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Registration No. 333-
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As filed with the Securities and Exchange Commission on September 15, 2000
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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MAIL.COM, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3780773
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
11 Broadway, 6th Floor
New York, NY, 10004
(212) 425-4200
(Address, including zip code and telephone number,including area code, of
registrant's principal executive offices)
David W. Ambrosia, Esq.
Executive Vice President and General Counsel
Mail.com, Inc.
11 Broadway, 6th Floor
New York, NY 10004
(212) 425-4200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Ronald A. Fleming, Jr., Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
(212) 858-1143
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Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this registration statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================== ============== ================== ================= ==============
Proposed
maximum
Proposed maximum aggregate Amount of
Title of each class of Amount to be offering price offering registration
securities to be registered registered(1)(2) per unit(2)(3) price(1)(2)(3) fee(3)
------------------------------ -------------- ------------------ ----------------- --------------
<S> <C> <C> <C> <C>
Class A Common Stock, par
value $0.01 per share(4)
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Preferred Stock, par value
$0.01 per share(4)..........
------------------------------ -------------- ------------------ ----------------- --------------
Depositary Shares(4)........
------------------------------ -------------- ------------------ ----------------- --------------
Debt Securities(4)..........
------------------------------ -------------- ------------------ ----------------- --------------
Warrants(4).................
------------------------------ -------------- ------------------ ----------------- --------------
Stock Purchase Units(4).....
------------------------------ -------------- ------------------ ----------------- --------------
Stock Purchase
Contracts(4)..............
------------------------------ -------------- ------------------ ----------------- --------------
Total............... $75,000,000 $75,000,000 $75,000,000 $19,800
============================== ============== ================== ================= ==============
</TABLE>
(1) The initial public offering price of any securities denominated in any
foreign currencies or currency units shall be the U.S. dollar equivalent
thereof based on the prevailing exchange rates at the respective times
such securities are first offered. For securities issued with an
original issue discount, the amount to be registered is the amount as
shall result in aggregate gross proceeds of $75,000,000.
(2) Pursuant to General Instruction II.D to Form S-3, the Amount To Be
Registered, Proposed Maximum Aggregate Offering Price Per Security and
Proposed Maximum Aggregate Offering Price has been omitted for each
class of securities which are registered hereby.
(3) The registration fee has been calculated in accordance with Rule 457(o)
under the Securities Act of 1933, as amended, and reflects the maximum
offering price of securities that may be issued rather than the
principal amount of any securities that may be issued at a discount.
(4) In addition to the securities that are being issued directly under this
registration statement, there are being registered hereunder an
indeterminate number of debt securities and shares of Class A common
stock, preferred stock and depositary shares as may be issued upon
exercise, conversion or exchange of the securities issued directly
hereunder. No separate consideration will be received for any debt
securities, shares of Class A common stock, preferred stock or
depositary shares so issued upon exercise, conversion or exchange.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED SEPTEMBER 15, 2000
PROSPECTUS
$75,000,000
MAIL.COM, INC.
CLASS A COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
DEBT SECURITIES
WARRANTS
STOCK PURCHASE UNITS
STOCK PURCHASE CONTRACTS
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This prospectus includes a general description of the shares of Class A
common stock, shares of preferred stock, depositary shares, debt securities,
warrants, stock purchase units and stock purchase contracts we may issue from
time to time. We will provide specific terms of these securities in supplements
to this prospectus. You should read this prospectus and each prospectus
supplement carefully before you invest.
Our Class A common stock trades on the Nasdaq National Market under the
symbol "MAIL".
Unless we state otherwise in a prospectus supplement, we will not list any
of the debt securities on any securities exchange.
We may sell securities through underwriters, dealers or agents. We may also
sell securities directly to investors. More information about the way we will
distribute the securities is under the heading "Plan of Distribution."
Information about the underwriters or agents who will participate in any
particular sale of securities will be in the prospectus supplement relating to
those securities.
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INVESTING IN OUR SECURITIES INVOLVES RISKS, WHICH WE DESCRIBE IN THE "RISK
FACTORS" SECTION BEGINNING ON PAGE 8 OF THIS PROSPECTUS.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is , 2000.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement of which this
prospectus is a part is declared effective by the Securities and Exchange
Commission. We are not making an offer to sell or soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
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You should rely only on the information contained or incorporated by reference
in this prospectus and the accompanying prospectus supplement. We have not
authorized anyone to provide you with different information. You should not
assume that the information contained in this prospectus or the accompanying
prospectus supplement is accurate as of any date other than the date on the
front cover of those documents.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
About This Prospectus................................................... 2
Incorporation of Documents by Reference................................. 3
Where You Can Get More Information...................................... 3
Cautionary Statements Regarding Forward-Looking Statements.............. 4
Summary................................................................. 5
Risk Factors............................................................ 8
Use of Proceeds......................................................... 27
Dividend Policy......................................................... 27
Ratio of Earnings to Fixed Charges...................................... 28
General Description of Securities....................................... 28
Description of Common Stock............................................. 28
Description of Preferred Stock.......................................... 30
Other Capital Stock Matters............................................. 32
Description of Depositary Shares........................................ 36
Description of Debt Securities.......................................... 38
Description of Warrants................................................. 45
Description of Stock Purchase Units and Stock Purchase Contracts........ 45
Plan of Distribution.................................................... 47
Legal Matters........................................................... 49
Experts................................................................. 49
</TABLE>
Unless the context otherwise requires, the terms "we," "our," "us," "the
company" and "Mail.com" refer to Mail.com, Inc., a Delaware corporation.
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INFORMATION CONTAINED ON OUR WEB SITES WILL NOT BE DEEMED TO BE PART OF THIS
PROSPECTUS.
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC using a shelf registration process. Under the shelf registration process, we
may offer from time to time shares of Class A common stock, shares of preferred
stock, depositary shares, debt securities, warrants, stock purchase units and
stock purchase contracts up to an aggregate amount of $75,000,000. This
prospectus provides you with a general description of the securities we may
offer. Each time we offer securities, in addition to this prospectus, we will
provide you with a prospectus supplement that will contain specific information
about the securities being offered. The prospectus supplement may also add,
update or change information contained in this prospectus. You should read both
this prospectus and any prospectus supplement as well as additional information
described under "Where You Can Find More Information" immediately below.
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INCORPORATION OF DOCUMENTS BY REFERENCE
We furnish our stockholders with annual reports containing audited financial
statements and other appropriate reports. We also file annual, quarterly and
current reports, proxy statements and other information with the SEC. Instead of
repeating in this prospectus information that we have already filed with the
SEC, rules of the SEC permit us to "incorporate by reference" the information we
file with them. These rules mean that we can disclose important information to
you by referring you to those documents that we have previously filed with the
SEC. These documents are considered to be part of this prospectus. Any documents
that we file with the SEC in the future will also be considered to be part of
this prospectus and will automatically update and supersede the information in
this prospectus. We incorporate by reference the documents listed below and any
future filings we make with SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 until we sell securities offered by this
prospectus.
- Our Annual Report on Form 10-K for the fiscal year ended December 31,
1999, filed with the SEC on March 30, 2000;
- Our Quarterly Reports on Form 10-Q for the fiscal quarters ended March
31, 2000 and June 30, 2000;
- Our Current Reports on Form 8-K dated March 28, 2000 (as amended on Form
8-K/A dated May 26, 2000), February 11, 2000 (as amended on Form 8-K/A
dated April 24, 2000), January 24, 2000 and January 6, 2000; and
- Our Proxy Statement filed on April 18, 2000.
Information that we file later with the SEC and that is incorporated by
reference in this prospectus will automatically update and supersede information
contained in this prospectus. You will be deemed to have notice of all
information incorporated by reference in this prospectus as if that information
was included in this prospectus.
WHERE YOU CAN GET MORE INFORMATION
We have filed a registration statement with the SEC to register the
securities we are offering to you. This prospectus is part of that registration
statement. As allowed by the SEC's rules, we have not included in this
prospectus all of the information that is included in the registration
statement. At your oral or written request, we will provide to you, without
charge, a copy of the registration statement or any of the exhibits to the
registration statement not delivered with this prospectus. If you want more
information, write or call us at:
Mail.com, Inc.
11 Broadway, 6th Floor
New York, NY 10004
Telephone: (212) 425-4200
Attention: Investor Relations
You may also obtain a copy of any filing we have made with the SEC directly
from the SEC. You
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may either:
- read and copy reports, statements or other information we have filed
with the SEC at the SEC's public reference room at 450 Fifth Street
N.W., Washington, D.C.
- obtain copies of documents that we have filed with the SEC on the SEC's
Internet web site at http://www.sec.gov.
You can get more information about the SEC's public reference room by
calling the SEC at 1-800-SEC-0330.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements within the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995 throughout this
prospectus. These statements relate to our future plans, objectives,
expectations and intentions. These statements may be identified by the use of
words such as "expects," "anticipates," "intends," "believes," "estimates,"
"plans" and similar expressions. Our actual results could differ materially from
those discussed in these statements. Factors that could contribute to such
differences include, but are not limited to, those discussed in the "Risk
Factors" section of this prospectus.
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SUMMARY
This section contains a general summary of the information contained in this
prospectus. It may not include all the information that is important to you. You
should read the entire prospectus, any accompanying prospectus supplement and
the documents incorporated by reference before making an investment decision.
OUR COMPANY
We are a leading global provider of Internet messaging services to
businesses, Internet Service Providers (ISPs), Web sites and direct to
consumers. We offer our messaging services to both the consumer and business
markets. Additionally, through our WORLD.com, Inc. subsidiary we have begun to
develop domain names from among our extensive portfolio of Internet domain
names.
BUSINESS MESSAGING SERVICES
We provide businesses with email service, Internet facsimile transmission
services and collaboration services. Our email services include services that
permit email systems to connect to the Internet, email hosting services and
email monitoring services. Our email monitoring services include virus scanning,
attachment control, spam control, legal disclaimers and other legends affixed to
outgoing emails and real time Web-based reporting. Our fax services include
email to fax, fax to email, enhanced fax and broadcast fax. Our collaboration
services include Web-hosted services and on-premise software solutions for group
calendaring, group scheduling, project management and document sharing. We earn
revenues in the business market on a usage or per seat basis.
PERSONAL COMMUNICATION SERVICES
In the consumer market, we provide Web-based email services, or WebMail, to
ISPs including several of the world's top ISPs, and we partner with top branded
Web sites to provide WebMail services to their users. In addition, we serve the
consumer market directly through our flagship site at www.mail.com. Our basic
consumer email services are free to our members. A consumer can become a member
of Mail.com by signing up for our email service at any of our partners' Web
sites or our own Web sites. We earn revenues in the consumer market from a
combination of:
- advertising related sales, including permission marketing and e-commerce
promotion; and
- subscription services, such as a service that allows members to purchase
increased storage capacity for their emails.
WORLD.COM, INC.
In March 2000, we formed WORLD.com, Inc. to focus on developing our
extensive portfolio of Internet domain names into major Web properties which
will serve the worldwide business-to-business and business-to-consumer
marketplace, beginning with Asia.com and India.com. In connection with the
formation of Asia.com, Inc., we acquired eLong.com, Inc., which through its
wholly-owned subsidiary operates the Web site www.elong.com in the Peoples'
Republic of China. Other properties from our portfolio of over 1,000 domains
include Europe.com, USA.com, Japan.com, lawyer.com and doctor.com. WORLD.com is
headquartered in New York, New York.
We are a Delaware corporation. Our principal executive offices are located
at 11 Broadway, 6th Floor, New York, NY 10004. Our phone number is (212)
425-4200.
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THE SECURITIES WE MAY OFFER
Each time we offer securities under this prospectus, we will provide you
with a prospectus supplement that will contain the specific terms of the
securities being offered. The following is a summary of the securities we may
offer under this prospectus.
CLASS A COMMON STOCK
We may issue shares of our Class A common stock, par value $0.01 per share.
In this prospectus, we provide a general description of our common stock, our
dividend policy and related matters.
PREFERRED STOCK AND DEPOSITARY SHARES
We may issue shares of our preferred stock, par value $0.01 per share, in
one or more series. Our board of directors, or a committee of our board of
directors, will determine the dividend, voting, conversion and other rights of
the series of shares of preferred stock being offered. We may also issue
fractional shares of preferred stock that will be represented by depositary
shares and depositary receipts.
DEBT SECURITIES
We may offer unsecured general obligations, which may be either senior or
subordinated and may be convertible into shares of our Class A common stock or
preferred stock. In this prospectus, we refer to the senior debt securities and
the subordinated debt securities together as the "debt securities." The senior
debt securities will have the same rank as all our other unsecured and
unsubordinated debt. The debt securities will be entitled to payment only after
payment on our senior debt. In addition, the subordinated debt securities will
be effectively subordinated to creditors and any third party shareholders of our
subsidiaries to the extent of the value of assets in those subsidiaries. Our
board of directors will determine the terms of each series of debt securities
being offered.
The debt securities will be issued under an indenture between us and the
trustee or trustees we name in the prospectus supplement. We have summarized
certain general features of the debt securities from the indentures, which will
be exhibits to this registration statement of which this prospectus is a part.
We encourage you to read the indentures and our recent periodic and current
reports that we file with the SEC. Directions on how to obtain copies of these
reports are provided under "Where You Can Find More Information."
WARRANTS
We may issue warrants for the purchase of shares of Class A common stock,
shares of preferred stock or debt securities. Our board of directors, or a
committee of our board of directors or officers appointed by them, will
determine the terms of the warrants.
STOCK PURCHASE UNITS AND STOCK PURCHASE CONTRACTS
We may issue stock purchase units and stock purchase contracts, including
contracts obligating holders to purchase from us, and us to sell to the holders,
a specified number of shares of Class A common stock or preferred stock at a
future date or dates. We may determine the price of shares of Class A common
stock or preferred stock at the time we issue the stock purchase contracts or
the price may be determined by referring to a specific formula described in the
stock purchase contracts. We may issue the stock purchase contracts separately
or as a part of stock purchase units consisting of a stock purchase contract and
debt securities, preferred stock or debt obligations of third parties, including
U.S. Treasury securities, which secure the holders' obligations to purchase the
Class A common stock or preferred stock
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under the stock purchase contracts. The stock purchase contracts may require us
to make periodic payments to the holders of the stock purchase units or vice
versa, and such payments may be unsecured or prefunded on some basis. The stock
purchase contracts may require holders to secure their obligations in a
specified manner.
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RISK FACTORS
Before investing in our securities, you should carefully consider the risks
described below and the accompanying prospectus supplement as well as the other
information included or incorporated by reference in this prospectus and the
accompanying prospectus supplement.
WE HAVE ONLY A LIMITED OPERATING HISTORY, AND WE ARE INVOLVED IN A NEW AND
UNPROVEN INDUSTRY.
We have only a limited operating history upon which you can evaluate our
business and our prospects. We have offered a commercial email service since
November 1996 under the name iName. We changed our company name to Mail.com,
Inc. in January 1999. In March 2000, we formed WORLD.com to develop and operate
our domain name properties as independent Web sites. Our success will depend in
part upon the development of a viable market for email advertising and fee-based
Internet messaging and collaboration services and outsourcing, and upon our
ability to compete successfully in those markets. Our success will also depend
on our ability to successfully develop and operate our domain name properties
under WORLD.com, beginning with Asia.com and India.com, and the acceptance by
businesses and consumers of the services offered at these Web sites. For the
reasons discussed in more detail below, there are substantial obstacles to our
achieving and sustaining profitability.
WE HAVE INCURRED LOSSES SINCE INCEPTION AND EXPECT TO INCUR SUBSTANTIAL LOSSES
IN THE FUTURE.
We have generated only limited revenues to date. We have not achieved
profitability in any period, and we may not be able to achieve or sustain
profitability. We incurred a net loss attributable to common stockholders of
$90.4 million for the six months ended June 30, 2000. We had an accumulated
deficit of $153.5 million as of June 30, 2000. We expect to continue to incur
substantial net losses and negative operating cash flow for the foreseeable
future. We have begun and will continue to significantly increase our operating
expenses in anticipation of future growth. We intend to expand our sales and
marketing operations, upgrade and enhance our technology, continue our
international expansion, and improve and expand our management information and
other internal systems. We intend to continue to make strategic acquisitions and
investments, which may result in significant amortization of goodwill and other
expenses. We are making these expenditures in anticipation of higher revenues,
but there will be a delay in realizing higher revenues even if we are
successful. If we do not succeed in substantially increasing our revenues, our
losses will continue indefinitely and will increase.
