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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ROWECOM INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 5961 04-3370008
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Numbers) Identification No.)
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15 SOUTHWEST PARK
WESTWOOD, MA 02090
(617) 497-5800
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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RICHARD R. ROWE, PH.D.
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
ROWECOM INC.
15 Southwest Park
Westwood, MA 02090
(617) 497-5800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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WITH COPIES TO:
BRIAN KEELER, ESQ.
JOHAN V. BRIGHAM, ESQ.
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
(617) 951-8000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME
TO TIME AS DESCRIBED IN THIS PROSPECTUS AFTER THE EFFECTIVE DATE.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(1) PRICE(2) REGISTRATION FEE
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Common Stock, par value $.01 per share 617,500 $4.9375 $3,048,906.20 $805
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(1) Shares of common stock that may be offered pursuant to this Registration
Statement consist of 617,500 shares issuable upon exercise of outstanding
stock purchase warrants held by the selling stockholders named herein.
(2) Estimated solely for the purpose of determining the registration fee.
Calculated in accordance with Rule 457(c), based on the purchase price of
$4.9375 per share, which is the average of high and low prices reported in
the consolidated reporting system of the Nasdaq National Market on June
28, 2000. It is not known how many shares will be purchased under this
Registration Statement or at what price such shares will be purchased.
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 SECTION 8(a), MAY
DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD UNTIL THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO
SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY IN ANY STATE IN
WHICH AN OFFER, SOLICITATION OR SALE IS NOT PERMITTED.
[LOGO]
ROWECOM INC.
COMMON STOCK
This prospectus relates to 617,500 shares of common stock of RoweCom Inc.
which may be sold from time to time by the selling securityholders, listed
elsewhere in this prospectus, or their transferees, pledgees, donees or
successors.
The shares are being registered to permit the selling securityholders to sell
the shares from time to time in the public market. The selling securityholders
may sell the common stock through ordinary brokerage transactions, directly to
market makers of our shares, or through any other means described in the section
entitled "Plan of Distribution." We cannot assure you that the selling
securityholders will sell all or any portion of the common stock offered hereby.
The selling securityholders are selling these shares for their own accounts.
Except for payment of the exercise price of the warrants, we will not receive
any of the proceeds from the sale of these shares, although we have paid the
expenses of preparing this prospectus and the related registration statement.
Our common stock is traded on the Nasdaq National Market under the symbol
"ROWE."
On June 27, 2000, the last reported sale price of our stock was $4.9375
per share.
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INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS," BEGINNING ON
PAGE 5.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 2000.
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WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR
ANY PROSPECTUS SUPPLEMENT. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION.
NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT IS AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THESE SECURITIES IN ANY JURISDICTION
WHERE AN OFFER OR SOLICITATION IS NOT PERMITTED. NO SALE MADE PURSUANT TO THIS
PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN OUR AFFAIRS SINCE THE DATE OF THIS PROSPECTUS.
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ROWECOM(R) AND THE ROWECOM LOGOS ARE REGISTERED TRADEMARKS OF ROWECOM.
KSTORE(TM) AND KLIBRARY(TM) ARE TRADEMARKS/SERVICE MARKS OF ROWECOM.
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TABLE OF CONTENTS
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WHERE YOU CAN FIND MORE INFORMATION............................................. 3
THE COMPANY..................................................................... 4
RISK FACTORS.................................................................... 5
SPECIAL NOTE REGARDING FORWARD-LOOKING ESTATEMENTS.............................. 14
USE OF PROCEEDS................................................................. 14
SELLING SECURITYHOLDERS......................................................... 15
PLAN OF DISTRIBUTION............................................................ 16
DESCRIPTION OF SECURITIES....................................................... 18
EXPERTS......................................................................... 22
LEGAL MATTERS................................................................... 22
DOCUMENTS INCORPORATED BY REFERENCE............................................. 23
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IN THIS PROSPECTUS, THE WORDS "WE," "OUR," AND "US" REFER ONLY TO
ROWECOM INC. AND NOT TO THE SELLING SECURITYHOLDERS OR ANY OTHER PERSON.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-3, including exhibits, schedules and amendments filed with
this registration statement, under the Securities Act with respect to the shares
of common stock to be sold in this offering. This prospectus does not contain
all of the information set forth in the registration statement and exhibits and
schedules thereto. For further information with respect to RoweCom and the
shares of common stock to be sold in this offering, reference is made to the
registration statement, including the exhibits and schedules thereto. Statements
contained in this prospectus as to the contents of any contract or other
document referred to herein are not necessarily complete and, where that
contract is an exhibit to the registration statement, each statement is
qualified in all respects by exhibit to which the reference relates.
Copies of the registration statement, including the exhibits and schedules
thereto, and the quarterly and other reports and proxy statements we file with
the Securities and Exchange Commission may be examined without charge at the
public reference room of the Securities and Exchange Commission, 450 Fifth
Street, N.W. Room 1024, Washington, DC 20549, and the Securities and Exchange
Commission's Regional Offices located at 500 West Madison Street, Suite 1400,
Chicago, IL 60601, and 7 World Trade Center, 13th Floor, New York, NY 10048.
Information about the operation of the public reference room may be obtained by
calling the Securities and Exchange Commission at 1-800-SEC-0300. Copies of all
or a portion of the registration statement can be obtained from the public
reference room of the Securities and Exchange Commission upon payment of
prescribed fees. Our Securities and Exchange Commission filings, including our
registration statement, are also available to you on the Securities and Exchange
Commission's Web site (http://www.sec.gov).
You can obtain documents incorporated by reference in this prospectus without
charge by requesting them in writing or by telephone from us at the
following addresses and telephone numbers:
RoweCom Inc.
15 Southwest Park
Westwood, MA 02090
Attention: Investor Relations
Telephone: (617) 497-5800
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THE COMPANY
We are the leading business-to-business provider of e-commerce solutions for
purchasing and managing the acquisition of magazines, newspapers, journals and
e-journals, books and other printed sources of commercial, scientific and
general interest information and analysis. We refer to these products as
"knowledge resources." We offer our clients and their employees easy and
convenient access to the largest catalog of knowledge resources on the Internet.
We also provide businesses with a highly effective means of managing and
controlling purchases of knowledge resources and reducing costs. We target
clients in knowledge-intense industries, such as business and financial
services; biomedical; academic and the federal government; and corporate and
professional services. We are headquartered in Westwood, Massachusetts, and have
several offices in North America, Spain, France, the United Kingdom and
Australia.
We were organized as a Delaware corporation in April 1997 as the eventual
successor to a corporation that commenced operations in 1994. Our World Wide Web
site address is www.rowe.com. The information on our Web site is not
incorporated by reference into this prospectus. Our principal executive offices
are located at 15 Southwest Park, Westwood, Massachusetts, 02090, and our
telephone number if (617) 497-5800.
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RISK FACTORS
YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING RISKS, ALONG WITH THE OTHER
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. THE RISKS
AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES WHICH MAY AFFECT
ROWECOM. ADDITIONAL RISKS AND UNCERTAINTIES MAY ALSO ADVERSELY AFFECT OUR
BUSINESS AND OPERATIONS. IF ANY OF THE FOLLOWING EVENTS ACTUALLY OCCURS, OUR
BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS WOULD LIKELY SUFFER,
POSSIBLY MATERIALLY.
