,
consolidation or transfer becoming effective.
(c) The provisions of this Section 7.04 are (i) intended to be for the
benefit of, and will be enforceable by, each of the Indemnified Parties and
(ii) in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such person may have by contract or
otherwise.
(d) For a period of three years after the Effective Time, Parent shall use
its best efforts to maintain in effect the directors' and officers' liability
insurance policies maintained by Company; provided, however, that in no event
shall Parent be required to expend in any one year in excess of 150% of the
annual premium currently paid by Company for such coverage and provided further,
that if the premium for such coverage exceeds such amount, Parent shall purchase
a policy with the greatest coverage available for such 150% of the annual
premium.
SECTION 7.05 No Shelf Registration. Parent shall not be required to amend or
maintain the effectiveness of the Registration Statement for the purpose of
permitting resale of the shares of Parent Common Stock received pursuant hereto
by the persons who may be deemed to be 'affiliates' of Company within the
meaning of Rule 145 promulgated under the Securities Act.
SECTION 7.06 Public Announcements. The initial press release concerning the
Merger shall be a joint press release and, thereafter, Parent and Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or the Merger and shall not
issue any such press release or make any such public statement without the prior
written approval of the other, except to the extent required by applicable Law
or the requirements of the rules and regulations of the NNM, in which case the
issuing party shall use all reasonable efforts to consult with the other party
before issuing any such release or making any such public statement.
SECTION 7.07 NNM Listing. Prior to the Effective Time, Parent shall use all
reasonable efforts to have the shares of Parent Common Stock issued or issuable
in connection with the Merger and approved for quotation on the NNM.
SECTION 7.08 Company Stock Options/Registration Statements on Form S-8.
(a) Prior to the Effective Time, Company shall take, or cause to be taken,
all action necessary and appropriate to effect the assumption of Company Stock
Options as contemplated by Section 3.05, including, if applicable, amending the
Company Stock Plan and Company Stock Options to provide that no 'cash-out' will
be made in connection with the Merger and obtaining the consent of affected
optionees and warrant holders. Parent shall reserve for issuance the number of
shares of Parent Common Stock that will be issuable upon exercise of Company
Stock Options assumed pursuant to Section 3.05 hereof. As soon as reasonably
practicable following the Effective Time, Parent shall file with the SEC one or
more registration statements on Form S-8 for the shares of Parent Common Stock
issuable with respect to Company Stock Options and will maintain the
effectiveness of such registration statements for so long as any of such options
or other rights remain outstanding.
A-32
<PAGE>
(b) Assuming that Company delivers to Parent the Section 16 Information (as
defined below) in a timely fashion, the board of directors of Parent or a
committee of two or more 'non-employee directors' (as such term is defined for
purposes of Rule 16b-3 under the Exchange Act) thereof, shall adopt resolutions
prior to the Effective Time providing that, and shall take other appropriate
action such that, the deemed grant to Company Insiders (as defined below) of
options to purchase Parent Common Stock under the Company Stock Options (as
converted into options to acquire Parent Common Stock pursuant to Section 3.05
and the receipt by Company Insiders of Parent Common Stock in exchange for
Company Common Stock pursuant to the Merger, are intended to be exempt from
liability pursuant to Section 16(b) of the Exchange Act. Such resolutions shall
comply with the approval conditions of Rule 16b-3 under the Exchange Act for
purposes of such Section 16(b) exemptions, including specifying the name of each
Company Insider, the number of equity securities to be acquired or disposed of
by each Company Insider, the material terms of any derivative securities, and
that the approval is intended to make the receipt of such securities exempt
pursuant to Rule 16b-3(d) under the Exchange Act. 'Section 16 Information' shall
mean the names of the Company Insiders, the number of shares of Company Common
Stock held by each Company Insider and expected to be exchanged for Parent
Common Stock in the Merger and the number and a description of Company Stock
Options held by each Company Insider and expected to be converted into options
to acquire Parent Common Stock in connection with the Merger. 'Company Insiders'
shall mean those officers and directors of the Company who will be subject to
the reporting requirements of Section 16(b) of the Exchange Act with respect to
Parent and whose names are included in the Section 16 Information.
SECTION 7.09 Employee Benefit Matters.
(a) For all purposes (including, without limitation, eligibility, vesting,
and benefit accrual) under the employee benefit plans of Parent and its
Subsidiaries providing benefits to former Company employees after the Effective
Time, each such employee shall be credited with his or her years of service with
Company before the Effective Time, to the same extent as such employee was
entitled, before the Effective Time, to credit for such service under any
similar Company Benefit Plan, except for purposes of benefit accrual under
defined benefit pension plans, if any. Following the Effective Time, Parent
shall, or shall cause its Subsidiaries to, waive any pre-existing condition
limitation under any welfare benefit plan maintained by Parent or any of its
Subsidiaries in which such employees and their eligible dependents participate
(except to the extent that such pre-existing condition limitation would have
been applicable under the comparable Company welfare benefit plans immediately
prior to the Effective Time).
(b) Unless Parent consents otherwise in writing, Company shall take all
action necessary to terminate, or cause to terminate, before the Effective Time,
any Company Benefit Plan that is a 401(k) plan or other defined contribution
retirement plan. Parent and Company shall take all action necessary to permit
Company employees to elect direct rollovers of their account balances in
Company's terminated 401(k) plan or other defined contribution plan (including
outstanding participant loans, if any) to a qualified relevant plan of Parent or
its Subsidiaries.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to the Obligations of Each Party to Consummate the
Merger. The obligations of the parties hereto to consummate the Merger are
subject to the satisfaction or, if permitted by applicable Law, waiver of the
following conditions:
(a) the Registration Statement shall have been declared effective by the SEC
under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceeding for
that purpose shall have been initiated by the SEC and not concluded or
withdrawn;
(b) this Agreement and the Merger shall have been duly approved by the
requisite vote of shareholders of Company in accordance with New York Law;
A-33
<PAGE>
(c) no court of competent jurisdiction shall have issued or entered any
order, writ, injunction or decree, and no other Governmental Entity shall have
issued any order, which is then in effect and has the effect of making the
Merger illegal or otherwise prohibiting its consummation;
(d) any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act or any other applicable
competition, merger control or similar Law shall have expired or been
terminated; and
(e) all consents, approvals and authorizations legally required to be
obtained to consummate the Merger shall have been obtained from all Governmental
Entities, except where the failure to obtain any such consent, approval or
authorization could not reasonably be expected to result in a Parent Material
Adverse Effect or a Company Material Adverse Effect.