IF WE ARE UNABLE TO RAISE NECESSARY CAPITAL IN THE FUTURE, WE MAY BE UNABLE TO
FUND NECESSARY EXPENDITURES.
We anticipate the need to raise additional capital in the future. However,
we may not be able to raise on terms favorable to us, or at all, amounts
necessary to fund our planned expansion, develop new or enhanced services,
respond to competitive pressures, promote our brand name or acquire
complementary businesses, technologies or services. Some of our stockholders
have registration rights that could interfere with our ability to raise needed
capital.
If we raise additional funds by issuing equity securities, stockholders may
experience dilution of their ownership interest. Moreover, we could issue
preferred stock that has rights senior to those of the Class A common stock or
any preferred stock offered by this prospectus. If we raise funds by issuing
debt, our lenders may place limitations on our operations, including our ability
to pay dividends. Some of our subsidiaries plan to raise funds by issuing
preferred stock, the terms of which may similarly restrict their operations and
their ability to pay dividends to us.
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WE INTEND TO CONTINUE TO ACQUIRE, OR MAKE STRATEGIC INVESTMENTS IN, OTHER
BUSINESSES AND ACQUIRE OR LICENSE TECHNOLOGY AND OTHER ASSETS AND WE MAY HAVE
DIFFICULTY INTEGRATING THESE BUSINESSES OR GENERATING AN ACCEPTABLE RETURN.
We have completed a number of acquisitions and strategic investments since
our initial public offering. For example, we acquired NetMoves Corporation, a
provider of a variety of Internet document delivery services to businesses, and
The Allegro Group, Inc., a provider of email and email related services, such as
virus blocking and content screening, to businesses. We also made two
investments in 3Cube, Inc., a company specializing in Internet fax technology,
and acquired TCOM, Inc., a software technology consulting firm, and Lansoft
U.S.A., Inc., a provider of email management, e-commerce and Web hosting
services to businesses. We also recently acquired eLong.com, Inc. and Huelink
Corporation Ltd. in connection with the formation of Asia.com, Inc. and Multiple
Zones in connection with the formation of India.com. We also recently acquired
technology related assets from IntraACTIVE, Inc. (now named Bantu, Inc.) and
made a strategic investment in Bantu and committed to make additional
investments in them. We will continue our efforts to acquire or make strategic
investments in businesses and to acquire or license technology and other assets,
and any of these acquisitions may be material to us. We cannot assure you that
acquisition or licensing opportunities will continue to be available on terms
acceptable to us or at all. Such acquisitions involve risks, including:
- inability to raise the required capital;
- difficulty in assimilating the acquired operations and personnel;
- inability to retain any acquired member or customer accounts;
- disruption of our ongoing business;
- the need for additional capital to fund losses of acquired businesses;
- inability to successfully incorporate acquired technology into our
service offerings and maintain uniform standards, controls, procedures
and policies; and
- lack of the necessary experience to enter new markets.
We may not successfully overcome problems encountered in connection with
potential acquisitions. In addition, an acquisition could materially impair our
operating results by diluting our stockholders' equity, causing us to incur
additional debt or requiring us to amortize acquisition expenses and acquired
assets.
THE ISSUANCE OF OUR CONVERTIBLE SUBORDINATED NOTES SIGNIFICANTLY INCREASED OUR
LEVERAGE.
In January 2000, we issued $100 million of convertible subordinated notes
due 2005. The sale of our convertible notes has increased our debt as a
percentage of total capitalization. We may incur substantial additional
indebtedness in the future. The level of our indebtedness, among other things,
could (1) make it difficult for us to make payments on our convertible notes and
any indebtedness that may be offered under this prospectus, (2) make it
difficult to obtain any necessary financing in the future for working capital,
capital expenditures, debt service requirements or other purposes, (3) limit our
flexibility in planning for, or reacting to changes in, our business, and (4)
make us more vulnerable in the event of a downturn in our business.
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WE MAY BE UNABLE TO PAY DEBT SERVICE ON OUR CONVERTIBLE NOTES AND OTHER
OBLIGATIONS.
We had an operating loss and negative cash flow during the six months ended
June 30, 2000 and 1999 and expect to incur substantial losses and negative cash
flows for the foreseeable future. Accordingly, cash generated by our operations
would have been insufficient to pay the amount of interest payable annually on
our convertible notes. We cannot assure you that we will be able to pay interest
and other amounts due on our convertible notes on the scheduled dates or at all.
If our cash flow and cash balances are inadequate to meet our obligations, we
could face substantial liquidity problems. If we are unable to generate
sufficient cash flow or otherwise obtain funds necessary to make required
payments, or if we otherwise fail to comply with any covenants in our
indebtedness, we would be in default under these obligations, which would permit
these lenders to accelerate the maturity of the obligations and could cause
defaults under our indebtedness. Any such default could have a material adverse
effect on our business, results of operations and financial condition. We cannot
assure you that we would be able to repay amounts due on our convertible notes
if payment of the convertible notes were accelerated following the occurrence of
an event of default under the indenture for the convertible notes.
TO GENERATE INCREASED REVENUES FROM OUR CONSUMER SERVICES, WE WILL HAVE TO
SUBSTANTIALLY INCREASE THE NUMBER OF OUR MEMBERS, WHICH WILL BE DIFFICULT TO
ACCOMPLISH.
To achieve our objective of generating advertising related revenues and
subscription revenues through our consumer email services, we will have to
retain our existing members and acquire a large number of new members. We have
relied upon strategic alliances with third party Web sites to attract the
majority of our current members.
We believe that our success in our consumer business will partially depend
on our ability to maintain our current alliances and to enter into new ones with
Web sites and ISPs on acceptable terms. We believe, however, that the
opportunity to form alliances with third party Web sites that are capable of
producing a substantial number of new members is diminishing. Many third party
Web sites that we have identified as potential sources for significant
quantities of new members already offer their visitors an email service similar
to ours. We cannot assure you that we will be able to enter into successful
alliances with third party Web sites or ISPs on acceptable terms or at all.
OUR CONTRACTS WITH OUR WEB SITE AND ISP PARTNERS REQUIRE US TO INCUR SUBSTANTIAL
EXPENSES.
In nearly all cases our Web site and ISP partners do not pay us to provide
our services. We bear the costs of providing our services. We generate revenues
by selling advertising space to advertisers who want to target our members and
by selling subscription services to these members. We pay the partner a share of
the revenues we generate. In addition, a number of our contracts have required
us to pay significant fees or to make minimum payments to the partner without
regard to the revenues we realize. If we are unable to generate sufficient
revenues at our partner sites, these fees and minimum payments can cause the
partner's effective share of our revenues to approach or exceed 100%. We intend
to reduce or eliminate the payment of these fees or minimum payments made
without regard to the revenues realized. We cannot assure you that we will be
able to renew partner contracts on the basis of reducing or eliminating these
payments or if renewed that the revised terms of such contracts will be
favorable to us.
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THE FAILURE TO RENEW OUR PARTNER CONTRACTS, WHICH HAVE LIMITED TERMS, CAN RESULT
IN THE LOSS OF MEMBERS AND IMPAIR OUR CREDIBILITY.
Our partner contracts generally have one or two year terms. A partner can
decide not to renew at the end of the term for a variety of reasons, including
dissatisfaction with our service, a desire to switch to one of our outsourcing
competitors, or a decision to provide email service themselves. Partners can
also choose not to renew our contract because they have entered into a merger or
other strategic relationship with another company that can provide email
service. This last factor is becoming increasingly common in light of the
consolidation taking place among Web sites, ISPs and other Internet-related
businesses. For example, XOOM recently combined with Snap, which is jointly
owned by CNET and NBC Multimedia, to create a new Internet services company
named NBC Internet, Inc., or NBCi. XOOM offers a free email service at its
xoom.com Web site. We cannot assure you that these partners will not seek to
terminate their contractual relationships with us. A partner may also fail to
renew our contract with them because we decide not to continue making payments
to them without regard to the revenue that we generate from their site. The loss
of a partner can be very disruptive for us for a number of reasons:
We may lose a substantial number of members. When members register for our
service at a partner's Web site, the default domain name members use for their
email address is typically a domain name that is owned by the partner. As of
June 30, 2000, we estimate that approximately 28% of our established emailboxes
have email addresses at partner-owned domain names. Upon expiration, most
partners can require us to relinquish existing members with addresses at
partner-owned domain names. Even those members who have selected addresses using
our domain names may find it more convenient to switch to whatever replacement
email service may be available at the partner's site. The loss of members due to
expiration or non-renewal of partner contracts may materially reduce our
revenues. Moreover, as of June 30, 2000, we estimate that approximately 16% of
our emailboxes established are at the email.com domain. If CNET and NBCi
exercise their rights to terminate our agreement, which includes the right to
terminate for convenience after May 13, 2001, we would be obligated to transfer
the email.com domain name and related member information to them. If CNET and
NBCi terminate for convenience, they would be obligated to pay us the greater of
$5.0 million or 120% of the fair market value of the email.com user data based
on the projected economic benefit of the users and either return to us the
shares that we issued to them for the establishment of emailboxes or pay us the
then fair market value of these shares. If CNET and NBCi terminate for other
reasons, the amount of compensation they must pay to us varies depending on the
reason for termination. NBC Multimedia may elect to exercise similar rights
relating to email.com emailboxes established through their sites under our
agreement with them.
Losing relationships with prominent partners can impair our credibility with
advertisers and other partners. We believe that partnerships with Web sites that
have prominent brand names help give us credibility with other partners and with
advertisers. The loss of our better-known Web site partners could damage our
reputation and adversely affect the advertising, direct marketing, e-commerce
and subscription rates we charge.
BECAUSE WE ARE DEPENDENT ON A SMALL NUMBER OF PARTNER SITES FOR A SUBSTANTIAL
PERCENTAGE OF OUR ANTICIPATED NEW MEMBERS, A DISRUPTION IN OUR RELATIONSHIP WITH
ANY OF THESE PARTNERS OR A DECREASE IN TRAFFIC AT ANY OF THESE SITES COULD
REDUCE OUR ADVERTISING RELATED REVENUES AND SUBSCRIPTION REVENUES.
Most of our partner sites, including most of those with well-known brand
names, do not generate significant numbers of new emailboxes. The following four
partners accounted for 34% of our new emailboxes established in June 2000:
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<TABLE>
<CAPTION>
PERCENTAGE DATE THAT OUR
OF NEW CONTRACT WITH
E-MAILBOXES THE PARTNER
PARTNER IN JUNE 2000 EXPIRES
------- ------------ -------
<S> <C> <C>
Juno 11% December 2001
Snap 10% *
iWon 7% October 2000
EarthLink 7% April 2001
</TABLE>
* Snap may terminate its contracts for convenience after May 13, 2001.
If any of the Web sites operated by these parties were to experience lower
than anticipated traffic, or if our relationships with any of these parties were
disrupted for any reason, our revenues could decrease and the growth of our
business would be impeded. Lower than anticipated traffic could result in
decreased advertising related revenues because those revenues are in part
dependent on the number of members and the level of member usage. Our contract
with iWon will not renew upon expiration.
WE HAVE ONLY LIMITED INFORMATION ABOUT OUR MEMBERS AND THEIR USAGE, WHICH MAY
LIMIT OUR POTENTIAL REVENUES.
Our ability to generate revenue from advertising related sales is directly
related to our members' activity levels and the quality of our demographic data.
To be successful, we will have to increase members' usage of our service. We are
subject to several constraints that will limit our ability to maximize the value
of our member base:
We believe that most of our members do not use their emailboxes regularly,
and many do not use them at all. We believe that a substantial majority of our
members do not access their emailboxes regularly or at all. Moreover, we believe
that many of our emailboxes that are accessed were first established during a
recent period prior to access. We expect our proportion of active members to
decrease as our total number of established emailboxes increases. On an ongoing
basis, we believe that a significant number of members will cease using our
service each month. We cannot assure you that we will be able to add enough new
members to compensate for this anticipated loss of usage.
We have only a limited ability to generate advertising revenues from
forwarding and POP3 accounts, which represent a significant percentage of our
emailboxes. Members who choose our forwarding service or subscribe to our POP3
service do not need to come to our partners' or our Web sites to access their
email. Therefore, we do not deliver Web-based advertisements to these members.
Forwarding and POP3 accounts represented approximately 25% of our total
emailboxes as of June 30, 2000, and 9% of the emailboxes that were established
during June 2000. If a disproportionate percentage of members choose either of
these options, it will adversely affect our ability to generate advertising
related revenues.
Our database contains inaccuracies that could reduce the value of our
information. Although we attempt to collect basic demographic information about
members at the time they establish their accounts, we do not verify the accuracy
of this information. Moreover, even if the information is correct when we
receive it, members may move, change jobs or die without our knowledge. As a
result, our database contains inaccuracies that could make our information less
appealing to advertisers.
We do not know how many members have established multiple emailboxes.
Because we do not charge for our basic service, individuals can easily establish
multiple emailboxes. This makes it impossible for us to
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<PAGE> 15
determine the number of separate individuals registering for our service, which
may reduce the advertising rates we can command.
WEBMAIL, EMAIL ADVERTISING AND INTERNET MESSAGING AND COLLABORATION SERVICES
OUTSOURCING MAY NOT PROVE TO BE VIABLE BUSINESSES.
We operate in an industry that is only beginning to develop. Our success
will require the widespread acceptance by consumers of Webmail. We are also
dependent on the development of viable markets for email advertising and the
outsourcing of email services to businesses and other organizations. For a
number of reasons, each of these developments is somewhat speculative:
Consumers may not be willing to use Webmail in large numbers. As a Web-based
messaging service, Webmail is subject to the same concerns and shortcomings as
the Internet itself. Concerns about the security of information carried over the
Internet and stored on central computer systems could inhibit consumer
acceptance of Webmail. Moreover, Webmail can only function as effectively as the
Web itself. If traffic on the Web does not move quickly or Internet access is
impeded, consumers are less likely to use Webmail. Consumers may also react
negatively to the relatively new concept of an advertising supported email
service. Our business will suffer if public perception of our service or of
Webmail in general is unfavorable. Articles and reviews published in popular
publications relating to computers and the Internet have a great deal of impact
on public opinion within our markets, and an article or review unfavorable to
Webmail or to our service specifically could slow or prevent broad market
acceptance. Similarly, if employers in large numbers implement policies or
software designed to restrict access to Webmail, Webmail is much less likely to
gain popular acceptance.
There are even greater uncertainties about our ability to successfully
market premium Webmail services. Consumers have generally been very reluctant to
pay for services provided over the Internet. In August 1999, we discontinued
charging our members for virtually all of our premium domain names. Moreover, if
our competitors choose to provide POP3 access, greater storage capacity or other
services without charge or as part of a bundled offering, we may be forced to do
the same.
There are significant obstacles to the development of a sizable market for
Internet messaging and collaboration services outsourcing. Outsourcing is one of
the principal methods by which we will attempt to reach the size we believe is
necessary to be successful. Security and the reliability of the Internet,
however, are likely to be of concern to Web sites, ISPs, schools, businesses and
organizations deciding whether to outsource their email or fax services or to
continue to provide it themselves. These concerns are likely to be particularly
strong at larger businesses, which are better able to afford the costs of
maintaining their own systems. We provide a range of email and fax services to
businesses and organizations. We currently generate revenues in the business
market primarily from email service fees related to our email system connection
services, email monitoring services and fax transmission services. We cannot be
sure that we will be able to expand our business customer base, attract
additional customers in other segments or acquire a sufficient base of customers
for whom we would provide hosting and other outsourced services. In addition,
the sales cycle for hosting services is lengthy and could delay our ability to
generate revenues in the business email services market. Furthermore, we may not
be able to generate significant additional revenues by providing our email
services to businesses. Standards for pricing in the business email services
market are not yet well defined and some businesses, schools and other
organizations may not be willing to pay the fees we wish to charge. We cannot
assure you that the fees we intend to charge will be sufficient to offset the
related costs of providing these services.