WE HAVE A LIMITED OPERATING HISTORY AND ARE SUBJECT TO THE RISKS OF START-UP
COMPANIES.
We began operations in 1994, did not generate significant revenues until March
1996 and began offering the kStore, our flagship product, in June 1997.
Consequently, we have a limited operating history and our prospects are subject
to the risks and uncertainties frequently encountered by start-up companies,
particularly in the new and rapidly evolving markets for Internet products and
services. These risks include:
- the failure to maintain our leadership position through enhancement of
our services and catalog of magazines, newspapers, journals and
e-journals, books and other knowledge resources;
- the failure to significantly and rapidly increase our client base;
- the development by competitors of services similar or superior to the
services we offer;
- the failure to increase penetration of our existing client base;
- the failure of businesses to widely adopt intranets and the Internet
as means for purchasing subscriptions and books; and
- the inability to identify, attract, retain and motivate qualified
personnel.
We may not be successful in addressing these risks and our failure to do so
could have a material adverse effect on our future results of operations and
financial condition.
WE HAVE A HISTORY OF LOSSES AND WILL PROBABLY CONTINUE TO INCUR NET LOSSES.
We have not achieved profitability on a quarterly or annual basis to date and
anticipate that we will continue to incur net losses for at least the near to
medium term. At March 31, 2000, we had an accumulated deficit of $44.3
million. Although we have experienced revenue growth in recent periods,
including through the completion of acquisitions, our revenues may not
continue at their current level or increase in the future. We establish our
expenditure levels for product development, sales and marketing and other
operating expenses based, in large part, on expected future revenues. We
currently expect to increase our operating expenses significantly in
connection with expansion of our sales and marketing operations and continued
development of our services and catalog. To the extent that these expenses
are not promptly followed by increased revenues, our future results of
operations and financial condition could be materially and adversely affected.
OUR QUARTERLY REVENUES ARE LIKELY TO FLUCTUATE, WHICH MAY HAVE AN IMPACT ON OUR
STOCK PRICE.
Our quarterly revenues, expenses and operating results have varied
significantly in the past and are likely to vary significantly from quarter
to quarter in the future. As a result, our operating results may fall below
market analysts' expectations in some future quarters, which could have a
material adverse effect on the market price of our stock. Delays in client
orders can cause our revenues and results of operations to significantly
fluctuate from period to period. Quarterly fluctuations may also result from
factors such as:
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- our ability to enhance our relationships with existing clients;
- obtaining new accounts;
- changes in our operating expenses;
- changes in the mix of knowledge resources sold;
- increased competition; and
- general economic factors.
Based upon all of these factors, we believe that quarterly revenues, expenses
and operating results are likely to vary significantly in the future, that
period-to-period comparisons of results of operations are not necessarily
meaningful and that, as a result, such comparisons should not be relied upon as
indications of future performance.
OUR GROWTH IN REVENUE IS NOT A RELIABLE INDICATOR OF OUR PROSPECTS.
Our extremely limited operating history and the uncertain nature of the markets
in which we compete make the prediction of future results of operations
difficult or impossible. Therefore, our recent revenue growth should not be
taken as indicative of the rate of revenue growth, if any, that can be expected
in the future. We believe that period-to-period comparisons of our results
should not be relied upon as an indication of future performance.
WE CURRENTLY RECEIVE SUBSTANTIALLY ALL OF OUR REVENUES FROM A SINGLE PRODUCT.
We currently derive substantially all of our revenues from the sale of knowledge
resources, which we sell principally through our kStore. Currently, some of the
companies we have acquired do not yet have a comparable product to the kStore,
however, they are no less dependent upon the sale of knowledge resources for
their revenues. Any decline in demand for knowledge resources, an inability to
integrate the kStore sales model into the companies we have recently acquired to
efficiently sell knowledge resources, or an inability of the kStore to penetrate
new markets as a result of competition, technological change or other factors
would have a material adverse effect on our future results of operations and
financial condition.
WE DEPEND IN PART ON UNPROVEN STRATEGIC ALLIANCES FOR GROWTH.
We have recently entered into several other important strategic alliances and
our prospects depend significantly upon the development of these relationships.
If these and any future strategic relationships into which we are able to enter
do not generate significant levels of revenue, or are terminated or expire, our
ability to become profitable could be adversely affected to a material extent.
We intend to continue to actively seek strategic partners and are relying on
such partnerships to generate a significant portion of RoweCom's growth in the
medium term. RoweCom's strategic relationships, many of which have not yet
generated significant amounts of revenue, are as yet unproven.
If our marketing and content arrangements with our strategic partners were
lessened, curtailed, or otherwise modified, we might not be able to replace or
supplement such marketing efforts or the content provided by such partners alone
or with other companies. If these partners, which do not currently compete with
us, were to reduce their joint marketing activities with us, further develop and
market their own business-to-business service for purchasing and managing the
acquisition of subscriptions and books, or market such services developed by a
competitor, our business, results of operations and financial condition would be
materially and adversely affected.
FUTURE ACQUISITIONS COULD HARM OUR BUSINESS.
We evaluate potential acquisitions on an ongoing basis. Acquisitions pose many
risks, including that:
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- we may not be able to compete successfully for available acquisition
candidates, complete future acquisitions or accurately estimate the
financial effect on our company of any businesses we acquire;
- future acquisitions may require us to spend significant cash amounts
or may decrease our operating income;
- we may have trouble integrating the acquired business and retaining
personnel;
- acquisitions may disrupt our business and distract our management from
other responsibilities; and
- to the extent that any of the companies which we acquire fail, our
business could be harmed.
WE MAY HAVE DIFFICULTY IN MANAGING GROWTH.
Our business has grown rapidly in the last five years and must continue to do so
in order for us to become profitable. Total revenues have increased from
$324,000 in 1995 to $307.6 million in 1999. The number of our employees has
grown from nine at December 31, 1995 to 705 at December 31, 1999, and the scope
of our operating and financial systems has expanded significantly. This recent
rapid growth has placed and, if sustained, will continue to place, a significant
strain on our management and operations. Accordingly, our future operating
results will depend on the ability of our officers and other key employees to
continue to implement and improve our operational, client support and financial
control systems, and effectively expand, train and manage our employee base. We
cannot be certain that we will be able to manage any future expansion
successfully, and any inability to do so would have a material adverse effect on
our future results of operations and financial condition.
AN INABILITY TO SUCCESSFULLY INTEGRATE OUR DAWSON ACQUISITION COULD ADVERSELY
AFFECT OUR CURRENT OPERATIONS AND SUBJECT US TO ADDITIONAL FOREIGN REGULATION.
On October 4, 1999, we acquired all of the issued and outstanding capital stock
of Dawson, Inc., a Delaware corporation, and certain assets of U.K.-based Dawson
Information Services Group from its publicly held parent, Dawson Holdings Plc.
Dawson is engaged in the subscription services business, Web-based electronic
information delivery and library information management software and services
business. Integrating any newly acquired business or technologies is expensive
and time-consuming. The acquired business had over 500 employees, an extensive
customer base and a broad content offering. Accordingly, we cannot assure you
that we will be able to integrate Dawson's business and operations successfully
into our own. In order to manage our changing business, Dawson's management and
other key employees must be assimilated into our own existing structure.