SECTION 8.02 Conditions to the Obligations of Company. The obligations of
Company to consummate the Merger, or to permit the consummation of the Merger
are subject to the satisfaction or, if permitted by applicable Law, waiver of
the following further conditions:
(a) each of the representations and warranties of Parent contained in this
Agreement shall be true, complete and correct in all respects (other than
representations and warranties subject to 'materiality' or 'Material Adverse
Effect' qualifiers, which shall be true, complete and correct in all respects)
both when made and on and as of the Effective Time as if made at and as of the
Effective Time (other than (i) representations and warranties which address
matters only as of a certain date which shall have been true, complete and
correct as of such certain date, and (ii) failures to be true, complete and
correct that do not, in the aggregate, constitute a Parent Material Adverse
Effect), and Company shall have received a certificate of the Chief Executive
Officer and Chief Financial Officer of Parent to such effect;
(b) Parent shall have performed or complied in all material respects with
all covenants required by this Agreement to be performed or complied with by it
on or prior to the Effective Time and Company shall have received a certificate
of the Chief Executive Officer and Chief Financial Officer of Parent to that
effect;
(c) Piper, Marbury, Rudnick & Wolfe LLP, legal counsel to Company, shall
have issued its opinion, such opinion dated on the date of the Closing,
addressed to Company, and reasonably satisfactory to it, based upon customary
representations of Company and Parent and customary assumptions, to the effect
that the Merger will constitute a 'reorganization' within the meaning of Section
368(a) of the Code, which opinion shall not have been withdrawn or modified in
any material respect; provided, however, that if such firm does not render such
opinion, this condition shall nonetheless be deemed satisfied if such opinion,
dated as of the date of the Closing, is rendered to Company by Brobeck, Phleger
& Harrison LLP, counsel to Parent; and
(d) There shall have been no Parent Material Adverse Effect since the date
of this Agreement.
SECTION 8.03 Conditions to the Obligations of Parent. The obligations of
Parent to consummate the Merger are subject to the satisfaction or waiver of the
following further conditions:
(a) each of the representations and warranties of Company contained in this
Agreement shall be true, complete and correct in all respects (other than
representations and warranties subject to 'materiality' or 'Material Adverse
Effect' qualifiers, which shall be true, complete and correct in all respects)
both when made and on and as of the Effective Time as if made at and as of the
Effective Time (other than (i) representations and warranties which address
matters only as of a certain date which shall have been true, complete and
correct as of such certain date, and (ii) failures to be true, complete and
correct that do not, in the aggregate, constitute a Company Material Adverse
Effect), and Parent shall have received a certificate of the Chief Executive
Officer and Chief Financial Officer of Company to such effect;
(b) Company shall have performed or complied in all material respects with
all covenants required by this Agreement to be performed or complied with by it
on or prior to the Effective
A-34
<PAGE>
Time and Parent shall have received a certificate of the Chief Executive Officer
and Chief Financial Officer of Company to that effect;
(c) There shall have been no Company Material Adverse Effect since the date
of this Agreement;
(d) Company shall have received from each of the parties set forth on
Section 8.03(d) of the Company Disclosure Schedule (each such party, an
'Assigning Party'), a valid and effective assignment, in form reasonably
acceptable to Parent, of all intellectual property rights in all work created by
such Assigning Party on behalf of Company; and
(e) Each of the employees listed in Section 8.03(e) of the Company
Disclosure Schedule hereto shall have terminated their respective employment
agreements with Company and shall have agreed to the terms of employment set
forth in their respective offer letters from Parent, and no employee listed in
such Section 8.03(e) shall have terminated, or given notice of termination of,
such employee's employment with Company.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.01 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite adoption and approval of this Agreement, as follows:
(a) by mutual written consent duly authorized by the boards of directors of
each of Parent and Company;
(b) by either Parent or Company, if the Effective Time shall not have
occurred on or before February 28, 2001; provided, however, that the right to
terminate this Agreement under this Section 9.01(b) shall not be available to
any party whose material breach of this Agreement shall have caused, or resulted
in, the failure of the Effective Time to occur on or before such date;
(c) by either Parent or Company, if any Governmental Order, writ, injunction
or decree preventing the consummation of the Merger shall have been entered by
any court of competent jurisdiction and shall have become final and
nonappealable;
(d) by Parent, if (i) the board of directors of Company withdraws, modifies
or changes its recommendation of this Agreement or the Merger in a manner
adverse to Parent or its stockholders, (ii) the board of directors of Company
shall have recommended to the shareholders of Company a Competing Transaction,
(iii) the Company fails to comply in all material respects with Section 6.04 or
Section 7.02, (iv) a Competing Transaction shall have been announced or
otherwise publicly known and the board of directors of Company shall have
(A) failed to recommend against acceptance of such by its shareholders
(including by taking no position, or indicating its inability to take a
position, with respect to the acceptance by its shareholders of a Competing
Transaction involving a tender offer or exchange offer) within 5 Business Days
of delivery of a written request from Parent for such action or (B) failed to
reconfirm its approval and recommendation of this Agreement and the transactions
contemplated hereby within 5 Business Days of delivery of a written request from
Parent for such action, (v) the board of directors of Company shall have
determined that a Competing Transaction was a Superior Proposal and to take any
of the actions allowed by clause (ii) of Section 6.04 (and shall not have, prior
to Parent's termination of this Agreement pursuant to this Section 9.01(d)(v),
(x) reconfirmed its approval and recommendation of this Agreement and (y)
recommended against acceptance of such Superior Proposal by its shareholders),
or (vi) the board of directors of Company resolves to take any of the actions
described above;
(e) by Parent or Company, if this Agreement and the Merger shall fail to
receive the requisite votes for approval at the Company Shareholders' Meeting or
any adjournment or postponement thereof;
(f) by Parent, 10 Business Days after receipt by Company of a written notice
from Parent of a breach of any representation, warranty, covenant or agreement
on the part of Company set forth
A-35
<PAGE>
in this Agreement, or if any representation or warranty of Company shall have
become untrue, incomplete or incorrect, in either case such that the conditions
set forth in Section 8.03 would not be satisfied (a 'Terminating Company
Breach'); provided, however, that if such Terminating Company Breach is curable
by Company through the exercise of its reasonable efforts within 10 days and for
so long as Company continues to exercise such reasonable efforts, Parent may not
terminate this Agreement under this Section 9.01(f); and provided, further that
the preceding proviso shall not in any event be deemed to extend any date set
forth in paragraph (b) of this Section 9.01;
(g) by Company, 10 Business Days after receipt by Parent of a written notice
from Company of breach of any representation, warranty, covenant or agreement on
the part of Parent set forth in this Agreement, or if any representation or
warranty of Parent shall have become untrue, incomplete or incorrect, in either
case such that the conditions set forth in Section 8.02 would not be satisfied
(a 'Terminating Parent Breach'); provided, however, that if such Terminating
Parent Breach is curable by Parent through the exercise of its reasonable
efforts within 10 days and for so long as Parent continues to exercise such
reasonable efforts, Company may not terminate this Agreement under this Section
9.01(g); and provided, further that the preceding proviso shall not in any event
be deemed to extend any date set forth in paragraph (b) of this Section 9.01; or
(h) by Company, if (i) the board of directors of Company authorizes Company,
subject to complying with the terms of this Agreement, to enter into a binding
written agreement concerning a transaction that constitutes a Superior Proposal
and Company notifies Parent in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement (or description
of all material terms and conditions thereof) to such notice, (ii) Parent does
not make, within three Business Days of receipt of Company's written
notification of its intention to enter into a binding agreement for a Superior
Proposal, an offer that the board of directors of Company determines, in good
faith after consultation with its financial advisors, is at least as favorable
to the shareholders of Company as the Superior Proposal, it being understood
that Company shall not enter into any such binding agreement during such
three-day period and (iii) Company prior to such termination pursuant to this
clause (h) pays to Parent in immediately available funds the fees required to be
paid pursuant to Section 9.05(b), provided, that Company shall not be permitted
to terminate this Agreement pursuant to this Section 9.01(h) if such Superior
Proposal is attributable to a violation by Company of its obligations under
Section 6.05 and such Superior Proposal did not otherwise result from a breach
of any of Company's obligations under this Agreement.