The market for email advertising is only beginning to develop and the
effectiveness of this form of advertising is unproven. Even if Webmail proves to
be popular, we will still need large numbers of
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<PAGE> 16
advertisers to purchase space on our Webmail service. We currently do not sell
advertisements in connection with our business email services.
Because we, and our competitors, have only recently begun to offer email
advertising, our potential advertising customers have little or no experience
with this medium. We do not yet have enough experience to demonstrate the
effectiveness of this form of advertising. As a result, those customers willing
to try email advertising are likely to allocate only a limited portion of their
advertising budgets. If early customers do not find email advertising to be
effective for promoting their products and services, the market for our products
will be unlikely to develop. Prices for banner advertisements on the Internet
may fall, in part because of diminishing "click" or response rates. Advertisers
may also request fewer "cost per thousand advertisements" pricing arrangements
and more "cost per click" pricing, which could effectively lower advertising
rates.
There are currently no standards for measuring the effectiveness of Webmail
advertising. Standard measurements may need to be developed to support and
promote Webmail advertising as a significant advertising medium. Our advertising
customers may refuse to accept our own measurements or third-party measurements
of advertisement delivery, which would adversely affect our ability to generate
advertising related revenues.
Filtering software could prevent us from delivering advertising. Inexpensive
software programs are available which limit or prevent the delivery of
advertising to a user's computer. The widespread adoption of this software would
seriously threaten the commercial viability of email advertising and our ability
to generate advertising revenues.
THERE ARE SIGNIFICANT OBSTACLES TO OUR ABILITY TO INCREASE ADVERTISING REVENUES.
Our success will largely depend on our ability to substantially increase our
advertising related revenues, which we currently generate only in connection
with our consumer services. Several factors will make it very difficult for us
to achieve this objective:
A limited number of advertisers account for a high percentage of our
revenues, our contracts with our advertisers typically have terms of only one or
two months, and we may be unable to renew these contracts. We are dependent on a
limited number of advertisers to derive a substantial portion of our revenues.
For the six months ended June 30, 2000 and 1999, revenues from our five largest
advertisers accounted for an aggregate of 11% and 48%, respectively, of our
revenues. Our future success will depend upon our ability to retain these
advertisers, to generate significant revenues from new advertisers and to reduce
our reliance on any single advertiser. Our existing contracts with advertisers
generally have terms of only one or two months and we may be unable to renew
them. The loss of one of our major advertisers or our inability to attract new
advertisers would cause our revenues to decline.
We may not be able to sell as much advertising on a "cost per thousand"
basis or to charge as much under this type of arrangement as we have in the
past. To date, we have generated a significant portion of our advertising
revenues on a "cost per thousand" basis. These agreements require the advertiser
to pay us a fixed fee for every 1,000 advertisements that we deliver to our
members. We believe that this type of agreement is the most effective for us,
but we may not be able to charge as much for these agreements, or to continue to
sell as much advertising on this basis, in the future.
We face greater risks when selling advertising on a "cost per action" basis.
The two types of "cost per action" contracts are "cost per click" and "cost per
conversion." In cost per click contracts, an advertiser agrees to pay us a fee
for each occasion on which a member "clicks" on the advertisement. Cost per
conversion contracts provide that we receive a fee only when a member both
"clicks" on the advertisement
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<PAGE> 17
and proceeds to purchase an item, order a catalog or take some other step
specified by the advertiser. In general, these arrangements do not yield as much
revenue for us for each advertisement that we deliver to our members. Moreover,
cost per conversion contracts present additional risks for us because we have no
control over the advertiser's ability to convert a "click" into a sale or other
action. We also must rely on the advertiser to report to us the number of
conversions. These reports may not be accurate, and they may not be timely, both
of which can adversely affect our revenues. Notwithstanding these risks, we may
have to sell more of our advertising on a cost per click or cost per conversion
basis in the future.
WE MAY FAIL TO MEET MARKET EXPECTATIONS BECAUSE OF FLUCTUATIONS IN OUR QUARTERLY
OPERATING RESULTS, WHICH WOULD CAUSE OUR STOCK PRICE TO DECLINE.
Although we intend to steadily increase our spending and investment to
support our planned growth, our revenues (and some of our costs) will be much
less predictable. This is likely to result in significant fluctuations in our
quarterly results, and to limit the value of quarter-to-quarter comparisons.
Because of our limited operating history and the emerging nature of our
industry, we anticipate that securities analysts will have difficulty in
accurately forecasting our results. It is likely that our operating results in
some quarters will be below market expectations. In this event, the price of our
Class A common stock is likely to decline.
The following are among the factors that could cause significant
fluctuations in our operating results:
- incurrence of other cash and non-cash accounting charges, including
charges resulting from acquisitions;
- incurrence of additional expenditures without receipt of offsetting
revenues as a result of the development of our domain name properties;
- delay or cancellation of even a small number of advertising contracts;
- expiration or termination of partnerships with Web sites or ISPs, which
can result from mergers or other strategic combinations as Internet
businesses continue to consolidate;
- system outages, delays in obtaining new equipment or problems with
planned upgrades;
- disruption or impairment of the Internet;
- introduction of new or enhanced services by us or our competitors;
- changes in our pricing policy or that of our competitors;
- seasonality in the demand for advertising, or changes in our own
advertising rates or advertising rates in general, both on and off the
Internet;
- changes in governmental regulation of the Internet and email in
particular; and
- general economic and market conditions, and particularly those affecting
email advertising.
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<PAGE> 18
SEVERAL OF OUR COMPETITORS HAVE SUBSTANTIALLY GREATER RESOURCES, LONGER
OPERATING HISTORIES, LARGER CUSTOMER BASES AND BROADER PRODUCT OFFERINGS.
Our business is, and we believe will continue to be, intensely competitive.
Our competitors with respect to email services include such large and
established companies as Microsoft, America Online, Yahoo!, Excite@Home, Disney
(which owns the GO Network) and Lycos. Microsoft offers free Webmail through its
Hotmail Web site, and has dominant market share with over 40 million emailboxes
according to Microsoft. We also compete for partners with email service
providers such as USA.NET, Inc., Critical Path, Inc. and CommTouch Software,
Ltd. In offering email services to businesses, schools and other organizations,
we expect to compete with MCI Mail, USA.NET and Critical Path. Our current and
prospective competitors in the facsimile transmission services market generally
fall into the following groups: telecommunication companies, such as AT&T,
WorldCom, Sprint, the regional Bell operating companies and telecommunications
resellers; ISPs, such as UUnet and NETCOM On-Line Communications Services, Inc.;
on-line services providers, such as Microsoft and America Online and direct fax
delivery competitors, including Premiere Document Distribution (formerly Xpedite
Systems, Inc.) and IDT Corporation. In addition, we compete for advertisers with
DoubleClick, 24/7 Media, and other Internet advertising networks. We also
compete for advertisers with other Internet publishers as well as traditional
media such as television, radio, print and outdoor advertising. Our domain
properties developed by WORLD.com will compete with the major business and
consumer portals and other providers of Internet services in the markets in
which they operate.
Some of our competitors provide a variety of Web-based services such as
Internet access, browser software, homepage design and Web site hosting, in
addition to email. The ability of these competitors to offer a broader suite of
complementary services may give them a considerable advantage over us. In
addition, some competitors who have other sources of revenue do not, or in the
future may not, place advertising on their Webmail pages. Consumers may prefer a
service that does not include advertisements.
The level of competition is likely to increase as current competitors
increase the sophistication of their offerings and as new participants enter the
market. In the future, as we expand our service offerings, we expect to
encounter increased competition in the development and delivery of these
services. Further, some of our competitors may offer services for which we now
charge our members at or below cost or for free. If our competitors choose to
offer premium or other services at or below cost or for free, we may be forced
to do the same for our comparable services. If this occurs, our ability to
generate revenues from our subscription services would be materially impaired.
Some of our competitors may offer advertisement-free email on a subscription
basis or for free, which could adversely affect our ability to attract and
retain members unless we do the same. In addition, new technologies and the
expansion of existing technologies may increase competitive pressures on us. We
may not be able to compete successfully against our current or future
competitors.
OUR RAPID EXPANSION IS STRAINING OUR EXISTING RESOURCES, AND IF WE ARE NOT ABLE
TO MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS AND OPERATING RESULTS WILL
SUFFER.
We have begun aggressively expanding our operations in anticipation of an
increasing number of strategic alliances and a corresponding increase in the
number of members as well as development of our business customer base. We have
entered into agreements with additional partners and have upgraded our email
services. We have also developed the technology and infrastructure to begin
offering a range of services in the business Internet messaging and
collaboration services market. In addition, we have formed WORLD.com for the
purpose of developing our portfolio of domain names. This expansion has placed,
and we expect it to continue to place, a significant strain on our managerial,
operational and financial resources. If we cannot manage our growth effectively,
our business and operating results will suffer.
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<PAGE> 19
IT IS DIFFICULT TO RETAIN KEY PERSONNEL AND ATTRACT ADDITIONAL QUALIFIED
EMPLOYEES IN OUR BUSINESS AND THE LOSS OF KEY PERSONNEL AND THE BURDEN OF
ATTRACTING ADDITIONAL QUALIFIED EMPLOYEES MAY IMPEDE THE OPERATION AND GROWTH OF
OUR BUSINESS AND CAUSE OUR REVENUES TO DECLINE.
Our future success depends to a significant extent on the continued service
of our key technical, sales and senior management personnel, but they have no
contractual obligation to remain with us. In particular, our success depends on
the continued service of Gerald Gorman, our Chairman and Chief Executive
Officer, Gary Millin, Chief Executive Officer, WORLD.com, Lon Otremba, our
President, Debra McClister, our Executive Vice President and Chief Financial
Officer, Sam Kline, our Chief Operating Officer, Thomas Murawski, Chief
Executive Officer, Mail.com Business Messaging Services, Inc. and Courtney
Nichols, President, Mail.com Personal Communication Services. The loss of the
services of Messrs. Gorman, Millin, Otremba, Kline, and Murawski or of Ms.
McClister and Ms. Nichols, or several other key employees, would impede the
operation and growth of our business.
To manage our existing business and handle any future growth, we will have
to attract, retain and motivate additional highly skilled employees. In
particular, we will need to hire and retain qualified salespeople if we are to
meet our sales goals. We will also need to hire and retain additional
experienced and skilled technical personnel in order to meet the increasing
technical demands of our expanding business. Competition for employees in
Internet-related businesses is intense. We have in the past experienced, and
expect to continue to experience, difficulty in hiring and retaining employees
with appropriate qualifications. If we are unable to do so, our management may
not be able to effectively manage our business, exploit opportunities and
respond to competitive challenges.
OUR BUSINESS IS HEAVILY DEPENDENT ON TECHNOLOGY, INCLUDING TECHNOLOGY THAT HAS
NOT YET BEEN PROVEN RELIABLE AT HIGH TRAFFIC LEVELS AND TECHNOLOGY THAT WE DO
NOT CONTROL.
The performance of our computer systems is critical to the quality of
service we are able to provide to our members and to our business customers. If
our services are unavailable or fail to perform to their satisfaction, they may
cease using our service. Reduced use of our service decreases our revenues by
decreasing the advertising space that we have available to sell. In addition,
our agreements with several of our partners establish minimum performance
standards. If we fail to meet these standards, our partners could terminate
their relationships with us and assert claims for monetary damages.
WE NEED TO UPGRADE OUR COMPUTER SYSTEMS TO ACCOMMODATE INCREASES IN EMAIL AND
FAX TRAFFIC AND TO ACCOMMODATE INCREASES IN THE USAGE OF OUR COLLABORATION
SERVICES, BUT WE MAY NOT BE ABLE TO DO SO WHILE MAINTAINING OUR CURRENT LEVEL OF
SERVICE, OR AT ALL.
We must continue to expand and adapt our computer systems as the number of
members and customers and the amount of information they wish to transmit
increases and as their requirements change, and as we develop our business
messaging and collaboration services. Because we have only been providing our
services for a limited time, and because our computer systems have not been
tested at greater capacities, we cannot guarantee the ability of our computer
systems to connect and manage a substantially larger number of members or meet
the needs of business customers at high transmission speeds. If we cannot
provide the necessary service while maintaining expected performance, our
business would suffer and our ability to generate revenues through our services
would be impaired.
The expansion and adaptation of our computer systems will require
substantial financial, operational and managerial resources. We may not be able
to accurately project the timing of increases in email traffic or other customer
requirements. In addition, the very process of upgrading our computer systems is
likely to cause service disruptions. This is because we will have to take
various elements of the network out of service in order to install some
upgrades.
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OUR COMPUTER SYSTEMS MAY FAIL AND INTERRUPT OUR SERVICE.
Our members have in the past experienced interruptions in our services. We
believe that these interruptions will continue to occur from time to time. These
interruptions are due to hardware failures, unsolicited bulk emails that
overload our system and other computer system failures. In particular, we have
experienced outages and delays in email delivery and access to our email service
related to disk failures, the implementation of changes to our computer system
and insufficient storage capacity. These failures have resulted and may continue
to result in significant disruptions to our service. Although we plan to install
backup computers and implement procedures to reduce the impact of future
malfunctions in these systems, the presence of these and other single points of
failure in our network increases the risk of service interruptions. Some aspects
of our computer systems are not redundant. These include our member database
system and our email storage system, which stores emails and other data for our
members. In addition, substantially all of our computer and communications
systems relating to our email services are currently located in our primary data
centers in Manhattan, Edison, New Jersey and Dayton, Ohio. We currently do not
have alternate sites from which we could conduct operations in the event of a
disaster. Our computer and communications hardware is vulnerable to damage or
interruption from fire, flood, earthquake, power loss, telecommunications
failure and similar events. Our services would be suspended for a significant
period of time if any of our primary data centers was severely damaged or
destroyed. We might also lose stored emails and other member files, causing
significant member dissatisfaction and possibly giving rise to claims for
monetary damages.
OUR SERVICES WILL BECOME LESS DESIRABLE OR OBSOLETE IF WE ARE UNABLE TO KEEP UP
WITH THE RAPID CHANGES CHARACTERISTIC OF OUR BUSINESS.
Our success will depend on our ability to enhance our existing services and
to introduce new services in order to adapt to rapidly changing technologies,
industry standards and customer demands. To compete successfully, we will have
to accurately anticipate changes in consumer and business demand and add new
features to our services very rapidly. We also have to regularly upgrade our
software to ensure that it remains compatible with the wide and changing variety
of Web browsers and other software used by our members and business customers.
For example, our system currently cannot properly receive files sent using some
third party email programs. We may not be able to integrate the necessary
technology into our computer systems on a timely basis or without degrading the
performance of our existing services. We cannot be sure that, once integrated,
new technology will function as expected. Delays in introducing effective new
services could cause existing and potential members to forego use of our
services and to use instead those of our competitors.
OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO PROVIDE ADEQUATE SECURITY FOR OUR
SERVICE, OR IF OUR SERVICE IS IMPAIRED BY SECURITY MEASURES IMPOSED BY THIRD
PARTIES.
Security is a critical issue for any online service, and presents a number
of challenges for us.
If we are unable to maintain the security of our service, our reputation and
our ability to attract and retain members and business customers may suffer, and
we may be exposed to liability. Third parties may attempt to breach our security
or that of our members or any business customers whose networks we may maintain
or for whom we provide services. If they are successful, they could obtain our
members' confidential information, including our members' profiles, passwords,
financial account information, credit card numbers, stored email or other
personal information, or obtain information that is sensitive or confidential to
a business customer or otherwise disrupt a business customer's operations. Our
members or any business customers may assert claims for money damages for any
breach in our security and any breach could harm our reputation.
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Our computers are vulnerable to computer viruses, physical or electronic
break-ins and similar incursions, which could lead to interruptions, delays or
loss of data. We expect to expend significant capital and other resources to
license or create encryption and other technologies to protect against security
breaches or to alleviate problems caused by any breach. Nevertheless, these
measures may prove ineffective. Our failure to prevent security breaches may
expose us to liability and may adversely affect our ability to attract and
retain members and develop our business market.