However, we cannot assure you that we will be successful in retaining and
integrating Dawson's key employees. Our success depends largely on the ability
of our officers and key employees to operate effectively, both independently and
as a group, and this ability may be impeded by the diversion of management's
attention from other business concerns due to the Dawson acquisition. In
addition, we cannot assure you that our systems, procedures and controls will be
adequate to support the expansion and integration of our operations. In
connection with the Dawson acquisition, we intend to convert all of Dawson's
clients to our kStore or kLibrary from their existing services. We cannot assure
you that we will not lose a substantial number of Dawson clients in the
transition, which could lead to a decrease in Dawson's revenues.
We may not be able to operate the acquired business profitably, if at all.
Because Dawson is based in the United Kingdom with operations in France, Canada
and Spain, we will become subject to the laws and regulations of various
countries. We may not always be able to operate the international Dawson
business if we cannot comply with changes in tax and regulatory policies. Even
if we are able to comply, such compliance may be cost prohibitive, and may
result in the cessation of some or all of Dawson's international operations.
Any failure to successfully integrate Dawson into our business could materially
delay or prevent our ability to operate profitably.
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WE MAY HAVE TROUBLE OPERATING SUCCESSFULLY INTERNATIONALLY AS WE INTEGRATE OUR
FOREIGN ACQUISITIONS.
A part of our strategy is to continue to expand into foreign markets. We have
only recently begun to develop localized versions of our services and have
little experience marketing and operating our services internationally. It may
be difficult for us to do so successfully in the future. In order to expand
overseas, we have made strategic acquisitions and entered into relationships
with foreign business partners. In the third and fourth quarters of 1999, we
acquired certain operations of two foreign companies, Dawson Holdings Plc and
International Subscription Agencies Pty. Ltd., and have become an international
organization in a very short period of time. We may experience difficulty in
managing international operations because of distance, as well as language and
cultural differences, and there can be no assurance that we or our future
foreign business associates will be able to successfully market and operate our
services in foreign markets. We also believe that, in light of substantial
anticipated competition, it will be necessary to implement our business strategy
quickly in international markets to obtain a significant share of the market.
For a description of the risks associated with potentially rapid growth, see the
risk factors captioned "FUTURE ACQUISITIONS COULD HARM OUR BUSINESS" and "WE MAY
HAVE DIFFICULTY IN MANAGING GROWTH." In addition, we do not currently have the
content necessary to conduct operations in many foreign markets. We are unlikely
to be able to penetrate such markets unless we gain such content, either through
partnerships with publishers or other content-providers in such markets, or
possibly through additional acquisitions.
WE MAY ISSUE ADDITIONAL SHARES WHICH WOULD REDUCE YOUR OWNERSHIP PERCENTAGE AND
DILUTE THE VALUE OF YOUR SHARES
Certain events over which you have no control could result in the issuance of
additional shares of our common stock, which would dilute your ownership
percentage in RoweCom. We may issue additional shares of common stock or
preferred stock to raise additional capital or finance acquisitions or upon
the exercise or conversion of outstanding options and warrants. As of May 31,
2000, there were outstanding warrants and options to acquire up to
approximately 1,928,325 additional shares of common stock (including the
617,500 shares registered in this registration statement) at prices ranging
from $0.72 to $50.13 per share. If exercised, these securities will reduce
your percentage ownership of common stock and could dilute the value of your
shares. In addition, as disclosed in the preceding risk factor, the number of
shares that may be issued upon conversion of the notes could increase
substantially if the market price of our common stock decreases during the
period the notes are outstanding.
OUR PROSPECTS DEPEND ON OUR ABILITY TO SUCCEED AGAINST INTENSE COMPETITION IN
THE KNOWLEDGE RESOURCE SALES MARKET.
The market for the sale of magazines, newspapers, journals and e -journals,
books and other knowledge resources to businesses is intensely and increasingly
competitive. We cannot be certain that we will maintain our competitive position
against current and potential competitors, especially the significant number of
such competitors with greater name recognition and client bases and greater
financial, marketing, service, support, technical and other resources than we
have.
We have not yet had significant direct competition from other companies offering
a service for purchasing and managing the acquisition of subscriptions and books
with management control features comparable to those of the kStore. However, we
expect that such competition will develop in the near future and it may have an
adverse impact on our business. Many of our competitors may be able to respond
more quickly to new or emerging technologies and changes in client requirements,
and to devote greater resources to the development, promotion and sale of their
service than we can. It is possible that our current or potential competitors
will develop Internet-based services superior to those we have developed or
adapt more quickly than we have to new technologies, evolving industry trends or
changes in client requirements. Our market is still evolving and we cannot be
certain that we will be able to compete successfully with current or future
competitors, or that competitive pressures faced by us will not have a material
adverse effect on our future results of operations and financial condition.
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WE DEPEND ON REED ELSEVIER TO SUPPLY US WITH A SUBSTANTIAL NUMBER OF THE
KNOWLEDGE RESOURCES WE SELL.
The primary supplier of the magazines and journals whose subscriptions we sell
is Reed Elsevier, which supplied titles accounting for 23.3% and 15.8% of our
sales for the year ended December 31, 1998 and 1999, respectively. We currently
do not have a contract with Reed Elsevier. If Reed Elsevier stops offering us
knowledge resources on favorable terms, we may not be able to offer clients
competitive prices on their orders. If Reed Elsevier were to cease to provide us
with knowledge resources, it would not be possible to obtain replacements for
many of the titles Reed Elsevier publishes at a comparable price, if at all,
from another supplier. Either of these events could have a material adverse
effect on our financial condition and results of operations. Similarly, if any
of the other publishers with whom we do business decided not to provide us with
knowledge resources or decided to stop providing us with knowledge resources on
favorable terms, it could have a material adverse effect on our financial
condition and results of operations.
WE MAY NOT BE ABLE TO EXPAND OUR CATALOG OF KNOWLEDGE RESOURCES.
One of the key elements of our strategy is to continue to expand our catalog of
knowledge resources. We gain content through acquisitions, entrance into
strategic alliances and through contact with various publishers as we
particular requests from clients. There can be no assurance that we will be able
to continue to gain available content through strategic alliances or directly
from publishers. In the event that we are unable to continue to increase our
available content, we may:
- be at a competitive disadvantage with respect to competitors that may
compile greater libraries of available titles;
- lose clients that rely upon us as a single-source of knowledge
resources; and
- be unable to increase the amount of revenue that is otherwise
generated from particular clients.
Any of these effects could have a material adverse effect on our future results
of operations and financial condition.
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WE MAY NOT BE ABLE TO ESTABLISH OUR BRAND NAME.