The right of any party hereto to terminate this Agreement pursuant to this
Section 9.01 will remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers, directors,
representatives or agents, whether prior to or after the execution of this
Agreement.
SECTION 9.02 Effect of Termination. Except as provided in Section 9.05, in
the event of termination of this Agreement pursuant to Section 9.01, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of any party hereto or any of its Affiliates or any of its
or their officers or directors, and all rights and obligations of each party
hereto shall cease; provided, however, that nothing herein shall relieve any
party hereto from liability for the willful or intentional breach of any of its
representations and warranties or the willful or intentional breach of any of
its covenants or agreements set forth in this Agreement. No termination of this
Agreement shall affect the obligation of the parties contained in the
Confidentiality Agreement, which shall survive termination of this Agreement and
remain in full force and effect in accordance with their terms.
SECTION 9.03 Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective boards of directors at any
time prior to the Effective Time; provided, however, that, after the approval of
this Agreement by the shareholders of Company, no amendment may be made that
changes the amount or type of consideration into which Company Common Stock will
be converted pursuant to this Agreement. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
A-36
<PAGE>
SECTION 9.04 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for or waive compliance with the performance of
any obligation or other act of any other party hereto, (b) waive any inaccuracy
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance by the other party with any
of the agreements or conditions contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
SECTION 9.05 Termination Fee; Expenses.
(a) Except as set forth in this Section 9.05, all Expenses incurred in
connection with this Agreement and the Merger shall be paid by the party
incurring such Expenses, whether or not the Merger is consummated, except that
Parent and Company each shall pay one-half of all Expenses (other than
attorneys' and accountants' fees and expenses) incurred solely for printing,
filing and mailing the Registration Statement and the Proxy Statement and all
SEC and other regulatory filing fees incurred in connection with the
Registration Statement and the Proxy Statement and any fees required to be paid
under the HSR Act.
(b) In the event that (i) Parent shall terminate this Agreement pursuant to
Section 9.01(d), (ii) Parent shall terminate this Agreement due to a Terminating
Company Breach of any covenant or agreement contained in this Agreement pursuant
to Section 9.01(f), (iii) Company shall terminate this Agreement pursuant to
Section 9.01(h) or (iv) this Agreement shall be terminated pursuant to Section
9.01(b) or pursuant to Section 9.01(e) as a result of the failure to obtain the
requisite approval of the Company shareholders and (A) at or prior to such
termination, there shall exist or have been publicly proposed a Competing
Transaction with respect to Company and (B) within 12 months after such
termination, Company shall enter into a definitive agreement with respect to any
Competing Transaction or any Competing Transaction involving Company shall be
consummated, then, in the case of (i), (ii) or (iii), promptly after such
termination, or in the case of (iv), immediately before the execution and
delivery of such agreement or such consummation, Company shall pay to Parent
(the 'Termination Fee') a sum equal to all of Parent's Expenses and an
additional amount equal to $8,600,000. In the event of termination of this
Agreement by Company pursuant to Section 9.01(g), Parent shall pay to Company an
amount equal to all of Company's Expenses.
(c) Parent and Company agree that the agreements contained in Section
9.05(b) above are an integral part of the transaction contemplated by this
Agreement and constitute liquidated damages and not a penalty. Accordingly, if
Company fails to pay to Parent any amounts due under Section 9.05(b), Company
shall pay the cash and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit of other legal
action, taken to collect payment, together with interest on such amounts at the
prime rate of Citibank, N.A. in effect on the date such payment was required to
be made.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 Non-Survival of Representations and Warranties. The
representations and warranties in this Agreement shall terminate at the
Effective Time or upon the termination of this Agreement pursuant to Section
9.01, as the case may be. This Section 10.01 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time.
SECTION 10.02 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy
or facsimile, by registered or certified mail (postage prepaid, return receipt
requested) or by a nationally recognized courier service to the
A-37
<PAGE>
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
10.02):
(a) if to Company:
NetCreations, Inc.
379 West Broadway, Suite 202
New York, New York 10012
Attention: Brian Burlant
Telecopier: (212) 274-9266
with a copy to:
Piper, Marbury, Rudnick & Wolfe LLP
1251 Avenue of the Americas
New York, New York 10020
Attention: Andrew J. Cosentino
Telecopier: (212) 835-6001
(b) if to Parent or Merger Sub:
DoubleClick Inc.
450 West 33rd Street
New York, New York 10001
Attention: Elizabeth Wang, General Counsel
Telecopier: (212) 287-9704
with a copy to:
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
Attention: Eric Simonson
Telecopier: (212) 586-7878
SECTION 10.03 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the Merger is not affected in any manner materially adverse to any party. Upon
such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner to the fullest extent
permitted by applicable Law in order that the Merger may be consummated as
originally contemplated to the fullest extent possible.