Security measures taken by others may interfere with the efficient operation
of our service, which may harm our reputation, adversely impact our ability to
attract and retain members and impede the delivery of advertisements from which
we generate revenues. "Firewalls" and similar network security software employed
by many ISPs, employers and schools can interfere with the operation of our
Webmail service, including denying our members access to their email accounts.
Similarly, in their efforts to filter out unsolicited bulk emails, Web sites,
ISPs and other organizations may block email from all or some of our members.
OUR DEPENDENCE ON LICENSED TECHNOLOGY EXPOSES US TO THE RISK THAT WE MAY NOT BE
ABLE TO INTEGRATE OUR TECHNOLOGY, WHICH MAY RESULT IN LESS DEVELOPMENT OF OUR
OWN TECHNOLOGY AND MAY INCREASE OUR COSTS.
We license a significant amount of technology from third parties, including
technology related to our Web servers, email monitoring services, billing
processes, database and Internet fax services. We anticipate that we will need
to license additional technology to remain competitive. We may not be able to
license these technologies on commercially reasonable terms or at all.
Third-party licenses expose us to increased risks, including risks relating to
the integration of new technology, the diversion of resources from the
development of our own proprietary technology, a greater need to generate
revenues sufficient to offset associated license costs, and the possible
termination of or failure to renew an important license by the third-party
licensor.
IF THE INTERNET AND OTHER THIRD-PARTY NETWORKS ON WHICH WE DEPEND TO DELIVER OUR
SERVICES BECOME INEFFECTIVE AS A MEANS OF TRANSMITTING DATA, THE BENEFITS OF OUR
SERVICE MAY BE SEVERELY UNDERMINED.
Our business depends on the effectiveness of the Internet as a means of
transmitting data. The recent growth in the use of the Internet has caused
frequent interruptions and delays in accessing and transmitting data over the
Internet. Any deterioration in the performance of the Internet as a whole could
undermine the benefits of our services. Therefore, our success depends on
improvements being made to the entire Internet infrastructure to alleviate
overloading and congestion. We also depend on telecommunications network
suppliers such as MFS, BBN Planet and UUNET to transmit and receive email
messages on behalf of our members and our business customers. We are also
affected by service outages at our partners' Web sites. If service at a
partner's site is unavailable for a period of time, we will be unable to sign up
new members and generate page views and revenue at that site during the outage.
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IF THE THIRD PARTY THAT WE DEPEND ON FOR THE ACTUAL DELIVERY OF THE
ADVERTISEMENTS WE SELL EXPERIENCES TECHNICAL DIFFICULTIES OR OTHERWISE FAILS TO
PERFORM, OUR REVENUES FROM ADVERTISING MAY BE ADVERSELY AFFECTED.
We contract with DoubleClick, Inc. to deliver the advertisements that we
sell and that appear on our Web pages and on the Web pages of our partners. If
DoubleClick experiences technical difficulties or otherwise fails to perform,
our revenues from advertising may be adversely affected. Furthermore,
DoubleClick may not have the same priorities for technology development as we do
and this may limit our ability to improve our delivery of advertising for our
specific needs.
GERALD GORMAN CONTROLS MAIL.COM AND WILL BE ABLE TO PREVENT A CHANGE OF CONTROL.
Gerald Gorman, our Chairman and Chief Executive Officer, beneficially owned
as of June 30, 2000 Class A and Class B common stock representing approximately
68.5% of the voting power of our outstanding common stock. Each share of Class B
common stock entitles the holder to 10 votes on any matter submitted to the
stockholders. As a result of his share ownership, Mr. Gorman will be able to
determine the outcome of all matters requiring stockholder approval, including
the election of directors, amendment of our charter and approval of significant
corporate transactions. Mr. Gorman will be in a position to prevent a change in
control of Mail.com even if the other stockholders were in favor of the
transaction.
Mail.com and Mr. Gorman have agreed to permit our stockholders who formerly
held our preferred stock to designate a total of three members of our board of
directors.
Our charter contains provisions that could deter or make more expensive a
takeover of Mail.com. These provisions include the ability to issue "blank
check" preferred stock without stockholder approval.
OUR GOAL OF BUILDING BRAND IDENTITY IS LIKELY TO BE DIFFICULT AND EXPENSIVE.
We believe that a quality brand identity will be essential if we are to
increase membership, traffic on our sites and revenues, and to develop our
business services market. We do not have experience with some of the types of
marketing that we are currently using. If our marketing efforts cost more than
anticipated or if we cannot increase our brand awareness, our losses will
increase and our ability to succeed will be seriously impeded.
OUR EXPANSION INTO INTERNATIONAL MARKETS IS SUBJECT TO SIGNIFICANT RISKS AND OUR
LOSSES MAY INCREASE AND OUR OPERATING RESULTS MAY SUFFER IF OUR REVENUES FROM
INTERNATIONAL OPERATIONS DO NOT EXCEED THE COSTS OF THOSE OPERATIONS.
We intend to continue to expand into international markets and to expend
significant financial and managerial resources to do so. We have limited
experience in international operations and may not be able to compete
effectively in international markets. If our revenues from international
operations do not exceed the expense of establishing and maintaining these
operations, our losses will increase and our operating results will suffer. We
face significant risks inherent in conducting business internationally, such as:
- uncertain demand in foreign markets for Webmail advertising, direct
marketing and e-commerce;
- difficulties and costs of staffing and managing international
operations;
- differing technology standards;
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- difficulties in collecting accounts receivable and longer collection
periods;
- economic instability and fluctuations in currency exchange rates and
imposition of currency exchange controls;
- potentially adverse tax consequences;
- regulatory limitations on the activities in which we can engage and
foreign ownership limitations on our ability to hold an interest in
entities through which we wish to conduct business; and
- political instability, unexpected changes in regulatory requirements,
and reduced protection for intellectual property rights in some
countries.
REGULATION OF EMAIL AND INTERNET USE IS EVOLVING AND MAY ADVERSELY IMPACT OUR
BUSINESS.
There are currently few laws or regulations that specifically regulate
activity on the Internet. However, laws and regulations may be adopted in the
future that address issues such as user privacy, pricing, and the
characteristics and quality of products and services. For example, the
Telecommunications Act of 1996 restricts the types of information and content
transmitted over the Internet. Several telecommunications companies have
petitioned the FCC to regulate ISPs and online service providers in a manner
similar to long distance telephone carriers and to impose access fees on these
companies. This could increase the cost of transmitting data over the Internet.
Any new laws or regulations relating to the Internet could adversely affect our
business.
Moreover, the extent to which existing laws relating to issues such as
property ownership, pornography, libel and personal privacy are applicable to
the Internet is uncertain. We could face liability for defamation, copyright,
patent or trademark infringement and other claims based on the content of the
email transmitted over our system. We do not and cannot screen all the content
generated and received by our members. Some foreign governments, such as
Germany, have enforced laws and regulations related to content distributed over
the Internet that are more strict than those currently in place in the United
States. We may be subject to legal proceedings and damage claims if we are found
to have violated laws relating to email content.
We are subject to regulation by various state public service and public
utility commissions and by various international regulatory authorities with
respect to our fax services. We are licensed by the FCC as an authorized
telecommunications company and are classified as a "non-dominant interexchange
carrier." Generally, the FCC has chosen not to exercise its statutory power to
closely regulate the charges or practices of non-dominant carriers.
Nevertheless, the FCC acts upon complaints against such carriers for failure to
comply with statutory obligations or with the FCC's rules, regulations and
policies. The FCC also has the power to impose more stringent regulatory
requirements on us and to change its regulatory classification. There can be no
assurance that the FCC will not change its regulatory classification or
otherwise subject us to more burdensome regulatory requirements.
On August 7, 1997, the FCC issued new rules which may significantly reduce
the cost of international calls originating in the United States. Such rules are
scheduled to be phased in over a five-year period starting on January 1, 1998.
To the extent that these new regulations are implemented and result in
reductions in the cost of international calls originating in the United States,
we will face increased competition for our international fax services which may
have a material adverse effect on our business, financial condition or results
of operations.
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In connection with the deployment of Internet-capable nodes in countries
throughout the world, we are required to satisfy a variety of foreign regulatory
requirements. We intend to explore and seek to comply with these requirements on
a country-by-country basis as the deployment of Internet-capable facsimile nodes
continues. There can be no assurance that we will be able to satisfy the
regulatory requirements in each of the countries currently targeted for node
deployment, and the failure to satisfy such requirements may prevent us from
installing Internet-capable facsimile nodes in such countries. The failure to
deploy a number of such nodes could have a material adverse effect on its
business, operating results and financial condition.
Our facsimile nodes and our faxLauncher service utilize encryption
technology in connection with the routing of customer documents through the
Internet. The export of such encryption technology is regulated by the United
States government. We have authority for the export of such encryption
technology other than to Cuba, Iran, Iraq, Libya, North Korea and Rwanda.
Nevertheless, there can be no assurance that such authority will not be revoked
or modified at any time for any particular jurisdiction or in general. In
addition, there can be no assurance that such export controls, either in their
current form or as may be subsequently enacted, will not limit our ability to
distribute our services outside of the United States or electronically. While we
take precautions against unlawful exportation of our software, the global nature
of the Internet makes it virtually impossible to effectively control the
distribution of our services. Moreover, future Federal or state legislation or
regulation may further limit levels of encryption or authentication technology.
Any such export restrictions, the unlawful exportation of our services, or new
legislation or regulation could have a material adverse effect on our business,
financial condition and results of operations.
The legal structure and scope of operations of our subsidiaries in some
foreign countries may be subject to restrictions which could result in severe
limits to our ability to conduct business in these countries and this could have
a material adverse effect on our financial position, results of operations and
cash flows. We have formed WORLD.com, Inc. for the purpose of developing our
portfolio of domain names, including Asia.com and India.com. In connection with
the formation of Asia.com, Inc., we acquired eLong.com, Inc. which operates
through its wholly-owned subsidiary the Web site www.elong.com in the Peoples
Republic of China or the PRC. We have also announced that we intend to expand
our Internet messaging business in international markets. To the extent that we
develop and operate Web sites or offer Internet messaging services in foreign
countries, we will be subject to the laws and regulations of these countries.
The laws and regulations relating to the Internet in many countries are evolving
and in many cases are unclear as to their application. For example, in India,
the PRC and other countries we may be subject to licensing requirements with
respect to the Internet activities in which we propose to engage and we may also
be subject to foreign ownership limitations or other approval requirements that
preclude our ownership interests or limit our ownership interests to up to 49%
of the entities through which we propose to conduct any regulated activities. If
these limitations apply to our activities, including our activities conducted
through eLong.com, Inc. or other subsidiaries, our opportunities to generate
revenue will be reduced, our ability to compete successfully in these markets
will be adversely affected, our ability to raise capital in the private and
public markets may be adversely affected and the value of our investments and
acquisitions in these markets may decline. Moreover, to the extent we are
limited in our ability to engage in certain activities or are required to
contract for these services from a licensed or authorized third party, our costs
of providing our services will increase and our ability to generate profits may
be adversely affected.
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OUR INTELLECTUAL PROPERTY RIGHTS ARE CRITICAL TO OUR SUCCESS, BUT MAY BE
DIFFICULT TO PROTECT.
We regard our copyrights, service marks, trademarks, trade secrets, domain
names and similar intellectual property as critical to our success. We rely on
trademark and copyright law, trade secret protection and confidentiality and/or
license agreements with our employees, members, strategic partners and others to
protect our proprietary rights. Despite our precautions, unauthorized third
parties may improperly obtain and use information that we regard as proprietary.
Third parties may submit false registration data attempting to transfer key
domain names to their control. Our failure to pay annual registration fees for
key domain names may result in the loss of these domains to third parties. Third
parties have challenged our rights to use some of our domain names, and we
expect that they will continue to do so.
The status of United States patent protection for software products is not
well defined and will evolve as additional patents are granted. We do not know
if our current or future patent applications will be issued with the scope of
the claims we seek, if at all. Current United States law does not adequately
protect our database of member contact and demographic information. In addition,
the laws of some foreign countries do not protect proprietary rights to the same
extent as do the laws of the United States. Our means of protecting our
proprietary rights in the United States or abroad may not be adequate and
competitors may independently develop similar technology.
Third parties may infringe or misappropriate our copyrights, trademarks and
similar proprietary rights. In addition, other parties have asserted and may in
the future assert infringement claims against us. We cannot be certain that our
services do not infringe issued patents. Because patent applications in the
United States are not publicly disclosed until the patent is issued,
applications may have been filed which relate to our services.
We have been and may continue to be subject to legal proceedings and claims
from time to time in the ordinary course of our business, including claims
related to the use of our domain names and claims of alleged infringement of the
trademarks and other intellectual property rights of third parties. Third
parties have challenged our rights to register and use some of our domain names
based on trademark principles and on the recently enacted Anticybersquatting
Consumer Protection Act. As domain names become more valuable to businesses and
other persons, we expect that third parties will continue to challenge some of
our domain names and that the number of these challenges may increase. In
addition, the existing or future laws of some countries, in particular countries
in Europe, may limit or prohibit our ability to use in those countries or
elsewhere some of our geographic names that contain the names of a city in those
countries or the name of those countries. Intellectual property litigation is
expensive and time-consuming and could divert management's attention away from
running our business.
THE SUCCESS OF OUR GLOBAL OPERATIONS IS SUBJECT TO SPECIAL RISKS AND COSTS.
We have begun, and intend to continue, to expand our operations outside of
the United States. This international expansion will require significant
management attention and financial resources. We face substantial risks in doing
business globally, including unexpected changes in regulatory requirements,
export restrictions, difficulties in staffing and managing foreign operations,
difficulties in protecting intellectual property rights, problems in collecting
accounts receivable, political instability, fluctuations in currency exchange
rates and exchange rate controls, difficulties in enforcing contracts and
potentially adverse consequences. In addition, as described elsewhere in this
prospectus, governments in foreign jurisdictions may regulate the Internet or
other online services in such areas as content, privacy, network security,
encryption or distribution, which may also affect our ability to conduct
business internationally.
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THE LIMITED INSTALLED PERSONAL COMPUTER BASE AND HIGH COST OF ACCESSING THE
INTERNET IN CHINA AND INDIA LIMITS THE POOL OF POTENTIAL CUSTOMERS FOR ASIA.COM
AND INDIA.COM.
The market penetration rates of personal computers and on-line access in
China and India are far lower than such rates in the United States. Alternate
methods of obtaining access to the Internet, such as through cable television
modems or set-top boxes for televisions, are currently unavailable in India and
China. There can be no assurance that the number or penetration rate of personal
computers in China and India will increase rapidly or at all or that alternate
means of accessing the Internet will develop and become widely available in
China and India.
Our growth is limited by the cost to Chinese and Indian consumers of
obtaining the hardware, software and communications links necessary to connect
to the Internet in China and India. If the costs required to access the Internet
do not significantly decrease, most of China's and India's population will not
be able to afford to use our services. The failure of a significant number of
additional Chinese and Indian consumers to obtain affordable access to the
Internet would make it very difficult to execute our business plan.
We believe that wireless access to the Internet through a variety of
hand-held and other devices such as mobile phones will become increasingly
important in Asia. Accordingly, our Asia.com subsidiary has made wireless
Internet services for businesses an important part of its business focus. We
cannot assure you that wireless access to the Internet will in fact develop and
reach wide use and acceptance in Asia as we expect.
WE ARE RELYING ON ELECTRONIC COMMERCE AS A SIGNIFICANT PART OF OUR FUTURE
REVENUE, BUT THE INTERNET HAS NOT YET BEEN PROVEN AS AN EFFECTIVE COMMERCE
MEDIUM IN CHINA AND INDIA.
Our revenue growth depends in part on the increasing acceptance and use of
electronic commerce in China and India. The Internet may not become a viable
commercial marketplace in Asia for various reasons, many of which are beyond our
control, including:
- inexperience with the Internet as a sales and distribution channel;
- inadequate development of the necessary infrastructure to facilitate
electronic commerce;
- concerns about security, reliability, cost, ease of deployment,
administration and quality of service associated with conducting
business over the Internet; and
- inexperience with credit card usage or with other means of electronic
payment.