We believe that establishing and maintaining the goodwill associated with our
brand name is a critical aspect of attracting and expanding our client base, as
well as of maintaining and building upon the competitive advantage of being the
first company to provide businesses with an Internet-based subscription and book
procurement system. We have not yet developed a strong brand name and if we fail
to do so it could have a material adverse impact on our business. The importance
of brand recognition will increase with competition. Promotion and enhancement
of the kStore brand will depend largely on our success in continuing to provide
high quality services, which cannot be assured. If users do not perceive the
kStore to be comprehensive and of high quality, or if we introduce new features,
or enter into new business ventures that are not favorably received by users, we
will risk diluting the value of our brand name. If we are unable to provide high
quality services, or otherwise fail to promote and maintain our brand name, or
if we incur excessive expenses in an attempt to improve our services, or promote
and maintain our brand name, our future results of operations and financial
condition could be materially and adversely affected.
OUR FUTURE SUCCESS CURRENTLY DEPENDS ON THE SERVICES OF A SMALL NUMBER OF KEY
PERSONNEL.
Our future operating results depend in significant part upon the continued
services of a relatively small number of key technical and senior management
personnel, particularly Dr. Richard R. Rowe, our Chairman, President and Chief
Executive Officer. In addition our future results will depend significantly upon
the following key technical, sales and managerial employees:
- Eileen Bergquist, Vice President of Human Development and Chief People
Officer;
- Paul Burmeister, Senior Vice President and Chief Financial Officer;
- Walter Crosby, Vice President and Chief Technical Officer;
- Ronald Grigg, Vice President, Design and Development;
- James Krzywicki, Senior Vice President and Chief of Knowledge
Resources; and
- Jeffrey Sands, Vice President of Business Development.
There can be no assurance that we will retain our key employees or that we will
be successful in attracting, assimilating and retaining other highly qualified
technical, sales and managerial personnel in the future. The loss of any of our
key technical, sales and senior management personnel or the inability to attract
and retain additional qualified personnel could have a material adverse effect
on our future results of operations and financial condition.
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WE MAY LOSE CLIENTS IF OUR SYSTEMS FAIL.
The performance of our computer and telecommunications equipment is critical
to our reputation and achieving market acceptance of our services. Any system
failure, including network, software or hardware failure, that causes
interruption or an increase in response time of our online services could
result in decreased usage of our services. If such failures occur often, it
could reduce the attractiveness of our services to our users. An increase in
the volume of the kStore orders could strain the capacity of the hardware
employed by us, which could lead to slower response time or system failures.
Our operations are also dependent in part upon our ability to protect our
operating systems against physical damage from acts of God, power loss,
telecommunications failures, physical break-ins and similar events. The
occurrence of any of these events could result in interruptions, delays or
cessations in service to users of our services, which could have a material
adverse effect on our future financial results. Our property and business
interruption insurance may not be adequate to compensate us for all losses
that may occur.
All of our computer and telecommunications equipment is located at our network
facility in London, Ontario. We currently have no backup systems at other sites.
Accordingly, there is a significant risk to our operations from a natural
disaster or system failure at our London facility. We currently anticipate that
we will be establishing redundant systems in our Westwood, Massachusetts
headquarters, or elsewhere. We cannot assure you, however, that any such back-up
systems will be online in the near future, or at all.
OUR REVENUES ARE SEASONAL IN NATURE.
We have historically experienced seasonal fluctuations in revenues because
substantially all of our revenues have been generated in the fourth quarter of
each year when most subscriptions are purchased or renewed by our clients. With
the acquisition of Dawson, our seasonal fluctuations in revenues are expected to
change from what they have been historically. In the future, due to Dawson's
established practice of paying publishers 30 to 60 days prior to receipt of
customers' funds, we anticipate that we will make substantial additional
expenditures in the fourth quarter, while we will receive the majority of our
cash receipts relating to these purchases late in the first quarter of the
following year. As a result of the seasonal nature of our cash flows, we will
have to rely on bank financing and lines of credit to cover current operating
expenses. Given these seasonal cash flow imbalances, if there was to be an
unexpected demand for liquid capital, or if financing was not available on
commercially reasonable terms, or at all, it would have a material adverse
effect on our future results of operations and financial condition.
OUR SUCCESS DEPENDS ON OUR ABILITY TO CONTINUOUSLY ENHANCE OUR PRODUCT
OFFERINGS.
Our future success will depend on our ability to enhance our current products
and to continue to develop and introduce new products and services that keep
pace with competitive product introductions and technological developments,
satisfy diverse and evolving client requirements and otherwise achieve market
acceptance. In particular, we believe that our future success will be dependent,
in large part, upon market acceptance of the most recent version of the kStore.
We cannot be certain that we will be successful in developing and marketing on a
timely and cost-effective basis future services or service enhancements, or
offer new services that respond to technological advances. Any failure by us to
anticipate or respond adequately to changes in technology and client
preferences, or any significant delays in other development efforts, could have
a material adverse effect on our future results of operations and financial
condition.
11
<PAGE>
RISKS TYPICAL OF E-COMMERCE COMPANIES
THE POSSIBLE SLOW ADOPTION OF INTERNET AND INTRANET SOLUTIONS BY BUSINESSES MAY
HARM OUR PROSPECTS.
In order for us to be successful, intranets must continue to be adopted by
businesses as the means of making information and electronic services available
to employees. In addition, the Internet must continue to be adopted as an
important means of buying and selling products and services. Because intranet
and Internet usage is continuing to evolve, it is difficult to estimate with any
assurance the size of this market and its growth rate, if any. To date, many
businesses have been deterred from using intranets and the Internet for a number
of reasons, including:
- security concerns;
- limited access to the corporate intranet;
- lack of availability of cost-effective, high-speed service;
- inconsistent quality of service;
- potentially inadequate development of network infrastructure;
- the inability to integrate business applications on these networks;
and
- the need to operate with multiple and frequently incompatible
products.
BUSINESSES MAY NOT BROADLY ACCEPT ELECTRONIC PROCUREMENT OF KNOWLEDGE RESOURCES,
WHICH COULD LIMIT POSSIBLE GROWTH IN OUR REVENUES.
Even if the Internet and intranets are widely adopted, the adoption of these
networks for book and subscription procurement, particularly by companies that
have relied on traditional means of procurement, will require broad acceptance
of the new approach. In addition, companies that have already invested
substantial resources in traditional methods of procurement may be reluctant to
adopt a new strategy.
THE INTERNET MAY NOT BE ABLE TO ACCOMMODATE GROWTH IN E-COMMERCE FOR COMPANIES
SUCH AS ROWECOM.
We depend upon the Internet to conduct our business and any problems in the
functioning of the Internet could adversely affect our business. To the extent
that the Internet continues to experience significant growth in the number of
users, their frequency of use or their speed and quality-of-service
requirements, it is possible that the infrastructure for the Internet will not
be able to support the demands placed upon it. In addition, the Internet could
lose its viability due to delays in the development or adoption of new standards
and protocols required to handle increased levels of Internet activity, or due
to increased governmental regulation. Changes in, or insufficient availability
of, telecommunications services to support the Internet also could result in
slower response times and adversely affect usage of the Internet generally and
our services in particular. If the infrastructure for the Internet does not
effectively support growth that may occur, our future financial results will be
materially adversely affected. Even if the required Internet infrastructure,
standards and protocols are developed, we may be required to incur substantial
expenditures in order to adapt our services to changing or emerging
technologies, which could have a material adverse effect on our future results
of operations and financial condition.
12
<PAGE>
POTENTIAL IMPOSITION OF GOVERNMENT REGULATION ON E-COMMERCE AND LEGAL
UNCERTAINTIES COULD LIMIT OUR GROWTH.