SECTION 10.04 Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of Law or otherwise) without the
prior written consent of the other parties hereto. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
Notwithstanding anything contained in this Agreement to the contrary, other than
Section 7.04, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective
successors and permitted assigns any rights or remedies under or by reason of
this Agreement.
SECTION 10.05 Incorporation of Exhibits. The Parent Disclosure Schedule, the
Company Disclosure Schedule and all Annexes attached hereto and referred to
herein are hereby incorporated herein and made a part of this Agreement for all
purposes as if fully set forth herein.
SECTION 10.06 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
OTHER THAN CONFLICT OF LAWS PRINCIPLES THEREOF
A-38
<PAGE>
DIRECTING THE APPLICATION OF ANY LAW OTHER THAN THAT OF NEW YORK. COURTS WITHIN
THE STATE OF NEW YORK (LOCATED WITHIN THE CITY OF NEW YORK) WILL HAVE
JURISDICTION OVER ALL DISPUTES BETWEEN THE PARTIES HERETO ARISING OUT OF OR
RELATING TO THIS AGREEMENT AND THE AGREEMENTS, INSTRUMENTS AND DOCUMENTS
CONTEMPLATED HEREBY. THE PARTIES HEREBY CONSENT TO AND AGREE TO SUBMIT TO THE
JURISDICTION OF SUCH COURTS. EACH OF THE PARTIES HERETO WAIVES, AND AGREES NOT
TO ASSERT IN ANY SUCH DISPUTE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF SUCH COURTS, (II) SUCH PARTY AND SUCH PARTY'S PROPERTY IS IMMUNE FROM ANY
LEGAL PROCESS ISSUED BY SUCH COURTS OR (III) ANY LITIGATION COMMENCED IN SUCH
COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
SECTION 10.07 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY PROCEEDING (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
TRANSACTION OR AGREEMENT CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO
IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.
SECTION 10.08 Headings; Interpretation. The descriptive headings contained
in this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement. The parties
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties, and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any provisions of this Agreement.
SECTION 10.09 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 10.10 Entire Agreement. This Agreement (including the Annexes, the
Schedules, the Parent Disclosure Schedule and the Company Disclosure Schedule)
and the Confidentiality Agreement constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
A-39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger and Reorganization to be executed as of the date first written above
by their respective officers thereunto duly authorized.
DOUBLECLICK INC.
By:
..................................
NAME:
TITLE:
NETCREATIONS, INC.
By:
..................................
NAME:
TITLE:
GENESIS MERGER SUB, INC.
By:
..................................
NAME:
TITLE:
A-40
<PAGE>
APPENDIX B
FORM OF COMPANY SHAREHOLDERS' AGREEMENT
This COMPANY SHAREHOLDERS' AGREEMENT (this 'Agreement') is made and entered
into as of October 2, 2000 by and among DOUBLECLICK INC., a Delaware corporation
('Parent'), and the undersigned shareholders (each, a 'Shareholder' and
collectively, the 'Shareholders') of NETCREATIONS, INC., a New York corporation
('Company'). Capitalized terms used and not otherwise defined herein shall have
the respective meanings set forth in the Merger Agreement described below.
RECITALS
WHEREAS, pursuant to an Agreement and Plan of Merger and Reorganization,
dated as of the date hereof, among Parent, Genesis Merger Sub, Inc., a New York
corporation and a wholly owned subsidiary of Parent ('Merger Sub'), and Company
(such agreement as it may be amended is hereinafter referred to as the 'Merger
Agreement'), Parent has agreed to acquire the outstanding securities of Company
pursuant to a statutory merger of Merger Sub with and into Company (the
'Merger') in which each outstanding share of capital stock of Company (the
'Company Capital Stock') will be converted into shares of common stock, par
value $0.001 per share, of Parent (the 'Parent Shares') at the Exchange Ratio
set forth in the Merger Agreement (the 'Transaction');
WHEREAS, in order to induce Parent to enter into the Merger Agreement and
consummate the Transaction, Company has agreed to use its reasonable best
efforts to cause certain shareholders of Company to execute and deliver to
Parent a Company Shareholders' Agreement upon the terms set forth herein; and
WHEREAS, each Shareholder is the registered and beneficial owner of such
number of shares of the outstanding capital stock of Company as is indicated on
the signature page of this Agreement under the heading 'Total Number of Shares
of Company Capital Stock owned on the date hereof', and such Shareholder desires
to make the number of shares indicated on the signature page of this Agreement
under the heading 'Total Number of Shares of Company Capital Stock subject to
this Agreement' (the 'Shares') subject to the terms of this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Ownership of Shares; Transfer. (a) Each Shareholder represents and
warrants to Parent that such Shareholder is the beneficial owner of (i.e., has
sole or shared voting or investment power with respect to) the Shares. The
Shares constitute a portion of such Shareholder's interest in the outstanding
capital stock and voting securities of Company. The Shares are free and clear of
any liens, claims, options, charges or other encumbrances. Such Shareholder's
principal residence or place of business is accurately set forth on the
signature page hereto. As used herein, the term 'Expiration Date' shall mean the
earlier to occur of (i) the Effective Time or (ii) termination of the Merger
Agreement in accordance with the terms thereof.
(b) Shareholder agrees not to transfer (except as may be specifically
required by court order or by operation of law, in which case any such
transferee shall agree to be bound hereby), sell, exchange, pledge or otherwise
dispose of or encumber any Shares, or to make any offer or agreement relating
thereto, at any time prior to the Expiration Date.
2. Agreement to Vote Shares. Prior to the Expiration Date, at every meeting
of the shareholders of Company at which any of the following is considered or
voted upon, and at every adjournment thereof, and on every action or approval by
written resolution of the shareholders of Company with respect to any of the
following, each Shareholder shall vote, or, using such Shareholder's best
efforts, and to the full extent legally permitted, cause the holder of record to
vote the Shares as to which such Shareholder then has voting control, in favor
of approval and adoption of the Merger Agreement and of the Transaction.
B-1
<PAGE>
Notwithstanding the foregoing, nothing in this Agreement shall limit or
restrict any Shareholder from (i) acting in his or her capacity as a director or
officer of Company, to the extent applicable, it being understood that this
Agreement shall apply to each Shareholder solely in his or her capacity as a
shareholder of Company or (ii) voting in his or her sole discretion on any
matter other than those matters referred to in the first paragraph of this
Section 2.