UNDERDEVELOPED TELECOMMUNICATIONS INFRASTRUCTURE HAS LIMITED AND MAY CONTINUE TO
LIMIT THE GROWTH OF THE INTERNET MARKET IN CHINA AND INDIA.
The telecommunications infrastructure in China and India is not well
developed. The underdeveloped Internet infrastructure in China and India has
limited the growth of Internet usage there. If the necessary Internet
infrastructure is not developed, or is not developed on a timely basis, future
growth of the Internet in China and India will be limited and our business could
be harmed.
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OUR ASIA.COM BUSINESS MAY BE ADVERSELY AFFECTED BY CHINESE GOVERNMENT REGULATION
OF INTERNET COMPANIES.
China has recently begun to regulate its Internet sector by making
pronouncements or enacting regulations regarding the legality of foreign
investment in the Chinese Internet sector, the existence and enforcement of
content restrictions on the Internet and the availability of securities
offerings by companies operating in the Chinese Internet sector. There are
substantial uncertainties regarding the proper interpretation of current and
future Chinese Internet laws and regulations.
Issues, risks and uncertainties relating to Chinese government regulation of
the Chinese Internet sector include the following:
A prohibition of foreign investment in businesses providing value-added
telecommunication services, including computer information services or
electronic mail box services, may be applied to Internet businesses such as
ours. Some officials of the Chinese Ministry of Information and Industry, or
MII, have taken the position that foreign investment in the Internet sector is
prohibited.
The MII has also stated recently that it intends to adopt new laws or
regulations governing foreign investment in the Chinese Internet sector in the
near future. If these new laws or regulations forbid foreign investment in the
Internet sector, our business in China will be severely impaired.
Under the agreement reached in November 1999 between China and the United
States concerning the United States' support of China's entry into the World
Trade Organization, or WTO, foreign investment in Chinese Internet services will
be liberalized to allow for 30% foreign ownership in key telecommunication
services, including Chinese Internet ventures, for the first year after China's
entry into the WTO (subject to certain geographic limitations), 49% in the
second year (with expanded geographic coverage) and 50% thereafter (with no
geographic limitations). The implementation of this agreement is subject to
approval by the U.S. Congress, China's completion of bilateral negotiations with
other WTO members, the multilateral negotiation of China's accession protocol
with the WTO and the completion of China's own domestic procedures for
accession. Within the United States, China's WTO accession faces opposition from
trade unions, environmentalists and human rights organization.
The MII has also stated recently that the activities of Internet content
providers are also subject to regulation by various Chinese government
authorities, depending on the specific activities conducted by the Internet
content provider. Various government authorities have stated publicly that they
are in the process of preparing new laws and regulations that will govern these
activities. The areas of regulation may include online advertising and online
news reporting. In addition, the new laws and regulations may require various
Chinese government approvals for securities offerings by companies engaged in
the Internet sector in China.
The interpretation and application of existing Chinese laws and regulations,
the stated positions of the MII and the possible new laws or regulations have
created substantial uncertainties regarding the legality of existing and future
foreign investments in, and the businesses and activities of, Chinese Internet
businesses, including our Asia.com business.
Accordingly, it is possible that the relevant Chinese authorities could, at
any time, assert that any portion or all of Asia.com's existing or future
ownership structure and businesses violates Chinese laws and regulations. It is
also possible that the new laws or regulations governing the Chinese Internet
sector that may be adopted in the future will prohibit or restrict foreign
investment in, or other aspects of, any of Asia.com's current or proposed
businesses and operations. In addition, these new laws and regulations may be
retroactively applied to Asia.com.
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If Asia.com is found to be in violation of any existing or future Chinese
laws or regulations, the relevant Chinese authorities would have broad
discretion in dealing with such a violation, including, without limitation, the
following:
- levying fines;
- revoking our business license;
- requiring us to restructure our ownership structure or operations; and
- requiring us to discontinue any portion or all of our Internet business.
EVEN IF ASIA.COM COMPLIES WITH CHINESE GOVERNMENTAL REGULATIONS, THE CHINESE
GOVERNMENT MAY PREVENT US FROM DISTRIBUTING, AND WE MAY BE SUBJECT TO LIABILITY
FOR, CONTENT THAT IT BELIEVES IS INAPPROPRIATE.
China has enacted regulations governing Internet access and the distribution
of news and other information. Even if we comply with Chinese governmental
regulations relating to licensing and foreign investment prohibitions, if the
Chinese government takes any action to limit or prohibit the distribution of
information through our network or to limit or regulate any current or future
content or services available to users on our network, our Asia.com business
would be harmed.
SOME OF OUR OPERATIONS ARE BASED IN INDIA, WHICH PRESENTS SPECIAL REGULATORY AND
OTHER RISKS TO OUR BUSINESS.
India has also recently begun to regulate its Internet sector by making
pronouncements or enacting regulations regarding various Internet activities in
India and the legality of foreign investment in the Indian Internet sector.
There are substantial uncertainties regarding the proper interpretation of
current and future Indian Internet laws and regulations. Issues, risks and
uncertainties relating to Indian government regulation of the Indian Internet
sector include risks similar to those in China, in particular with respect to
limitations on foreign investment.
Political instability related to the formation of a new government in India
could halt or delay the liberalization of the Indian economy and adversely
affect business and economic conditions in India generally and our business in
particular. During the past decade, the government of India has pursued policies
of economic liberalization, including significantly relaxing restrictions on the
private sector. Nevertheless, the role of the Indian central and state
governments in the Indian economy has remained significant. The government of
India recently changed for the fifth time since 1996. A significant change in
India's economic liberalization and deregulation policies could adversely affect
business and economic conditions in India generally and our India.com business
in particular.
A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK MAY COME ONTO THE MARKET IN THE FUTURE,
WHICH COULD DEPRESS OUR STOCK PRICE.
Sales of a substantial number of shares of our common stock in the
public market could cause the market price of our Class A common stock to
decline. As of June 30, 2000, we had an aggregate of 59,161,555 shares of Class
A and Class B common stock and 14,361,356 options and 1,251,233 warrants to
purchase an aggregate of 15,612,589 shares of Class A common stock outstanding.
As of such date, approximately 50,746,846 shares of Class A common stock and
Class B common stock were freely tradable, in some cases subject to the volume
and manner of sale limitations contained in Rule 144. As of such date,
approximately 8,414,709 shares of Class A common stock will become available for
sale at
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various later dates upon the expiration of one-year holding periods or upon the
expiration of any other applicable restrictions on resale. We are likely to
issue large amounts of additional Class A common stock, which may also be sold
and which could adversely affect the price of our stock.
As of June 30, 2000 the holders of up to 21,211,911 shares of Class A common
stock, had the right, subject to various conditions, to require us to file
registration statements covering their shares, or to include their shares in
registration statements that we may file for ourselves or for other
stockholders, including the shelf registration statement we are required to file
with respect to our convertible notes. By exercising their registration rights
and selling a large number of shares, these holders could cause the price of the
Class A common stock to fall. An undetermined number of these shares have been
sold publicly pursuant to Rule 144.
OUR STOCK PRICE HAS BEEN VOLATILE AND WE EXPECT THAT IT WILL CONTINUE TO BE
VOLATILE.
Our stock price has been volatile since our initial public offering and we
expect that it will continue to be volatile. As discussed above, our financial
results are difficult to predict and could fluctuate significantly. In addition,
the market prices of securities of Internet-related companies have been highly
volatile. A stock's price is often influenced by rapidly changing perceptions
about the future of the Internet or the results of other Internet or technology
companies, rather than specific developments relating to the issuer of that
particular stock. As a result of volatility in our stock price, a securities
class action may be brought against us. Class-action litigation could result in
substantial costs and divert our management's attention and resources.
USE OF PROCEEDS
We will use the net proceeds from the sale of securities that we may offer
under this prospectus and the accompanying prospectus supplement for general
corporate purposes. General corporate purposes may include development of our
domain name properties, potential acquisitions, investments, international
expansion, expansion of sales and marketing activities, hiring of additional
personnel, capital expenditures, repayment of debt and any other purposes that
we may specify in any prospectus supplement. We may invest the net proceeds
temporarily until we use them for their stated purpose.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and
do not anticipate paying any cash dividends on our capital stock in the
foreseeable future. We currently intend to retain future earnings, if any, to
finance the expansion of our business.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our deficiency of earnings to fixed
charges for each of the periods indicated.
<TABLE>
<CAPTION>
Year ended December 31, Six Months Six Months
---------------------------------------- Ended Ended
1996 1997 1998 1999 June 30, 1999 June 30, 2000
-------- --------- -------- -------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Loss to Fixed $- $- $- $- $- $-
Charges(1)(2)...........
</TABLE>
--------------
(1) The ratio of earnings to fixed charges is computed by dividing fixed charges
into earnings. Earnings is defined as pretax income from continuing
operations adjusted by adding fixed charges and excluding interest
capitalized during the period. Fixed charges means the total of interest
expense and amortization of financing costs, the estimated interest
component of rental expense on operating leases and preferred stock
dividends. As a result of the loss incurred for all periods presented, the
ratio coverage was less than 1:1 as Mail.com was unable to cover the
indicated fixed charges. Mail.com would have had to generate additional
earnings of $0.5 million, $3.0 million, $12.5 million and $61.6 million for
the years ended December 31, 1996, 1997, 1998 and 1999 and $14.4 million and
$90.4 million for the six months ended June 30, 1999 and 2000, respectively
to achieve a ratio coverage of 1:1.
(2) We do not have any preferred stock outstanding and consequently the ratio of
combined fixed charges and preference dividends to earnings is identical to
the ratio of earnings to fixed charges at the date of this prospectus.
GENERAL DESCRIPTION OF SECURITIES
We may offer shares of Class A common stock, shares of preferred stock,
depositary shares, debt securities, warrants, stock purchase units, stock
purchase contracts, or any combination of the foregoing, either individually or
in units consisting of one or more securities. We may offer up to $75,000,000 of
securities under this prospectus.
DESCRIPTION OF COMMON STOCK
The following descriptions of our common stock and the relevant provisions
of our amended and restated certificate of incorporation, as amended, and bylaws
are summaries and are qualified by reference to our amended and restated
certificate of incorporation, as amended, and our bylaws.
We are authorized to issue up to 150,000,000 shares of Class A common stock,
par value $.01 per share, 10,000,000 shares of Class B common stock, par value
$.01 per share, and 60,000,000 shares of preferred stock, par value $.01 per
share.
As of June 30, 2000, we had 49,161,555 shares of Class A common stock
outstanding held of record by approximately 372 stockholders and 10,000,000
shares of Class B common stock outstanding held entirely by Gerald Gorman, our
Chairman and Chief Executive Officer.
All of the issued and outstanding shares of our Class A common stock are
fully paid and nonassessable. Except as described below, the issued and
outstanding shares of our Class A common stock and Class B common stock
generally have identical rights. In addition, under our amended and restated
certificate of incorporation, as amended, holders of Class A common stock have
no preemptive or other subscription rights to purchase shares of our stock, nor
are they entitled to the benefits of any redemption or sinking fund provisions..
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VOTING RIGHTS
The holders of our Class A common stock are entitled to one vote per share
on all matters to be voted on by stockholders generally, including the election
of directors. The holder of our Class B common stock is entitled to ten votes
per share on all matters to be voted on by stockholders generally, including the
election of directors. In addition to any class vote that may be required under
law or our amended and restated certificate of incorporation, as amended, all
classes of capital stock entitled to vote generally on any matter vote together
as a single class. There are no cumulative voting rights. Accordingly, holders
of a majority of the total votes entitled to vote in an election of directors
will be able to elect all of the directors standing for election. Please see
"Risk Factors - Gerald Gorman controls Mail.com and will be able to prevent a
change of control."
LIQUIDATION PREFERENCES
If we are liquidated, dissolved or wound up, the holders of our Class A
common stock and Class B common stock will be entitled to receive distributions
only after satisfaction of all liabilities and the prior rights of any
outstanding class of preferred stock. If we are liquidated, dissolved or wound
up, our assets legally available after satisfaction of all of our liabilities
shall be distributed to the holders of our Class A common stock and Class B
common stock pro rata based on the respective numbers of shares of Class A
common stock held by these holders or issuable to them upon conversion of Class
B common stock.
CONVERSION RIGHTS/MANDATORY CONVERSION
Holders of our Class A common stock have no conversion rights. Holders of
our Class B common stock may convert each share into one share of Class A common
stock. In addition, the holder of Class B common stock has contractually agreed
with the former holders of Class C preferred stock and Class E preferred stock
and some former holders of Class A preferred stock that he will not transfer his
shares of Class B common stock in the form of Class B common stock unless such
holders have had the opportunity within specified time periods to dispose of
their shares of Class A common stock issuable upon conversion of their preferred
stock at specified prices. As a result, until this condition has been satisfied
or the former holders of a majority in interest of each class of preferred stock
otherwise consent in writing, the holder of Class B common stock must convert
shares of Class B common stock into shares of Class A common stock prior to
transfer.
DIVIDENDS
The holders of both classes of our common stock are entitled to receive
equal non-cumulative dividends when and as declared from time to time by the
board of directors, subject to any preferential dividend rights of any
outstanding preferred stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our Class A common stock is American
Stock Transfer and Trust Company.
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PREFERRED STOCK
Under our amended and restated certificate of incorporation, as amended, the
board of directors is authorized, without further stockholder approval, to issue
up to 60,000,000 shares of preferred stock in one or more classes or series. The
board also has the authority to fix or alter the designations, preferences,
rights and any qualifications, limitations or restrictions of the shares of each
such class or series, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences. Preferred stock could
thus be issued quickly with terms that could delay or prevent a change of
control of Mail.com or make removal of management more difficult. Additionally,
the issuance of preferred stock may decrease the market price of our Class A
common stock and may adversely affect the voting and other rights of the holders
of our Class A common stock. Currently, we do not have any preferred stock
outstanding.
Each time that we issue a new series of preferred stock, we will file with
the SEC a definitive certificate of designations. In addition, the prospectus
supplement relating to that new series of preferred stock will specify the
particular amount, price and other terms of that new series. These terms will
include:
- the designation of the title of the series;
- voting rights;
- special or relative rights in the event of liquidation, dissolution,
distribution or winding up of Mail.com;
- whether the preferred stock will be convertible into our Class A common
stock or any other of our securities or exchangeable for securities of
any other person;
- redemption provisions, if any;
- sinking fund provisions, if any;
- dividend rates; and
- any other preferences, privileges, powers, rights, qualifications,
limitations and restrictions, not inconsistent with our by-laws.
The shares of any series of preferred stock will be, when issued, fully paid
and non-assessable. The holders of the preferred stock will not have preemptive
rights.
RANKING
Each new series of preferred stock will rank with respect to each other
series of our preferred stock as specified in the prospectus supplement relating
to that new series of preferred stock.
VOTING RIGHTS
The holders of shares of any series of preferred stock will have no voting
rights except as indicated in the certificate of designations or prospectus
supplement relating to that series or as required by law.
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LIQUIDATION PREFERENCE
Upon our voluntary or involuntary liquidation, dissolution or winding up,
holders of each series of preferred stock will be entitled to receive:
- distributions upon liquidation in the amount provided in the prospectus
supplement of that series of preferred stock; plus
- any accrued and unpaid dividends.
These payments will be made to holders of preferred stock out of our assets
available for distribution to stockholders before any distribution is made on
any securities ranking junior to the preferred stock regarding liquidation
rights.
After payment of the full amount of the liquidation preference to which they
are entitled, the holders of each series of preferred stock will not be entitled
to any further participation in any distribution of our assets.
CONVERSION AND EXCHANGE
The prospectus supplement for any new series of preferred stock will state
the terms and other provisions, if any, on which shares of the new series of
preferred stock are convertible into shares of our Class A common stock or
exchangeable for securities of a third party.
REDEMPTION
We will specify in the prospectus supplement relating to each new series of
preferred stock:
- whether that new series will be redeemable at any time, in whole or in
part, at our option or at the option of the holder of the shares of
preferred stock;
- whether that new series will be subject to mandatory redemption under a
sinking fund or on other terms; and
- the redemption prices.