Few laws or regulations currently are directly applicable to access to, or
commerce on, the Internet and we are not subject to direct government
regulation, other than regulations applicable to businesses generally. The
adoption of new laws or the adaptation of existing laws to the Internet may
decrease the growth in the use of the Internet, which could in turn decrease
the demand for our services, increase the cost of our doing business or
otherwise have a material adverse effect on our future results of operations
and financial condition. A number of legislative and regulatory proposals
relating to Internet commerce are under consideration by federal, state,
local and foreign governments and, as a result, a number of laws or
regulations may be adopted with respect to Internet user privacy, taxation,
pricing, quality of products and services and intellectual property
ownership. There is also uncertainty as to how existing laws will be applied
to the Internet in areas such as property ownership, copyright, trademark,
trade secret, obscenity and defamation.
THE IMPOSITION OF SALES TAX AND OTHER TAX OBLIGATIONS ON E-COMMERCE COULD AFFECT
OUR FINANCIAL PERFORMANCE AND LIMIT OUR GROWTH.
We do not currently collect sales or other similar taxes with respect to our
marketing of products and services, although we are currently reviewing the
necessity of collecting sales taxes on certain of the products and services sold
through our kStore. If one or more states or any foreign country were to require
that we collect sales or other taxes on the sale of books and subscriptions
through our system, it could have a material adverse effect on our future
financial results. In addition, any requirement that we remit sales taxes for
prior periods could have a material adverse effect on our financial condition
and results of operations.
A number of proposals have been made at the federal, state and local levels that
would impose taxes on the sale of goods and services through the Internet in
circumstances where no tax or tax collection responsibility is presently thought
to be imposed. Such proposals, if adopted, could substantially impair the growth
of e-commerce and could adversely affect our future results of operation and
financial condition.
There is currently in effect in the United States a three-year moratorium
expiring on October 26, 2001 on new state and local taxes on Internet access and
"multiple or discriminatory" taxes on e-commerce. Sales or use taxes imposed on
those buying or selling products or services over the Internet are not generally
affected by this moratorium. The full effect of this moratorium on our business
is not clear. To the extent that the moratorium provides a material benefit, its
expiration on October 20, 2001 could have a material adverse effect on our
financial condition and results of operations.
POSSIBLE E-COMMERCE SECURITY BREACHES COULD HARM OUR BUSINESS.
We rely on encryption and authentication technology to effect secure
transmission of confidential information, such as payment instruction sets. It
is possible that advances in computer capabilities, new discoveries in the field
of cryptography, or other events or developments will result in a compromise or
breach of the codes used by us to protect client transaction data. If any such
compromise of our security were to occur, it could have a material adverse
effect on our reputation and future results of operations and financial
condition, and expose us to a risk of loss or litigation and possible liability.
It is possible that our security measures will not prevent security breaches.
13
<PAGE>
POSSIBLE INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS COULD HARM OUR BUSINESS.
Legal standards relating to the protection of intellectual property rights in
Internet-related industries are uncertain and still evolving. As a result, the
future viability or value of our intellectual property rights, as well as those
of other companies in the Internet industry, is unknown. We cannot be certain
that the steps we have taken to protect our intellectual property rights will be
adequate or that third parties will not infringe or misappropriate our
proprietary rights. Any such infringement or misappropriation could have a
material adverse effect on our future financial results. In addition, we cannot
be certain that our business activities will not infringe upon the proprietary
rights of others, or that other parties will not assert infringement claims
against us.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve substantial
risks and uncertainties. In some cases you can identify these statements by
forward-looking words such as "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "should," "will," and "would" or similar words. You
should read statements that contain these words carefully because they discuss
future expectations, contain projections of future results of operations or of
financial position or state other "forward-looking" information. The important
factors listed above in the section captioned "Risk Factors," as well as any
cautionary language in this prospectus, provide examples of risks, uncertainties
and events that may cause our actual results to differ materially from the
expectations described in these forward-looking statements. You should be aware
that the occurrence of the events described in these risk factors and elsewhere
in this prospectus could have an adverse effect on our business, results of
operations and financial position.
Any forward-looking statements in this prospectus are not guarantees of future
performances, and actual results, developments and business decisions may differ
from those envisaged by such forward-looking statements, possibly materially. We
disclaim any duty to update any forward-looking statements, all of which are
expressly qualified by the statements in this section.
USE OF PROCEEDS
The selling securityholders will receive all of the net proceeds from the sale
of shares of common stock by any of the selling securityholders sold pursuant to
this prospectus.
We will receive up to $3,087,500 if all of the warrants are exercised. We
intend to use any proceeds received from the exercise of the warrants for
general working capital purposes.
We estimate that our expenses in connection with the filing of this
registration statement will be approximately $35,000.
14
<PAGE>
SELLING SECURITYHOLDERS
The shares of common stock being offered by the selling securityholders are
issuable upon exercise of warrants issued by us in connection with a private
financing. For additional information about the warrants, see "Description of
Securities - Warrants to Purchase Common Stock" We are registering the shares
in order to permit the selling securityholders to offer these shares for
resale from time to time. In addition to their ownership of the warrants,
four of the selling security holders are directors or affiliates of our
company. See the table below for further details.
The table below lists the selling securityholders and other information
regarding the beneficial ownership of the common stock by each of the selling
securityholders.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SELLING SHARES SHARES
STOCKHOLDER PRIOR TO OFFERING PERCENT SHARES OFFERED* AFTER OFFERING PERCENT
----------- ----------------- ------- --------------- -------------- -------
<S> <C> <C> <C> <C> <C>
Zero Stage Capital VI, L.P. 439,901 3.49% 235,000 204,901 1.58%
Philippe Villers 202,337 1.62% 135,000 67,337 *
Dr. Richard R. Rowe 1,861,841 14.92% 100,000 1,761,841 13.56%
Working Ventures Canadian Fund, Inc. 893,780 7.16% 100,000 793,780 6.12%
Arthur Bauernfeind 20,244 * 10,000 10,244 *
Brizio Biondi 10,000 * 10,000 0 *
Antoine Hadamard 10,990 * 7,500 3,490 *
Noel Villers 6,500 * 6,500 0 *
Katherine Villers 5,000 * 5,000 0 *
Philippe Villers as Trustee of
Raymond Villers Trust 3,500 * 3,500 0 *
Bob Keegan 2,000 * 2,000 0 *
Alan Kennedy 1,000 * 1,000 0 *
Robert Pratt 1,000 * 1,000 0 *
Fred Young 1,000 * 1,000 0 *
Total 617,500
</TABLE>
------------------
* Less than 1%
15
<PAGE>
PLAN OF DISTRIBUTION
The selling securityholders or, subject to applicable law, their pledges,
donees, distributees, transferees or successors in interest are offering
shares of our common stock, which are issuable to them upon exercise of
warrants that they acquired from us in a private placement transaction. This
prospectus covers the selling securityholders' resale of up to 617,500 shares
of our common stock that we may issue to them upon exercise of the related
warrants, as well as any additional shares that may become issuable upon
exercise of the warrants because of stock splits, stock dividends and other
specified transactions.