3. Irrevocable Proxy. Each Shareholder hereby agrees to timely deliver to
Parent a duly executed proxy in the form attached hereto as Annex A (the
'Proxy'), such Proxy to cover the Shares in respect of which such Shareholder is
entitled to vote at each meeting of the shareholders of Company and held by such
Shareholder as of the record date for such meeting (including, without
limitation, each written consent in lieu of a meeting). In the event that any
Shareholder is unable to provide any such Proxy in a timely manner, such
Shareholder hereby grants Parent a power of attorney to execute and deliver such
Proxy for and on behalf of such Shareholder, such power of attorney, which being
coupled with an interest, shall survive any death, disability, bankruptcy or any
other such impediment of such Shareholder. Upon the execution of this Agreement
by each Shareholder, such Shareholder hereby revokes any and all prior proxies
or powers of attorney given by such Shareholder with respect to the Shares and
agrees not to grant any subsequent proxies or powers of attorney with respect to
the Shares until after the Expiration Date.
4. Representations, Warranties and Covenants of Shareholder. Each
Shareholder hereby represents, warrants and covenants to Parent as follows:
(a) Each Shareholder has full power, authority and legal capacity to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by such Shareholder and constitutes the valid
and binding obligation of such Shareholder, enforceable against such Shareholder
in accordance with its terms, except as may be limited by (i) the effect of
bankruptcy, insolvency, conservatorship, arrangement, moratorium or other laws
affecting or relating to the rights of creditors generally, or (ii) the rules
governing the availability of specific performance, injunctive relief or other
equitable remedies and general principles of equity, regardless of whether
considered in a proceeding in equity or at law. The execution and delivery of
this Agreement by such Shareholder does not, and the performance of such
Shareholder's obligations hereunder will not, result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any right to terminate, amend,
accelerate or cancel any right or obligation under, or result in the creation of
any lien or encumbrance on any Shares pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which such Shareholder is a party or by which such
Shareholder or the Shares are or will be bound or affected.
(b) Except to the extent otherwise permitted under Section 6.04 of the
Merger Agreement, until the Expiration Date, each Shareholder, in the
Shareholder's capacity as a Shareholder, will not (and will use such
Shareholder's reasonable best efforts to cause its affiliates, officers,
directors and employees and any investment banker, attorney, accountant or other
agent retained by such Shareholder, not to): (i) initiate or solicit, directly
or indirectly, any proposal, plan or offer to acquire all or any material part
of the business or properties or capital stock of Company, whether by merger,
purchase of assets, tender offer or otherwise, or to liquidate Company or
otherwise distribute to the shareholders of Company all or any substantial part
of the business, properties or capital stock of Company (each, an 'Acquisition
Proposal'); (ii) initiate, directly or indirectly, any contact with any person
in an effort to or with a view towards soliciting any Acquisition Proposal;
(iii) furnish information concerning Company's business, properties or assets to
any corporation, partnership, person or other entity or group (other than
Parent, or any associate, agent or representative of Parent) under any
circumstances that could reasonably be expected to relate to an actual or
potential Acquisition Proposal; or (iv) negotiate or enter into discussions or
an agreement, directly or indirectly, with any entity or group with respect of
any potential Acquisition Proposal. In the event any Shareholder, in such
Shareholder's capacity as a Shareholder, shall receive or become aware of any
Acquisition Proposal subsequent to the date hereof, such
B-2
<PAGE>
Shareholder shall promptly inform Parent as to any such matter and the details
thereof to the extent possible without breaching any other agreement to which
such Shareholder is a party or violating its fiduciary duties.
(c) Each Shareholder understands and agrees that if any Shareholder attempts
to vote or provide any other person with the authority to vote any of the Shares
held by such Shareholder as of the record date for any meeting at which such
Shares are to be voted other than in compliance with this Agreement, Company
shall not, and such Shareholder hereby unconditionally and irrevocably instructs
Company to not record such vote unless and until such Shareholder shall have
complied with the terms of this Agreement.
5. No Limitation on Discretion as Director. If any Shareholder is a natural
person and is a member of the board of directors of Company, then this Agreement
will apply to the exercise by such Shareholder in his or her individual capacity
of rights attaching to ownership of the Shares, and nothing herein shall be
deemed to apply to, or to limit in any manner the discretion of such Shareholder
with respect to, any action which may be taken or omitted by him or her acting
in his or her fiduciary capacity as a director of Company.
6. Additional Documents. Each Shareholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Parent, to carry out the purpose and intent of this
Agreement.
7. Consent and Waiver. Each Shareholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Transaction under the
terms of any agreement to which such Shareholder is a party; provided, however,
that such Shareholder shall not be required by this Section 7 to give any
consent or deliver in his or her capacity as a director or officer of Company.
8. Termination. This Agreement and the Proxy delivered in connection
herewith shall terminate and shall have no further force or effect as of the
Expiration Date.
9. Confidentiality. Each Shareholder agrees (i) to hold any information
regarding this Agreement and the Transaction in strict confidence, and (ii) not
to divulge any such information to any third person, except to the extent any of
the same is hereafter publicly disclosed by Parent.
10. Miscellaneous.
10.1 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
10.2 Binding Effect and Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but, except as otherwise
specifically provided herein, neither this Agreement nor any of the rights,
interests or obligations of the parties hereto may be assigned by either of the
parties without the prior written consent of the other. This Agreement is
intended to bind each Shareholder solely as a securityholder of Company only
with respect to the specific matters set forth herein.
10.3 Amendment and Modification. This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.
10.4 Specific Performance; Injunctive Relief. The parties hereto acknowledge
that Parent will be irreparably harmed and that there will be no adequate remedy
at law for a violation of any of the covenants or agreements of each Shareholder
set forth herein. Therefore, it is agreed that, in addition to any other
remedies that may be available to Parent upon any such violation, Parent shall
have the right to enforce such covenants and agreements by specific performance,
injunctive relief or by any other means available to Parent at law or in equity.
10.5 Notices. All notices, requests, demands or other communications that
are required or may be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed to have
B-3
<PAGE>
been duly given (a) when delivered, if delivered by hand, (b) one business day
after transmitted, if transmitted by a nationally recognized overnight courier
service, (c) when telecopied, if telecopied (which is confirmed), or (d) three
business days after mailing, if mailed by registered or certified mail (return
receipt requested), to the parties at the following addresses:
(a) If to any Shareholder, at the address set forth below such Shareholder's
signature at the end hereof.