DIVIDENDS
Holders of each new series of preferred stock will be entitled to receive
cash dividends or dividends in kind, if declared by our board of directors out
of funds legally available for dividends. For each series of preferred stock, we
will specify in the prospectus supplement:
- the dividend rates;
- whether the rates will be fixed or variable or both;
- the dates of distribution of the cash dividends; and
- whether the dividends on any series of preferred stock will be
cumulative or non-cumulative.
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TRANSFER AGENT AND REGISTRAR
We will specify each of the transfer agent, registrar, dividend disbursing
agent and redemption agent for shares of each new series of preferred stock in
the prospectus supplement relating to that series.
OTHER CAPITAL STOCK MATTERS
REGISTRATION RIGHTS
PREFERRED STOCKHOLDERS
The stockholders who formerly held shares of our Class A preferred stock,
other than Lycos, and the stockholders who formerly held shares of our Class C
and Class E preferred stock are entitled to various registration rights with
respect to their shares of Class A common stock issued upon conversion of each
class of preferred stock.
- Demand registration rights. The holders of a majority of our shares
issued upon conversion of our Class A preferred stock and the holders of
a majority of the shares issued upon conversion of our Class C preferred
stock, voting as separate classes, have the right to demand that we
register their shares of Class A common stock under the Securities Act.
The stockholders who formerly held shares of our Class A preferred stock
may exercise their demand registration rights up to three times, and the
stockholders who formerly held shares of our Class C preferred stock may
exercise their demand registration right once. In addition, the holders
of 20% or more of the shares issued upon conversion of our Class E
preferred stock may demand that we register their shares of Class A
common stock under the Securities Act. If 30% or more of the shares
registered in any Class C or Class E demand registration are shares
requested to be registered by Lycos, then the former holders of each of
our Class C and Class E preferred stock have the right to a second
demand registration.
- Piggyback registration rights. The stockholders who formerly held shares
of our Class A, Class C and Class E preferred stock can request to have
their shares registered under the Securities Act any time we file a
registration statement to register any of our securities for our own
account or for the account of any of our stockholders in connection with
an underwritten public offering. The number of times such rights may be
exercised is unlimited, but the number of shares that can be registered
at any one time is subject to limitations that any underwriters may
impose.
- S-3 demand registration rights. The holders of at least a majority of
the shares issued upon conversion of each of our Class A preferred stock
and Class C preferred stock have the right to have their shares of Class
A common stock registered under the Securities Act on Form S-3. The
holders of at least 25% of the shares issued upon conversion of our
Class E preferred stock also have the right to demand a Form S-3. The
number of times these Form S-3 registration rights may be exercised is
unlimited, but we are required to file only one Form S-3 in any
twelve-month period.
In the case of the stockholders who formerly held shares of our Class A
preferred stock, their registration rights will terminate on June 23, 2004, five
years from the closing of our initial public offering. In the case of the
stockholders who formerly held shares of our Class C and Class E preferred
stock, their registration rights will terminate on December 23, 2001, 30 months
from the closing of our initial public offering.
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LYCOS
Lycos has the right to have its shares of our Class A common stock
registered any time we file a registration statement for any of our securities
for our own account or the account of any of our directors, officers or 5%
stockholders. The number of times Lycos may exercise its right is unlimited, but
the number of shares that can be registered at any one time is subject to
limitations that any underwriters may impose.
CNET AND NBC MULTIMEDIA
We granted registration rights to CNET and NBC Multimedia with respect to
the shares of our Class A common stock issued upon exercise of their warrants.
The holder or holders of a majority of the shares of Class A common stock issued
upon exercise of their warrants may require us to effect one registration under
the Securities Act. If 30% or more of the shares to be registered in that demand
registration are shares requested to be registered by Lycos, then the holders
have the right to a second demand registration.
The holder or holders of a majority of shares of our Class A common stock
issued upon exercise of the CNET and NBC Multimedia warrants have the right to
have their shares of Class A common stock registered under the Securities Act
any time we file a registration statement to register any of our securities for
our own account or for the account of any of our stockholders in connection with
an underwritten public offering.
The holder or holders of a majority of shares of our Class A common stock
issued upon exercise of the CNET and NBC Multimedia warrants have the right to
have their shares of Class A common stock registered on Form S-3. The number of
times this registration right may be exercised is unlimited, but we are required
to file only one Form S-3 in any twelve-month period.
These registration rights will terminate 30 months from the closing of our
initial public offering, which occurred on June 23, 1999.
3CUBE, INC.
In connection with our investments in 3Cube, Inc. we granted 3Cube
registration rights. We agreed to register on Form S-3 the shares of our Class A
common stock that we issued in June 2000. 3Cube has the right to have its other
shares of our Class A common stock registered under the Securities Act any time
we file a registration statement to register any of our securities for our own
account or for the account of any of our stockholders in connection with an
underwritten public offering. The number of times these piggyback rights may be
exercised is unlimited, but the number of shares that can be registered at any
one time is subject to limitations that any underwriters may impose.
BANTU, INC.
In connection with our investment in Bantu, Inc., we agreed to register on
Form S-3 the shares of our Class A common stock issued or issuable to Bantu,
Inc.
BULLETN.NET, INC.
In connection with our investment in BulletN.net, Inc., we agreed to
register on Form S-3 the shares of our Class A common stock issued to
BulletN.net, Inc.
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EDD HELMS GROUP, INC.
In connection with our acquisition of a telephone number, we granted
registration rights to Edd Helms, Group, Inc. We are required to register on
Form S-3 all of the shares of our Class A common stock issued to Edd Helms
Group.
MADISON AVENUE TECHNOLOGY GROUP, INC.
In connection with our investment in Madison Avenue Technology Group, Inc.
we agreed to register on Form S-3 the shares of our Class A common stock issued
to Madison Avenue Technology Group, Inc.
SAPIENT CORPORATION
In connection with our Web site development contract with Sapient
Corporation, we agreed to register on Form S-3 the shares of our Class A common
stock issuable to Sapient upon conversion of a Convertible Promissory Note
issuable to Sapient.
STD, INC.
In connection with our investment in STD, Inc. (doing business as Software
Tool and Die), we granted registration rights to STD. Holders of a majority of
the shares of our Class A common stock issued to STD have the right to require
us to have their shares registered on Form S-3. STD has the right to have its
shares of our Class A common stock registered under the Securities Act any time
we file a registration statement to register any of our shares of capital stock
for our account or the account of any of our stockholders in connection with an
underwritten public offering. The number of times these piggyback rights may be
exercised is unlimited, but the number of shares that can be registered at any
one time is subject to limitations that the underwriters may impose.
ELONG.COM, INC.
In connection with our acquisition of eLong.com, Inc., we granted
registration rights to former stockholders of eLong. The holders of a majority
of the shares of our Class A common stock issued in connection with this
acquisition have a one-time right to have their shares registered on Form S-3 on
or after January 1, 2001.
HUELINK CORPORATION LIMITED
In connection with our acquisition of Huelink Corporation Limited, we
granted registration rights to Aligned Investments Limited, the former principal
shareholder of Huelink. Holders of a majority of the subject shares have a
one-time right to have their shares registered on Form S-3. Prior to the
effectiveness of such registration statement, Aligned has the right to have the
subject shares registered under the Securities Act any time we file a
registration statement to register any of our shares of capital stock for our
account or the account of any of our stockholders in connection with an
underwritten public offering. The number of times these piggyback rights may be
exercised is unlimited, but the number of shares that can be registered at any
time is subject to limitations that the underwriters may impose.
NETMOVES WARRANTS
In connection with our acquisition of NetMoves, we assumed registration
rights obligations with respect to shares underlying certain outstanding
warrants of NetMoves that we assumed. Under a warrant held by The Tail Wind Fund
Ltd. representing the right to purchase 24,860 shares of our Class A common
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stock, we are obligated to register on Form S-3 the shares issuable upon
exercise of the warrant. Tail Wind also has the right to have the shares
underlying the warrant, and not included in an effective registration statement,
registered under the Securities Act any time we file a registration statement to
register any of our shares for our account or for any stockholders in connection
with a public offering. The number of times these piggyback rights may be
exercised is unlimited, but the number of shares that can be registered at any
time is subject to limitations that the underwriters may impose.
Under warrants held by Comdisco representing the right to purchase an
aggregate of 17,540 shares of our Class A common stock, we are obligated to
effect up to two registrations relating to the shares underlying such warrants.
In addition, Comdisco has the right to have the shares underlying the warrants
included any time we file a registration statement for our account or for the
account of any stockholder in connection with a public offering. The number of
times the piggyback rights may be exercised is unlimited, but the number of
shares that may be included at any time is subject to limitations that the
underwriters may impose.
OTHER REGISTRATION RIGHTS
In connection with our acquisition of a domain name, we granted registration
rights to an individual. We are required to register on Form S-3 all of the
shares of our Class A common stock issued to this individual.
OUTSTANDING WARRANTS
Under an engagement letter dated March 2, 1998 between PaineWebber
Incorporated and Mail.com and entered into in connection with the private
placement of our Class C preferred stock, we issued to PaineWebber Incorporated
warrants to purchase 143,484 shares of our Class A common stock and we issued to
a former employee of PaineWebber Incorporated warrants to purchase 35,872 shares
of our Class A common stock. These warrants are exercisable at an exercise price
of $3.50 per share and expire July 31, 2003. The warrants are entitled to
anti-dilution adjustment in the event of stock splits, stock dividends, stock
distributions or combinations.
Under our letter agreement with AT&T dated May 26, 1999, we issued warrants
to purchase 1,000,000 shares of our Class A common stock at an exercise price of
$11.00 per share. AT&T may exercise the warrants at any time on or before
December 31, 2000. AT&T may not sell or otherwise transfer to a third party the
warrants or the shares issuable upon exercise of the warrants until May 26,
2004. If AT&T does not exercise the warrants on or before December 31, 2000, the
warrants will expire and be cancelled.
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF DELAWARE LAW AND OUR AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION, AS AMENDED, AND BYLAWS
We are subject to the provisions of Section 203 of the General Corporation
Law of the State of Delaware. Generally, Section 203 prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the time 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 mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Generally, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, 15% or more of a corporation's
voting stock. This statute could prohibit or delay the accomplishment of mergers
or other takeovers or changes in control with respect to Mail.com and,
accordingly, may
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discourage attempts to acquire Mail.com.
In addition, provisions of the amended and restated certificate, as amended,
and bylaws, which provisions are summarized in the following paragraphs, may be
deemed to have an anti-takeover effect. These provisions may delay, defer or
prevent a tender offer or takeover attempt that a stockholder might consider to
be in its best interests, including those attempts that might result in a
premium over the market price for the shares held by stockholders.
BOARD OF DIRECTORS VACANCIES. Our bylaws authorize the board of directors to
fill vacant directorships or increase the size of the board of directors. This
may prevent a stockholder from removing incumbent directors and simultaneously
gaining control of the board of directors by filling the resulting vacancies
created by such removal with its own nominees.
SPECIAL MEETINGS OF STOCKHOLDERS. Our bylaws provide that special meetings
of stockholders of Mail.com may be called at any time by the Chairman of the
board, the Vice Chairman of the board, if any, the President, if any, or the
board of directors. Written notice of the meeting must be given not less than 10
nor more than 60 days before the date of the meeting.
AUTHORIZED BUT UNISSUED SHARES. The authorized but unissued shares of our
common stock and preferred stock are available for future issuance without
stockholder approval, subject to the limitations imposed by The Nasdaq National
Market. These additional shares may be utilized for a variety of corporate
purposes, including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved common stock and preferred stock could render more
difficult or discourage an attempt to obtain control of Mail.com by means of a
proxy contest, tender offer, merger or otherwise.
The General Corporation Law of the State of Delaware provides generally
that, in addition to the approval of the board of directors, 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 unless a corporation's
certificate of incorporation requires a greater percentage.
DESCRIPTION OF DEPOSITARY SHARES
The description below and in the related prospectus supplement is not
complete. You should read the forms of deposit agreement and depositary receipts
filed with the SEC in connection with the offering of each series of the
preferred stock described below.
GENERAL
We may, at our option, elect to offer fractional interests in shares of
preferred stock, rather than shares of preferred stock. If we exercise that
option, we will provide for a depositary to issue receipts for depositary
shares, each of which will represent a fractional interest in a share of
preferred stock.
The shares of preferred stock underlying the depositary shares will be
deposited under a separate deposit agreement between us and a bank or trust
company depositary that has its principal office in the United States. The
prospectus supplement will set forth the name and address of the depositary.
Subject to the terms of the deposit agreement, each owner of a depositary share
will be entitled, in proportion to the applicable fractional interest in a share
of preferred stock, to all the rights and preferences of the underlying
preferred stock, including dividend, voting, redemption, conversion and
liquidation rights. Depositary receipts will be issued for depositary shares.
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The depositary may issue temporary depositary receipts substantially
identical to, and entitling the holders to all the rights pertaining to, the
definitive depositary receipts. Definitive depositary receipts will then be
prepared thereafter and temporary depositary receipts may be exchanged for
definitive depositary receipts at our expense.
Upon surrender of depositary receipts and payment of the charges provided in
the deposit agreement, the depositary will deliver the whole shares of preferred
stock underlying the depositary shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The depositary will distribute all cash dividends or other cash
distributions on the preferred stock, rounded to the nearest cent, to the record
holders of depositary shares in proportion to the numbers of such depositary
shares owned by them on the relevant record date. Fractions of one cent not so
distributed will be added to the next sum received by the depositary for
distribution to record holders of depositary shares.
In the event of a non-cash distribution, the depositary will, if feasible,
distribute property received by it to the record holders of depositary shares
entitled to them. If the distribution is not feasible, the depositary may sell
the property and distribute the net proceeds to such holders.
REDEMPTION OF DEPOSITARY SHARES
If we redeem the preferred stock underlying the depositary shares, the
depositary will redeem the depositary shares from the proceeds of the redemption
of the preferred stock held by the depositary. The depositary will mail notice
of redemption not less than 30 or more than 60 days prior to the date fixed for
redemption to the record holders of the depositary shares. The redemption price
per depositary share will be equal to the applicable fraction of the redemption
price per share payable with respect to the preferred stock. Whenever we redeem
shares of preferred stock held by the depositary, the depositary will redeem the
corresponding depositary shares as of the same redemption date. If less than all
the depositary shares are to be redeemed, the depositary will select by lot or
pro rata which depositary shares will be redeemed.
After the redemption, the depositary shares called for redemption will no
longer be deemed to be outstanding. All rights of the holders of the depositary
shares will cease, except the right to receive the money or other property to
which the holders are entitled upon redemption and surrender of the depositary
receipts for their depositary shares.
VOTING THE PREFERRED STOCK
The depositary will mail to the holders of depositary shares the information
contained in any notice of meeting at which the holders of preferred stock are
entitled to vote. Each record holder of depositary shares on the record date for
the preferred stock may instruct the depositary to exercise its voting rights
with respect to the depositary shares. The depositary will attempt to vote the
number of shares of preferred stock underlying such depositary shares in
accordance with these instructions. We will agree to take any action required to
enable the depositary to vote the depositary shares. The depositary will abstain
from voting shares of preferred stock to the extent it does not receive
instructions from the holders of depositary shares relating to that preferred
stock.
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AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
We and the depositary may amend the form of depositary receipt and any
provision of the deposit agreement at any time. However, neither of us can make
any amendment that would materially and adversely alter the rights of the
existing holders of depositary shares without approval by the record holders of
at least a majority of the outstanding depositary shares. We or the depositary
may terminate a deposit agreement only if (1) all outstanding depositary shares
relating thereto have been redeemed or (2) there has been a final distribution
to the holders of preferred stock in a liquidation, dissolution or winding up of
Mail.com and to the holders of the related depositary shares.
CHARGES OF DEPOSITARY
We will pay all transfer and other taxes and governmental charges arising
solely from the depositary arrangements. We will pay charges of the depositary
in connection with the initial deposit of the preferred stock and any redemption
of the preferred stock. Holders of depositary shares will pay transfer and other
taxes and governmental charges and any other charges listed in the deposit
agreement as holders' charges.