In connection with our issuance the warrants, we have agreed to file a
registration statement on Form S-3 of which this prospectus is a part. This
registration statement covers the resale of the common stock referred to
above from time to time on the Nasdaq National Market or in
privately-negotiated transactions. We have also agreed to prepare and file
any amendments and supplements to this registration statement as may be
necessary to keep it effective until this prospectus is no longer required
for the selling securityholders to sell their shares of common stock, and to
indemnify and hold the selling securityholders harmless against various
liabilities under the Securities Act that could arise in connection with the
selling securityholders' sale of their shares. We have agreed to pay all
reasonable fees and expenses incident to the filing of the registration
statement, but the selling securityholders will pay any brokerage
commissions, discounts or other expenses relating to the sale of their common
stock. The selling securityholders may sell the shares of common stock
described in this prospectus directly or through underwriters, broker-dealers
or agents. The selling securityholders may also transfer, devise or give
their shares by other means not described in this prospectus. As a result,
pledges, donees, transferees or other successors in interest that receive
shares as a gift, partnership distribution or other non-sale related transfer
may offer shares of common stock under this prospectus. In addition, if any
shares covered by this prospectus qualify for sale pursuant to Rule 144 under
the Securities Act, the selling securityholders may sell those shares under
Rule 144 rather than pursuant to this prospectus.
The selling securityholders may sell shares of common stock from time to time in
one or more transactions:
- at fixed prices that may be changed;
- at market prices prevailing at the time of sale; or
- at prices related to such prevailing market prices or at negotiated
prices.
16
<PAGE>
The selling securityholders may offer their shares of common stock in one
or more of the following transactions:
- on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale, including
the Nasdaq National Market;
- in the over-the-counter market;
- in privately-negotiated transactions;
- through options;
- by pledge to secure debts and other obligations;
- by a combination of the above methods of sale; or
- to cover short sales made pursuant to this prospectus.
In effecting sales, broker or dealers engaged by the selling securityholders
or affiliated with them may arrange for other brokers or dealers to
participate in the resales. The selling securityholders may enter into
hedging transactions with broker-dealers, and in connection with those
transactions, broker-dealers may engage in short sales of the shares. The
selling securityholders also may sell shares short and deliver the shares to
close out such short positions. The selling securityholders also may enter
into option or other transactions with broker-dealers that require the
delivery to the broker-dealer of the shares, which the broker-dealer may
resell pursuant to this prospectus. The selling securityholders also may
pledge the shares to a broker or dealer, and upon a default, the broker or
dealer may effect sales of the pledged shares pursuant to this prospectus.
The Securities and Exchange Commission may deem the selling securityholders and
any underwriters, broker-dealers or agents that participate in the distribution
of the shares of common stock to be "underwriters" within the meaning of the
Securities Act. The Securities and Exchange Commission may deem any profits on
the resale of the shares of common stock and any compensation received by any
underwriter, broker-dealer or agent to be underwriting discounts and commissions
under the Securities Act. Each selling securityholder who holds a note has
advised us that it holds the note and related warrants in the ordinary course of
its business, and at the time the selling securityholder purchased the note and
related warrants, it was not a party to any agreement or other understanding to
distribute the securities, directly or indirectly.
Under the Exchange Act, any person engaged in the distribution of the shares of
common stock may not simultaneously engage in market-making activities with
respect to the common stock for five business days prior to the start of the
distribution. In addition, each selling securityholder and any other person
participating in a distribution will be subject to the Exchange Act, which may
limit the timing of purchases and sales of common stock by the selling
securityholder or any other person.
17
<PAGE>
DESCRIPTION OF SECURITIES
AUTHORIZED CAPITAL STOCK
Our authorized capital stock of consists of 34,000,000 shares of common stock,
$0.01 par value per share, and 23,000,000 shares of preferred stock, $0.01 par
value per share.
COMMON STOCK
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders, and are not able to multiply the
number of shares they own by the number of directors up for election for
purpose of electing directors. 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 dividends in proportion to the number of shares they
hold, if they are declared by our board of directors out of funds that are
legally available for that purpose, provided that dividends declared on
outstanding preferred stock shall have priority. Upon our liquidation,
dissolution or winding up, the holders of common stock are entitled to
receive our net assets available after the payment of all debts and other
liabilities, provided that holders of the outstanding preferred stock shall
have priority. Holders of the common stock have no preferential right to
participate in any future debt or equity offerings, right to have their
shares redeemed or right to convert their shares into any other type of
security. The outstanding shares of common stock are fully paid and
non-assessable. In the event we issue shares of preferred stock in the
future, the rights of the holders of our common stock may be adversely
affected by that issuance. This is because it is probable that any preferred
stock issued will have certain rights and preferences that entitle the
holders of such shares to have priority over the holders of the common stock
with respect to certain matters. These matters include the right to receive
dividends and the right to receive our assets in the event of a bankruptcy or
similar type event. There will be no shares of preferred stock outstanding
immediately after the closing of this offering.
18
<PAGE>
WARRANTS TO PURCHASE COMMON STOCK
The Leonardo and HFTP Investment Warrants
Under the terms of a Securities Purchase Agreement dated as of October 13,
1999, by and among RoweCom, Leonardo, L.P. and HFTP Investment L.L.C., we
issued to Leonardo, L.P. and HFTP Investment L.L.C. warrants to purchase an
aggregate of 224,000 shares of our common stock at an exercise price of
approximately $27.50 per share, subject to adjustment as provided in the
warrant agreement, which may be exercised at the holder's election on a net
or "cashless" basis. The warrants may be exercised at any time or from time
to time on or prior to October 13, 2003.
These warrants were issued in connection with the sale of $20.0 million of
convertible promissary notes to Leonardo, L.P. and HFTP Investment L.L.C. In
May, 2000 approximately $5.7 million of principal and accrued interest of
these convertible notes were converted into approximately 1.5 million shares
of Common Stock. The remaining convertible notes were redeemed in full prior
to June 12, 2000.
The Securities Purchase Agreement also provides that upon specified
conditions, including but not limited to an election to require the former
note holders to purchase additional convertible notes, we may elect to cause
the holders of the warrants to purchase additional warrants exercisable for a
number of shares of common stock determined by a formula that is based, in
part, on the closing price of our common stock as reported by Nasdaq. Such
warrants would be at an exercise price equal to 110% of the arithmetic
average of the closing price of our common stock for the 10 consecutive
trading days immediately preceding the closing date for the purchase of the
additional warrants. Any additional issuance of warrants would be on the
terms discussed above.
In connection with the sale of the convertible notes and warrants described
above pursuant to the Securities Purchase Agreement, the parties also signed a
Registration Rights Agreement that provides the holders of the convertible notes
and warrants with certain rights to the registration of the shares of common
stock issuable upon conversion of the notes and exercise of the warrants.
Other Warrants
In May, 2000 we issued warrants for the purchase of an aggregate 617,500
shares to certain investors in a private placement bridge financing. The
warrants may be exercised at the option of the holders at an exercise price
of $5.00 per share, and expire ten years from the date of issuance.
In connection with the sale of these warrants, we agreed to register the
underlying common stock within 30 days from the date of issuance through a
Registration Statement on Form S-3, of which this prospectus is a part.