(b) if to Parent, to:
DoubleClick Inc.
450 West 33rd Street
New York, New York 10001
Attention: Elizabeth Wang, General Counsel
Facsimile No: (212) 287-9704
with a copy to:
Brobeck, Phleger & Harrison LLP
1633 Broadway, 47th Floor
New York, New York 10019
Attention: Eric Simonson
Facsimile No.: (212) 586-7878
or to such other address as any party hereto may designate for itself by notice
given as herein provided.
10.6 Governing Law. This Agreement shall be governed by, construed and
enforced in accordance with the internal laws of the State of New York without
giving effect to the principles of conflicts of law thereof.
10.7 Entire Agreement. This Agreement and the Proxy contain the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
10.8 Counterpart. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
10.9 Effect of Headings. The section headings herein are for convenience
only and shall not affect the construction or interpretation of this Agreement.
[Remainder of page intentionally left blank.]
B-4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Company Shareholders'
Agreement to be executed as of the date first above written.
<TABLE>
<CAPTION>
DOUBLECLICK INC. SHAREHOLDER
<S> <C>
By: ..................................... ............................................
(Signature)
Name: ..................................... ............................................
(Print Name of Shareholder)
Title: ................................... ............................................
(Print Street Address)
............................................
(Print City, State and Zip)
............................................
(Print Telephone Number)
............................................
(Print Facsimile Number)
............................................
(Social Security or Tax I.D. Number)
</TABLE>
Total Number of Shares of Company Capital Stock owned on the date hereof:
Common Stock: ....................
State of Residence: .................
Total Number of Shares of Company Capital Stock subject to this Agreement:
Common Stock: ....................
B-5
<PAGE>
ANNEX A
IRREVOCABLE PROXY
TO VOTE STOCK OF
NETCREATIONS, INC.
The undersigned shareholder of NetCreations, Inc., a New York corporation
('Company'), hereby irrevocably (to the full extent permitted by New York
Business Corporation Law) appoints the members of the board of directors of
DoubleClick Inc., a Delaware corporation ('Parent'), and each of them, or any
other designee of Parent, as the sole and exclusive attorneys and proxies of the
undersigned, with full power of substitution and resubstitution, to vote and
exercise all voting and related rights (to the full extent that the undersigned
is entitled to do so) with respect to the shares of capital stock of Company
indicated on the signature page hereto that are beneficially owned by the
undersigned (collectively, the 'Shares') in accordance with the terms of this
Irrevocable Proxy until the Expiration Date (as defined below). Upon the
undersigned's execution of this Irrevocable Proxy, any and all prior proxies
given by the undersigned with respect to any Shares are hereby revoked and the
undersigned agrees not to grant any subsequent proxies with respect to the
Shares until after the Expiration Date.
This Irrevocable Proxy is irrevocable (to the extent provided in New York
Business Corporation Law) until the Expiration Date, is coupled with an interest
and is granted in consideration of Parent entering into that certain Agreement
and Plan of Merger and Reorganization (the 'Merger Agreement'), among Parent,
Genesis Merger Sub, Inc., a New York corporation and a wholly owned subsidiary
of Parent ('Merger Sub'), and Company, which Merger Agreement provides for the
merger of Merger Sub with and into Company (the 'Merger'). As used herein, the
term 'Expiration Date' shall mean the earlier to occur of (i) such date and time
as the Merger shall become effective in accordance with the terms and provisions
of the Merger Agreement, and (ii) the date of termination of the Merger
Agreement.
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other rights of the undersigned with respect to the
Shares (including, without limitation, the power to execute and deliver written
consents pursuant to the New York Business Corporation Law), at every annual,
special or adjourned meeting of the shareholders of Company and in every written
consent in lieu of such meeting, in favor of approval and adoption of the Merger
Agreement and of the transactions contemplated thereby.
The attorneys and proxies named above may not exercise this Irrevocable
Proxy on any other matter except as provided above. The undersigned shareholder
may vote the Shares on all other matters.
All authority herein conferred shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.
This Irrevocable Proxy is coupled with an interest as aforesaid and is
irrevocable.
Dated: October 2, 2000
.....................................
(Signature of Shareholder)
.....................................
(Print Name of Shareholder)
Shares subject to this Irrevocable
Proxy:
........... shares of Company Common
Stock
B-6
<PAGE>
APPENDIX C
[ROBERTSON STEPHENS, INC. LETTERHEAD]
October 2, 2000
Board of Directors
NetCreations, Inc.
379 West Broadway, Suite 202
New York, NY 10012
Members of the Board:
We understand that NetCreations, Inc. ('NetCreations'), DoubleClick Inc.
('DoubleClick') and Genesis Merger Sub, Inc. (a wholly owned subsidiary of
DoubleClick, 'Merger Sub') are proposing to enter into an Agreement and Plan of
Reorganization (the 'Agreement'), which will provide, among other things, for
the merger (the 'Merger') of Merger Sub with and into NetCreations. Upon
consummation of the Merger, NetCreations will become a wholly owned subsidiary
of DoubleClick. Under the terms set forth in a draft of the Agreement dated
September 27, 2000 (the 'Draft Agreement'), at the effective time of the Merger
(the 'Effective Time'), each share of common stock of NetCreations, no par value
('NetCreations Common Stock'), issued and outstanding immediately prior to the
Effective Time, other than certain shares to be canceled pursuant to the
Agreement and shares held by shareholders who properly exercise dissenters'
rights ('Dissenting Shares'), will be converted into the right to receive 0.41
(the 'Exchange Ratio') shares of the common stock of DoubleClick ('DoubleClick
Common Stock'). The terms and conditions of the Merger are set out more fully in
the Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair from a
financial point of view and as of the date hereof to the 'Holders of
NetCreations Common Stock.' The 'Holders of NetCreations Common Stock' shall be
defined as all holders of NetCreations Common Stock other than DoubleClick,
Merger Sub, any affiliates of DoubleClick or Merger Sub or any holders of
Dissenting Shares.