MISCELLANEOUS
The depositary will forward to the holders of depositary shares all reports
and communications that we are required to furnish to the holders of the
preferred stock.
Neither the depositary nor Mail.com will be liable if the law or any
circumstance beyond its control prevents it from performing its obligations
under the deposit agreement. Mail.com and the depositary are required only to
perform their duties in good faith. They will not be obligated to prosecute or
defend any legal proceeding regarding any depositary shares or preferred stock
unless the holders of those securities provide them with satisfactory indemnity.
They may rely on written advice of counsel or accountants, or information
provided by persons presenting preferred stock for deposit, holders of
depositary shares or other persons believed to be competent and on documents
believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering notice to us, and we may
at any time remove the depositary. Any such resignation or removal will take
effect when a successor depositary is established.
DESCRIPTION OF DEBT SECURITIES
We also may offer any combination of senior debt securities or subordinated
debt securities. Debt securities are unsecured general obligations of Mail.com.
Senior debt securities rank above all subordinated indebtedness and equal to all
other indebtedness outstanding on the date of the prospectus supplement.
Subordinated debt securities rank in right of payment below all other
indebtedness outstanding at or after the time issued, unless the other
indebtedness provides that it is not senior to the subordinated debt.
We may issue the senior debt securities and the subordinated debt securities
under separate indentures between us, as issuer, and the trustee or trustees
identified in the prospectus supplement. A copy of the form of each type of
indenture has been or will be filed as an exhibit to the registration statement
of which this prospectus is a part. A prospectus supplement will describe the
particular terms of any debt securities we may offer.
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The following summaries of the debt securities and the indentures are not
complete. We strongly urge you to read the indentures and the description of the
debt securities included in the prospectus supplement.
GENERAL
We may issue an unlimited principal amount of debt securities in separate
series. We may specify a maximum aggregate principal amount for the debt
securities of any series. The debt securities will have terms that are
consistent with the indentures. Unless otherwise specified in the applicable
prospectus supplement, senior debt securities will be unsecured and
unsubordinated obligations of Mail.com and will rank equal with all our other
unsecured and unsubordinated debt. Subordinated debt securities will be paid
only if all payments due under our senior indebtedness, including any
outstanding senior debt securities, have been made.
The indentures might not limit the amount of other debt that we may incur
and might not contain financial or similar restrictive covenants. The indentures
might not contain any provision to protect holders of debt securities against a
sudden or dramatic decline in our ability to pay our debt.
The prospectus supplement will describe the debt securities and the price or
prices at which we will offer the debt securities. The description will include:
- the title of the debt securities;
- any limit on the aggregate principal amount of such debt securities or
the series of which they are a part;
- the person to whom any interest on a debt security of the series will be
paid;
- the date or dates on which we must pay the principal;
- the rate or rates at which the debt securities will bear interest, if
any, the date or dates from which interest will accrue, and the dates on
which we must pay interest;
- the place or places where we must pay the principal and any premium or
interest on the debt securities;
- the terms and conditions on which we may redeem any debt security, if at
all;
- any obligation to redeem or purchase any debt securities, and the terms
and conditions on which we must do so;
- the denominations in which we may issue the debt securities;
- the manner in which we will determine the amount of principal of or any
premium or interest on the debt securities;
- the currency in which we will pay the principal of and any premium or
interest on the debt securities;
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- the principal amount of the debt securities that we will pay upon
declaration of acceleration of their maturity;
- the amount that will be deemed to be the principal amount for any
purpose, including the principal amount that will be due and payable
upon any maturity or that will be deemed to be outstanding as of any
date;
- if applicable, that the debt securities are defeasible;
- if applicable, the terms of any right to convert debt securities into,
or exchange debt securities for, shares of common stock or other
securities or property;
- whether we will issue the debt securities in the form of one or more
global securities and, if so, the respective depositaries for the global
securities and the terms of the global securities;
- the subordination provisions that will apply to the subordinated debt
securities;
- any addition to or change in the events of default applicable to the
debt securities and any change in the right of the trustee or the
holders to declare the principal amount of any of such debt securities
due and payable; and
- any addition to or change in the covenants in the indentures.
We may sell the debt securities at a substantial discount below their stated
principal amount. We will describe certain special U.S. federal income tax
considerations, if any, applicable to debt securities sold at an original issue
discount in the prospectus supplement. An "original issue discount security" is
any debt security that provides for an amount less than the principal amount to
be due and payable upon the declaration of acceleration of the maturity in
accordance with the terms of the applicable indenture. The prospectus supplement
relating to any original issue discount securities will describe the particular
provisions relating to acceleration of the maturity upon the occurrence of an
event of default. In addition, we will describe certain special U.S. federal
income tax or other considerations applicable to any debt securities that are
denominated in a currency or unit other than U.S. dollars in the applicable
prospectus supplement.
CONVERSION AND EXCHANGE RIGHTS
The prospectus supplement will describe, if applicable, the terms on which
you may convert debt securities into or exchange them for common stock or other
securities or property. The conversion or exchange may be mandatory or may be at
your option. We will describe how the number of shares of common stock or other
securities or property to be received upon conversion or exchange would be
calculated.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless the prospectus supplement indicates otherwise, the following
provisions will apply to the subordinated debt securities. The indebtedness
underlying the subordinated debt securities will be payable only if all payments
due under senior indebtedness, including any outstanding senior debt securities,
have been made. If we distribute our assets to creditors upon any dissolution,
winding-up, liquidation or reorganization or in bankruptcy, insolvency,
receivership or similar proceedings, we must first pay all amounts due or to
become due on all senior indebtedness before we pay the principal of, or any
premium
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or interest on, the subordinated debt securities. In the event the
subordinated debt securities are accelerated because of an event of default, we
may not make any payment on the subordinated debt securities until we have paid
all senior indebtedness or the acceleration is rescinded. If the payment of
subordinated debt securities accelerates because of an event of default, we must
promptly notify holders of senior indebtedness of the acceleration.
We may not make any payment on the subordinated debt securities if a default
in the payment of the principal of, premium, if any, interest, rent or other
obligations, including a default under any repurchase or redemption obligation,
in respect of designated senior indebtedness occurs and continues beyond any
applicable grace period. We may not make any payment on the subordinated debt
securities if any other default occurs and continues with respect to designated
senior indebtedness that permits holders of the designated senior indebtedness
to accelerate its maturity and the trustee receives a notice of such default
from us, a holder of such designated senior indebtedness or other person
permitted to give such notice. We may not resume payments on the subordinated
debt securities until the defaults are cured or certain periods pass.
If we experience a bankruptcy, dissolution or reorganization, holders of
senior indebtedness may receive more, ratably, and holders of subordinated debt
securities may receive less, ratably, than our other creditors.
The term "designated senior indebtedness" means our obligations under any
particular senior indebtedness in which the debt instrument expressly provides
that the senior indebtedness will be designated senior indebtedness with respect
to the subordinated debt securities.
The indenture for subordinated debt securities may not limit our ability to
incur additional senior indebtedness.
FORM, EXCHANGE AND TRANSFER
We will issue debt securities only in fully registered form, without
coupons, and, unless otherwise specified in the prospectus supplement, only in
denominations of $1,000 and integral multiples thereof.
The holder of a debt security may elect, subject to the terms of the indentures
and the limitations applicable to global securities, to exchange them for other
debt securities of the same series of any authorized denomination and of a like
tenor and aggregate principal amount.
Holders of debt securities may present them for exchange as provided above
or for registration of transfer, duly endorsed or with the form of transfer
endorsed thereon duly executed, at the office of the transfer agent we designate
for that purpose. We will not impose a service charge for any registration of
transfer or exchange of debt securities, but we may require a payment sufficient
to cover any tax or other governmental charge payable in connection with the
transfer or exchange. We will name the transfer agent in the prospectus
supplement. We may designate additional transfer agents or rescind the
designation of any transfer agent or approve a change in the office through
which any transfer agent acts, but we must maintain a transfer agent in each
place in which we will pay on debt securities.
If we redeem the debt securities, we will not be required to issue, register
the transfer of or exchange any debt security during a specified period prior to
mailing a notice of redemption. We are not required to register the transfer of
or exchange any debt security selected for redemption, except the unredeemed
portion of the debt security being redeemed.
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GLOBAL SECURITIES
The debt securities may be represented, in whole or in part, by one or more
global securities that will have an aggregate principal amount equal to that of
the debt securities. Each global security will be registered in the name of a
depositary identified in the prospectus supplement. We will deposit the global
security with the depositary or a custodian, and the global security will bear a
legend regarding the restrictions on exchanges and registration of transfer.
No global security may be exchanged in whole or in part for debt securities
registered, and no transfer of a global security in whole or in part may be
registered, in the name of any person other than the depositary or any nominee
of the depositary unless (1) the depositary has notified us that it is unwilling
or unable to continue as depositary or (2) an event of default occurs and
continues with respect to the debt securities. The depositary will determine how
all securities issued in exchange for a global security will be registered.
As long as the depositary or its nominee is the registered holder of a
global security, the depositary or the nominee will be considered the sole owner
and holder of the global security and the underlying debt securities. Except as
stated above, owners of beneficial interests in a global security will not be
entitled to have the global security or any debt security registered in their
names, will not receive physical delivery of certificated debt securities and
will not be considered to be the owners or holders of the global security or
underlying debt securities. We will make all payments of principal, premium and
interest on a global security to the depositary or its nominee. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in definitive form. These laws may prevent you from
transferring your beneficial interests in a global security.
Only institutions that have accounts with the depositary or its nominee and
persons that hold beneficial interests through the depositary or its nominee may
own beneficial interests in a global security. The depositary will credit, on
its book-entry registration and transfer system, the respective principal
amounts of debt securities represented by the global security to the accounts of
its participants. Ownership of beneficial interests in a global security will be
shown only on, and the transfer of those ownership interests will be effected
only through, records maintained by the depositary or any such participant.
The policies and procedures of the depositary may govern payments,
transfers, exchanges and others matters relating to beneficial interests in a
global security. We and the trustee assume no responsibility or liability for
any aspect of the depositary's or any participant's records relating to, or for
payments made on account of, beneficial interests in a global security.
PAYMENT AND PAYING AGENTS
Unless otherwise stated in the prospectus supplement, we will pay principal
and any premium or interest on a debt security to the person in whose name the
debt security is registered at the close of business on the regular record date
for such interest.
Unless otherwise stated in the prospectus supplement, we will pay principal
and any premium or interest on the debt securities at the office of our
designated paying agent, except we may pay interest by check mailed to the
address of the person entitled to the payment. Unless we state otherwise in the
prospectus supplement, the corporate trust office of the trustee will be the
paying agent for the debt securities.
42
<PAGE> 45
Any other paying agents we designate for the debt securities of a particular
series will be named in the prospectus supplement. We may designate additional
paying agents, rescind the designation of any paying agent or approve a change
in the office through which any paying agent acts, but we must maintain a paying
agent in each place of payment for the debt securities.
The paying agent will return to us all money we pay to it for the payment of
the principal, premium or interest on any debt security that remains unclaimed
for a specified period. The holder thereafter may look only to us for payment.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Under the terms of the indentures, we may not consolidate with or merge into
any other person, in a transaction in which we are not the surviving
corporation, or convey, transfer or lease our properties and assets
substantially as an entirety to, any person, unless:
- the successor is a corporation, limited liability company, partnership,
trust or other entity organized and existing under the laws of the
United States, or any state, and assumes our obligations under the debt
securities and the indentures;
- immediately after the transaction, no event of default occurs and
continues; and
- we meet certain other conditions.
EVENTS OF DEFAULT
Each of the following will constitute an event of default under each indenture:
- failure to pay the principal of or any premium on any debt security when
due;
- failure to pay any interest on any debt security when due, continued for
a specified number of days;
- failure to deposit any sinking fund payment when due;
- failure to perform any other covenant in the indenture that continues
for a specified number of days after written notice has been given by
the trustee or the holders of a specified percentage in aggregate
principal amount of the debt securities of that series;
- certain events in bankruptcy, insolvency or reorganization of Mail.com;
and
- any other event of default specified in the prospectus supplement.
If an event of default, other than an event of default as a result of
certain events of bankruptcy, insolvency or reorganization, occurs and
continues, either the trustee or the holders of a specified percentage in
aggregate principal amount of the outstanding securities of that series may
declare the principal amount of the debt securities of that series to be
immediately due and payable. If an event of default occurs as a result of
certain events of bankruptcy, insolvency or reorganization, the principal amount
of all the debt securities of that series automatically will become immediately
due and payable. The holders of a majority in aggregate principal amount of the
outstanding securities of that series may,
43
<PAGE> 46
under certain circumstances, rescind and annul the acceleration if all events of
default, other than the nonpayment of accelerated principal, have been cured or
waived.
Except for certain duties in case of an event of default, the trustee will
not be obligated to exercise any of its rights or powers at the request or
direction of any of the holders, unless the holders have offered the trustee
reasonable indemnity. If they provide this indemnification, the holders of a
majority in aggregate principal amount of the outstanding securities of any
series may direct the time, method and place of conducting any proceeding for
any remedy available to the trustee or exercising any trust or power conferred
on the trustee with respect to the debt securities of that series.
No holder of a debt security of any series may institute any proceeding with
respect to the indentures, or for the appointment of a receiver or a trustee, or
for any other remedy, unless (1) the holder has previously given the trustee
written notice of a continuing event of default, (2) the holders of a specified
percentage in aggregate principal amount of the outstanding securities of that
series have made a written request, and the holders have offered reasonable
indemnity to the trustee to institute the proceeding, and (3) the trustee has
failed to institute the proceeding, and has not received a direction
inconsistent with the request within a specified number of days.
Each indenture will include a covenant requiring our officers to furnish to
the trustee annually a statement as to whether, to their knowledge, we are in
default under the indenture and, if so, specifying all such known defaults.
MODIFICATION AND WAIVER
We and the trustee may amend the indentures with the consent of the holders
of a majority in aggregate principal amount of the outstanding securities of
each series affected by the amendment. However, to the extent discussed in the
prospectus supplement, without the consent of each holder, we may not make any
amendment that would:
- change the stated maturity of the principal of, or any installment of
principal or interest on, any debt security;
- reduce the principal, premium or interest on any debt security;
- reduce the amount of principal of an original issue discount security or
any other debt security payable upon acceleration of the maturity;
- change the place or currency of payment of principal, premium or
interest on any debt security;
- impair the right to enforce any payment on any debt security;
- in the case of subordinated debt securities, modify the subordination
provisions in a manner materially adverse to their holders;
- in the case of debt securities that are convertible or exchangeable into
other securities of Mail.com, adversely affect the right of holders to
convert or exchange any of the debt securities;
- reduce the percentage in principal amount of outstanding securities of
any series for which the holders' consent is required;
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<PAGE> 47
- reduce the percentage in principal amount of outstanding securities of
any series necessary for waiver of compliance with certain provisions of
the indentures or for waiver of certain defaults; or
- modify provisions with respect to modification and waiver.
The holders of a majority in aggregate principal amount of the outstanding
debt securities of any series may waive, on behalf of the holders of all debt
securities of that series, our compliance with certain restrictive provisions of
the indentures. The holders of a majority in principal amount of the outstanding
debt securities of any series may waive any past default under the indenture
with respect to debt securities of that series, except a default (1) in the
payment of principal, premium or interest on any debt security of that series or
(2) in respect of a covenant or provision of the indenture that cannot be
amended without each holder's consent.
Except in certain limited circumstances, we may set any day as a record date
for the purpose of determining the holders of outstanding securities of any
series entitled to give or take any direction, notice, consent, waiver or other
action under the indentures. In certain limited circumstances, the trustee may
set a record date for action by holders. To be effective, the action must be
taken by holders of the requisite principal amount of such debt securities
within a specified period following the record date.
DEFEASANCE AND COVENANT DEFEASANCE
To the extent stated in the prospectus supplement, we may elect to apply the
provisions relating to defeasance and discharge of indebtedness, or to
defeasance of certain restrictive covenants in the indentures, to the debt
securities of any series.