PREFERRED STOCK
Under our certificate of incorporation, our board of directors is authorized,
subject to certain limitations prescribed by law, without further stockholder
approval, from time to time to issue up to an aggregate of 23,000,000 shares
of preferred stock. The preferred stock may be issued in one or more series.
Each series may have different rights, preferences and designations and
qualifications, limitations and restrictions that may be established by our
board of directors without approval from the shareholders. These rights,
designations and preferences include:
- number of shares to be issued;
- dividend rights;
- dividend rates;
- right to convert the preferred shares into a different type of
security;
- voting rights attributable to the preferred shares;
- right to set aside a certain amount of assets for payments relating to
the preferred shares; and
- prices to be paid upon redemption of the preferred shares or a
bankruptcy type event.
19
<PAGE>
If our board of directors decides to issue any preferred stock, it could have
the effect of delaying or preventing another party from taking control of us.
This is because the terms of the preferred stock could be designed to make it
prohibitively expensive for any unwanted third party to make a bid for our
shares. We have has no present plans to issue any shares of preferred stock.
DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to certain exceptions, Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a certain period of time. That period is
three years after the date of the transaction in which the person became an
interested stockholder, unless the interested stockholder attained that
status with the approval of the board of directors or unless the business
combination is approved in a prescribed manner. A "business combination"
includes certain mergers, asset sales and other transactions resulting in a
financial benefit to the stockholder. Subject to certain exceptions, an
"interested stockholder" is a person who, together with his or her affiliates
and associates, owns, or owned within three years prior, 15% or more of the
corporation's voting stock.
Our certificate of incorporation and by-laws provide for the division of the
board of directors into three classes, as nearly equal in size as possible,
with each class beginning its three year term in a different year. Any
director may be removed only for cause by the vote of a majority of the
shares that are permitted to vote for the election of directors.
Our by-laws provide that for nominations to our board of directors or for
other business to be properly brought by a stockholder before a meeting of
stockholders, the stockholder must first have given timely notice of the
matter in writing to our Secretary. To be timely, a notice of nominations or
other business to be brought before an annual meeting must be delivered
either:
- between 120 and 150 days before the date that is the one year anniversary
of the date of the preceding year's proxy statement relating to the annual
meeting; or
- if the date of the current year's annual meeting is more than 30 days
before or 60 days after the anniversary date described above or no proxy
statement was delivered in the preceding year, then notice must be given
no earlier than 90 days before the meeting and no later than (1) 60 days
before the meeting or (2) 10 days after the date on which a public
announcement that relates the date of the annual meeting is made,
whichever is later.
With respect to special meetings, notice must generally be delivered not more
than 90 days prior to such meeting and not later than the later of 60 days
prior to such meeting or 10 days following the day on which public
announcement of such meeting is first made by RoweCom. The notice must
contain, among other things, certain information about the stockholder
delivering the notice and, as applicable, background information about each
nominee or a description of the proposed business to be brought before the
meeting.
Our certificate of incorporation empowers its board of directors, when
considering a tender offer or merger or acquisition proposal, to take into
account factors in addition to potential economic benefits to stockholders.
These factors may include:
- comparison of the proposed consideration to be received by
stockholders in relation to the then current market price of our
capital stock, our estimated current value in a freely negotiated
transaction and our estimated future value as an independent entity;
and
- the impact of a transaction on the employees, suppliers and our
clients and its effect on the communities in which we operate.
20
<PAGE>
The provisions described above could make it more difficult for a third party to
acquire control of RoweCom and, furthermore, could discourage a third party from
making any attempt to acquire control of us.
Our certificate of incorporation provides that any action required or
permitted to be taken by our stockholders may be taken only at duly called
annual or special meeting of the stockholders, and that special meetings may
be called only by the chairman of our board of directors, a majority of our
board of directors or our president, except that holders of a majority of the
common stock entitled to vote on the election of directors may call a special
meeting for the purpose of filling a vacancy on the board of directors, and
holders of at least two-thirds of the common stock entitled to vote generally
may call a special meeting for any other purpose. These provisions could have
the effect of delaying until the next annual stockholders meeting stockholder
actions that are favored by the holders of a majority of our outstanding
voting securities. These provisions may also discourage another person or
entity from making an offer to our stockholders for the common stock. This is
because the person or entity making the offer, even if it acquired a majority
of our outstanding voting securities, would be unable to call a special
meeting of the stockholders and would further be unable to obtain unanimous
written consent of the stockholders. As a result, any meeting as to matters
they endorse, including the election of new directors or the approval of a
merger, would have to wait for the next duly called stockholders meeting.
The Delaware General Corporation Law provides that the affirmative vote of a
majority of the shares entitled to vote on any matter is required to amend a
corporation's certificate of incorporation or by-laws, unless the
corporation's certificate of incorporation or by-laws, as the case may be,
requires a greater percentage. Our certificate of incorporation requires the
affirmative vote of the holders of at least 67% of our outstanding voting
stock to amend or repeal any of the provisions of RoweCom's certificate of
incorporation described above, or to reduce the number of authorized shares
of common stock and preferred stock. The 67% vote is also required to amend
or repeal any of our by-law provisions described above. Our by-laws may also
be amended or repealed by vote of our board of directors. The 67% stockholder
vote would be in addition to any separate vote that each class of preferred
stock is entitled to that might in the future be required in accordance with
the terms of any preferred stock that might be outstanding at the time any
amendments are submitted to stockholders.
21
<PAGE>
REGISTRATION RIGHTS
We are party to the Registration Rights Agreement, dated as of October 13,
1999, by and among RoweCom, HFTP Investment L.L.C. and Leonardo, L.P., under
which we have granted HFTP Investment L.L.C. and Leonardo, L.P. rights to
have an undetermined number of shares of our common stock issuable upon the
exercise of warrants held by such persons, and an undetermined number of
shares of our common stock issuable upon the conversion of convertible notes
held, or to be held, by such person, registered under the Securities Act.
Pursuant to the terms of the agreement we filed a registration statement on
Form S-3 no later than March 16, 2000, which became effective April 20, 2000.
We may be required to file an additional short form registration statement on
Form S-3 if specified conditions occur in the future. The Leonardo and HFTP
warrant and note holders have also been granted so-called "piggyback rights"
to participate in any registration, other than a registration on Form S-8 or
S-4, by the company of its stock during a specified period which ends on the
earlier of all registrable shares becoming eligible for resale under Rule 144
or having been sold by the warrant holders.
We are also required, under the terms of warrants to purchase 617,500 shares
of common stock that we issued in connection with a May, 2000 bridge
financing, to register the underlying common stock within 30 days from the
date of issuance.
NASDAQ MARKET
Our common stock is, and the shares being offered by this prospectus will
be, traded on the Nasdaq National Market.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe Trust
Company, N.A.
EXPERTS
The consolidated financial statements of RoweCom as of December 31, 1998 and
1999 and for each of the three years in the period ended December 31, 1999
that are incorporated by reference in this prospectus have been so
incorporated by reference in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts
in auditing and accounting.