For purposes of this opinion we have, among other things:
(i) reviewed certain publicly available financial statements and other
business and financial information of NetCreations and DoubleClick,
respectively;
(ii) reviewed certain financial forecasts and other forward-looking
financial information relating to NetCreations and DoubleClick
prepared by the managements of NetCreations and DoubleClick,
respectively;
(iii) reviewed certain financial forecasts and other forward looking
financial information relating to NetCreations and DoubleClick
prepared by the managements of NetCreations and DoubleClick,
respectively;
(iv) held discussions with the respective managements of NetCreations and
DoubleClick concerning the businesses, past and current operations,
financial condition and future prospects of both NetCreations and
DoubleClick, independently and combined, including discussions with
the managements of NetCreations and DoubleClick concerning their views
regarding the strategic rationale for the Merger;
(v) reviewed the financial terms and conditions set forth in the Draft
Agreement;
(vi) reviewed the stock price and trading history of NetCreations and
DoubleClick;
(vii) compared the financial performance of NetCreations and DoubleClick
and the prices and trading activity of NetCreations Common Stock and
DoubleClick Common Stock with that of certain other publicly traded
companies comparable with NetCreations and DoubleClick, respectively;
C-1
<PAGE>
(viii) compared the financial terms of the Merger with the financial terms,
to the extent publicly available, of other transactions that we
deemed relevant;
(ix) reviewed the pro forma impact of the Merger on DoubleClick's revenue
and earnings per share;
(x) reviewed and considered in the analysis, information prepared by
members of management of NetCreations and DoubleClick relating to the
relative contributions of NetCreations and DoubleClick to the
combined company;
(xi) prepared a discounted cash flow analysis of NetCreations;
(xii) participated in discussions and negotiations among representatives of
NetCreations and DoubleClick and their financial and legal advisors;
and
(xiii) made such other studies and inquiries, and reviewed such other data,
as we deemed relevant.
In our review and analysis, and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us (including information furnished to us orally or
otherwise discussed with us by management of NetCreations and DoubleClick) or
publicly available and have neither attempted to verify, nor assumed
responsibility for verifying, any of such information. We have relied upon the
assurances of management of NetCreations and DoubleClick that they are not aware
of any facts that would make such information inaccurate or misleading.
Furthermore, we did not obtain or make, or assume any responsibility for
obtaining or making, any independent evaluation or appraisal of the properties,
assets or liabilities (contingent or otherwise) of NetCreations or DoubleClick,
nor were we furnished with any such evaluation or appraisal. With respect to the
financial forecasts and projections (and the assumptions and bases therefor) for
each of NetCreations and DoubleClick that we have reviewed, upon the advice of
the managements of NetCreations and DoubleClick, we have assumed that such
forecasts and projections have been reasonably prepared in good faith on the
basis of reasonable assumptions and reflect the best currently available
estimates and judgments as to the future financial condition and performance of
NetCreations and DoubleClick, respectively, and we have further assumed that
such projections and forecasts will be realized in the amounts and in the time
periods currently estimated. We have assumed that the Merger will be consummated
upon the terms set forth in the Draft Agreement without material alteration
thereof, including, among other things, that the Merger will be accounted for as
a 'purchase method' business combination in accordance with U.S. generally
accepted accounting principles ('GAAP') and that the Merger will be treated as a
tax-free reorganization pursuant to the Internal Revenue Code of 1986, as
amended. In addition, we have assumed that the historical financial statements
of each of NetCreations and DoubleClick reviewed by us have been prepared and
fairly presented in accordance with GAAP consistently applied. We have relied as
to all legal matters relevant to rendering our opinion on the advice of counsel.
This opinion is necessarily based upon market, economic and other conditions
as in effect on, and information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect the conclusion
expressed in this opinion and that we disclaim any undertaking or obligation to
advise any person of any change in any matter affecting this opinion which may
come or be brought to our attention after the date of this opinion. Our opinion
is limited to the fairness, from a financial point of view and as to the date
hereof, of the Exchange Ratio to the Holders of NetCreations Common Stock. We do
not express any opinion as to (i) the value of any employee agreement or other
arrangement entered into in connection with the Merger, (ii) any tax or other
consequences that might result from the Merger or (iii) what the value of
DoubleClick Common Stock will be when issued to NetCreations' shareholders
pursuant to the Merger or the price at which the shares of DoubleClick Common
Stock that are issued pursuant to the Merger may be traded in the future. Our
opinion does not address the relative merits of the Merger and the other
business strategies that NetCreations' Board of Directors has considered or may
be considering, nor does it address the decision of NetCreations' Board of
Directors to proceed with the Merger.
C-2
<PAGE>
We are acting as financial advisor to NetCreations in connection with the
Merger and will receive (i) a fee contingent upon the delivery of this opinion
and (ii) an additional fee contingent upon the consummation of the Merger. In
addition, NetCreations has agreed to indemnify us for certain liabilities that
may arise out of the rendering of this opinion. We maintain a market in the
shares of DoubleClick Common Stock. In the ordinary course of business, we may
trade in NetCreations' securities and DoubleClick's securities for our own
account and the account of our customers and, accordingly, may at any time hold
a long or short position in NetCreations' securities or DoubleClick's
securities.
Our opinion expressed herein is provided for the information of the Board of
Directors of NetCreations in connection with its evaluation of the Merger. Our
opinion is not intended to be and does not constitute a recommendation to any
shareholder of NetCreations as to how such shareholder should vote, or take any
other action, with respect to the Merger. This opinion may not be summarized,
described or referred to or furnished to any party except with our express prior
written consent.
Based upon and subject to the foregoing considerations, it is our opinion
that, as of the date hereof, the Exchange Ratio is fair to the Holders of
NetCreations Common Stock from a financial point of view.
Very truly yours,
ROBERTSON STEPHENS, INC.
/s/ ROBERTSON STEPHENS, INC.
.....................................
C-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The amended and restated certificate of incorporation of DoubleClick (the
'Registrant') provides that, except to the extent prohibited by the Delaware
General Corporation Law (the 'DGCL'), no director of the Registrant shall be
personally liable to the Registrant or its stockholders for monetary damages for
any breach of fiduciary duty as a director. Under the DGCL, the directors have a
fiduciary duty to the Registrant which is eliminated by this provision of the
amended and restated certificate of incorporation and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
nonmonetary relief will remain available. In addition, each director will
continue to be subject to liability under the DGCL for breach of the director's
duty of loyalty to the Registrant, for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are prohibited by the DGCL. This provision
also does not affect the directors' responsibilities under any other laws, such
as the federal securities laws or state or federal environmental laws. The
Registrant has obtained liability insurance for its officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of the director: (i) for any breach
of the director's duty of loyalty to the corporation or its shareholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) arising under Section 174 of the DGCL, or
(iv) for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's certificate of incorporation or
bylaws, any agreement, a vote of shareholders or otherwise. The Registrant's
amended and restated certificate of incorporation eliminates the personal
liability of directors to the fullest extent permitted by the DGCL and provides
that the Registrant shall fully indemnify any person who was or is a party or is
threatened to be made a party to, any threatened, pending or completed action,
suite or proceeding (whether civil, criminal, administrative or investigative)
by reason of the fact that such person is or was a director or officer of the
Registrant, or is or was serving at the request of the Registrant as a director
or officer of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or proceeding.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Registrant's certificate of incorporation. The
Registrant is not aware of any threatened litigation or proceeding that may
result in a claim for such indemnification.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2.1 -- Agreement and Plan of Merger and Reorganization, dated as
of October 2, 2000, among the Registrant, Genesis Merger
Sub, Inc. and NetCreations, Inc. (attached as Appendix A
to the proxy statement/prospectus contained in this
registration statement).