NOTICES
We will mail notices to holders of debt securities at the addresses that
appear in the security register.
TITLE
We may treat the person in whose name a debt security is registered as the
absolute owner, whether or not such debt security may be overdue, for the
purpose of making payment and for all other purposes.
DESCRIPTION OF WARRANTS
We may issue warrants, including debt warrants, which are warrants to
purchase debt securities, and equity warrants, which are warrants to purchase
Class A common stock or preferred stock.
Each series of warrants will be issued under a separate warrant agreement to
be entered into between us and a warrant agent. The warrant agent will act
solely as our agent in connection with a series of warrants and will not assume
any obligation or relationship of agency for or with holders or beneficial
owners of warrants. The following describes the general terms and provisions of
the warrants offered by this prospectus. The applicable prospectus supplement
will describe any other terms of the warrant and the applicable warrant
agreement.
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<PAGE> 48
DEBT WARRANTS
The applicable prospectus supplement will describe the terms of any debt
warrants, including the following:
- the title and aggregate number of the debt warrants;
- any offering price of the debt warrants;
- the number of debt warrants and debt securities that will be separately
transferable;
- any date on and after which the debt warrants and debt securities will
be separately transferable;
- the title, total principal amount, ranking and terms, including
subordination and conversion provisions, of the underlying debt
securities that may be purchased upon exercise of the debt warrants;
- the time or period when the debt warrants are exercisable, the minimum
or maximum amount of debt warrants which may be exercised at any one
time and the final date on which the debt warrants may be exercised;
- the principal amount of underlying debt securities that may be purchased
upon exercise of each debt warrant and the price, or the manner of
determining the price, at which the principal amount may be purchased
upon exercise;
- the terms of any right to redeem or call the debt warrants;
- any book-entry procedure information;
- any currency or currency units in which the offering price and the
exercise price are payable; and
- any other terms of the debt warrants not inconsistent with the
provisions of the debt warrant agreement.
EQUITY WARRANTS
The applicable prospectus supplement will describe the terms of any equity
warrants, including the following:
- the title and aggregate number of the equity warrants;
- any offering price of the equity warrants;
- the designation and terms of any shares of preferred stock that are
purchasable upon exercise of the equity warrants;
- if applicable, the designation and terms of the securities with which
the equity warrants are issued and the number of the equity warrants
issued with each security;
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<PAGE> 49
- if applicable, the date from and after which the equity warrants and any
securities issued with those warrants will be separately transferable;
- the number of shares of Class A common stock or preferred stock
purchasable upon exercise of an equity warrant and the price;
- the time or period when the equity warrants are exercisable and the
final date on which the equity warrants may be exercised and terms
regarding any of our rights to accelerate this final date;
- if applicable, the minimum or maximum amount of the equity warrants
exercisable at any one time;
- any currency or currency units in which the offering price and the
exercise price are payable;
- any applicable anti-dilution provisions of the equity warrants;
- any applicable redemption or call provisions; and
- any additional terms of the equity warrants not inconsistent with the
provisions of the equity warrant agreement.
DESCRIPTION OF THE STOCK PURCHASE UNITS AND STOCK PURCHASE CONTRACTS
The following summarizes the general terms of stock purchase units and stock
purchase contracts we may issue. The particular terms of any stock purchase
units or stock purchase contracts we offer will be described in the prospectus
supplement. This description is subject to the stock purchase contracts, and any
collateral arrangements and depositary arrangements, relating to the stock
purchase contracts or stock purchase units.
We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of Class A common stock or preferred stock at a future date or dates.
We may fix the consideration per share of Class A common stock or preferred
stock at the time we issue the stock purchase contracts, or the consideration
may be determined by referring to a specific formula stated in the stock
purchase contracts. We may issue the stock purchase contracts separately or as a
part of stock purchase units consisting of a stock purchase contract and debt
securities, preferred securities or debt obligations of third parties, including
U.S. Treasury securities, which secure the holders' obligations to purchase the
Class A common stock or preferred stock under the stock purchase contracts. The
stock purchase contracts may require us to make periodic payments to the holders
of the stock purchase units or vice versa. These payments may be unsecured or
prefunded on some basis. The stock purchase contracts may require holders to
secure their obligations in a specified manner.
PLAN OF DISTRIBUTION
We may sell our shares of Class A common stock, shares of preferred stock,
depositary shares, debt securities, warrants, stock purchase units and stock
purchase contracts in any of three ways:
- through underwriters;
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<PAGE> 50
- through agents; or
- directly to a limited number of institutional purchasers or to a single
purchaser.
The prospectus supplement for the securities we sell will describe that
offering, including:
- the name or names of any underwriters;
- the purchase price and the proceeds to us from that sale;
- any underwriting discounts and other items constituting underwriters'
compensation;
- any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers; and
- whether the securities will trade on any securities exchanges or the
Nasdaq National Market.
UNDERWRITERS
If underwriters are used in the sale, we will execute an underwriting
agreement with those underwriters relating to the securities that we will offer.
Unless otherwise provided in the applicable prospectus supplement, the
obligations of the underwriters to purchase these securities will be subject to
conditions. The underwriters will be obligated to purchase all of these
securities if any are purchased.
The securities subject to the underwriting agreement will be acquired by the
underwriters for their own account and may be resold by them from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale.
Underwriters may be deemed to have received compensation from us in the form of
underwriting discounts or commissions and may also receive commissions from the
purchasers of these securities for whom they may act as agent. Underwriters may
sell these securities to or through dealers. These dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agent. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
We also may sell the securities in connection with a remarketing upon their
purchase, in connection with a redemption or repayment, by a remarketing firm
acting as principal for its own account or as our agent. Remarketing firms may
be deemed to be underwriters in connection with the securities that they
remarket.
We may authorize underwriters to solicit offers by institutions to purchase
the securities subject to the underwriting agreement from us at the public
offering price stated in the prospectus supplement under delayed delivery
contracts providing for payment and delivery on a specified date in the future.
If we sell securities under these delayed delivery contracts, the prospectus
supplement will state that as well as the conditions to which these delayed
delivery contracts will be subject and the commissions payable for that
solicitation.
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<PAGE> 51
AGENTS
We may also sell any of the securities through agents designated by us from
time to time. We will name any agent involved in the offer or sale of these
securities and will list commissions payable by us to these agents in the
prospectus supplement. These agents will be acting on a best efforts basis to
solicit purchases for the period of their appointment, unless we state otherwise
in the applicable prospectus supplement.
DIRECT SALES
We may sell any of the securities directly to purchasers. In this case, we
will not engage underwriters or agents in the offer and sale of these
securities.
INDEMNIFICATION
We may indemnify underwriters, dealers or agents who participate in the
distribution of the securities against certain liabilities, including
liabilities under the Securities Act, and agree to contribute to payments which
these underwriters, dealers or agents may be required to make.
LEGAL MATTERS
Certain legal matters with respect to the securities will be passed upon for
us by Winthrop, Stimson, Putnam & Roberts, New York, New York, or other counsel
named in the appropriate prospectus supplement.
EXPERTS
Our consolidated financial statements appearing in our Annual Report (Form
10-K) for the year ended December 31, 1999 have been audited by KPMG LLP,
independent accountants, as set forth in their report thereon incorporated
herein by reference. Such consolidated financial statements are incorporated by
reference in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of Asia.com, Inc. (formerly eLong.com,
Inc.) (a development stage enterprise) incorporated in this prospectus by
reference to Mail.com's Amendment to Current Report on Form 8-K/A, dated May 26,
2000, have been audited by KPMG, independent public accountants, as indicated in
their report with respect thereto and have been incorporated by reference herein
in reliance upon the authority of said firm as experts in accounting and
auditing. Our report dated May 24, 2000, contains an emphasis paragraph that
states the group's operations are subject to extensive regulation and
supervision by the People's Republic of China ("PRC") government. The laws and
regulations pertaining to Internet content provider businesses in the PRC are
evolving and may be subject to change.
The financial statements of NetMoves Corporation (formerly FaxSav
Incorporated) incorporated in this prospectus by reference to Mail.com's
Amendment to Current Report on Form 8-K/A, dated April 24, 2000, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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<PAGE> 52
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses, other than
underwriting discounts, payable by the registrant in connection with the
offering of the securities being registered.
<TABLE>
<CAPTION>
<S> <C>
Registration fee $19,800
Accounting fees and expenses *
Legal fees and expenses *
Miscellaneous expenses *
---------
Total: $ *
</TABLE>
* To be provided by amendment or as a exhibit to a filing with the SEC under
Section 13(a), 13(c) or 15(d) of the Securities Exchange Act of 1934, as
amended.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of Delaware General Corporation Law empowers the company to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit, or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such person 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, partnership, joint venture, trust 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 if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe that such person's conduct was
unlawful. The termination of any cause of action, suit or proceeding by
judgment, order, settlement, conviction, or upon plea of nolo contendre or its
equivalent, does not, of itself, create a presumption that such person did not
act in good faith and in a manner that such person reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
As permitted by Section 145 of the Delaware General Corporation Law, the
registrant's amended and restated certificate of incorporation, as amended,
provides that a director of the company will not be personally liable to the
company or its stockholders for monetary damages for breach of fiduciary duty as
a director, except for any breach of the director's duty of loyalty to the
company or its stockholders; for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law; for the unlawful
payment of dividends or unlawful stock repurchases under Section 174 of the
Delaware General Corporation Law; or for any transaction from which the director
derived an improper personal benefit.
The bylaws of the company provide that the company shall indemnify
directors, officers and employees for such liabilities in such manner, under
such circumstances and to such extent as permitted by Section 145 of the
Delaware General Corporation Law, as now enacted or hereafter amended and that
the company shall advance all reasonable costs and expenses (including
attorney's fees) incurred in defending any action, suit or proceeding to all
persons entitled to such indemnification, all in the manner,
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<PAGE> 53
under the circumstances and to the extent permitted by Section 145 of the
Delaware General Corporation Law, as now enacted or hereafter amended.
The company has entered into indemnity agreements with each of its directors
and executive officers to give them additional contractual assurances regarding
the scope of the indemnification described above and to provide additional
procedural protections. In addition, the company has obtained directors' and
officers' insurance providing indemnification for directors, officers and key
employees for various liabilities.
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 amended and restated certificate of
incorporation, as amended. The registrant is not aware of any threatened
litigation or proceeding that may result in a claim for such indemnification.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
1.1 Proposed Form of Underwriting Agreement for [Class A Common Stock] [Preferred
Stock].*
1.2 Form of Underwriting Agreement for [Convertible] [Senior] [Subordinated] Debt
Securities.*
4.1 Amended and Restated Certificate of Incorporation of Mail.com, Inc. (incorporated
herein by reference to Exhibit 4.1 to Form S-8, Registration No. 333-39586, filed
on June 19, 2000).
4.2 Certificate of Amendment of Amended and Restated Certificate of Incorporation of
Mail.com, Inc. (incorporated herein by reference to Exhibit 4.2 to Form S-8,
Registration No. 333-39586, filed on June 19, 2000).
4.3 Bylaws of Mail.com, Inc. (incorporated herein by reference to Exhibit 4.3 of Form
S-8, Registration No. 333-39586, filed on June 19, 2000).
4.4 Form of Deposit Agreement.*
4.5 Form of Senior Indenture.*
4.6 Form of Senior Debt Security.*
4.7 Form of Subordinated Indenture.*
4.8 Form of Subordinated Debt Security.*
4.9 Form of Standard Stock Warrant Provisions.*
4.10 Form of Standard Debt Securities Warrant Provisions.*
</TABLE>
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<PAGE> 54
<TABLE>
<S> <C>
4.11 Form of Stock Purchase Contract.*
5 Opinion of Winthrop, Stimson, Putnam & Roberts or other counsel.*
12 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of KPMG LLP.
23.2 Consent of KPMG.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Winthrop, Stimson, Putnam & Roberts or other counsel (included in
Exhibit 5).*
24 Power of Attorney (set forth on signature page hereof).
25.1 Statement of Eligibility and Qualification on Form T-1 of trustee to act as
trustee under indenture.*
</TABLE>
* To be filed by amendment or as an exhibit to a report pursuant to Section
13(a), 13(c) or 15(d) of the Exchange Act
ITEM 17. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 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 the time shall be deemed to be
the initial bona fide offering thereof.
(2) 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.
(3) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
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<PAGE> 55
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
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;
(b) 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.
(c) 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.
(d) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
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<PAGE> 56
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on September 15, 2000.
MAIL.COM, INC.
By /s/ Lon Otremba
-----------------
Lon Otremba
President
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<PAGE> 57
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS THAT each individual whose signature
appears below appoints each of Lon Otremba and David Ambrosia, and each of them,
as his or her true and lawful attorneys-in-fact and agents, with full power of
substitution, for him or her and in his or her name, place and stead, in any and
all capacities, to sign any and all amendments (including post- effective
amendments) to this Registration Statement on Form S-3 and to sign any
registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 415 promulgated
under the Securities Act of 1933 and all post-effective amendments thereto, and
to file the same, with all exhibits thereto and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and anything appropriate or necessary to be done, as fully and for
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or his or her substitute or
substitutes may lawfully do or cause to be done by virtue thereof.
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>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ Gerald Gorman Chairman and Chief Executive September 15, 2000
--------------------------- Officer and Director
(Gerald Gorman) (principal executive officer)
/s/ Gary Millin Chief Executive Officer, September 15, 2000
--------------------------- WORLD.com, Inc., Director
(Gary Millin)
/s/ Lon Otremba President, Director September 15, 2000
---------------------------
(Lon Otremba)
/s/ Debra McClister Executive Vice President and September 15, 2000
--------------------------- Chief Financial Officer
(Debra McClister) (principal accounting and
finance officer)
/s/ Thomas Murawski Chief Executive Officer, September 15, 2000
--------------------------- Mail.com Business Messaging
(Thomas Murawski) Services, Inc., Director
/s/ William Donaldson Director September 15, 2000
---------------------------
(William Donaldson)
/s/ Stephen Ketchum Director September 15, 2000
---------------------------
(Stephen Ketchum)
/s/ Jack Kuehler Director September 15, 2000
---------------------------
(Jack Kuehler)
</TABLE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
1.1 Proposed Form of Underwriting Agreement for [Class A Common Stock] [Preferred
Stock].*
1.2 Form of Underwriting Agreement for [Convertible] [Senior] [Subordinated] Debt
Securities.*
4.1 Amended and Restated Certificate of Incorporation of Mail.com, Inc. (incorporated
herein by reference to Exhibit 4.1 to Form S-8, Registration No. 333-39586, filed
on June 19, 2000).
4.2 Certificate of Amendment of Amended and Restated Certificate of Incorporation of
Mail.com, Inc. (incorporated herein by reference to Exhibit 4.2 to Form S-8,
Registration No. 333-39586, filed on June 19, 2000).
4.3 Bylaws of Mail.com, Inc. (incorporated herein by reference to Exhibit 4.3 of Form
S-8, Registration No. 333-39586, filed on June 19, 2000).
4.4 Form of Deposit Agreement.*
4.5 Form of Senior Indenture.*
4.6 Form of Senior Debt Security.*
4.7 Form of Subordinated Indenture.*
4.8 Form of Subordinated Debt Security.*
4.9 Form of Standard Stock Warrant Provisions.*
4.10 Form of Standard Debt Securities Warrant Provisions.*
4.11 Form of Stock Purchase Contract.*
5 Opinion of Winthrop, Stimson, Putnam & Roberts or other counsel.*
12 Computation of Ratio of Earnings to Fixed Charges.
23.1 Consent of KPMG LLP.
23.2 Consent of KPMG.
23.3 Consent of PricewaterhouseCoopers LLP.
23.4 Consent of Winthrop, Stimson, Putnam & Roberts or other counsel (included in
Exhibit 5).*
24 Power of Attorney (set forth on signature page hereof).
25.1 Statement of Eligibility and Qualification on Form T-1 of trustee to act as
trustee under
</TABLE>
II-7
<PAGE> 59
indenture.*
* To be filed by amendment or as an exhibit to a report pursuant to Section
13(a), 13(c) or 15(d) of the Exchange Act
II-8