The combined financial statements of Dawson's subscription business as of
September 30, 1998 and October 2, 1999 and for each of the three years in the
period ended September 30, 1997 and 1998 and October 2, 1999 that are
incorporated by reference in this prospectus have been incorporated by reference
in reliance on the report of Deloitte & Touche, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the shares of our common stock has been passed upon for us by
Bingham Dana LLP, Boston, Massachusetts, our counsel. Five attorneys at
Bingham Dana LLP own, in the aggregate, 1,650 shares of our common stock.
22
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
This document includes information relating to us that has not been delivered
or presented to you, but is "incorporated by reference," which means that the
information is disclosed to you by referring you to another document filed
separately with the Securities and Exchange Commission. The information
incorporated by reference is considered a part of this prospectus, except for
any information superseded by information provided in this prospectus. This
prospectus incorporates by reference the documents listed below, which
contain important information about RoweCom and its financial condition and
results of operations.
<TABLE>
<CAPTION>
ROWECOM SEC FILINGS (FILE NO. 000-25163) PERIOD
<S> <C>
Current Report on Form 8-K........................... Filed on June 2, 2000
Registration Statement on Form S-3/A
(file no. 333-32670)................................. Filed April 19, 2000
Quarterly Report on Form 10-Q........................ Quarter ended March 15, 2000
Annual Report on Form 10-K........................... Year ended December 31, 1999
Description of Capital Stock
as described in Registration
Statement on Form 8-A................................ Filed on December 11, 1998
</TABLE>
We are also incorporating by reference any additional documents that we file
with the Securities and Exchange Commission as required by the Exchange Act
between the date of this prospectus and the date of the special meetings of
stockholders. These include periodic reports, such as Annual Reports on Form
10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as well
as proxy statements.
Our stockholders should rely only on the information contained or incorporated
by reference in this prospectus. We have not authorized anyone to provide you
with information that is different.
23
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection with the
sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fee.
<TABLE>
<CAPTION>
TO BE PAID
BY THE
REGISTRANT
----------
<S> <C>
SEC registration fee..................................................... $ 805
Accounting fees and expenses............................................. $12,000
Legal fees and expenses.................................................. $20,000
Miscellaneous expenses................................................... $ 2,195
Total................................................................... $35,000
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the Delaware General Corporation Law allows a corporation to
eliminate the personal liability of directors of a corporation to the
corporation or its stockholders for monetary damages for a breach of fiduciary
duty as a director, except where the director breached his duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or knowingly
violated a law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an improper
personal benefit. The Registrant has included such a provision in its
Certificate of Incorporation.
Section 145 of the General Corporation Law of Delaware provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
The Registrant's Third Amended and Restated Certificate of Incorporation and the
Registrant's Amended and Restated By-Laws, copies of the forms of which are
filed as Exhibits 3.1 and 3.2 hereto, provide for indemnification of officers
and directors of the Registrant and certain other persons against liabilities
and expenses incurred by any of them in certain stated proceedings and under
certain stated conditions.
The above discussion of the Registrant's Third Amended and Restated Certificate
of Incorporation, Amended and Restated By-Laws and Section 145 of the Delaware
General Corporation Law is not intended to be exhaustive and is qualified in its
entirety by such Third Amended and Restated Certificate of Incorporation,
Amended and Restated By-Laws, and statute.
For information regarding the Registrant's undertaking to submit to adjudication
the issue of indemnification for violation of the securities laws, see Item 17.
II-1
<PAGE>
ITEM 16. EXHIBITS
(a) EXHIBITS:
EXHIBIT NO. DESCRIPTION
4.1 Third Amended and Restated Certificate of Incorporation (Incorporated
by reference to exhibit 3.1 to RoweCom's Registration Statement on
Form S-1 (file No. 333-68761) filed March 8, 1999).
4.2 Amended and Restated By-laws (Incorporated by reference to exhibit 3.2
to RoweCom's Registration Statement on Form S-1 (file No. 333-68761)
filed March 8, 1999).
5.1 Opinion of Bingham Dana LLP as to the legality of the shares being
issued (including consent).
23.1 Consent of PricewaterhouseCoopers LLP relating to the audited
financial statements of the Registrant.
23.2 Consent of Deloitte & Touche LLP relating to the audited financial
statements of Dawson's subscription business.
23.3 Consent of Bingham Dana LLP (included in Exhibit No. 5.1).
24.1 Power of Attorney (set forth on the signature page of this
Registration Statement).
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes: (1) to file, during
any period in which offers or sales are being made, a post-effective amendment
to this Registration Statement: (i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the
prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement; and (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 of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under
II-2
<PAGE>
the Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be anew registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) 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 of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(d) The undersigned Registrant hereby undertakes that: (i) for the
purposes of determining any liability under the Securities Act, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or(4) or 497(h) under the Securities Act
shall be deemed to be part of the registration statement as of the time it was
declared effective; and (ii) for the purposes of determining any liability under
the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Commonwealth of Massachusetts, on June 14, 2000.
ROWECOM INC.
By: /s/ Richard Rowe
-----------------------------------------
Richard Rowe, Ph. D.
Chairman of the Board of Directors, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints Dr.
Richard R. Rowe and Paul Burmeister, and each of them severally, acting alone
and without the other, his/her true and lawful attorney-in-fact with full
power of substitution or resubstitution, for such person and in such person's
name, place and stead, in any and all capacities, to sign on such person's
behalf, individually and in each capacity stated below, any and all
amendments, including post-effective amendments to this Registration
Statement, and to sign any and all additional registration statements
relating to the same offering of securities of the Registration Statement
that are filed pursuant to Rule 462(b) of the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as such person might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact, or their
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Richard Rowe Chairman of the Board of Directors, June 28, 2000
------------------------------ President, Chief Executive Officer
Richard R. Rowe, Ph. D. and Director (Principal Executive
Officer)
/s/ Paul Burmeister Senior Vice President and Chief June 28, 2000
------------------------------ Financial Officer (Principal
Paul Burmeister Financial and Accounting Officer)
/s/ John Kennedy
------------------------------- Director June 14, 2000
John Kennedy
/s/ Thomas Lemberg
------------------------------- Director June 28, 2000
Thomas Lemberg
/s/ Jerome S. Rubin
------------------------------- Director June 28, 2000
Jerome S. Rubin
/s/ Philippe Villers
------------------------------- Director June 16, 2000
Philippe Villers
/s/ Donald A.B. Lindberg
------------------------------- Director June 28, 2000
Donald A.B. Lindberg, M.D.
</TABLE>
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
4.1 Third Amended and Restated Certificate of Incorporation (Incorporated
by reference to exhibit 3.1 to RoweCom's Registration Statement on
Form S-1 (file No. 333-68761) filed March 8, 1999).
4.2 Amended and Restated By-laws (Incorporated by reference to exhibit 3.2
to RoweCom's Registration Statement on Form S-1 (file No. 333-68761)
filed March 8, 1999).
5.1 Opinion of Bingham Dana LLP as to the legality of the shares being
issued (including consent).
23.1 Consent of PricewaterhouseCoopers LLP relating to the audited
financial statements of the Registrant.
23.2 Consent of Deloitte & Touche LLP relating to the audited financial
statements of Dawson's subscription business.
23.3 Consent of Bingham Dana LLP (included in Exhibit No. 5.1).
24.1 Power of Attorney (set forth on the signature page of this
Registration Statement).