4.1 -- Specimen certificate representing shares of Common Stock
(incorporated by reference to Exhibit 4.1 to the
Registrant's registration statement on Form S-1 (Reg. No.
333-42323)).
5.1 -- Opinion of Brobeck, Phleger & Harrison LLP regarding the
legality of the securities being issued.
8.1 -- Opinion of Piper Marbury Rudnick & Wolfe LLP, as to
certain federal income tax consequences of the merger.
23.1 -- Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
23.2 -- Consent of Piper Marbury Rudnick & Wolfe LLP (included in
Exhibit 8.1).
23.3 -- Consent of PricewaterhouseCoopers LLP with respect to the
Registrant's financial statements.
23.4 -- Consent of KPMG LLP with respect to NetGravity Inc.'s
financial statements.
23.5 -- Consent of Grant Thornton LLP with respect to
NetCreations' financial statements.
24.1 -- Power of Attorney, included on the signature page of this
Registration Statement.
99.1 -- Form of NetCreations Proxy Card.
99.2 -- Consent of Robertson Stephens, Inc.
99.3 -- Section captioned 'Risk Factors' contained in the
@plan.inc Annual Report on Form 10-K for the year ended
December 31, 1999 (Commission File No. 000-27923).
</TABLE>
(c) Opinion of Robertson Stephens, Inc., attached as Appendix C to the proxy
statement/prospectus which is part of this registration statement.
ITEM 22. UNDERTAKINGS
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 (the 'Securities Act');
(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 percent 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;
(2) That, for the purpose of determining any liability under the
Securities Act, each 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;
II-2
<PAGE>
(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;
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a)
or 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;
(5) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue;
(6) That, prior to any public reoffering of the securities registered
hereunder through use of a prospectus, which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act, such reoffering prospectus
will contain the information called for by the applicable registration form
with respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form;
(7) That every prospectus (i) that is filed pursuant to paragraph (6)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes 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;
(8) That, 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 this
registration statement as of the time it was declared effective;
(9) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus, shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof;
(10) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of
Form S-4, within one business day of receipt of such request, and to send
the incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed subsequent to
the effective date of this Registration Statement through the date of
responding to the request; and
(11) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in this Registration Statement when
it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in The City of New York,
State of New York, on this 7th day of November, 2000.
DOUBLECLICK INC.
By: /S/ KEVIN P. RYAN
..................................
KEVIN P. RYAN
CHIEF EXECUTIVE OFFICER
AND DIRECTOR
POWER OF ATTORNEY
We, the undersigned directors and/or officers of DoubleClick Inc. (the
'Company'), hereby severally constitute and appoint Kevin P. Ryan, and Stephen
R. Collins, and each of them individually, with full powers of substitution and
resubstitution, our true and lawful attorneys, with full powers to them and each
of them to sign for us, in our names and in the capacities indicated below, the
Registration Statement on Form S-4 filed with the Securities and Exchange
Commission, and any and all amendments to said Registration Statement (including
post-effective amendments), and any registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended, of equity securities
of the Company, and to file or cause to be filed the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys, and each of them, full power
and authority to do and perform each and purposes as each and every act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as each of them might or could do in person, and hereby
ratifying and confirming all that said attorneys, and each of them, or their
substitute or substitutes, shall do or cause to be done by virtue of this Power
of Attorney.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ KEVIN J. O'CONNOR Chairman of the Board November 7, 2000
.........................................
KEVIN J. O'CONNOR
/s/ KEVIN P. RYAN Chief Executive Officer and Director November 7, 2000
.........................................
KEVIN P. RYAN
/s/ DWIGHT A. MERRIMAN Chief Technical Officer and Director November 7, 2000
.........................................
DWIGHT A. MERRIMAN
/s/ DAVID N. STROHM Director November 7, 2000
.........................................
DAVID N. STROHM
/s/ MARK E. NUNNELLY Director November 7, 2000
.........................................
MARK E. NUNNELLY
/s/ THOMAS S. MURPHY Director November 7, 2000
.........................................
THOMAS S. MURPHY
/s/ W. GRANT GREGORY Director November 7, 2000
.........................................
W. GRANT GREGORY
/s/ DON PEPPERS Director November 7, 2000
.........................................
DON PEPPERS
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2.1 Agreement and Plan of Merger and Reorganization, dated as of
October 2, 2000, among the Registrant, Genesis Merger Sub,
Inc. and NetCreations, Inc. (attached as Appendix A to the
proxy statement/prospectus contained in this registration
statement).
4.1 Specimen certificate representing shares of Common Stock
(incorporated by reference to Exhibit 4.1 to the
Registrant's registration statement on Form S-1 (Reg.
No. 333-42323)).
5.1 Opinion of Brobeck, Phleger & Harrison LLP regarding the
legality of the securities being issued.
8.1 Opinion of Piper Marbury Rudnick & Wolfe LLP as to certain
federal income tax consequences of the merger.
23.1 Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
23.2 Consent of Piper Marbury Rudnick & Wolfe LP (included in
Exhibit 8.1).
23.3 Consent of PricewaterhouseCoopers LLP with respect to the
Registrant's financial statements.
23.4 Consent of KPMG LLP with respect to NetGravity Inc.'s
financial statements.
23.5 Consent of Grant Thornton LLP with respect to NetCreations'
financial statements.
24.1 Power of Attorney, included on the signature page of this
Registration Statement.
99.1 Form of NetCreations Proxy Card.
99.2 Consent of Robertson Stephens, Inc.
99.3 Section captioned 'Risk Factors' contained in the @plan.inc
Annual Report on Form 10-K for the year ended December 31,
1999 (Commission File No. 000-27923).
</TABLE>
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as 'r'
